Opinion
No. 013526/11.
2013-01-31
SHANTS INC., Plaintiff, v. CAPITAL ONE N.A., MRW Group, Inc., Tower Insurance Company of New York, Defendants.
Gabriel Mendelberg, Esq., Law Offices of Gabriel Mendelberg, New York, Attorney for Plaintiff. Maryam Parvaneh, Esq., Lazer, Aptheker, Rosella & Yedid, P.C., Melville, Attorney for Defendant Capital One, N.A.
Gabriel Mendelberg, Esq., Law Offices of Gabriel Mendelberg, New York, Attorney for Plaintiff. Maryam Parvaneh, Esq., Lazer, Aptheker, Rosella & Yedid, P.C., Melville, Attorney for Defendant Capital One, N.A.
Debra M. Krebs, Esq., Robert W. Lewis, Esq., Keidel, Weldon & Cunningham, LLP, White Plains, Attorney for Defendant MRW Group, Inc.
Joseph S. Wiener, Esq., Law Office of Max W. Gershweir, New York, Attorney for Defendant Tower Insurance Company of New York.
DANIEL R. PALMIERI, J.
The motion by defendant MRW Group, Inc. (“MRW”) (seq. no. 002) pursuant to CPLR 3212 and, in effect, CPLR 3001, for summary judgment declaring that a certain fire insurance policy issued by co-defendant Tower Insurance Company of New York (“Tower”) was in full force and effect on March 11, 2011, the date of a fire at the plaintiff Shants, Inc. (“Shants”)'s premises and that Tower therefore owes coverage under the policy, and dismissing all claims asserted against MRW, is decided as set forth in this order.
The motion by defendant Capital One, N.A. (“Capital One”) (seq. no. 003) pursuant to CPLR 3025(b) to amend its answer to include, inter alia, additional affirmative defenses and cross claims against Tower and MRW, is decided as set forth in this order.
The cross motion by Tower (seq. no. 004) pursuant to CPLR 3211(a)(1) and (7) and CPLR 3212 to dismiss the complaint and all cross claims asserted against it is decided as set forth in this order.
The instant litigation arose from a fire on March 11, 2011, causing extensive damage to commercial premises owned by Shants, located at 157–163 Hempstead Avenue in West Hempstead, New York. Prior to the fire Shants had purchased a renewal commercial insurance policy which provided coverage for such a loss. The policy had been procured for Shants by MRW, its broker/agent, who did so through a non-party “producer”, Jersey Link, Inc.
On page 10 of the Declarations section the policy named GreenPoint Mortgage Funding (“GreenPoint”) as the insured's mortgagee, giving an address in Atlanta, Georgia. The policy had an effective date of August 17, 2010 and a one-year term, during which the fire occurred.
Jersey Link, Inc. and MRW are named as “producer” and “subproducer”, respectively in the Notice of Cancellation, discussed below.
However, on August 24, 2010, Tower sent a Notice of Cancellation (“Notice”). The Notice recited that the reason was nonpayment of the premium, that it was being issued pursuant to New York Insurance Law § 3426(c)(1)(a), and that cancellation would be effective at 12:01 a.m. on September 13, 2010. It also stated that “If the premium due is received by the cancellation effective date, your policy will remain in effect with no lapse of coverage.”
The Notice was sent to both Shants and to GreenPoint. Page 5 of an endorsement entitled “New York Changes—Cancellation and Nonrenewal” provides for notice in the event the policy is to be cancelled. In relevant part, it states as follows:
f. Cancellation
u(1) If we cancel this policy, we will give written notice to the mortgage holder at least:
(a) 10 days before the effective date of cancellation if we cancel for your nonpayment of premium
On August 31, 2010, between the mailing of the Notice and the effective date of the cancellation, MRW sent Tower a Commercial Policy Change Request to change the mortgagee from GreenPoint to Capital One, at a different address from GreenPoint's. It is undisputed that GreenPoint is a wholly-owned subsidiary of Capital One. On September 9, 2010, just days before the effective date of the cancellation, Tower issued an endorsement amending the mortgagee to read Capital One. In addition, the endorsement indicates that the change in the mortgagee designation was made effective as of August 17, 2010, the same day as the effective date of the policy itself.
No additional cancellation notice to Capital One or any other party was issued, and no premium payment was received by Tower by the cancellation effective date. On September 24, 2010, Capital One sent and Tower received a premium check. Tower asserts that on October 14, 2010 it returned to Capital One what it states to be “the unearned premium” after deducting the “earned premium, plus applicable fees.” Wiener Aff., at ¶ 32. Tower also claims it returned additional premiums two more times in April, 2011, after the March, 2011 fire, and declined coverage based on nonpayment of the premium and the Notice.
Shants sued MRW under breach of contract and negligence theories, alleging that it had failed to ensure that the policy remained in effect, which included monitoring payment by the mortgagee bank, to whom Shants made payments of insurance costs. The complaint further alleges that MRW had assured Shants that any changes would be processed, such as the change to Capital One as the mortgagee who would make the premium payments to Tower. Shants admits it was aware of the Notice, but relied to its detriment on MRW to “handle” the situation and that MRW had assured it that MRW would have Capital One make the required premium payment.
Shants sued Tower based on the failure to serve the Notice on the mortgagee under the New York State Insurance Law and the policy, asserting that a failure to serve Capital One is fatal to the vitality of the Notice. It also claimed that Tower had accepted a late payment of the premium sent to Tower by Capital One, thereby vitiating its prior cancellation. Shants thus contends that Tower had wrongfully disclaimed coverage for a loss occurring during the policy period. It seeks a declaratory judgment to that effect.It sued Capital One for failing to make the premium payment.MRW has cross-claimed against Tower and Capital One for contribution or indemnification, and Capital One has moved to amend its answer to assert cross claims against Tower and MRW, also for contribution or indemnification.
In support of its motion, MRW argues that the policy requires the notice of cancellation to be served on the mortgagee at least 10 days prior to the effective date of the cancellation. It thus contends that because Tower did not serve Capital One, the Notice was ineffective, coverage existed on the day of the fire, and thus all claims against MRW should be dismissed inasmuch as all ultimately are based on the absence of coverage. In its cross motion, and in opposition, Tower contends that it properly canceled the policy, entitling it to summary judgment against plaintiff Shants, and dismissal of MRW's cross claim against it for contribution and indemnification. Tower also opposes Capital One's motion to amend, asserting that Tower's sole liability, if any, lies in contract to Shants. It also contends that even assuming that there is a defect in service on the mortgagee, this does not free Shants from the effect of the cancellation, as Shants admits receipt of the Notice and that the premium was not timely paid before the effective date of the cancellation.
The law of summary judgment is well established. This is a drastic remedy which should not be granted where there is any doubt about the existence of a triable issue of fact. Bhatti v. Roche, 140 A.D.2d 660, 528 N.Y.S.2d 1020 (2d Dept.1988). It is nevertheless an appropriate tool to weed out meritless claims. Lewis v. Desmond, 187 A.D.2d 797, 589 N.Y.S.2d 678 (3d Dept.1992); Gray v. Bankers Trust Co. of Albany, N. A., 82 A.D.2d 168, 442 N.Y.S.2d 610 (3d Dept.1981). Even where there are some issues in dispute in the case which have not been resolved, the existence of such issues will not defeat a summary judgment motion if, even when the facts are construed in the nonmoving party's favor, the moving party would still be entitled to relief. Brooks v. Blue Cross of Northeastern New York, Inc., 190 A.D.2d 894, 593 N.Y.S.2d 119 (3d Dept.1993).
Generally speaking, to obtain summary judgment it is necessary that the movant establish its claim or defense by the tender of evidentiary proof in admissible form sufficient to warrant the court, as a matter of law, in directing judgment in its favor. CPLR 3212(b). The burden then shifts to the non-moving party. To defeat the motion for summary judgment the opposing party must come forward with evidence to demonstrate the existence of a material issue of fact requiring a trial. CPLR 3212(b); see also GTF Marketing, Inc. v. Colonial Aluminum Sales, Inc., 66 N.Y.2d 965, 498 N.Y.S.2d 786, 489 N.E.2d 755 (1985); Zuckerman v. City of New York, 49 N.Y.2d 557, 427 N.Y.S.2d 595, 404 N.E.2d 718 (1980). The non-moving party must lay bare all of the facts at its disposal regarding the issues raised in the motion. Mgrditchian v. Donato, 141 A.D.2d 513, 529 N.Y.S.2d 134 (2d Dept.1988). Conclusory allegations are insufficient ( Zuckerman v. City of New York, supra ), and the defending party must do more than merely parrot the language of the complaint or bill of particulars. There must be evidentiary proof in support of the allegations. Fleet Credit Corp. v. Harvey Hutter & Co., Inc., 207 A.D.2d 380, 615 N.Y.S.2d 702 (2d Dept.1994); Toth v. Carver Street Associates, 191 A.D.2d 631, 595 N.Y.S.2d 236 (2d Dept.1993).
On such a motion the court must draw all reasonable inferences in favor of the nonmoving party. Nicklas v. Tedlen Realty Corp., 305 A.D.2d 385, 759 N.Y.S.2d 171 (2d Dept.2003); Rizzo v. Lincoln Diner Corp., 215 A.D.2d 546, 626 N.Y.S.2d 280 (2d Dept.1995). The role of the court in deciding a motion for summary judgment is not to resolve issues of fact or to determine matters of credibility, but simply to determine whether such issues of fact requiring a trial exist (Dyckman v. Barrett, 187 A.D.2d 553, 590 N.Y.S.2d 224 (2d Dept.1992); Barr v. County of Albany, 50 N.Y.2d 247, 254, 428 N.Y.S.2d 665, 406 N.E.2d 481 (1980); James v. Albank, 307 A.D.2d 1024, 763 N.Y.S.2d 838 (2d Dept.2003); Heller v. Hicks Nurseries, Inc., 198 A.D.2d 330, 605 N.Y.S.2d 888 (2d Dept.1993). The Court need not, however, ignore the fact that an allegation is patently false or that an issue sought to be raised is merely feigned. Sexstone v. Amato, 8 A.D.3d 1116, 778 N.Y.S.2d 635 (4th Dept.2004). The Court may also search the record and grant summary judgment in favor of a nonmoving party with respect to a cause of action or issue that is the subject of a motion for summary judgment without the necessity of a cross-motion. CPLR 3212(b); Katz v. Waitkins, 306 A.D.2d 442, 761 N.Y.S.2d 501 (2d Dept.2003).
The standards for leave to amend pleadings pursuant to CPLR 3025 are also settled. Leave should be freely given provided that the proposed amendment is not palpably insufficient, does not prejudice or surprise the opposing party, and is not patently devoid of merit. Greco v. Christofferson, 70 A.D.3d 769, 896 N.Y.S.2d 363 (2d Dept.2010): Gitlin v. Chirinkin, 60 A.D.3d 901, 875 N.Y.S.2d 585 (2d Dept.2009); Ingrami v. Rovner, 45 A.D.3d 806, 847 N.Y.S.2d 132 (2d Dept.2007). Determination of whether to grant such leave is within the broad discretion of the court, and will not lightly be set aside. Greco, supra; Gitlin, supra.
Also relevant is the general law regarding the interpretation of insurance contracts. Such contracts are to be interpreted according to common speech and consistent with the reasonable expectation of the average insured. Cragg v. Allstate Indem. Corp., 17 N.Y.3d 118, 926 N.Y.S.2d 867, 950 N.E.2d 500 (2011). Ambiguities in an insurance policy are to be construed against the insurer. Breed v. Insurance Co. of N.Am., 46 N.Y.2d 351, 413 N.Y.S.2d 352, 385 N.E.2d 1280 (1978). These principles apply with additional force when statutory mandates are involved and cancellation is the issue. See, Sweeney v. Preferred Mut. Ins. Co., 43 A.D.3d 1395, 841 N.Y.S.2d 915 (4th Dept.2007). Courts should not, however, rewrite policies where no such ambiguities exist. New England Mut. Life Ins. Co. v. Doe, 93 N.Y.2d 122, 688 N.Y.S.2d 459, 710 N.E.2d 1060 (1999).
Applying the foregoing law to the record before it, the Court denies MRW's motion for summary judgment declaring that coverage exists in favor of Shants by dint of an ineffective notice of cancellation, or acceptance of a late premium payment by Capital One. It is undisputed that Shants received the Notice, the Notice complied with the requirements of Insurance Law § 3426(c), (h) and (i) as to Shants as the insured, and that the premium was not paid before the effective date of the cancellation contained in the Notice. Accordingly, MRW has failed to make out its prima facie case that the Notice was ineffective as to Shants. Insurance Law § 3426 simply does not require notice to the mortgagee for a notice of cancellation of a commercial policy such as the one at bar to be effective.
It is true that another section of the Insurance Law, section 3404(e), requires as part of a standard fire insurance policy a provision providing for notice of cancellation to a mortgagee if the carrier wishes to cancel insurance in favor of such mortgagee. However, that provision does not avail Shants. Specifically, the language required by § 3404(e) unambiguously applies to the mortgagee's interest, not the insured property owner's: “If loss hereunder is made payable, in whole or in part, to a designated mortgagee not named herein as the insured, such interest in this policy may be cancelled by giving to such mortgagee a ten days' written notice of cancellation.” CPLR 3404(e) (Form of policy, lines 68–73. emphasis supplied.) As set forth above, the subject policy required that notice of cancellation be sent to the mortgagee, but that was consistent with the notice under Insurance Law § 3404.
This notice in turn is premised on the separate contractual interest owed by the insurer to the mortgagee under a standard mortgage clause, to the extent of the mortgagee's interest in the property. See Reed v. Federal Ins. Co., 71 N.Y.2d 581, 589, 528 N.Y.S.2d 355, 523 N.E.2d 480 (1988); Agriculver Profit Sharing Plan v. Dryden Mut. Ins. Co., 145 A.D.2d 811, 535 N.Y.S.2d 797 (3d Dept.1988). The insured has no interest in that contract. Murphy v. Aetna Ins. Co., 96 A.D.2d 99, 468 N.Y.S.2d 265 (4th Dept.1983). The Court thus must reject MRW's argument, in effect, that Shants can bootstrap its claim that the Notice was invalid as to it based upon the rights of the mortgagee, whether it was GreenPoint or Capital One. Accordingly, even assuming that the Notice was defective, the nature of the defect applied only to the mortgagee's rights. It does not act to invalidate the Notice as it applied to Shants, and to the extent MRW's motion is for a declaration that Shants was covered by reason of a defective notice of cancellation, it is denied.
This result cannot change even assuming that this always was a “mortgagee billed and paid” policy, and that Capital One would have paid the premium on time had it known of the default prior to the effective date of the cancellation, as Shants argues. With respect to Tower's liability to Shants the Court can go no further than the clear terms of the policy and the Insurance Law, and must conclude that the policy was effectively cancelled as to the insured, Shants, for nonpayment of premium. That, however, does not end the inquiry on these motions.
With respect to the late premium payment, Tower acknowledges that it received a premium payment from Capital One shortly after the cancellation effective date had passed, and well before the fire. Tower presents some documentary proof, in the form of print-outs of electronically stored records, that it issued its own refund check to Capital One thereafter for that premium (less an amount that represented the premium earned by Tower prior to cancellation). Nevertheless, there is a sharp issue of fact as to whether such a check was actually mailed and received by Capital One, as it was never cashed, and there is no proof of mailing presented by Tower. One of Tower's affiants, Richard Gossett, its Customer Service Manager, Operations, avers that the refund check was mailed “in accordance with (Tower's) mailing procedures”, but does not describe these procedures and does not state that he has personal knowledge that they were followed in this case. The check ultimately was voided by Tower on March 15, 2011, a few days after the fire. The premium paid by Capital One thus remained with Tower through the date of the loss.
There is authority holding that “acceptance of premiums by the carrier after learning of facts which allow for rescission of the policy, constitutes a waiver of, or more properly an estoppel against, the right to rescind.” Scalia v. Equitable Life Assur. Socy. of the U.S., 251 A.D.2d 315 (2d Dept.1998); see also Continental Ins. Co. v. Helmsley Enters., 211 aD2d 589 (1st Dept.1995). In this case the policy already had been cancelled as to Shants for nonpayment. However, and although there is no proof that Tower ever indicated that reinstatement had occurred after it received the late payment, an issue exists as to whether “acceptance” of the late premium had occurred, which may support an estoppel preventing Tower from denying that there was such a reinstatement. Cf., Ferber ex rel. Ferber v. Farm Family Cas. Ins. Co., 272 A.D.2d 747, 707 N.Y.S.2d 545 (3d Dept.2000). As the role of the Court in deciding the cross motion by Tower is issue finding and not issue determination, the matter of the unreturned late premium payment is sufficient to bar summary judgment in favor of Tower, with the exception of the issue of cancellation, as indicated.
In view of the foregoing, the following results must ensue.
MRW's motion is denied with regard to Tower's coverage for Shants's loss., as the Court holds that the policy was cancelled and an issue of fact exists as to reinstatement. The Court grants partial summary judgment to Tower and declares that Shants's policy was properly cancelled by Tower for nonpayment of premium. Tower's motion, however, is otherwise denied.
That branch of MRW's motion that is for dismissal of all claims asserted against it is denied. No basis for such a result is offered by MRW other than that such claims would be rendered academic if the Court declared Shants entitled to coverage based on the failure to provide the mortgagee with the Notice, or Tower's acceptance of the late premium payment. As indicated above, the former has been rejected, and an issue of fact exists as to the latter.
In view of the foregoing, Capital One's motion to serve an amended answer is granted. The Court rejects Tower's contention that it cannot be liable to Capital One under any circumstance because it owed no contractual duty to it. The change of mortgagee endorsement issued by Tower itself established Capital One as mortgagee, triggering, at least facially, a contractual relationship between them as insurer and insured under the policy and the Insurance Law. Reed v. Federal Ins. Co., 71 N.Y.2d 581, 589, 528 N.Y.S.2d 355, 523 N.E.2d 480,supra. Further, while a determination that Tower did not effectively reinstate the contract would insulate it from co-defendants' claims, as they all are ultimately based upon an alleged wrongful withholding of coverage from Shants, that has not yet been decided and the co-defendants' claims are thus viable at this time. Given the liberal standards applicable to amendments of pleadings this is sufficient to ground the motion to amend. The amended answer shall be deemed served as of the date of this Decision and Order.
What remains for trial, therefore, is 1) whether there was acceptance by Tower of the late premium payment from Capital One, and whether this is sufficient to support an estoppel of Tower's denial of reinstatement of the policy; 2) if no estoppel is found and the cancellation of the policy remains in effect, leaving Shants without coverage, and freeing Tower from any further liability to Shants, whether MRW and/or Capital One is liable to Shants for the absence of insurance coverage; and 3) as between MRW and Capital One, whether either or both are liable to one another if either is found liable to Shants for losses sustained because of the absence of such coverage.
The Court notes that it does not rule on the effectiveness of the cancellation on Capital One's rights to coverage separate and distinct from that owed to Shants, as no party has moved for such relief and it is not at issue on these applications.
The parties, by counsel, are to appear for the next regularly scheduled conference on March 6, 2013.
This shall constitute the Decision and Order of this Court.