Fifty States Management Corp. v. Public Service Mut. Ins. Co.

• Decision Date: 01 September 1971
• Citation: 324 N.Y.S.2d 345,67 Misc.2d 778
• Parties: FIFTY STATES MANAGEMENT CORP., Plaintiff, v. PUBLIC SERVICE MUTUAL INSURANCE COMPANY et al., Defendants.
• Court: New York Supreme Court

Page 345

324 N.Y.S.2d 345

67 Misc.2d 778

FIFTY STATES MANAGEMENT CORP., Plaintiff, v. PUBLIC SERVICE MUTUAL INSURANCE COMPANY et al., Defendants.

Supreme Court, Erie County.

Sept. 1, 1971.

Sheldon Hurwitz, Buffalo, for plaintiff.

Hodgson, Russ, Andrews, Woods & Goodyear, Buffalo, and Max J. Gwertzman, New York City, for defendant Public Service Mutual Ins. Co.

Duke & Yaeger, Buffalo, for defendants National Life Ins. Co. and Benderson Development Co., Inc.

DECISION

MICHAEL CATALANO, Justice.

Plaintiff, Fifty States Management Corp. (Fifty) commenced four actions against defendants, Public Service Mutual Insurance Company (Public), National Life Insurance Company (National) and Benderson Development Co., Inc. (Benderson), that were tried together before a jury and were briefly described as Action No. 1 (December 4, 1969 fire), Action No. 2 (February 3, 1970 fire), Action No. 3 (March 4, 1970 fire) and Action No. 4 (March 18, 1970 fire and explosion).

In the four actions, Public alleged affirmative defenses against Fifty charging increased hazard, concealment and fraud; National and Benderson cross-claimed against Public; Public answered National's cross-claim affirmatively alleging cancellation of the insurance policy as of March 1, 1970 before the last two losses occurred.

In a motion by National a summary judgment was granted March 22, 1971, in Actions No. 1 and No. 2, by Hon. Gilbert H. King, J.S.C., upon its crossclaim against Public, directing that the damages be determined before a jury to be binding on all parties herein, and payable to National. Instead of going to trial, the parties stipulated that the damages incurred in fires on December 4, 1969 and February 3, 1970 amounting to $53,750.00 be paid to National, and they were so paid.

July 8, 1966, Benderson, by corporate warranty deed, conveyed to Fifty certain real property improved with a large theater and a ten-story office building (Lafayette Building), subject to a mortgage held by National having a principal balance due of $4,844,585.22, of which $619,600.32 was applicable to said premises. At the same time a joint bond and second mortgage (one instrument) was executed by Fifty to Benderson in the amount of $50,000, together with a mortgage note in the same amount, as well as an assignment of rents to Benderson which was to pay the first mortgage principal and interest, tax and insurance escrow payments, then pay the excess income to Fifty.

Since June 4, 1962, Public and Aaron S. Freedman Agency, Inc. (Freedman), were parties to an agency agreement, granting Freedman full underwriting authority to receive and accept contracts of insurance in behalf of Public, including the duty and authority to '* * * refund ratably to the Company, on business heretofore or hereafter written, commissions on cancelled liability and on reductions in premiums at the same rate on which such commissions were originally retained.'

A multi-peril policy was issued for Public and signed by Freedman, stating the insured's name and mailing address as 'Fifty States Management Corp. and/or Benderson Development Co., Inc. A/I/M/A (as interest may appear), 14 Lafayette Square, Buffalo, New York 14203,' for three years, 7/15/66 to 7/15/69, covering the building for $800,000 and loss of rents up to $120,000 and naming National as first mortgagee. A renewal policy was issued for Public by Freedman, attached to which was a notice from Freedman stating that it concerned 'Fifty States Management Corp. and/or Benderson Devel. Co., Inc. 2--16 Broadway (Lafayette Bldg.)'. This renewal policy changed the insured's mailing address through a clerical error as follows: 'Insured's Name and Mailing Address Fifty States Management Corp. and/or Benderson Development Company Inc. A/I/M/A 570 Delaware Ave., Buffalo, N.Y. 14202.' increasing the coverage on buildings to $1,400,000.00 and continuing loss of rents at $120,000. The cancellation clause (as corrected by stipulation in open court) provided: 'This policy may be cancelled at any time by this Company by giving to the insured a 20 days' written notice of cancellation with or without tender of the excess of paid premium above the pro rata premium for the expired time, which excess, if not tendered, shall be refunded on demand. Notice of cancellation shall state that said excess premium (if not tendered) will be refunded on demand.' 'Definitions-section 11' of this policy provided: 'When used in the provisions applicable to Section 11 of this policy (including endorsements forming a part hereof): * * * 'insured' means any person or organization qualifying as an insured in the 'Persons Insured' provision of the applicable insurance coverage. The insurance afforded applies separately to each insured against whom claim is made or suit is brought, except with respect to the limits of the Company liability * * *' The policy of insurance in effect at the time of the four losses had a golden sticker affixed to the top stating, in part: 'Aaron S. Freedman Agency, Inc. represented by Morris Himmel * * *' Said Himmel had persuaded Fifty to increase the renewal policy to $1,400,000.00.

A notice of cancelation of the fire insurance policy, date of mailing February 11, 1970, property covered 2--16 Broadway including 437--439 Washington St., Buffalo, N.Y., stated: 'Take notice that the above policy in its entirety, including any mortgagee or loss payable clause, is hereby cancelled as to all interests insured. You will, therefore, please take notice that at the expiration of 20 days from the receipt of this notice, unless surrender thereof to us be sooner made, the said policy will terminate and cease to be in force.' This notice also stated: 'Insured--Fifty States Management Corp. and/or Benderson Development Co., Inc. A/I/M/A 570 Delaware Ave. Buffalo, N.Y. 14202;' 'Mortgagee--National Life Insurance Co. National Life Drive, Montpelier, Vermont 05602;' 'Producer--Aaron S. Freedman Agcy. Inc. 1500 Hertel Ave. Buffalo, N.Y. 14216;' and it was subscribed: 'Public Service Mutual Insurance Company by (signed) Caroll Colway, Aaron S. Freedman Agcy. Inc., Authorized Representative.'

On February 11, 1970, Public mailed one copy of this notice to 570 Delaware Ave., Buffalo, N.Y. 14202, Benderson's address, but it failed to send one to Fifty at its address in the Lafayette Building, 2--16 Broadway, Buffalo, N.Y. 14203 or to Fifty at its alternate address 14 Lafayette Square, Buffalo, New York 14203. (Notice the different ZIP code numbers.)

February 19, 1970, Fifty by Frank J. Bona, as President, wrote Freedman a letter stating that a 'Mr. Benderson' notified him of the cancelation, 'Accordingly, would you make arrangements to extend time to us. Perhaps your office can be of assistance to us in this matter for other insurance.'

February 23, 1970, Freedman by Morris Himmel, C.P.C.V., Vice President, answered Fifty, inviting Bona to come into the office and apply for new insurance; on the yellow, carbon copy of this letter is written: '2/25/70 Spoke to Dorothy Silver. She is mailing new notice tomorrow to 50 States not at this office giving them 20 days. M. H.' Dorothy Silver was assistant underwriter for Public at its office in Rochester, New York.

A second notice of cancellation, date of mailing February 26, 1970 was mailed from Rochester, New York, similar to the first notice, except that it changed the insured to: '50 States Management Corp. 703 Lafayette Bldg. Buffalo, N.Y. 14203.' One copy thereof was mailed to Fifty but none to Benderson.

March 4, 1970, National mailed a letter, received March 6, 1970 by Freedman, stating that National received a notice of cancelation as of March 1, 1970 and that National demanded the 'return premium check.'

May 12, 1970, Public sent an unearned premium bill to Freedman which, through Morris Himmel, canceled the insurance policy effective March 3, 1970 and directed the payment of return premium of $636.00.

May 26, 1970, Freedman sent its check for $636.00 to National, which cashed it.

June 17, 1970, Public sent its check for $636.00 to National which retained it as evidence, but did not cash it.

December 29, 1970, National mailed a letter to Freedman stating: 'A review of our file has brought to our attention that the request and acceptance of a refund on the above Public Service policy was made through clerical error. Therefore, we are returning to you the refund in the amount of $636.00.' This check dated the same date was received by Freedman, which cashed it.

It was stipulated in open court that National's acceptance of unearned premium was not binding on Benderson or Fifty; that National, Fifty and Benderson were entitled to 20 days notice of cancelation, starting to run from the receipt thereof; that Benderson was not bound by any alleged acts of increased hazard, concealment or fraud which apply solely to Fifty.

'The time of the fire and of the loss established the rights of the parties, and in the absence of an election by the company to repair, the amount of the loss payable to the mortgagee became fixed as of that time.' (Savarese v. Ohio Farmers' Ins. Co., 260 N.Y. 45, 54, 182 N.E. 665.)

Here, Public did not elect to repair, so that the four losses became fixed at each date thereof, to wit: December 4, 1969, February 3, 1970, March 4, 1970 and March 18, 1970.

Cancelation notices must be mailed strictly in accordance with applicable statutes, allowing a set time before date of cancelation and containing all information required by statute; any ambiguity is strictly construed against the insurer. (Government Employees Ins. Co. v. Mizell, 36 A.D.2d 452, 453--454, 320 N.Y.S.2d 936, 937--938) Insurer's failure to comply strictly and literally with the policy renders an attempted cancelation nugatory. (Ibid., 454, 320 N.Y.S.2d 937)

'A policy of insurance may be canceled at any time before loss, by agreement between the parties, and there may be cancelation by consent of the parties,...