McAlpin v. Rli Ins. Co.

• Decision Date: 05 September 2007
• Docket Number: No. 04-CV-6125L.,04-CV-6125L.
• Citation: 509 F.Supp.2d 242
• Parties: Patrick W. McALPIN, Plaintiff, v. RM INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Western District of New York

509 F.Supp.2d 242

Patrick W. McALPIN, Plaintiff, v. RM INSURANCE COMPANY, Defendant.

No. 04-CV-6125L.

United States District Court, W.D. New York.

September 5, 2007.

COPYRIGHT MATERIAL OMITTED

Anthony J. Piazza, Gary H. Abelson, Hiscock & Barclay LLP, Rochester, NY, for Plaintiff.

Joseph D. Picciotti, Harris Beach LLP, Pittsford, NY, for Defendant.

DECISION AND ORDER

DAVID G. LARIMER, District Judge.

Plaintiff, Patrick W. McAlpin, commenced this action in New York State Supreme Court, Ontario County, in February 2004, seeking a declaration that defendant, RLI Insurance Co. ("RLI"), is obligated to defend and indemnify him for any and all claims arising out of an automobile accident ("the accident") in which he was involved on October 10, 2002. RLI removed the action to this Court on March 30, 2004, based on diversity of citizenship under 28 U.S.C. § 1332.¹

Both sides have moved for summary judgment. For the reasons that follow, plaintiffs motion is granted, and defendant's motion is denied.

FACTUAL BACKGROUND

The relevant facts are not in dispute. At the time of the accident, McAlpin was covered by two separate insurance policies. One of these, issued by Progressive Insurance Co. ("Progressive"), was a motor vehicle policy with an effective period of May 3, 2002 to November 3, 2002, providing up to $300,000 of liability coverage per occurrence. Dkt. # 54 Ex. A. The other, issued by RLI, was a personal umbrella liability policy with an effective period of May 18, 2002 to May 18, 2003, providing up to $1,000,000 of coverage for claims in excess of any primary insurance held by McAlpin, such as his Progressive policy. Dkt. # 53 Ex. G. McAlpin purchased both policies through the Hatch Leonard Naples, Inc. insurance agency ("Hatch Leonard").

On October 10, 2002, McAlpin was involved in a collision between the truck that he was driving and a motorcycle being ridden by Orlando O'Neill. O'Neill was injured in the accident. McAlpin called Hatch Leonard to inform them of the accident, apparently from a cellular telephone while he was still at the accident scene. See McAlpin Depo. Tr. (Dkt. # 53 Ex. L) at 17. McAlpin testified that either he or Hatch Leonard then called Progressive. Id. at 18-19. A Progressive representative contacted McAlpin within about a day and came to McAlpin's office to take photographs of his truck. RLI was not contacted concerning the accident at this time.

In January 2003, O'Neill and his wife, Lori Moose, filed an action ("O'Neill action") against McAlpin in New York State Supreme Court, Ontario County, seeking damages for the injuries that O'Neill sustained in the accident and for loss of consortium. The ad damnum clause in the complaint in the O'Neill action alleged $2.5 million in damages.

After being notified of the existence of the ONeill action, Progressive agreed to defend McAlpin and to indemnify him up to the limits of the Progressive policy.² McAlpin Decl. (Dkt.# 68-1) ¶ 14; Michael Budd Decl. (Dkt.# 54) ¶ 6. On June 10 2003, a Progressive representative, John Modoski, sent RLI a faxed copy of the October 10, 2002 police report concerning the accident between plaintiff and O'Neill. Dkt. # 60-2 at 3. The cover sheet stated that this related to a "new loss," and asked RLI's "assigned rep" to call Modoski for details. Id. at 2.

The following day, RLI's Casualty Claims Director, Frank C. White, Jr. sent a letter to McAlpin, stating that RLI "ha[d] received its first notice of loss by Orlando O'Neill on June 10, 2003." Dkt. # 53 Ex. O. White asked McAlpin to submit to RLI "any copies of letters from [McAlpin's] primary personal insurance policy" concerning the loss. White stated that until RLI received those materials and certain other documents, it could not take a definitive position on whether it would provide coverage, adding, "RLI will investigate this loss under a complete reservation of rights, including but not limited to late notice of a loss." Id.

On July 28, 2003, White sent another letter to McAlpin stating that "RLI is denying coverage for violation of the policy conditions of late notice." Dkt. # 53 Ex. P. Specifically, White quoted language in the RLI policy stating,

In the event of an Occurrence which is likely to involve this policy, or if you or anyone else covered under the policy is sued in connection with an Injury which may be covered under this policy, you or they must do the following:

1. Notify us or our agent as soon as possible;

2. Provide us with any Suit papers and any other documents which will help us to defend you or them....

Id. White noted that the "date of loss" was October 10, 2002, the O'Neill action was commenced on January 11, 2003, RLI had not received its "first notice" until June 10, 2003, and RLI did not receive a "copy of the suit" until June 26. Id.

RLI did not participate in McAlpin's defense in the O'Neill action. In March 2007, a jury awarded the plaintiffs in that action nearly $850,000. Since Progressive has indicated that it will indemnify plaintiff up to the full amount of the Progressive policy — $300,000 — plaintiff seeks in this action, in effect, an order directing RLI to indemnify plaintiff for the $550,000 balance of the O'Neill award.

DISCUSSION

A. Summary Judgment: General Principles

A court may grant summary judgment only "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). The Court determines which facts are material by considering the substantive law of the action, for only those "facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

The initial burden rests with the moving party to demonstrate the absence of any genuine issues of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). If the moving party satisfies its burden, the nonmoving party must provide "specific facts showing that there is a genuine issue for trial" in order to survive the motion for summary judgment. Fed.R.Civ.P. 56(e); see also Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986); Shannon v. New York City Transit Auth., 332 F.3d 95, 98-99 (2d Cir.2003).

In considering a motion for summary judgment, the Court must view the evidence in the light most favorable to the non-moving party, and draw all reasonable inferences in that party's favor. See Williams v. R.H. Donnelley Corp., 368 F.3d 123, 126 (2d Cir.2004). The Court must refrain from weighing the evidence, and restrict its inquiry to whether there are triable issues of material fact. See Anderson, 477 U.S. at 249, 106 S.Ct. 2505.

B. Adequacy of Notice to RLI and RLI's Delay in Disclaiming

RLI's position in this action is straightforward. It contends that because it did not receive notice of the relevant occurrence, i.e., the O'Neill action, until June 10, 2003, and because it did not receive the O'Neill suit papers until June 26, 2003, plaintiff did not comply with the notice provisions of the RLI policy. RLI was therefore entitled to disclaim coverage under the policy.

In response, plaintiff advances two arguments why notice to RLI was timely. First, plaintiff asserts that Hatch Leonard had apparent authority to act as RLI's agent, so that the notice provided to Hatch Leonard on the day of the accident satisfied the RLI policy's, notice requirement. Second, plaintiff contends that even if notice was not given to RLI until Progressive informed RLI of the O'Neill action in June 2003, notice was still timely, because plaintiff had no reason to believe that the O'Neill action would implicate the RLI policy at that time.

Under New York law, "an insured has a contractual obligation under the policy to provide timely notice of a claim...." Webster ex rel. Webster v. Mount Vernon Fire Ins. Co., 368 F.3d 209, 214(2dCir.2004). Consequently, "compliance with a notice-of-occurrence provision in an insurance policy is a condition precedent to an insurer's liability under the policy." Commercial Union Insurance Co. v. International Flavors & Fragrances, Inc., 822 F.2d 267, 271 (2d Cir. 1987); see Security Mutual Insurance Co. v. Acker-Fitzsimons Corp., 31 N.Y.2d 436, 440, 340 N.Y.S.2d 902, 293 N.E.2d 76 (1972).

The defenses of late notice of claim or of occurrence are subject to waiver, however. In New York, an insurer seeking to "disclaim liability or deny coverage for death or bodily injury arising out of a motor vehicle accident or any other type of accident occurring within this state" must provide the insured and the injured person or other claimant with written notice of its intent to disclaim "as soon as is reasonably possible...." N.Y. Ins. Law § 3420(d). "[A]n insurer cannot deny coverage if it delays unreasonably in issuing its denial, even if the insured has itself delayed unreasonably in notifying the insurer of the occurrence." New York Univ. v. First Fin. Ins. Co., 322 F.3d 750, 753 n. 3 (2d Cir.2003). See also Arbitration Between Allcity Ins. Co. and Jimenez, 78 N.Y.2d 1054, 1056, 576 N.Y.S.2d 87, 581 N.E.2d 1342 (1991) ("an insurer who fails to timely disclaim `liability or deny coverage 'as soon as is reasonably possible,' when required by Insurance Law § 3420(d), waives its affirmative defense of late notice") (internal citations omitted); Schulman v. Indian Harbor Ins. Co., 40 A.D.3d 957, 958, 836 N.Y.S.2d 682, 684 (2d Dep't 2007) ("The failure of an insured to timely notify the insurer of a claim does not excuse the insurer's failure to timely disclaim coverage"). "Under this statute, it is not necessary for an insured to show prejudice caused by an insurer's unreasonable delay...