Opinion
650510/2014
01-29-2016
Eurotech Construction Corp., Plaintiff, v. Illinois National Insurance Company and Structure Tone, Inc., Defendants.
For plaintiff: FG McCabe & Associates PLLC 45 Rockefeller Plaza, Suite 2000 New York, NY 10111 By: Gerard McCabe, Esq. For defendant: Law Offices of Michael F. Klag 12 MetroTech Center, 28th Floor Brooklyn, NY 11201 By: Charmagne A. Padua, Esq.
For plaintiff: FG McCabe & Associates PLLC 45 Rockefeller Plaza, Suite 2000 New York, NY 10111 By: Gerard McCabe, Esq. For defendant: Law Offices of Michael F. Klag 12 MetroTech Center, 28th Floor Brooklyn, NY 11201 By: Charmagne A. Padua, Esq. Robert R. Reed, J.
Plaintiff Eurotech Construction Corp. (Eurotech) commenced this action for, inter alia, a declaratory judgment that defendant Illinois National Insurance Company (INIC), Eurotech's commercial umbrella liability insurer, is obligated to defend and indemnify it with respect to a personal injury action pending in the New York State Supreme, Court Bronx County (see Padua affirmation, exhibit E: Thomas McGinty v Structure Tone Inc., Silverstein Properties, Inc., 7 World Trade Company, L.P. and Moody's Corporation, index No. 307933/2008 [the McGinty action]), to which Eurotech later was impleaded via a third-party action (see id., exhibit G: Structure Tone, Inc., Silverstein Properties, Inc., 7 World Trade Center Company, L.P. and Moody's Corporation v Eurotech Construction Corp., index No. 84116/2009 [the third-party action]).
Eurotech also is seeking a declaratory judgment that Structure Tone is obligated to pay a $500,000 deductible under it primary policy, in contribution toward the damages claimed by McGinty.
Defendant INIC now moves for summary judgment declaring that it is not obligated to defend or indemnify Eurotech with respect to the McGinty/related third-party action.
BACKGROUND
On April 17, 2007, Thomas McGinty, an employee of Eurotech, was injured when he tripped and fell on construction debris and materials that had been left on the floor of his work site at the newly constructed 7 World Trade Center in lower Manhattan. At the time of McGinty's accident, Eurotech was performing carpentry work at the space, pursuant to a subcontract with defendant Structure Tone. Structure Tone had contracted with Moody's Corporation (Moody's), the lessee of the space, to act as construction manager on a project to build out Moody's office space at the site.
Eurotech's subcontract with Structure Tone required, inter alia, that Eurotech obtain liability insurance of at least $4,000,000 combined single limit, naming Structure Tone, among others, as additional insureds. At the time of the occurrence, Eurotech was insured under a primary general liability policy issued by QBE Insurance Corp. (QBE), in the amount of $1,000,000 per each occurrence and $2,000,000 in aggregate, for the policy period between August 1, 2006 and August 1, 2007. Eurotech also was insured under a commercial umbrella liability coverage issued by INIC for another $10,000,000 per each occurrence, and $10,000,000 in aggregate, for the same policy period (see Padua affirmation, exhibit A: Commercial Umbrella Liability Policy No. BE 9749096).
The record reflects that Structure Tone was the first party to learn of McGinty's accident on or about September 11, 2008, when it received a letter from McGinty's attorney notifying it of McGinty's probable claim. Structure Tone promptly notified AIG Domestic Claims, Inc. (AIG), the representative of its primary insurer, which, in turn, notified QBE, Eurotech's primary insurer, by letter dated October 2, 2008. In its October 2, 2008 letter, AIG requested QBE to provide Structure Tone with defense and indemnification in connection with the McGinty claim.
Although McGinty's accident occurred on April 17, 2007, the record reflects that McGinty did not report or otherwise bring the accident to the attention of either Eurotech or Structure Tone at that time. Rather, it was not until September 11, 2008, that McGinty's attorney first advised Structure Tone that McGinty would be asserting a claim against it, among others, to recover for the injuries that McGinty allegedly had suffered as a result of the accident.
Meanwhile, on October 1, 2008, shortly after putting Structure Tone on notice of his probable claim, McGinty commenced the McGinty personal injury action against Structure Tone, Silverstein Properties, Inc., 7 World Trade Company L.P. and Moody's (together, the Structure Tone parties) in the Supreme Court, Bronx County. Issue was joined by the Structure Tone parties on November 7, 2008. However, Structure Tone did not advise QBE of the commencement of the McGinty action at that time.
QBE initially agreed to provide a defense to the Structure Tone parties while it investigated the McGinty claim and the timeliness of Structure Tone's notice. However, on May 20, 2009, QBE advised that it would no longer defend and indemnify the Structure Tone parties based on their failure to timely advise QBE of the commencement of the McGinty action, which QBE did not learn of until May 7, 2009.
On November 25, 2009, following QBE's denial of coverage, the Structure Tone parties commenced a declaratory judgment action against Eurotech, QBE, and INIC in the Supreme Court, New York County (the 2009 declaratory judgment action), seeking a declaratory judgment that each of the named defendants owed the Structure Tone parties a duty to indemnify, defend, and/or otherwise provide insurance coverage for all risks falling within the scope of those policies (see Padua affirmation, exhibit K). QBE and INIC each then moved to dismiss the 2009 declaratory judgment action, based upon the Structure Tone parties' alleged untimely notice of the occurrence and/or suit.
By decision dated October 7, 2011, the court denied QBE's motion to dismiss, finding that the Structure Tone parties had given QBE timely notice of the occurrence, and that any delay in notifying QBE of the commencement of the McGinty action had not prejudiced QBE (see Padua affirmation, exhibit U). However, the court granted INIC's motion, noting that the Structure Tone parties had conceded that INIC had not been provided with notice of either the occurrence or suit until the Structure Tone parties had served INIC with their complaint in the 2009 declaratory judgment action. Accordingly, the court adjudged and declared that INIC had no obligation to defend or indemnify the Structure Tone parties, as additional insureds, in the McGinty action.
Meanwhile, on or about September 8, 2009, approximately two months prior to commencing their 2009 declaratory judgment action, the Structure Tone parties had commenced the third-party action against Eurotech in the Supreme Court, Bronx County. Although there is some disagreement as to when Eurotech first received notice of this third-party action, Eurotech acknowledges receipt of the third-party summons and complaint from Structure Tone no later than November 19, 2009. Issue was joined by Eurotech on or after December 29, 2009. QBE has been providing Eurotech with a defense in the McGinty/third-party action, pursuant to the QBE primary policy. The parties since have completed discovery, and McGinty filed a note of issue and certificate of readiness for trial on or about January 12, 2012.
In their third-party complaint, the Structure Tone parties alleged, inter alia, that Eurotech had breached its subcontract with Structure Tone by failing to defend, indemnify, and purchase insurance for the Structure Tone parties, as required under the terms of that agreement and/or the blanket insurance/indemnity agreement contained therein.
INIC contends that Eurotech actually was served with the summons and third-party complaint almost two months earlier. In support of this assertion, INIC has produced a copy of the proof of service that subsequently was filed with the court, which indicates that Eurotech was served with the third-party summons and complaint at its offices on September 21, 2009 (see Padua affirmation, exhibit H).
During the discovery in the McGinty/third-party action, the Structure Tone parties and Eurotech had deposed McGinty on November 3, 2010 (Padua affirmation, exhibit R). Prior to that deposition, McGinty had provided the parties with a bill of particulars, dated August 6, 2009, detailing his injuries and claimed damages up to that point (id., exhibit J). Following his deposition, McGinty provided the Structure Tone parties and Eurotech with a supplemental bill of particulars, dated June 6, 2011 (id., exhibit S).
In his August 6, 2009 bill of particulars, McGinty provided details regarding the nature and severity of his injuries, hospitalizations, and treatments, which had included two total knee replacements, as well as details regarding his alleged pain, suffering, and likely permanent physical limitations and impairments caused by his injuries. McGinty also reported approximately $88,250 to date in special damages for health care providers, for which a lien may exist.
The August 6, 2009 bill of particulars indicates that McGinty last worked on May 1, 2007, and remained totally incapacitated from employment from that date. The bill of particulars also indicated that McGinty was 47 years old at the time of his allegedly disabling injury. Based upon the itemized hourly wage rates and benefits that McGinty had been earning, pursuant to the union collective bargaining agreements under which McGinty had been employed at the time of his injury, McGinty was claiming lost earnings to date of $282,642.80, and lost annuities and benefits to date of $240,572.40. McGinty indicated that he also would be claiming future lost earnings and benefits.
In his November 3, 2010 deposition testimony, McGinty further detailed and described his injuries, treatments, surgeries, hospitalizations, and pain and suffering. Specifically, McGinty testified that his injuries and damages included four hospitalizations, arthroscopic surgery on both knees, total knee replacements on both knees, prolonged periods of physical therapy and pain, permanent disability from work, as well as lost past and future income in excess of the amounts already set forth in his August 6, 2009 bill of particulars.
In his June 6, 2011 supplemental bill of particulars, McGinty stated that he remained totally disabled from employment and was claiming continuing lost wages, at the previous rates claimed, in addition to continuing lost wages into the indefinite future. The supplemental bill of particulars also states that McGinty had been advised by his doctor to anticipate future knee surgeries at a cost of approximately $60,000.00.
Approximately three weeks after McGinty had filed his note of issue, Rockville Risk Management Associates, Inc. (Rockville), the designated third-party administrator for QBE, first informed INIC that the McGinty claim would likely exhaust the limits of QBE's primary policy, and thus trigger coverage under INIC's umbrella policy. In its letter dated February 1, 2012, which INIC received on February 8, 2012, Rockville stated, in pertinent part: "We are in receipt of the lawsuit entitled Thomas McGinty v Moody's Corporation, Structure Tone, Inc., Silverstein Properties, Inc. [and] 7 World Trade Company, L.P., venued in the Supreme Court of the State of New York, County of Bronx. It is probable that the value of this matter will exceed the primary policy limit. Please advise whether the above referenced QBE excess policy will follow form to the above referenced QBE policy. Your anticipated cooperation is appreciated. Please contact our office should you require any additional information" (id., exhibit Q).
On March 1, 2012, in response to a request from INIC, Eurotech's attorney forwarded a copy of the third-party summons and complaint against Eurotech to INIC (id., exhibit W). Immediately thereafter, by letter also dated March 1, 2012, which was 22 days after INIC's receipt of Rockville's initial notice and request for umbrella coverage on behalf of Eurotech, INIC disclaimed Eurotech's request for umbrella coverage based, inter alia, on untimely notice and breach of the policy's conditions (id., exhibit X). In its letter of disclaimer, INIC referenced and cited to section VI. G. of its umbrella policy, which provides, in pertinent part: "Duties in the Event of an Occurrence, Claim or Suit
1. You must see to it that we are notified as soon as practicable of an Occurrence that may result in a claim or Suit under this policy. To the extent possible, notice should include:* * * 3. You and any other involved Insured must:
a. how, when and where the Occurrence took place;
b. the names and addresses of any injured persons and any witnesses; and
c. the nature and location of any injury or damage arising out of the Occurrence.
2. If a claim is made or Suit is brought against any Insured which is reasonably likely to involve this policy, you must notify us in writing as soon as practicable.
a. immediately send us copies of any demands, notices, summonses or legal papers received in connection with the claim or Suit;(id., exhibit A).
b. authorize us to obtain records and other information;
c. cooperate with us in the investigation, settlement or defense of the claim or Suit; and
d. assist us, upon our request, in the enforcement of any right against any person or organization that may be liable to the Insured because of injury or damage to which this insurance may apply.
4. No Insured will, except at that Insured's own cost, voluntarily make a payment, assume any obligation or incur any expense, other than for first aid, without our consent"
In its March 1, 2012 letter disclaiming coverage, INIC stated, inter alia, that: "As indicated in the relevant portions of the policy attached hereto, Section VI. Conditions, paragraph G. - Duties in the Event of an Occurrence, Claim or Suit states that you must see to it that we are notified as soon as practicable of an Occurrence that may result in a claim or Suit under this policy.' Policy no. BE 9749096 requires timely notice. The date of loss was April 17, 2007. First notice to INIC was not until February 8, 2012, almost 5 years after the date of loss. Additionally, suit was filed in September 2008 and [the] third party action against Eurotech Construction was filed in August 2009, a little over 2 years prior to INIC's first notice. This notice, therefore, breached INIC's policy conditions" (id., exhibit X).
On February 14, 2014, Eurotech commenced the instant declaratory judgment action against INIC and Structure Tone, in which it seeks, inter alia, a declaratory judgment that INIC has a duty to defend and indemnify Eurotech in the McGinty action, to which plaintiff was impleaded as a third-party defendant. Issue since has been joined, and INIC now moves for summary judgment declaring that INIC is not obligated to defend or indemnify Eurotech with respect to the McGinty and/or related third-party action.
Eurotech later filed a first amended complaint on October 9, 2014, and a second amended complaint on November 14, 2014. --------
DISCUSSION
It is well settled that "[t]he proponent of a summary judgment motion must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to eliminate any material issues of fact from the case" (Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853 [1985]). "Failure to make such prima facie showing requires a denial of the motion, regardless of the sufficiency of the opposing papers" (Alvarez v Prospect Hosp., 68 NY2d 320, 324 [1986], citing Winegrad, 64 NY2d at 853). Once the movant's burden is met, the burden shifts to the party opposing the motion to "present evidentiary facts in admissible form sufficient to raise a genuine, triable issue of fact" (Mazurek v Metropolitan Museum of Art, 27 AD3d 227, 228 [1st Dept 2006]; see also Zuckerman v City of New York, 49 NY2d 557, 562 [1980]).
As this action involves a commercial umbrella policy that was issued in 2006, the 2008 amendments to Insurance Law § 3420, which provide that an insurer must prove prejudice to invalidate coverage where the notice of a claim is provided within two years, do not apply to this coverage dispute (see Ponok Realty Corp. v United Natl. Specialty Ins. Co., 69 AD3d 596, 596-587 [2d Dept 2010] [2008 amendments to statute are effective only for policies issued on or after January 17, 2009]).
Under the law that governs this dispute, it is well settled that compliance with the notice provisions of a liability insurance policy is a condition precedent to coverage, and that " [a]bsent a valid excuse, a failure to satisfy the notice requirement vitiates the policy . . . and the insurer need not show prejudice before it can assert the defense of noncompliance'" (see American Home Assur. Co. v International Ins. Co., 90 NY2d 433, 440 [1997], quoting Security Mut. Ins. Co. of NY v Acker—Fitzsimons Corp., 31 NY2d 436, 440 [1972]). The rule is applicable to excess as well as to primary carriers ( id. at 443).
Our courts have recognized that, except if otherwise provided by the terms of an excess policy (see e.g. Ambra v Awad, 62 AD3d 732, 734 [2d Dept 2009]), the obligation to notify an excess insurer differs somewhat from the obligation to notify a primary insurer (Olin Corp. v Insurance Co. of N. Am., 743 F Supp 1044, 1054 [SD NY 1990], affd 929 F2d 62 [2d Cir 1991]). Where notice to an excess or umbrella liability carrier is at issue, "the focus is on whether the insured reasonably should have known that the claim against it would likely exhaust its primary insurance coverage and trigger its excess coverage, and whether any delay between acquiring that knowledge and giving notice to the excess carrier was reasonable under the circumstances" (National Union Fire Ins. Co. of Pittsburgh, Pa. v. Connecticut Indem. Co., 52 AD3d 274, 276 [1st Dept 2008]; Morris Park Contr. Corp. v National Union Fire Ins. Co. of Pittsburgh, Pa., 33 AD3d 763, 765 [2d Dept 2006]). The issue of when an insured reasonably should have known that the claim against it would likely exhaust its primary insurance coverage is dependent on the facts of each case.
INIC argues that its motion for summary judgment should be granted because the evidence establishes that Eurotech failed to provide it with timely notice of the McGinty/third-party action, and also failed to timely forward copies of the complaints and other legal papers to INIC. INIC notes that Eurotech first learned of the McGinty action no later than September 21, 2009, when the Structure Tone parties served Eurotech with the third-party summons and complaint. However, Eurotech did not provide INIC with notice of the McGinty action until the February 8, 2012, and failed to provide INIC with a copy of the summons and complaint in the third-party action until March 1, 2012.
INIC argues that Eurotech also failed to notify INIC, as soon as practicable, that the McGinty claim likely would exhaust QBE's primary insurance coverage, and trigger INIC's excess coverage. INIC argues that Eurotech reasonably should have known, no later than November 3, 2010, that McGinty's claim likely would exhaust the QBE primary policy limits, based upon the detailed information regarding the severity and extent of McGinty's injuries, and the itemization of damages, that were provided to the parties in McGinty's August 6, 2009 bill of particulars and November 3, 2010 deposition testimony. INIC argues that Eurotech's failure to notify INIC until February 8, 2012 that its policy might be implicated breached the policy's provision requiring notice, as soon as practicable, of a claim or suit reasonably likely to involve the umbrella policy.
Eurotech argues that INIC's motion for summary judgment should be denied because its February 8, 2012 notice to INIC was not untimely. Eurotech argues that the obligation to notify an excess carrier is not triggered until there is some substantiation or evidence that exhaustion of the primary liability policy will occur. Thus, Eurotech was not required to notify INIC that its umbrella policy could be reached until McGinty had "produced credible facts and/or evidence that the primary policy would not support any possible damages that could be awarded under" the facts of this case (Eurotech's memorandum of law in opposition at 12).
Eurotech argues that McGinty's August 6, 2009 and June 6, 2011 bills of particulars, and McGinty's November 3, 2010 deposition testimony, were "devoid of any facts or evidence that would present a reasonable ground to conclude that the primary policy could not cover any damages that could be awarded under these facts" ( id.), and thus did not provide Eurotech with a reasonable basis to notify INIC that its policy would be implicated. Eurotech argues that, although McGinty had provided details about his injuries and treatments, the total amount of the expenses that McGinty claimed to have incurred for his treatments fell well within the QBE policy limits. Moreover, McGinty had testified that his medical bills had been paid by Blue Cross-Blue Shield, and that he had received Medicare and/or Medicaid benefits. Eurotech argues that, because McGinty's total treatment expenses could not be ascertained at that time, it had no basis to determine that the INIC umbrella coverage could reasonably have been invoked.
Eurotech contends that it was not until August 22, 2012, the date on which McGinty's attorneys allegedly provided the parties with an expert report and analysis of McGinty's damages, that Eurotech first became aware that the quantum of damages claimed by McGinty would exceed the limits of the QBE primary policy. Eurotech contends that until it received this expert analysis substantiating the possibility that the primary policy would be exhausted it could not reasonably have concluded that the primary policy limits would be exceeded, and thus was not required to notify INIC that McGinty's claim was likely to reach INIC's umbrella policy. Thus, Eurotech claims that, because its obligation to provide notice to INIC did not arise until August 22, 2012, Eurotech's February 8, 2012 notice could not have been untimely.
Eurotech argues that its decision to provide INIC with notice as of February 8, 2012 was based solely on its "apprehension of the enhancement of the claim" (Plaintiff's memorandum of law in opposition at 9), which had resulted from certain "unsubstantiated claims made by McGinty's attorneys concerning the extent of the damage claim" (id. at 10). Eurotech argues, however, that such unsubstantiated claims did not provide Eurotech with reasonable grounds to notify INIC that exhaustion of the primary policy would occur. Nevertheless, Eurotech did conclude, after conducting a thorough examination of the McGinty claim, that it would be reasonable to provide notice to INIC of the possibility that the QBE primary policy might become exhausted, and that INIC's umbrella policy might be implicated. Eurotech argues that, in providing INIC with notice of the possibility that its policy could be breached, well before McGinty had produced credible evidence that the INIC umbrella policy would be triggered, Eurotech had provided adequate notice to INIC.
In any event, Eurotech argues that the issue of whether an obligation to provide notice of a claim or suit has been triggered, and the issue of whether any delay in providing such notice is reasonable, are generally issues of fact that preclude the granting of summary judgment. Eurotech argues that denial of INIC's motion for summary judgment further is warranted because INIC's March 1, 2012 letter disclaiming coverage, which Eurotech received on March 2, 2012, 22 days after Eurotech's notice to INIC, also was untimely.
Defendant Structure Tone also opposes INIC's motion for summary judgment. Structure Tone argues that, because it has received nothing by way of discovery related to Eurotech's tender to INIC, or INIC's handling and response to Eurotech's tender, summary judgment would be premature. In any event, Structure Tone argues that INIC's motion should be denied because: (1) it was not determined that McGinty's claim would exceed QBE's policy limit until Rockville's February 1, 2012 letter to INIC; and (2) given that INIC had known of the McGinty matter since the 2009 declaratory judgment action, INIC's delay in disclaiming Eurotech's request for coverage was unreasonable as a matter of law.
INIC's motion for summary judgment is granted.
In support of its motion, INIC has produced evidence sufficient to establish that Eurotech knew or should have known that it was reasonably likely that McGinty's claim would exceed the one million dollar QBE primary policy limit by no later than November 3, 2010, the date of McGinty's deposition, or, in any event, no later than June 6, 2011, the date of McGinty's supplemental bill of particulars.
While Eurotech contends that it did not receive evidence substantiating the possibility that the primary policy would be exhausted until August 22, 2012, Eurotech does not claim that it was unaware of the severity of McGinty's injuries, or of the itemized amounts that McGinty was claiming as damages for lost earnings and benefits, in addition to the damages for McGinty's medical treatment expenses, by November 3, 2010 (see Morris Park Contracting Corp., 33 AD3d at 765 [it is a combination of the ad damnum figure and evidence regarding the seriousness of the injuries which triggers the obligation to provide notice]). Here, the severity of McGinty's injuries was made clear from the evidence of McGinty's multiple surgeries, including two total knee replacements, and extended physical rehabilitations described in McGinty's August 9, 2009 bill of particulars and November 3, 2010 deposition testimony. Additionally, the likelihood that future surgeries would be necessary was set forth in McGinty's June 6, 2011 supplemental bill of particulars. Moreover, McGinty had testified that, as a result of his accident, he had been rendered totally disabled from further employment at age 47. Thus, even if the medical treatment expenses that McGinty was claiming as damages would have fallen well within QBE's primary policy limits, McGinty's claims for past and future lost earnings, and probable damages for pain or suffering, made it likely that McGinty's damages would exceed QBE's $1,000,000 primary policy limit.
Nevertheless, Eurotech argues that any possible delay, on its part, in providing notice to INIC was not unreasonable, given Eurotech's reasonable belief/position that INIC's umbrella coverage was not triggered until McGinty's expert had issued its report analyzing McGinty's alleged damages. Generally, "[w]here an excuse or explanation is offered for delay in furnishing notice, the reasonableness of the delay and the sufficiency of the excuse are matters to be determined at trial" (Travelers Ins. Co. v Volmar Constr. Co., 300 AD2d 40, 42 [1st Dept 2002] [quotation marks and internal citations omitted]). "However, where there is no excuse or mitigating factor, the issue poses a legal question for the court, and courts have found relatively short periods to be unreasonable as a matter of law" (id. [citations omitted]).
Here, the INIC policy requires, inter alia, that Eurotech provide notice "as soon as is practicable" of any claim or suit "which is reasonably likely to involve this policy" (Padua affirmation, exhibit A). Thus, these terms obligated Eurotech to provide notice to INIC when it became clear that a potential excess claim was likely to involve the INIC policy, and not just when there was evidence or substantiation that the primary policy was or would be exhausted.
Moreover, it is clear that Eurotech, or the representative acting on its behalf, had concluded that the INIC umbrella likely would be implicated by no later than February 1, 2012, the date when Rockville issued the notice to INIC stating that "it is probable that the value of [the McGinty] matter will exceed the primary policy limit" (Padua affirmation, exhibit Q). Although Eurotech states that this notice stemmed from certain "unsubstantiated claims made by McGinty's attorneys concerning the extent of the damage claim" (Eurotech memorandum of law in opposition at 10), Eurotech does not identify or particularize the source or nature of those claims. Nor does Eurotech identify or describe any specific information or evidence, other than that with which it already was in possession as of June 6, 2011, which would explain or excuse the delay in waiting until February 8, 2012, to inform INIC that its policy might be implicated.
Alternatively, Eurotech argues that INIC's motion for summary judgment should be denied because INIC's March 1, 2012 disclaimer also was untimely, and thus ineffective.
Insurance Law § 3420 (d) (2) provides that an insurer wishing to deny coverage for death or bodily injury must "give written notice as soon as is reasonably possible of such disclaimer of liability or denial of coverage." "When an insurer fails to do so, it is precluded from disclaiming coverage based upon late notice, even where the insured has in the first instance failed to provide the insurer with timely notice of the accident" (Hunter Roberts Constr. Group, LLC v Arch Ins. Co., 75 AD3d 404, 408—09 [1st Dept 2010]).
Eurotech argues that INIC's March 1, 2012 disclaimer was untimely, because INIC admittedly had known of the McGinty claim and legal action since December 2009, as a result of the 2009 declaratory judgment action in which the Structure Tone parties had sought coverage from INIC, as additional insureds, with respect to the McGinty action. Thus, Eurotech appears to argue that, based on this prior knowledge, INIC should have known of the grounds for disclaiming coverage to Eurotech in this action. Therefore, INIC's delay in disclaiming Eurotech's request for coverage, which measured 22 days from Eurotech's notice to INIC and approximately two years and three months after INIC first had learned of the McGinty claim and action, was unreasonable as a matter of law, and rendered the disclaimer ineffective.
The " timeliness of an insurer's disclaimer is measured from the point in time when the insurer first learns of the grounds for disclaimer of liability or denial of coverage'" (First Fin. Ins. Co. v Jetco Contr. Corp., 1 NY3d 64, 68-69 [2003], quoting Matter of Allcity Ins. Co. [Jiminez], 78 NY2d 1054, 1056 [1991]). "An insurer who delays in giving written notice of disclaimer bears the burden of justifying the delay" (id. at 69). " The reasonableness of any delay in disclaiming coverage must be judged from that point in time when the insurer is aware of sufficient facts to issue a disclaimer'" (Travelers Ins. Co., 300 AD2d at 44, quoting Generali-U.S. Branch v Rothschild, 295 AD2d 236, 237 [1st Dept 2002]). Where the basis for the denial of coverage was, or should have been, readily apparent before the onset of the delay, an insurer's explanation of the delay will be insufficient as a matter of law (First Fin. Ins. Co., 1 NY3d at 69; Bovis Lend Lease LMB, Inc. v Royal Surplus Lines Ins. Co., 27 AD3d 84, 88 [1st Dept 2005]).
Although INIC may have first learned of the McGinty action when it received notice from the Structure Tone parties in connection with their 2009 declaratory judgment action, INIC had no basis on which to disclaim coverage to Eurotech until it received Eurotech's request for coverage with respect to the third-party action (Travelers Ins. Co., 300 AD2d at 45). Moreover, Eurotech's own duty to provide notice to INIC was not negated by INIC's actual knowledge acquired from another source (see Ocean Partners, LLC v North Riv. Ins. Co., 25 AD3d 514, 515 [1st Dept 2006]). Thus, any delay by INIC in disclaiming coverage to Eurotech must be measured, at its earliest, from February 8, 2012, the date that INIC received the letter from Rockville.
Although receipt of the Rockville letter, on February 8, 2012, was sufficient to put INIC on notice that the value of the McGinty matter likely would exceed the QBE primary policy limit, the letter makes no reference to the third-party action against Eurotech, nor indicates that the notice pertains to coverage of a potential excess third-party claim against Eurotech. While the letter does make express reference to the underlying McGinty action, Eurotech was not a party to that action until the filing of the third-party complaint. Nor did Eurotech provide INIC with a copy of the summons and complaint in that third-party action until March 1, 2012. The record reflects that INIC issued its disclaimer of coverage that same day.
As the letter from Rockville contained no reference to the third-party action against Eurotech, nor provided INIC with a copy of the third-party summons and complaint, the grounds for disclaiming Eurotech's request for excess coverage were not readily apparent from the face of that notice. Thus, until such time as Eurotech apprised INIC of the third-party claims for which Eurotech was seeking potential excess coverage, INIC would not have been aware of sufficient facts upon which to base its decision to disclaim that request. As INIC has established that it disclaimed coverage within 22 days of first receiving the notice indicating that the value of the McGinty matter would likely exceed the QBE primary policy limits, and within one day of being provided with a copy of the summons and complaint in the third-party action for which Eurotech was seeking excess coverage, INIC's disclaimer was not untimely.
Accordingly, it is
ORDERED that the motion by defendant Illinois National Insurance Company for summary judgment with respect to the complaint's first declaratory judgment cause of action is granted, with costs and disbursements to defendant as taxed by the Clerk, and it is further
ADJUDGED and DECLARED that defendant Illinois National Insurance Company is not obligated to defend or indemnify plaintiff with respect to the personal injury action pending in the New York State Supreme Court, Bronx County, captioned Thomas McGinty v Structure Tone Inc., Silverstein Properties, Inc., 7 World Trade Company, L.P. and Moody's Corporation, index No. 307933/2008, to which plaintiff subsequently was impleaded via a third-party action, captioned Structure Tone, Inc., Silverstein Properties, Inc., 7 World Trade Center Company, L.P. and Moody's Corporation v Eurotech Construction Corp., index No. 84116/2009; and it is further
ORDERED that the remainder of this action is severed and will continue as to the remaining defendant; and it is further
ORDERED that counsel for the remaining parties are directed to appear for a compliance conference in Part 43, Room 581, 111 Centre Street, on February 25, 2016, at 9:30 AM. DATED: January 29, 2016 ENTER: _______________________ J.S.C.