Hartford Acc. & Indem. Co. v. CNA Ins. Companies

• Decision Date: 23 February 1984
• Citation: 472 N.Y.S.2d 342,99 A.D.2d 310
• Court: New York Supreme Court — Appellate Division
• Parties: HARTFORD ACCIDENT & INDEMNITY CO., Plaintiff-Respondent-Appellant, v. CNA INSURANCE COMPANIES s/h/a CNA Insurance, Defendant-Appellant-Respondent, and Schectman Carpentry, Inc., Defendant.

Page 342

472 N.Y.S.2d 342

99 A.D.2d 310

HARTFORD ACCIDENT & INDEMNITY CO., Plaintiff-Respondent-Appellant, v. CNA INSURANCE COMPANIES s/h/a CNA Insurance,

Defendant-Appellant-Respondent,

and

Schectman Carpentry, Inc., Defendant.

Supreme Court, Appellate Division,

First Department.

Feb. 23, 1984.

Irwin H. Haut, New York City, of counsel (Morris, Duffy, Ivone & Jensen, New York City, attorneys), for defendant-appellant-respondent.

F.V. Mina, P.C., New York City (Mona C. Engel, New York City, on brief), for plaintiff-respondent-appellant.

Before SULLIVAN, J.P., and ROSS, CARRO, MILONAS and KASSAL, JJ.

KASSAL, Justice.

In this declaratory judgment action, Hartford Accident & Indemnity Co. ("Hartford") seeks a declaration that CNA Insurance Companies ("CNA") is obligated to share pro rata in an underlying settlement by Hartford of an action which had been brought to recover for the wrongful death of Paul Yenchick, a construction worker killed on a construction site on August 17, 1973. In January 1975, Yenchick's widow brought suit against the owner and general contractor, who, in June 1975, impleaded Samuel Scholosberg, Inc., the plumbing contractor, the employer of Yenchick, and Schectman Carpentry, Inc., a contractor.

Hartford had issued a "wrap-up" policy, which covered several contractors at the construction site, including Schectman. Accordingly, Hartford defended Schectman in that action and subsequently paid $200,000 in settlement thereof. Thereafter, on March 22, 1979, Hartford brought this action to recover from CNA one-half of the settlement, since CNA had also insured Schectman during the same period under a general liability policy.

CNA alleges that it did not receive timely written notice of the accident, as is required by the policy provision directing that written notice be given "as soon as practicable." The first notice CNA received was in 1977, two years after the wrongful death action had been brought and almost four years after the accident, which the insurer claims was insufficient compliance with the condition precedent to coverage. Accordingly, CNA moved for summary judgment dismissing the complaint on that ground and Hartford cross-moved for the same relief in its favor, alleging that it had given notice as soon as it discovered the existence of the CNA policy.

In support of its claim that it acted diligently, Hartford states that it was unaware of the accident and the underlying action until June 6, 1975, when Schectman transmitted the third party summons and complaint to Hartford. On June 13, 1975, Hartford wrote to ascertain from Schectman whether other insurance coverage existed. When no reply was received, on October 20, 1975, Hartford again wrote to its insured, with a copy to the broker. After a third letter on December 3, 1975 went unanswered, Hartford initiated an investigation, from which it was ascertained in March 1977 that CNA provided concurrent liability coverage. On March 23, 1977, Hartford sent a mailgram to Schectman, the insurance broker and CNA and, the following day, served a subpoena on the insurer to produce any policies covering Schectman. Thereafter, CNA served a reservation of rights letter and disclaimed coverage on April 12, 1977.

In denying both motions, Special Term concluded that there were triable issues of fact dealing with whether the notice to CNA was timely and whether that insurer had properly disclaimed coverage. We disagree. The failure of the insured to give timely written notice to CNA bars the action by Hartford for contribution. The only claim in favor of Hartford under the CNA policy is as equitable assignee or subrogee of its insured, Schectman. However, the insured's failure to satisfy the condition precedent to coverage likewise operates as a bar to one claiming rights through the insured.

In support of its request for declaratory judgment relief, Hartford made no claim to any direct benefit under the CNA policy, nor does it assert any right as third-party beneficiary. Clearly, Hartford is a "stranger" to the contract between CNA and Schectman and there is no proof that the parties intended to confer any benefit upon Hartford (see Stainless Inc. v. Employers Fire Ins. Co., 69 A.D.2d 27, 33-34, 418 N.Y.S.2d 76, aff'd 49 N.Y.2d 924, 428 N.Y.S.2d 675, 406 N.E.2d 490; Cerullo v. Aetna Cas. & Sur. Co., 41 A.D.2d 1, 4, 341 N.Y.S.2d 767).

Hartford's only right to proceed against CNA arises as a result of its settlement of the underlying action, as a result of which the insurer became equitably subrogated to the rights of the insured. A right of subrogation may be created conventionally by contract or may arise by operation of law out of the underlying relationship between the parties. An insurance carrier, upon payment of a loss, becomes equitably subrogated to the rights and remedies of its assured to proceed as against a party primarily liable (see Ocean Acc. & Guar. Corp. v. Hooker Electrochemical Co., 240 N.Y. 37, 47, 147 N.E. 351; New York Bd. of Fire Underwriters v. Trans Urban Constr. Co., 91 A.D.2d 115, 458 N.Y.S.2d 216, aff'd 60 N.Y.2d 912, 470 N.Y.S.2d 578, 458 N.E.2d 1255; Hartford Acc. and Ind. Co. v. Michigan Mut. Ins. Co., 93 A.D.2d 337, 462 N.Y.S.2d 175). An equitable assignee or subrogee, however, is vested with no greater or different right or remedy than that possessed by its subrogor (see Medical Malpractice Ins. Ass'n v. Medical Liab. Mut. Ins. Co., 86 A.D.2d 476, 479-480, 450 N.Y.S.2d 191; New York Bd. of Fire Underwriters v. Trans Urban Constr. Co., supra, 91 A.D.2d at 123, 458 N.Y.S.2d 216). Where an insurer seeks to assert an equitable right of subrogation for pro rata contribution from a co-insurer, it is subject to any defense or claim of lack of coverage which may be raised against the assured. Upon this basis, in Medical Malpractice Ins. Ass'n v. Medical Liab. Mut. Ins. Co., supra, we affirmed the order dismissing the complaint, holding that MMIA, which had insured a State hospital and settled an action...