Beckford v. Empire Mut. Ins. Group

• Decision Date: 29 February 1988
• Citation: 525 N.Y.S.2d 260,135 A.D.2d 228
• Parties: Julia BECKFORD, et al., Plaintiffs-Respondents, v. EMPIRE MUTUAL INSURANCE GROUP, et al., Defendants-Respondents, Greenpoint Savings Bank, Appellant, et al., Defendants.
• Court: New York Supreme Court — Appellate Division

Page 260

525 N.Y.S.2d 260

135 A.D.2d 228

Julia BECKFORD, et al., Plaintiffs-Respondents, v. EMPIRE MUTUAL INSURANCE GROUP, et al., Defendants-Respondents Greenpoint Savings Bank, Appellant, et al., Defendants.

Supreme Court, Appellate Division,

Second Department.

Feb. 29, 1988.

Abrams & Martin, P.C., New York City (Mark E. Abrams and Evan W. Godsall, of counsel), for appellant.

Kenneth P. Lowenthal and Sandra Ruth Schiff, New York City, for plaintiffs-respondents.

Raymond J. MacDonnell, New York City (Isabella Natale, of counsel), for defendants-respondents.

Before MANGANO, J.P., and THOMPSON, LAWRENCE and KUNZEMAN, JJ.

LAWRENCE, Justice.

On or about April 15, 1969, the plaintiffs, Julia Beckford and her son Pedro Beckford, purchased a two-family dwelling located at 103-11 35th Avenue in Corona, Queens. The purchase was financed, in part, by a mortgage loan from the defendant Greenpoint Savings Bank (hereinafter Greenpoint).

The mortgage provided, in relevant part, that in order to more fully protect the security of the mortgage, together with the monthly payments of principal and interest, the mortgagor was to pay to the mortgagee one-twelfth of the annual premium "that will next become due and payable on policies of fire and other hazard insurance on the [mortgaged] premises * * * to be held by Mortgagee in trust to pay said * * * premiums * * * before the same become delinquent".

The mortgage further provided, as follows:

"13. That the Mortgagor will keep the improvements now existing or hereafter erected on the mortgaged premises, insured as may be required from time to time by the Mortgagee against loss by fire and other hazards, casualties, and contingencies in such amounts and for such periods as it may require and will pay promptly, when due, any premiums on such insurance provision for payment of which has not been made hereinbefore; that he will assign and deliver all insurance policies to the Mortgagee; and that he will reimburse the Mortgagee for any and all insurance premiums paid by the Mortgagee upon the Mortgagor's default in so insuring the buildings, paying the premiums or in so assigning and delivering the policies".

Fire insurance policies covering the premises were secured by the plaintiffs through the defendant Richard Fernandez, an insurance broker associated with the defendant J.V. Gould Co., Inc. (hereinafter Gould), an insurance agency. At issue is the fire insurance policy issued by the defendants Empire Mutual Insurance Group (hereinafter Empire Mutual) and its Allcity Insurance Company (hereinafter Allcity) for the period commencing January 24, 1981 through January 24, 1982. The insurance policy named the plaintiffs as the insureds, and contained the standard mortgagee clause making the loss payable to Greenpoint, as mortgagee, as its interest may appear.

On February 17, 1981, Greenpoint received its copy of the subject policy covering the mortgaged premises and on February 25, 1981, Greenpoint remitted its check to Empire Mutual in payment of the insurance premium.

On April 21, 1981, Greenpoint received in the mail from Gould, Empire Mutual's agent, a copy of a Notice of Cancellation, dated April 16, 1981, and effective May 1, 1981. The stated reason for cancellation was the nonpayment of the premium. Greenpoint immediately contacted the insurance broker to advise him that payment of the premium had been made on February 25, 1981.

On April 29, 1981, Greenpoint received in the mail from Gould a Notice of Reinstatement, also dated April 16, 1981, indicating that the policy was reinstated and continued without lapse, and that the earlier "notice of cancellation" was to be disregarded.

In the interim, on April 23, 1981, Greenpoint had received a second Notice of Cancellation dated April 20, 1981, and effective May 25, 1981. The second notice was from Allcity rather than from the agent, Gould, and the stated reason for cancellation was that there was a "Vacant Building.,--Adjacent to Risk". Nothing was done by Greenpoint about the second notice.

On or about August 28, 1981, the subject premises were extensively damaged by fire. Upon the plaintiffs' demand for payment of the fire loss, Empire Mutual and Allcity refused to make payment on the ground that the insurance policy had been cancelled on May 25, 1981. Thereafter, this action was commenced by the plaintiffs against Empire Mutual and Allcity, the agent, Gould, the broker, Fernandez, and the appellant, Greenpoint. In their verified complaint, the plaintiffs alleged, inter alia, that the defendant insurance companies had never notified the plaintiffs that their policy had been cancelled. With respect to Greenpoint, the plaintiffs averred that the bank was negligent, and had breached its contractual obligations to the plaintiffs by its failure to notify the plaintiffs of the cancellation of the policy and its failure to procure new insurance.

At the trial, Empire Mutual and Allcity presented testimony of an employee as to their mailing procedures; additionally, they produced postal certificates of mailing as proof of service upon the plaintiffs and Greenpoint of the second cancellation notice. Greenpoint acknowledged that it was an oversight on the part of its employee responsible for checking reinstatement notices against cancellation notices not to have detected that the second cancellation notice was actually dated four days after the reinstatement notice, that the reason given in the second cancellation notice differed from the reason stated in the first notice, and that the second cancellation notice came from the insurance carrier itself. Greenpoint further acknowledged that it had continued to accept and hold in escrow monthly payments from the plaintiffs on account of fire insurance premiums, pursuant to the terms of the mortgage.

At the conclusion of the trial, the trial court found that Empire Mutual and Allcity had met their burden of proving that they had properly cancelled the fire insurance policy and directed the dismissal of the action against the defendants other than Greenpoint and of Greenpoint's cross claims as against the defendant insurance companies.

The trial court further acknowledged that upon receipt of the second notice of cancellation, the plaintiffs had an obligation to maintain insurance coverage upon the premises. Nevertheless, the court imposed liability upon Greenpoint because it had "wrongfully neglected to take appropriate measures to respond to the [second] notice of cancellation", while continuing to accept monthly payments to be held in escrow for future insurance premiums. Therefore, the trial court directed entry of an interlocutory judgment in favor of the plaintiffs as against Greenpoint on the issue of liability and set the matter down for an assessment of damages.

Greenpoint now appeals from stated portions of the interlocutory judgment subsequently entered upon the trial court's decision.

Initially, we find no merit to Greenpoint's claim that Empire Mutual and Allcity did not effectively cancel the plaintiffs' fire insurance policy. This contention is based, in relevant part, upon the fact that the Notice of Reinstatement was received by Greenpoint after it had received the second notice of cancellation. Nevertheless, the dates on the respective notices indicate that the Notice of Reinstatement related only to the first...