Opinion
117927/09
11-01-2011
Hernan Santa Jr., Israel Ernesto Lugo, Alexander Santana, and Freddy Alvarez Jr., Plaintiffs, v. Capitol Specialty Insurance, Ltd., Redland Insurance, Ltd., Azure Nightclub, Inc., d/b/a Club Plaid, Defendants.
For Plaintiffs: Miller & Eisenman, LLP For Respondent: Havkins Rosenfel Ritzert & Varriale, LLP
For Plaintiffs: Miller & Eisenman, LLP
For Respondent: Havkins Rosenfel Ritzert & Varriale, LLP
Saliann Scarpulla, J.
In this action for a declaratory judgment, plaintiffs Hernan Santa Jr., Israel Ernesto Lugo, Alexander Santana and Freddy Alvarez Jr. (collectively "plaintiffs") move for summary judgment against defendants Capitol Specialty Insurance, Ltd. ("Capitol"), Redland Insurance, Ltd. ("Redland") and Azure Nightclub, Inc. d/b/a Club Plaid ("Azure") (collectively "defendants"). Plaintiffs argue that Capitol and Redland must make their full insurance policies available in plaintiffs' underlying personal injury action against Azure. Defendants cross-move for summary judgment, arguing that a $50,000 sub-limit applies to Capitol's policy and that Redland's excess policy is unavailable. Defendants also move for dismissal of the action against Azure.
This action arises from an alleged assault on plaintiffs in Club Plaid, a Manhattan nightclub, on November 13, 2004. Plaintiffs commenced the underlying personal injury action against Azure on August 29, 2005. On November 16, 2005, the third-party claims administrator of Capitol and Redland, Insurance Designers of Maryland ("IDMD), received the summons and complaint. The complaint described the claim in detail, including that it arose from an alleged assault. It also listed plaintiffs' names and their attorney's contact information.
On August 14, 2006, approximately nine months after IDMD received the complaint, Azure served a Response to a Preliminary Conference Order on plaintiffs' attorney. The response stated:
At the time of the alleged incident, AZURE NIGHTCLUB, INC., d/b/a PLAID CLUB was insured under a policy of insurance issued by Capitol Specialty, Ltd under policy number 3001691 effective from December 18, 2003 through December 18, 2004 with coverage limits of $1,000,000 per occurrence, a general aggregate of $2,000,000 and an assault and battery sub-limit of $50,000. There is an excess liability policy of $4,000,000 per occurrence and a general aggregate of $4,000,000 subject to a self-insured retention of $10,000.
This response was the first time plaintiffs became aware of the assault/battery sub-limit. Plaintiffs' counsel immediately notified defendants' counsel that he believed the notice was untimely. Nevertheless, plaintiffs proceeded with the underlying litigation.
When the action was called for trial on May 26, 2009, defendants' counsel asserted that there was no coverage available because the $50,000 sub-limit in the Capitol policy had been exhausted in litigation costs and the Redland excess insurance was not available. On July 29, 2009, the parties stipulated to have the case marked off the trial calendar to allow plaintiffs to file this declaratory judgment action to determine the available insurance limits. The stipulation stated the following:
Plaintiffs may file in Supreme Court, New York County, a declaratory judgment action in connection with the scope of insurance coverage available to the defendant under a policy of insurance number 3001687 issued to Azure, Inc. by Capitol Specialty, Ltd.. . .
Capitol's policy, effective December 18, 2003 through December 18, 2004, provided liability coverage with a $1,000,000 per occurrence limit and a $2,000,000 general aggregate limit. The policy included a sub-limit of $50,000 per occurrence for assault and battery claims.
Redland's excess policy, also effective December 18, 2003 through December 18, 2004, provided coverage with a per occurrence and aggregate limit of $4,000,000. The policy stated that it would apply "in like manner" (emphasis in original) as Capitol's policy. It also required as a condition for payment that Capitol "has paid the amount of underlying insurance stated in Declaration 5." Declaration 5 listed the underlying insurance as: "General Liability as provided by: Capitol Specialty, Ltd. $1,000,000 per Occur./$2,000,000 Agg." The Redland policy did not list any assault/battery exclusions or sub-limits.
Plaintiffs now move for summary judgment, arguing that Capitol must provide up to $1,000,000 in coverage because it did not give plaintiffs timely notice of its assault/battery sub-limit. In any event, plaintiffs maintain that Redland must make available the full $4,000,000 under its excess policy because that policy is triggered whether or not Capitol applied the $50,000 sub-limit on its underlying policy. Plaintiffs argue that there is no assault/battery sub-limit or exclusion in the Redland policy and Redland should be estopped from disclaiming coverage now. They further argue that the complaint against Azure should not be dismissed because Azure has an interest in this action.
In opposition, defendants argue that a disclaimer notice is not necessary here because Capitol is not denying coverage. They also argue that Redland's excess coverage is not available because it is only triggered once Capitol pays the full $1,000,000 under its policy. Moreover, Redland's policy would only pay out $50,000 because it arose from an assault claim and the Redland policy incorporated the Capitol policy assault/battery sub-limit. Further, defendants maintain that this Court does not have jurisdiction to determine the Redland policy's coverage because the stipulation initiating this declaratory judgment action only listed the Capitol policy. Finally, defendants argue that the Court should dismiss the complaint against Azure because Azure is not an insurer and therefore has no interest in the current action. Discussion
Defendants also argue that Insurance Law § 3420(d)(1)(B) does not apply because plaintiffs did not request sub-limit information and because the policies were issued prior to 2009. Because plaintiffs never alleged the applicability of Insurance Law § 3420(d)(1)(B) in their complaint, this Court need not address defendants' argument.
An insurer "disclaiming liability or denying coverage" must "give written notice as soon as is reasonably possible of such disclaimer of liability or denial of coverage to the insured and the injured person or any other claimant." Insurance Law § 3420(d)(2) (emphasis added). Failure to give timely notice precludes the insurer from denying coverage. JT Magen v. Hartford Fire Ins. Co., 64 AD3d 266, 268-69 (1st Dept. 2009); Worcester Ins. Co. v. Bettenhauser, 95 NY2d 185, 188 (2000).
While plaintiffs argue that defendants have violated Insurance Law § 3420(d)(2), this section of the Insurance Law is inapplicable because Capitol is not disclaiming liability or denying that insurance coverage is available for the underlying action. Indeed, Capital has offered the full measure of available insurance for the incident — $50,000. Therefore, notice of disclaimer is unnecessary. See Skanska USA Building, Inc. v. Arch Insurance Company, 2008 NY Slip Op 32424U, *11-12 (Sup. Ct. NY Co. 2008) (notice requirement does not apply to insurance endorsement limiting, but not denying, coverage). Plaintiffs cite Reliance Ins. Cos. v. Daly, 67 Misc 2d 23, 25 (Sup. Ct. Nassau Co. 1971) to support their argument that the assault/battery sub-limit amounts to an exclusion. But the insurance limit in Reliance was a statutory minimum, not a limitation included in the policy. Unlike Capitol, the insurer in Reliance was attempting to deny the entire benefit under that policy. Here, Capitol is not denying plaintiffs the benefit of insurance coverage at all.
Defendants' second argument, that Redland's excess policy is not an issue in this suit is unpersuasive. It is true that under Insurance Law § 3420(a), an injured party must secure a judgment against the tortfeasor and await payment for thirty days before bringing a declaratory action against a tortfeasor's insurer. See Lang v. Hanover Ins. Co., 3 NY3d 350, 352 (2004). The plaintiffs have not yet obtained a judgment. Also, the parties' stipulation concerning insurance coverage issues to be raised does not directly mention the Redland policy.
However, defendants do not dispute that both the Capitol policy and the Redland policy were at issue when the underlying action was marked off the calendar and this action was commenced. Moreover, plaintiffs in this action allege claims in their complaint in connection with both the Capitol and Redland policies. Defendants did not assert plaintiffs' lack of standing to assert the Redland policy claim in either their answer or in a pre-answer motion to dismiss. Redland thus waived any objection to adjudicating the availability of the Redland policy. See CPLR §§ 3211(a)(3), 3211(e); Lance Intl., Inc. v. First Natl. City Bank, 86 AD3d 479, 479 (1st Dept. 2011).
Though Redland's answer asserted that plaintiffs failed to state a cause of action, defendants' belated attempt to avoid litigation of the Redland policy relates not to Capitol's failure to state a cause of action under 3211(a)(7), but its inability to sue under Insurance Law § 3420(a). See Lance, 86 AD3d at 479.
Defendants argue that, in any event, Redland' policy is not available unless Capitol pays the full $1,000,000 under that policy. But the Redland policy does not state that full payment under Capitol's policy is a condition for payment of excess coverage. The Redland policy states that Redland would not be liable until the underlying insurer "paid the amount of underlying insurance stated in Declaration 5."
The dollar amounts in Declaration 5 are a description of the general maximum liability amount and do not include a $50,000 assault/battery negligence sub-limit. However, nowhere in the Capitol or Redland policy is there any indication that no excess coverage would be available for assault/battery negligence claims. As the Redland policy does not explicitly exclude assault/battery negligence claims, and "ambiguities in an insurance policy must be construed against the insurer," Thomas J. Lipton, Inc. v. Liberty Mut. Ins. Co., 34 NY2d 356, 361 (1974), the Redland policy must be construed as affording excess coverage for plaintiffs' claims after exhaustion of the $50,000 in primary coverage.
Further, Redland's policy must make full coverage available. The Redland policy states that it would apply "in like manner" as Capitol's policy but does not specifically set forth a $50,000 assault/battery sub-limit like that contained in the Redland policy. Policy exclusions or exceptions "must be specific and clear in order to be enforced" and may not "be extended by interpretation or implication . . ." Seaboard Surety Co. v. Gillette Co., 64 NY2d 304, 311 (1984). Because the Redland policy did not specify any exclusions or sub-limits, or reference any Capitol policy exclusions or sub-limits, it must make its full $4,000,000 coverage available.
Moreover, Redland may not argue this late in the litigation that its policy does not cover plaintiffs. Though estoppel generally cannot create coverage where there is none, if the policy covered the insured at the time of the loss and the insurer's inconsistent stance prejudiced the insured, the insurer may be estopped from denying coverage. See Gen. Accident Ins. Co. of Am. v. Metro. Steel Indust., 9 AD3d 254, 254 (1st Dept. 2004). Here, Redland provided a disclosure document that stated "[t]here is an excess liability policy of $4,000,000 per occurrence and a general aggregate of $4,000,000 . . ." Though Redland did not state specifically that $4,000,000 was available, its failure to indicate any sub-limit or precondition to coverage (as Capitol did with its policy) indicated that it was available. Further, allowing Redland to make this argument now would greatly prejudice plaintiffs, who may not have continued with the action if defendants had informed them that no excess coverage was available. See Gen. Accident Ins. Co. of Am., 9 AD3d at 254.
Finally, the Court grants Azure's motion to dismiss the complaint against it. "[I]f relief is not sought from a party, dismissal as to that party is in order." See Clarendon Place Corp. v. Landmark Ins. Co., 182 AD2d 6, 9 (1st Dept. 1992). In this action, plaintiffs are not seeking any relief from Azure, as it is not an insurer and has no control over insurance coverage.
In accordance with the foregoing, it is hereby
ORDERED that the part of the motion by plaintiffs Hernan Santa Jr., Israel Ernesto Lugo, Alexander Santana and Freddy Alvarez Jr. for summary judgment declaring the maximum policy coverage of defendant Redland Insurance, Ltd.'s excess insurance policy is granted as set forth above, and in all other respects the motion is denied; it is further
ORDERED that the part of the cross-motion by defendants Capitol Specialty Insurance, Ltd., Redland Insurance, Ltd and Azure Nightclub, Inc. d/b/a Club Plaid for summary judgment declaring the policy coverage of defendant Capitol Specialty Insurance, Ltd. to be $50,000 and for dismissal of the complaint against Azure Nightclub, Inc. d/b/a Club Plaid is granted, and in all other respects the motion is denied.
Settle judgment.
Dated:New York, New York
November, 2011
ENTER:
______________________
Saliann Scarpulla, J.S.C.