Gotkin v. Allstate Ins. Co.
| Decision Date | 06 July 2016 |
| Parties | Martin E. GOTKIN, appellant, v. ALLSTATE INSURANCE COMPANY, respondent. |
| Court | New York Supreme Court — Appellate Division |
142 A.D.3d 17
35 N.Y.S.3d 223
2016 N.Y. Slip Op. 05359
Martin E. GOTKIN, appellant,
v.
ALLSTATE INSURANCE COMPANY, respondent.
Supreme Court, Appellate Division, Second Department, New York.
July 6, 2016.
Green & Willstatter, White Plains, NY (Theodore S. Green of counsel), for appellant.
Lewis Johs Avallone Aviles, LLP, Islandia, NY (Amy E. Bedeli of counsel), for respondent.
MARK C. DILLON, J.P., JOHN M. LEVENTHAL, JEFFREY A. COHEN, and JOSEPH J. MALTESE, JJ.
COHEN, J.
Insurance Law § 3425 imposes restrictions on a liability insurer's right to cancel, refuse to renew, or condition renewal of a policy, and requires the insurer to provide notice to the policyholder before any cancellation, nonrenewal, or conditional renewal occurs. At issue on this appeal is Insurance Law § 3425(d)(1), which requires an insurer to notify a policyholder, at least 45 days before the end of the coverage period, of its intention to condition renewal “upon change of limits or elimination of any coverages,” and to provide a specific reason for so conditioning renewal. For the reasons which follow, we find that the notice requirement of Insurance Law § 3425(d)(1) applies where, as here, an insurer issues an umbrella policy providing the policyholder with additional coverage above the limits of his or her automobile coverage, and then increases the amount of underlying automobile liability insurance the policyholder must maintain before the additional coverage provided by the umbrella policy becomes available. We further find that an insurer's failure to comply with Insurance Law § 3425(d)(1) provides a basis for reformation of the subject policy.
Beginning in 1990, the plaintiff, Martin E. Gotkin, maintained two policies of insurance with the defendant, Allstate Insurance Company (hereinafter Allstate): a primary automobile insurance policy and an excess liability insurance policy (hereinafter the umbrella policy). At the time the plaintiff initially purchased the umbrella policy, it required that he maintain underlying primary automobile insurance policy limits of at least $100,000 per claimant and $300,000 per occurrence for automobile bodily injury liability. The limit of liability for the umbrella policy was $1 million for each occurrence. In August 2004, the plaintiff changed his primary automobile insurance carrier to Nationwide Insurance Company (hereinafter Nationwide), keeping the same policy limits of $100,000 per claimant and $300,000 per occurrence.
In October of 2004, the plaintiff renewed his Allstate umbrella policy while continuing to maintain the same underlying automobile insurance policy limits. However, he was billed an increased premium. By letter dated February 3, 2005, with enclosures, Allstate informed the plaintiff that the increased premium for the umbrella policy was billed in error. Enclosed with the February 2005 letter was an amended policy declarations page, which provided that for the premium period beginning
October 14, 2004, Allstate required underlying primary automobile insurance policy limits of $250,000 per claimant and $500,000 per occurrence. However, there was no language in the February 2005 letter notifying the plaintiff of this change.
Rather, the only indication of this change was in an enclosed amended declarations page. Also enclosed with the February 2005 letter was an “Important Notice Concerning the Insurance You Must Maintain (Not a part of the Policy),” advising the plaintiff, among other things, to carefully read the provisions concerning the “Required Underlying Insurance.” According to Allstate, its decision to increase the amount of underlying automobile insurance the plaintiff was required to maintain was prompted by the plaintiff's cancellation of his Allstate automobile insurance policy. Although the “limits of liability” for the umbrella policy remained $1 million for each occurrence, by increasing the amount of automobile insurance the plaintiff was required to maintain, Allstate created a gap in coverage between the then-existing primary insurance policy issued by Nationwide and the umbrella policy issued by Allstate.
A renewal policy for the period of October 14, 2005, through October 14, 2006, was thereafter sent to the plaintiff. An “amendatory endorsement,” which reflected changes to the policy, did not mention the increase of the required underlying insurance limits in the primary automobile insurance policy to $250,000 per claimant and $500,000 per occurrence. The plaintiff renewed his umbrella policy with Allstate each year through 2009.
In July 2009, the plaintiff was involved in an automobile accident with another vehicle. The owner and operator of that vehicle subsequently commenced a personal injury action against the plaintiff and his wife. When the plaintiff submitted a claim for coverage under his umbrella policy, Allstate informed him that there was a gap in his insurance coverage of $150,000 due to his failure to maintain underlying policy limits of $250,000 per claimant and $500,000 per accident. Accordingly, Allstate denied coverage for any damages between $100,000 and $250,000, but extended coverage for any damages over $250,000.
By summons and verified complaint dated May 22, 2012, the plaintiff commenced this action against Allstate. As relevant to this appeal, the plaintiff sought reformation of his insurance contract with Allstate to provide coverage of $100,000 to $1
million without any gap. The plaintiff additionally sought declaratory relief directing Allstate to fill the umbrella policy's gap in coverage based upon its failure to timely notify him of a change in the underlying limits, in violation of Insurance Law § 3425(d)(1). Allstate joined issue with a verified answer dated June 26, 2012.
The plaintiff subsequently moved for summary judgment to reform the umbrella liability insurance policy to provide coverage in the originally issued amounts of $100,000 to $1 million, and for a declaration that Allstate must provide coverage to him for amounts between $100,000 and $250,000. In support of his motion, the plaintiff argued that he was entitled to reformation of his umbrella policy because the evidence demonstrated that Allstate changed the underlying automobile policy limits without notifying him of the change. The plaintiff maintained that the February 2005 letter did not satisfy the notice requirements of Insurance Law § 3425(d)(1) because it only addressed the change to the underlying policy limits in the “third page buried in the declaration[s].” Even assuming that this letter constituted notice of the policy change, the plaintiff maintained that it did not satisfy statutory requirements because it did not set forth an explanation for the policy change as required by Insurance Law § 3425(d)(1). The plaintiff further alleged that Allstate violated Insurance Law § 3425(d)(3), which requires an insurer to notify an
insured of its intention to “substitute at the annual renewal date another approved policy form,” and to provide the insured with a “full and clear comparison of the differences between the policy form as last issued and the substitute policy form.”
In support of his motion, the plaintiff submitted, inter alia, interrogatory responses from an Allstate employee. The Allstate employee explained in his interrogatory responses that the plaintiff was entitled to a refund in February of 2005 because the premium for an umbrella policy with required underlying limits of $250,000 per claimant and $500,000 per occurrence was less than the premium for an umbrella policy with required underlying limits of $100,000 per claimant and $300,000 per occurrence. The Allstate employee confirmed that the change to “the required underlying automobile insurance policy limits was not due to recalculation of premiums,” but rather, was made due to “an underwriting program put into place by Allstate in 1996.” The Allstate employee also acknowledged that the “precipitating factor” for the increase in the underlying
limits was the plaintiff's cancellation of his primary automobile insurance policy with Allstate.
Allstate cross-moved for summary judgment, in effect, for a declaration in its favor. In support of its cross motion, Allstate contended that the plaintiff received clear notice of the increase in the required underlying automobile insurance limits, and that it was not required to comply with the statutory notice provisions of Insurance Law § 3425(d)(1) because the increase in the required underlying limits of automobile coverage did not involve a non-renewal or conditional renewal of the policy. Allstate also argued that Insurance Law § 3425(d)(3) was not applicable because there had been no substitution of policy forms, and no change in the coverage provided by the plaintiff's personal umbrella...
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