Opinion
12226/09.
Decided February 15, 2011.
Plaintiffs Attorney: Michael Treybich, Esq., Tsyrgauz Associates, PC, Defendants Attorney: Pauline E. Glaser, Nicoletti, Gonson, Spinner Owen, LLP, Gennady Fedorov, Esq., Levine Slavit.
Defendant United States Liability Insurance Company (d/b/a U.S. Underwriters Insurance Company (United) moves, pursuant to CPLR 3212, for summary judgment dismissing plaintiff Orange Grill Restaurant Corporation's (Orange Grill) complaint against it. Orange Grill cross-moves for a judgment declaring that United is obligated to defend and indemnify Orange Grill in the lawsuit entitled Gennady Fedorov v Orange Grill Restaurant Corporation pending in Kings County, Supreme Court under Kings County Index No. 20740/08 (the underlying action).
Facts and Procedural Background
On February 10, 2008, Gennady Fedorov, the plaintiff in the underlying action, allegedly sustained injuries while dancing with a group of friends at the Orange Grill. In this regard, Dennis Gromov, the vice president and floor manager of the Orange Grill, testified at his deposition and states in his affidavit that while this group was dancing, he observed Mr. Fedorov clutch his leg and fall after one of people in the group jumped and accidently landed on his ankle. Mr. Gromov then approached Mr. Fedorov and helped him into a chair. Ultimately, an ambulance was summoned to the Orange Grill and Mr. Fedorov was placed on a stretcher and taken to the hospital.
At the time of the incident, Orange Grill was insured under a liability policy issued by United. However, Orange Grill failed to notify United of the incident after it occurred. On or about July 15, 2008, Mr. Fedorov commenced the underlying personal injury action against Orange Grill. The underlying complaint alleges that Mr. Federov was injured when he slipped an fell on the dance floor and that Orange Grill was negligent in permitting slipping hazards to remain on the dance floor including pieces of glass, glitter and confetti. After being served with the summons and complaint, Orange Grill delivered them to its insurance broker, who had procured its liability policy with United. However, the broker failed to deliver the pleadings to United. Thereafter, Orange Grill received a letter from Mr. Fedorov's attorney, warning that it was in default in the underlying action. Orange Grill then retained a new insurance broker and directed that it notify United of the claim and lawsuit. On January 22, 2009, United received a fax from Fairmont Insurance notifying it of the underlying action.
In a January 23, 2009 disclaimer letter sent to Orange Grill, United acknowledged receipt of the summons and complaint in the underlying action and advised Orange Grill that it was denying coverage and would not provide it with a defense in that action pursuant to the terms of its policy. The letter noted that the underlying incident took place on February 10, 2008 and that United did not receive notice of the incident until January 22, 2009. The letter further set forth a portion of the liability conditions of the policy which provided that the insured "must see to it that [United is] notified as soon as practicable of an occurrence' or offense which may result in a claim" and that, in the event a claim or suit is brought against the insured, said insured must "[n]otify [United] as soon as practicable" and "[i]mediately send us copies of any . . . legal papers received in connection with the claim or suit.'" Thereafter, the letter stated that the "claim is being denied to Orange Grill . . . under the Commercial General Liability Coverage part for failure to comply with the above policy conditions."
Finally, the letter set forth the conditions of the liquor liability conditions of the policy, which included similar provisions requiring that the insured notify United regarding potential claims as well lawsuits. Thereafter, the letter stated that "to the extent liability arises from the sale, service or furnishing of alcoholic beverages . . . [United is] denying coverage to Orange Grill . . . under the Liquor Liability Coverage Part for failure to comply with the policy conditions listed above.
By summons and complaint dated May 18, 2009, Orange Grill commenced the instant action against United seeking a judgment declaring that it was obligated to defend and indemnify Orange Grill in the underlying action. The instant motions are now before the court.
United's assertions
In support of its motion for summary dismissing the complaint, United initially notes that, under the terms of its policy, Orange Grill had a duty to notify it of any potential claim as well as any lawsuits commenced against Orange Grill as soon as practicable. United further points to the fact that Orange Grill's floor manager became aware of the underlying incident as soon as it occurred and actually witnessed Mr. Fedorov being removed from the premises on a stretcher and taken away in an ambulance, but Orange Grill failed to notify United of this potential claim. In addition, United notes that Orange Grill did not notify United of the underlying action and that United did not receive any notice of the action until six months after it was commenced.
Accordingly, United maintains that it had every right to disclaim coverage based upon both Orange Grill's failure to notify it of Mr. Fedorov's potential claim as well the underlying action, as required under the terms and conditions of the policy. Additionally, United points to the fact that it disclaimed coverage within one day of learning of the underlying claim and action. Finally, United contends that its disclaimer letter set forth the basis for its disclaimer in specific detail as required under Insurance Law § 3420 (d). Under the circumstance, United maintains that Orange Grill's declaratory judgment action must be dismissed.
Orange Grill's assertions
In opposition to United's motion, and in support of its own cross motion for a judgment declaring that United is obligated to defend and indemnify it in the underlying action, Orange Grill raises several arguments. In particular, with respect to United's claim that it failed to provide timely notice of the underlying incident, Orange Grill maintains that its failure to provide such notice is excusable inasmuch as it had a good faith belief in non-liability. In support of this argument, Orange Grill points to Dennis Gromov's affidavit and deposition testimony. In particular, Mr. Gromov testified that he witnessed the accident and saw that Mr. Fedorov's injuries were caused by one of his friends, who accidently jumped on his ankle. Mr. Gromov further testified that this friend acknowledged that the accident was his fault and repeatedly apologized to Mr. Federov. Under the circumstances, Orange Grill maintains it had a good faith basis for its belief in non-liability inasmuch as neither Mr. Federov nor his friend had any connection with Orange Grill other than being patrons at the establishment.
In further support of its cross motion, Orange Grill argues that the letter issued by United failed to apprise it of the grounds upon which United was disclaiming coverage with the high degree of specificity required under Insurance Law § 3420 (d). Specifically, Orange Grill maintains that the disclaimer letter does not state anywhere that the notice provided by Orange Grill to United was untimely. Orange Grill also maintains that there is no merit to United's claim that it failed to provide United with notice of the underlying lawsuit "as soon as practicable." In this regard, Orange Grill notes that, as soon as it received the summons and complaint in the underlying action, it notified the insurance broker who procured the policy and requested that it forward copies of the summons and complaint to United. According to Orange Grill, its actions in this regard must be taken into account in determining whether notice was given as soon as practicable. In particular, Orange Grill avers that after it delivered the pleadings to the insurance broker, it had a reasonable belief that United had been notified of the law suit. Finally, Orange Grill argues that United was not prejudiced by any late notice of the law suit.
Gennady Fedorov's assertions
Mr. Fedorov, the plaintiff in the underlying action and a defendant in the instant action, also opposes United's motion. In particular, Mr. Federov echos Orange Grill's argument that United's disclaimer letter failed to appraise the insured of its basis for disclaiming with the high degree of specificity required under Insurance Law § 3420 (d). In addition, Mr. Fedorov argues that United's disclaimer is invalid against him inasmuch as the disclaimer letter was based solely upon Orange Grill's failure to timely notify United of the underlying claim and lawsuit and failed to mention anything at all with respect to Mr. Fedorov's notification of the claim.
United's oppsition
In opposition to Orange Grill's cross motion, United argues that, as a matter of law, Orange Grill did not have a good faith belief in non-liability given the fact that Mr. Gromov, the vice president and floor manager of Orange Grill, witnessed Mr. Fedorov being removed from the premises by an ambulance immediately after the underlying incident occurred. Further, United maintains that Mr. Gromov's professed belief that the accident was the fault of one of Mr. Fedorov's friends is insufficient to raise an issue of fact as to whether Orange Grill had a good faith belief in non-liability. In any event, United avers that Mr. Gromov's claim regarding his belief in non-liability is belied by his own deposition testimony, wherein he stated that he contracted his insurance broker shortly after the accident and told the broker what had transpired. In addition, United maintains that its disclaimer letter was sufficiently specific to apprise Orange Grill as to the basis for the disclaimer. Finally, United argues that there is no merit to Mr. Fedorov's claim that United's disclaimer is invalid as against him. In this regard, United argues that it had no duty to directly disclaim against Mr. Fedorov since he did not provide timely notice of the underlying claim and fails to even allege that he acted diligently in attempting to learn the identity of Orange Grill's liability carrier.
Discussion
It is well-settled that, "[w]here a policy of liability insurance requires that notice of an occurrence be given as soon as practicable,' such notice must be accorded the carrier within a reasonable period of time" ( Great Canal Realty Corp. v Seneca Ins. Co., Inc. , 5 NY3d 742 , 743). Further, "the insured's failure to satisfy the notice requirement constitutes a failure to comply with a condition precedent which, as a matter of law, vitiates the contract'" ( id. at 743, quoting Argo Corp. v Greater NY Mut. Ins. Co. , 4 NY3d 332 , 339). Thus, "the carrier need not show prejudice before disclaiming based on the insured's failure to timely notify it of an occurrence" ( Great Canal Realty Corp., 5 NY3d at 743).
However, even a delay in providing notice which, on its face, is unreasonable, may be excused "[i]f the insured did not know about the accident, or had a reasonable belief in nonliability'" ( Avery Avery, P.C., v American Ins. Co. , 51 AD3d 695 , 697, quoting White v City of New York, 81 NY2d 955, 957). "In general, the existence of a good faith belief that the injured party would not seek to hold the insured liable, and the reasonableness of such belief, are questions of fact for the fact-finder" ( Bigman Bros. v QBE Insurance Corp. , 73 AD3d 1110 , 1111). Nevertheless, "the insured has the burden of showing the reasonableness of the excuse" and the failure to meet this burden may result in an award of summary judgment to the insurer ( Avery Avery, 51 AD3d at 697).
As a final matter, pursuant to Insurance Law § 3420 (d), "[a] notice of disclaimer must promptly apprise the claimant with a high degree of specificity of the ground or grounds on which the disclaimer is predicated" ( Adames v Nationwide Mut. Fire Ins. Co. , 55 AD3d 513 , 515). Accordingly, "an insurer waives any ground for denying coverage that is not specifically asserted in its notice of disclaimer, even when that ground would otherwise have merit" ( id. at 515). In the instant case, the underlying occurrence took place on February 10, 2008 and Orange Grill's vice president became aware of this incident as soon as it occurred. Nevertheless, United was not provided with notice of the occurrence until January 22, 2009, when it was provided with a copy of the summons and complaint in the underlying lawsuit. This nearly one-year delay in providing notice of the occurrence was unreasonable as a matter of law ( Ponok Realty Corp. v United Nat. Specialty Ins. Co., 69 AD3d 596597-598 [2010]). Consequently, the burden shifts to Orange Grill to demonstrate that it had a reasonable belief in nonliability.
Even construing all inferences in favor of the insured, as the court must, Orange Grill has failed to meet its burden of demonstrating a good faith belief in non-liability. It is undisputed that Orange Grill's vice president witnessed Mr. Fedorov being removed from the premises on a stretcher to a waiting ambulance shortly after he was injured ( Balbert v 302 96th Street Owners Corp. , 77 AD3d 779 , 780; Tower Ins. Co. of NY, 50 AD3d 305, 308). Moreover, the sole basis for Orange Grill's professed belief in non-liability rests upon Mr. Gromov's lay assessment that, because Mr. Fedorov was injured when one of his friends jumped on his ankle, there was no reasonable probability that he would bring suit against Orange Grill. However, in determining the reasonableness of an insured's belief in non-liability, courts should not place "undue emphasis on the liability assessment of one not trained or even knowledgeable in such matters" ( Paramount Ins. Co. v Rosedale Gardens, 293 AD2d 235, 240; see also Balbert, 77 AD3d at 780; Tower Ins. Co. of NY, 50 AD3d at 308). Finally, Mr. Gromov's professed belief in non-liability is contradicted by his own deposition testimony. Specifically, Mr. Gromov testified that on the Monday following the incident, which occurred on a Saturday night, he telephoned his insurance broker and told him "everything" that occurred. Although Mr. Grovov also testified that "I was sure that nothing will happen because his friend who step[ped] on his knee . . . its their fault." The fact that he took the trouble to contact Orange Grill's insurance broker regarding the incident undercuts this claim. It is undisputed that Orange Grill's insurance broker did not notify United regarding the incident after speaking with Mr. Gromov. In any event, "[w]here a broker is an agent of the insured, notice to the broker cannot be deemed notice to the insurer" ( 120 Whitehall Realty Assoc., LLC v Hermitage Ins. Co. , 40 AD3d 719, 717).
The court next addresses the adequacy of United's notice of disclaimer since, notwithstanding Orange Grill's failure to provide timely notice of the underlying occurrence, United will be deemed to have waived its right to disclaim on this basis unless its notice of disclaimer apprised Orange Grill of these grounds for disclaimer with the high degree of specificity required under Insurance Law § 3420 (d). In order to satisfy the "high degree of specificity" requirement, the disclaimer notice must identify the policy exclusion or condition upon which the insurer is relying, as well as the factual basis for the insurer's position that the coverage condition has not been met or the exclusion is applicable ( Massot v Utica First Ins. Co. , 36 AD3d 499, [2007]; Realm Nat. Ins. Co. v Hermitage Ins. Co. , 8 AD3d 110, 111). Here, to the extent that it relies upon Orange Grill's failure to provide it with notice of the underlying incident, United's notice of disclaimer apprised its insured with the required high degree of specificity of its grounds for disclaiming. Specifically, the disclaimer letter initially notes that Mr. Fedorov fell at the Orange Grill on February 10, 2008, that he was taken from the premises by an ambulance for the injuries he allegedly sustained, and that United did not receive notice of this incident until January 22, 2009. Thereafter, the letter notes that United's liability policy insures Orange Grill subject to certain terms, conditions and exclusions. The disclaimer letter then reproduces that portion of the conditions section of United's liability policy which requires, in part, that the insured "must see to it that we are notified as soon as practicable of an occurrence' or offense, which may result in a claim." Finally, immediately following the cited conditions, the notice of disclaimer specifically states that "[t]his claim is being denied to Orange Grill . . . under the Commercial General Liability Coverage part for failure to comply with the above policy conditions." Thus, the disclaimer notice sets forth both the policy condition upon which United is relying ( i.e., the requirement that the insured provide notice of an occurrence as soon as reasonably practicable) and the factual basis for United's reliance upon this condition ( i.e., Mr. Fedorov was injured and removed from the premises in an ambulance on February 10, 2008 but United was not notified of this occurrence until January 22, 2009).
As a final matter, there is no merit to Mr. Fedorov's separate argument that United's notice of disclaimer is invalid as against him inasmuch as it only referenced Orange Grill's failure to provide notice of the underlying incident. It is true, as Mr. Fedorov asserts, that an injured party has an independent right to notify an insurance carrier of an accident ( see Insurance Law § 3420 [a][3]). Further, when an injured party provides such notice, the insurer must specifically disclaim against the injured party ( Legion Ins. Co. v Weiss, 282 AD2d 576). However, "the injured party is required, in order to rely upon that provision, to demonstrate that he or she acted diligently in attempting to ascertain the identity of the insurer, and thereafter expeditiously notified the insurer" ( Steinberg v Hermitage Ins. Co. , 26 AD3d 426 , 428). Here, Mr. Fedorov never provided United with notice of the incident or his claim, nor does Mr. Fedorov does allege that he made diligent efforts in attempting to ascertain the identity of Orange Grill's insurer.
Accordingly, United's motion for summary judgment dismissing Orange Grill's action against it is granted. Orange Grill's cross motion for a judgment declaring that United is obligated to defend and indemnify it in the underlying action and for attorney's fees and costs is denied. A judgment is to be entered declaring that United is not obligated to defend and indemnify Orange Grill in the underlying action.
This constitutes the decision, order, and judgment of the court.