Handelsman v. Sea Ins. Co. Ltd.

• Decision Date: 20 October 1994
• Citation: 85 N.Y.2d 96,647 N.E.2d 1258,623 N.Y.S.2d 750
• Parties: , 647 N.E.2d 1258 Florence HANDELSMAN, et al., Plaintiffs, v. SEA INSURANCE COMPANY, LTD., Respondent, et al., Defendants, and Ann Samochwal, Appellant.
• Court: New York Court of Appeals Court of Appeals

Page 750

623 N.Y.S.2d 750

85 N.Y.2d 96, 647 N.E.2d 1258

Florence HANDELSMAN, et al., Plaintiffs, v. SEA INSURANCE COMPANY, LTD., Respondent, et al., Defendants and Ann Samochwal, Appellant.

Court of Appeals of New York.

Oct. 20, 1994.

[85 N.Y.2d 97] Budin, Reisman & Schwartz, New York City (Robin Mary Heaney and Harlan S. Budin, of counsel), for appellant.

[85 N.Y.2d 98] Stuart M. Herz, Garden City, for respondent.

OPINION OF THE COURT

TITONE, Judge.

This action arises out of an automobile accident involving Thomas Alberino, who was driving a vehicle owned by his mother (Dorothy Alberino), and Florence Handelsman, who was driving her own car and was accompanied by Ann Samochwal at the time of the occurrence. The allegedly injured parties, including Samochwal, sued the two drivers. Dorothy Alberino was also sued as the owner of the Alberino vehicle. This appeal concerns the extent to which an insurance policy that was issued to Dorothy Alberino's husband and provides for coverage of "family members" in some circumstances applies to this accident. We hold that because of the policy's ambiguity, its terms must be construed to extend coverage to Dorothy and Thomas Alberino for any liability they may incur in connection with the Handelsman accident.

At the time of the accident, the car owned by Dorothy Alberino was insured under a $10,000/$20,000 liability policy. At the same time, Dorothy's husband, Robert Alberino, owned two other automobiles, both of which were insured by defendant Sea Insurance Company under a combined single limit liability policy with a $300,000 limit. The present action was brought by the Handelsmans in an effort to obtain a declaration that, having failed to make a timely disclaimer, Sea was obligated to defend and indemnify Dorothy and Thomas Alberino under the policy issued to Robert Alberino. The other injured parties, including Samochwal, were joined as nominal defendants in the lawsuit.

In response to the Handelsman complaint, defendant Sea did not dispute that it had failed to register a timely disclaimer. Rather, the insurer took the position that it was nevertheless not liable because the policy issued to Robert Alberino did not cover this occurrence in the first instance and, under settled principles, a failure to disclaim cannot create coverage that the policy was not written to provide (see, Zappone v. Home Ins. Co., 55 N.Y.2d 131, 143, 447 N.Y.S.2d 911, 432 N.E.2d 783; Schiff Assocs. v. Flack, 51 N.Y.2d 692, 435 N.Y.S.2d 972, 417 N.E.2d 84). This theory was tested when Sea and its nominal codefendant Samochwal cross-moved for summary judgment.

In its ruling on the cross motions, the Supreme Court held that Sea had no obligation to defend and indemnify Dorothy and Thomas Alberino under the policy it had issued to Robert Alberino, since, in its view, the occurrence in question was not within the scope of that policy's coverage. On Samochwal's appeal, a majority at the Appellate Division affirmed principally in reliance on this Court's prior holding in Zappone v. Home Ins. Co. (55 N.Y.2d 131, 447 N.Y.S.2d 911, 432 N.E.2d 783, supra ). One Appellate Division Justice dissented, taking the position that the Sea policy was ambiguous and that, accordingly, it should be construed to encompass coverage for this accident. This appeal, taken by permission of this Court, ensued.

The fundamental governing legal principles are not in dispute. When a liability insurer is notified of a claim, it must timely disclaim coverage in order to avoid its duty to defend and indemnify (Insurance Law § 3420[d]. A timely disclaimer is not required, however, when the policy on which the claim rests does not, by its terms, cover the incident giving rise to liability (Zappone v. Home Ins. Co., supra). Thus, in the present case, the obligation of the insurer, which did not timely disclaim, depends on a construction of the particular provisions of the policy it issued to Robert Alberino.

The general coverage provision of the policy in issue states that the insurer will pay damages for bodily injury or property damage for which any "insured" becomes legally responsible because of an auto accident. The critical policy provision is the one that defines what constitutes an "insured":

"B. 'Insured' as used in this Part means:

"1. You or your 'family member' for the ownership, maintenance or use of any auto or 'trailer.'

"2. Any person using 'your covered auto.'

"3. For 'your covered auto,' any person or organization but only with respect to legal responsibility for acts or omissions of a person for whom coverage is afforded under this Part.

"4. For any auto or 'trailer,' other than 'your covered auto,' any other person or organization but only with respect to legal responsibility for acts or omissions of you or any 'family member' for whom coverage is afforded under this Part. This provision (B.4.) applies only if the person or organization does not own or hire the auto or 'trailer' " (emphasis supplied).

"Family member" is defined elsewhere in the policy as a person related to the policyholder by blood or marriage who is also a resident of the policyholder's home.

It is undisputed for the purpose of this appeal that both Dorothy and Thomas Alberino qualify as "family members" under this definition. Further, under the terms of clause 1 of section B, both of those individuals are covered for their use or ownership of "any auto"--a term that is plainly broad enough to encompass the vehicle involved in the Handelsman accident. Thus, section B.1 of the insurance policy issued to Robert Alberino unambiguously provides coverage for the Handelsman occurrence.

In support of its effort to avoid the obligation to defend and indemnify that is created by clause 1 of section B, Sea cites clause 4, which limits coverage to situations in which "the person or organization does not own or hire the auto or 'trailer.' " However, it is not clear from the language or structure of section B whether its provisions are intended to be independent or cumulative or whether clause 4 was intended to modify or narrow the coverage contemplated in clause 1.

Notably, there are no conjunctive or disjunctive connecting words to indicate how the four clauses in section B are supposed to relate to each other. Moreover, there is no...