Opinion
117342/03.
Decided September 29, 2005.
Kenneth V. Madden, Esq., Brooklyn, New York, Attorneys for Plaintiffs.
Joseph L. Natalie, Lustig Brown, LLP, New York, New York, Att: Louis Klein, Esq., Attorneys for Defendant.
Thomas M. Bona, P.C., White Plains, New York, By: Anthony M. Napoli, Esq., Attorneys for Defendant New York Property Insurance Underwriting Association.
In this action, plaintiffs sue their insurance carrier and broker for breach of contract and negligence, respectively, because of denial of coverage for the loss of a cottage caused by a fire on October 25, 2002. Defendants insurance carrier New York Property Insurance Underwriting Association ("NYPIUA") and Joseph L. Natalie ("Natalie"), insurance broker, move and cross move for summary judgment pursuant to CPLR 3212. NYPIUA contends that the policy does not cover the loss and that the plaintiffs misrepresented the cottage would be occupied, and Natalie contends he provided the coverage the plaintiffs requested. Plaintiffs Philips and Ewhenia Waters oppose both motions contending that the policy covers their loss, and, alternatively, that their broker was negligent in not procuring the requested coverage.
For the reasons set forth below, summary judgment is granted to NYPIUA and to Natalie.
Facts:
The following facts are not in dispute. The Waters reside in their home located at 30 Furman Lane, Patchogue, New York. In March 1999, they purchased a cottage on the adjacent property at 24 Furman Lane (the "Cottage"). After purchasing the Cottage, the Waters contacted Natalie who had procured insurance for their automobile and residence with Allstate Insurance Company ("Allstate"). Mrs. Waters met with Natalie to discuss obtaining insurance coverage for the Cottage.
Natalie determined Allstate could not provide property insurance for the Cottage, but NYPIUA could provide coverage. The NYPIUA insurance application (the "Application") required the Waters to classify the Cottage as "owner occupied," "non-owner occupied," or "seasonal." The Waters' application classified the Cottage "owner occupied." After preliminary discussions, Natalie completed the Application and Mrs. Waters signed it.
The NYPIUA insurance policy provision entitled "Additional General Exclusions" excludes property that is "vacant or unoccupied beyond a period of sixty (60) consecutive days."
The Waters acknowledge that they neither lived in the Cottage, nor used the Cottage other than storing some furnishings, mowing the lawn, and playing on the grounds occasionally with their children. The Cottage had neither water, gas, nor telephone service.
On October 25, 2002, a fire damaged the Cottage and contents, and the Waters filed a claim with NYPIUA for coverage. NYPIUA denied the Waters' claim in a letter dated March 24, 2003, for the following reason:
Our investigation of your claim has determined that your building was vacant or unoccupied for sixty (60) consecutive days prior to the loss or damage. Your policy excludes payment of loss caused by any cause of loss if building has been vacant or unoccupied for sixty (60) consecutive days.Allegations:
The Waters claim the insurance policy covers their property damage and NYPIUA's denial of coverage constitutes breach of contract. If the policy does not cover the damage, then the Waters allege Natalie failed to provide the coverage they requested, or notify them of his inability to provide such coverage.
NYPIUA contends no triable issues of fact remain because the Waters are bound by the policy they signed, which excludes coverage for unoccupied property. Moreover, NYPIUA argues the Waters misrepresented that the property would be occupied, warranting rescission of the policy. Natalie avers he provided the requested coverage and his actions do not constitute negligence as a matter of law.
The plaintiffs and Natalie dispute the facts surrounding preparation of the Application. The Waters allege that they clearly communicated their intention to use the Cottage as a guest house and children's play area. Furthermore, they allege that Natalie understood their plans because he notified them that Allstate could not provide property insurance because the Waters would not be living there. However, Natalie alleges he asked Mrs. Waters about her plans, and her explanation assured him the family would occupy the Cottage. He alleges he told Mrs. Waters that Allstate could not provide property insurance because of the Cottage's proximity to the water and poor condition of the property's structure.
NYPIUA's Motion for Summary Judgment:
Plaintiffs remain bound by the terms of the insurance contract, which specifically excludes "vacant or unoccupied" property. Plaintiffs' contention that "owner occupied" is an ambiguous term is without merit. The term "owner occupied" requires actually using the Cottage, and reasonable people would agree that turning off water, gas, and telephone service is inconsistent with "owner occupied." Thus, the distinction between occupied and unoccupied is clear, and the NYPIUA policy excludes unoccupied premises. The fact that Mrs. Waters claims that she did not read the contract has no bearing on its validity. See Maines Paper Food Serv. v. Adel, 256 AD2d 760 (3rd Dept. 1998) (finding defendant's alleged inability to understand English irrelevant when determining he was bound to the contract he signed).
In addition to denial of coverage based on contractual language, rescission is warranted because identifying the Cottage as "occupied" constitutes a material misrepresentation. NY Insurance Law permits rescission for material misrepresentations which occur when "knowledge by the insurer of the facts misrepresented would have led to a refusal by the insurer to make such contract." NY Ins. Law § 3105(b). Misrepresentations on insurance applications regarding occupancy are material and warrant rescission. See McLaughlin v. Nationwide Mutual Fire Insurance Co., 8 AD3d 739 (3rd Dept. 2004) (finding that the representation that the premises were owner-occupied rather than unoccupied in the application constituted a material misrepresentation warranting rescission). Even unintentional misrepresentations may warrant rescission. Id.
The NYPIUA Supervisor of the Underwriting Department Maryanne Hagenberg states that NYPIUA would not have written a risk for unoccupied premises because NYPIUA customarily does not write policies for unoccupied and unsecured risks.
Thus, no triable issues of fact remain regarding NYPIUA's alleged breach of contract because the Waters are bound by the contract they signed which explicitly excludes unoccupied property. Moreover, the Application contains a material misrepresentation, warranting rescission.
Natalie's Cross Motion for Summary Judgment:
Insurance agents owe customers the "common-law duty to obtain requested coverage for their clients within a reasonable time or inform the client of the inability to do so; however, they have no continuing duty to advise, guide or direct a client to obtain additional coverage." Murphy v. Kuhn, 90 NY2d 266, 270 (1997). Insurance agents generally cannot be held liable for acts beyond obtaining requested coverage unless exceptional circumstances exist warranting reliance on an agent's statements. See Curanovic v. New York Central Mutual Fire Ins. Co. et al, 307 AD2d 435 (3rd Dept. 2003) (finding insurance agent could not be held negligent in an ordinary agent and customer relationship when applicant signed the application even though the applicant could not read or write English). The issue of whether Natalie fulfilled his duty to provide the coverage the Waters requested is not dispositive because the plaintiffs must also show that they were justified in relying on their broker's statements in order to support a negligence claim.
The Waters cannot show justified reliance on Natalie's statements because they are presumed to have read their insurance policy, which unambiguously excludes vacant or unoccupied property. See Rotanelli v. Madden, 172 AD2d 815 (2nd Dept. 1991) (dismissing a negligence claim where the plaintiffs could not show justified reliance on their agent's alleged misstatements, although he had previously procured insurance for them, because they were presumed to have read their policy). Mrs. Waters' professional experience as a licensed insurance agent further undermines plaintiffs' claim that they reasonably relied on Natalie's statements. Once Natalie prepared the Application, Mrs. Waters had a duty to review the document and correct any errors. See North Atl. Life Ins. Co. Of Am v. Katz, 163 AD2d 283 (2nd Dept. 1990) (finding that the decedent had a duty to review the insurance application and correct errors, and the failure to correct his medical information when applying for a second policy warranted rescission). Thus, any factual disputes regarding Mrs. Waters' and Natalie's conversations are not material because the Waters have failed to show justified reliance on Natalie's statements, and, thus, cannot support a claim for negligence.
Conclusion:
NYPIUA's denial of coverage does not constitute breach of contract as a matter of law because the Waters' policy does not cover their loss. The plaintiffs cannot support a negligence claim against Natalie because they have failed to show justified reliance on Natalie's statements.
Accordingly, it is
ORDERED that NYPIUA's motion for summary judgment is granted and further
ORDERED that Natalie's cross motion for summary judgment is granted and the complaint is dismissed, and it is further
ORDERED that the Clerk is directed to enter judgment accordingly.