Great Am. Ins. Co. v. London Records, Inc.

• Citation: 35 A.D.2d 661,314 N.Y.S.2d 369
• Parties: GREAT AMERICAN INSURANCE COMPANY, Plaintiff-Appellant, v. LONDON RECORDS, INC., and Carl Lurie, Defendants-Respondents, and Benny Fernandez, Defendant.
• Decision Date: 29 September 1970
• Court: New York Supreme Court — Appellate Division

Page 369

314 N.Y.S.2d 369

35 A.D.2d 661

GREAT AMERICAN INSURANCE COMPANY, Plaintiff-Appellant, v. LONDON RECORDS, INC., and Carl Lurie, Defendants-Respondents, and Benny Fernandez, Defendant.

Supreme Court, Appellate Division, First Department.

Sept. 29, 1970.

H. H. Wolgel, New York City, for plaintiff-appellant.

L. Trager, New York City, for defendants-respondents.

Before EAGER, J.P., and NUNEZ, STEUER and TILZER, JJ.

PER CURIAM.

Order (Quinn, J.) entered May 21, 1968, granting defendants-respondents' motion for summary judgment declaring that plaintiff Great American Insurance Company defend on behalf of said defendants an action entitled Benny Fernandez v. London Records Inc., et al. and denying plaintiff's cross-motion for summary judgment, affirmed, and that the respondents recover of the appellant $50 costs and disbursements.

The facts are fully set forth in the dissenting memorandum of this court. We are of the opinion, however, that the exclusionary clause relied upon by the plaintiff does not relieve it from its duty to defend in the Fernandez action. That clause provides that '2. This insurance does not apply * * * (d) to injury sustained by any person who is an employee of the named insured at the time of the offense causing the injury'. Hence, the policy excludes coverage only in relation to one who was 'an employee * * * at the time of the offense causing the injury.' The complaint in the Fernandez action clearly contains separate causes of action based upon separate acts which occurred long after termination of Fernandez' employment. Based upon such complaint it would be possible for a jury to find for plaintiff (Fernandez) solely on the basis of events occurring after his discharge and without reference to events which took place earlier during the course of his employment. Since the complaint in the Fernandez action alleges facts and circumstances, some of which would, if proved, fall within the risk covered by the policy, the insurer must defend (see Prashker v. United States Guaranty Company, 1 N.Y.2d 584, 154 N.Y.S.2d 910, 136 N.E.2d 871).

The plaintiff urges that the phrase contained in the exclusionary clause--' offense causing the injury'--refers to the act of the employee giving rise to the hazards of false arrest, false imprisonment, etc., and hence there is no coverage since the act of the employee occurred during the time of his employment. A fair reading of the policy and with reference to the other exclusionary clauses indicates that such phrase referred to acts of the Insured which caused the injury. In any event, if at best there be any ambiguity in the exclusionary clause, such must be resolved against the insurer and in favor of the insured. (Sincoff v. Liberty Mutual Fire Insurance Co., 11 N.Y.2d 386, 230 N.Y.S.2d 13, 183 N.E.2d 899)

Moreover, the position that the exclusion applies to all acts taken by the insured even after termination of the employment is certainly not within the strict wording of the exclusionary clause and the insurer has not carried its burden of proving that the case comes within the exclusion. (American Surety Company of New York v. National Fire Insurance Company of Hartford, 25 A.D.2d 734, 269 N.Y.S.2d 77) 'To sustain the construction of an exclusion provision in a policy as urged by the insurer, the insurer has the burden of establishing that the words and expressions used not only are susceptible of that construction, but that it is the only construction which can be fairly placed thereon.' (29 N.Y.Jur. Insurance § 623, p. 616)

Accordingly, the order entered May 21, 1968 directing plaintiff to defend the Fernandez' action should be affirmed.

All concur except STEUER, J., who dissents in the following memorandum:

STEUER, Justice (dissenting):

By this action plaintiff seeks a declaratory judgment that it is not required to defend nor to pay any possible judgment against the respondents, its insureds, in a particular action. Trial Term found that plaintiff was obligated to defend the action and left the question of liability for payment of any possible judgment for later determination dependent on what was established in the...