Agoado Realty Corp. v. United Intern. Ins. Co.

• Decision Date: 30 November 1999
• Citation: 699 N.Y.S.2d 335,260 A.D.2d 112
• Parties: AGOADO REALTY CORP., et al., Plaintiffs-Appellants, v. UNITED INTERNATIONAL INSURANCE COMPANY, Defendant-Respondent, and Rosa Felipe, etc., et al., Defendants.
• Court: New York Supreme Court — Appellate Division

Page 335

699 N.Y.S.2d 335

AGOADO REALTY CORP., et al., Plaintiffs-Appellants, v. UNITED INTERNATIONAL INSURANCE COMPANY, Defendant-Respondent and Rosa Felipe, etc., et al., Defendants.

Supreme Court, Appellate Division, First Department, New York.

Nov. 30, 1999.

Robert H. Goldberg, of counsel (Dawn E. Lederman, on the brief, Goldberg & Carlton, attorneys) for plaintiffs-appellants.

Bruce Robins, of counsel (Richard J. Gottlieb, on the brief, Feder, Kaszovitz, Isaacson, Weber, Skala & Bass LLP, attorneys) for defendant-respondent.

ERNST H. ROSENBERGER, J.P., PETER TOM, ISRAEL RUBIN, DAVID B. SAXE and JOHN BUCKLEY, JJ.

ROSENBERGER, J.P.

This is a declaratory judgment action involving a commercial general liability policy issued to plaintiffs by defendant, United International Insurance Company. On May 19, 1996, Miguel Felipe, a tenant of the building owned by plaintiffs, was murdered in the building by unknown assailants. Felipe's estate and family commenced a wrongful death action against plaintiffs, alleging negligent security, by service on the Secretary of State on February 10, 1997. The attorney designated to accept service for plaintiffs was deceased, and plaintiffs did not receive actual notice that a claim had been made against them until they received the summons and complaint in the mail on June 9, 1997.

Plaintiffs immediately notified their broker, which filed a notice of occurrence with the "producer" of the insurance. The producer, in turn, forwarded the notice, summons and complaint to defendant, which received it June 20, 1997.

On July 23, 1997, defendant sent a letter to plaintiffs disclaiming coverage on the grounds of late notice of occurrence and late notice of claim. The policy conditions required the insured to notify the company "as soon as practicable" of any occurrence which may result in a claim and of any suit brought against the insured. Defendant contended that these policy conditions were breached because defendant did not receive notice of the occurrence until 397 days after it occurred, nor did it receive notice of the claim until 130 days after the Felipes' summons and complaint was served on the Secretary of State.

On August 11, 1997, plaintiffs' attorney filed an answer in the underlying wrongful death action and commenced the instant declaratory judgment action seeking a declaration that defendant was required to defend and indemnify plaintiffs. On September 22, 1997, defendant served its answer, alleging that plaintiff breached the insurance contract by virtue of the late notices of the occurrence and the lawsuit.

On June 23, 1998, defendant moved to amend its complaint to add two affirmative defenses never previously asserted. First, defendant alleged that there was no covered "occurrence," because "occurrence" is defined as "an accident" in the policy, whereas the basis for the underlying claim was an intentional assault. Second, defendant invoked the exclusion for "expected or intended" injury, although the exclusion only applies to bodily injury "expected or intended from the standpoint of the insured " (emphasis added).

Plaintiffs opposed the motion to amend as violative of Insurance Law § 3420(d), and cross-moved for summary judgment. The IAS court granted defendant's motion to add two affirmative defenses to its answer, and denied plaintiffs' cross-motion for summary judgment. The motion to amend should have been denied.

Section I(1)(b)(1) of the policy in question covers bodily injury and property damage only if caused by an "occurrence" that takes place in the coverage territory while the policy is in effect. Section V(12) of the policy defines "occurrence" as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions." Section I(2)(a), under the heading "Exclusions," excludes coverage for bodily injury and property damage that is "expected or intended from the standpoint of the insured." There is no exclusion for assault, either in the definition of "occurrence" (compare, 2500 Motel Corp. v. Investors Ins. Co. of America, 169 A.D.2d 604, 605, 564 N.Y.S.2d 750, lv. denied 78 N.Y.2d 857, 574 N.Y.S.2d 939, 580 N.E.2d 411) or in the list of "Exclusions" set forth in Section I(2) (compare, Mt. Vernon Fire Ins. Co. v. Creative Housing Ltd., 88 N.Y.2d 347, 350, 645 N.Y.S.2d 433, 668 N.E.2d 404).

Insurance Law § 3420(d) requires an insurance company to give prompt notice of the grounds for disclaimer: "If under a liability policy delivered or issued for delivery in this state, an insurer shall disclaim liability or deny coverage for death or bodily injury arising out of a motor vehicle accident or any other type of accident occurring within this state, it shall give written notice as soon as is reasonably possible for such disclaimer of liability or denial of coverage to the insured and the injured person or any other claimant."

Defendant correctly argues that § 3420(d) does not apply to the second affirmative defense because this defense is based on lack of coverage rather than on a policy exclusion (Zappone v. Home Ins. Co., 55 N.Y.2d 131, 137, 447 N.Y.S.2d 911, 432 N.E.2d 783). Construing the predecessor to § 3420(d), the Court of Appeals concluded that "the Legislature ... did not intend to require notice when there never was any insurance in effect, and intended ... to cover only situations in which a policy of insurance that would otherwise cover the particular accident is claimed not to cover it because of an exclusion in the policy" (supra, at 138, 447 N.Y.S.2d 911, 432 N.E.2d 783). This analysis applies to the second affirmative defense that an assault by a third party was never intended to be a covered "occurrence" within the scope of the policy. Thus, that defense is not waived by the insurer's delay.

The second affirmative defense should nonetheless be dismissed on the merits. Although the assault was intentional from the standpoint of the perpetrator, it was an accident from the standpoint of the insured, i.e., "an event which under the circumstances is unusual and unexpected by the person to whom it happens" (Black's Law Dictionary [5th ed.] ). This issue may be decided as a matter of law when the facts of the underlying assault and injury are not disputed (see, Massachusetts Bay Ins. Co. v. National Surety Corp., 215 A.D.2d 456, 459, 626 N.Y.S.2d 271, lv. denied 87 N.Y.2d 806, 641 N.Y.S.2d 597, 664 N.E.2d 508).

Case law supports this approach to the problem. For instance, in Floralbell Amusement Corp. v. Standard Sur. & Cas. Co. of New York, 256 App.Div. 221, 9 N.Y.S.2d 524, the plaintiff was sued when its employee assaulted and injured a customer. When the plaintiff sought defense and indemnification costs from the defendant insurer, the insurer claimed that the assault was intentional and therefore not covered by a policy insuring against accidental injury (supra, at 223, 9 N.Y.S.2d 524). This court granted judgment in favor of the plaintiff insured: "Since the alleged assault was not authorized, consented to, participated in or ratified by the plaintiff it was an accident within the meaning of the policy in so far as plaintiff was concerned" (supra, at 225, 9 N.Y.S.2d 524). The Court of Appeals has cited this reasoning with approval (Nallan v. Union Labor Life Ins. Co., 42 N.Y.2d 884, 885, 397 N.Y.S.2d 786, 366 N.E.2d 874[affirming dismissal of complaint where policy excluded accidental injuries and insured was victim of assault] ).

The above interpretation of "occurrence" is consistent with the policy language in the instant case. In Hanover Ins. Co. v. 21 Mott Street Restaurant Corp., 95 Misc.2d 427, 428-29, 407 N.Y.S.2d 952, as here, the policy defined "occurrence" as an accident but did not exclude assault, either in the definition of "occurrence" or in the long list of exclusions. As in Floralbell, supra, the insured in Hanover was a company seeking liability coverage after its employee assaulted a third party and the latter sued the insured. The Hanover court noted that ambiguities in a policy should be construed against the insurer and held that no exclusion for assault would be read into the definition of "occurrence" because the insurer could have made such a limitation explicit but did not do so (Hanover, supra, at 429, 407 N.Y.S.2d 952).

An even stronger statement in favor of coverage can be found in this Department's opinion in 2500 Motel Corp. v. Investors Ins. Co. of America, 169 A.D.2d 604, 605, 564 N.Y.S.2d 750, lv. denied 78 N.Y.2d 857, 574 N.Y.S.2d 939, 580 N.E.2d 411. The insured, a motel owner, was sued for negligent security by guests who were assaulted on the premises by an intruder. The policy in question provided coverage for an "occurrence", which was defined as an "accident". Even though an endorsement to the policy clarified that assault and battery would not qualify as an accident, this court held:

[W]e read this exclusion to apply to intentional damage caused by or at the direction of the insured, its agents or employees, rather than assaults or batteries committed by unrelated third persons. Had [the insurer] intended to preclude indemnification for damage upon the motel premises caused by criminal acts of a third party, it should have done so 'in clear and unmistakable' language (supra, at 605, 564...