Ponok Realty Corp. v. United National Specialty Insurance Company

• Decision Date: 05 January 2010
• Docket Number: 2008-07499
• Parties: PONOK REALTY CORP., Appellant, v. UNITED NATIONAL SPECIALTY INSURANCE COMPANY, Respondent.
• Court: New York Supreme Court — Appellate Division

69 A.D.3d 596

893 N.Y.S.2d 125

2010 NY Slip Op 124

PONOK REALTY CORP., Appellant, v. UNITED NATIONAL SPECIALTY INSURANCE COMPANY, Respondent.

2008-07499

Appellate Division of the Supreme Court of New York, Second Department.

Decided January 5, 2010.

In an action, inter alia, for a judgment declaring that the defendant, United National Specialty Insurance Company, is obligated to defend and indemnify Ponok Realty Corp. in an underlying action entitled RO Gallery Image Makers, Inc. v Ponok Realty Corp., pending in the Supreme Court, Queens County, under index No. 19538/03, the plaintiff appeals from an order of the Supreme Court, Queens County (Kelly, J.), entered July 7, 2008, which granted the defendant's motion, among other things, in effect, for summary judgment declaring that the defendant is not so obligated.

[Prior Case History: 2008 NY Slip Op 31819(U).]

Ordered that the order is affirmed, with costs, and the matter is remitted to the Supreme Court, Queens County, for the entry of a judgment, inter alia, declaring that the defendant is not obligated to defend and indemnify Ponok Realty Corp. in the underlying action.

The plaintiff's argument that the "prejudice" rule articulated in Insurance Law § 3420 (c) (2) (A), governs this case is unavailing. A 2008 amendment to Insurance Law § 3420 (c) (2) (A) (see L 2008, ch 388, § 4) provides that where "an insurer alleges that it was prejudiced as a result of a failure to provide timely notice, the burden shall be on ... the insurer to prove that it has been prejudiced" if the notice was provided within two years of the time required under the policy (see Insurance Law § 3420 [c] [2] [A] [i]). However, it is clear from section 8 of the act amending Insurance Law § 3420 that the amendments were to "apply to policies issued or delivered in this state on or after [January 17, 2009]" (Historical and Statutory Notes, McKinney's Cons Laws of NY, Book 27, Insurance Law § 3420, 2009 Pocket Part, at 15, quoting L 2008, ch 388, § 8; see generally Matter of Auerbach v Board of Educ. of City School Dist. of City of N.Y., 86 NY2d 198, 204 [1995]). The insurance policy issued by the defendant to the plaintiff was effective from October 3, 2003, until October 3, 2004. Since the policy was issued before the effective date of the relevant amendment to Insurance Law § 3420, the amended version of that section does not apply to the subject insurance policy.

Moreover, the plaintiff's argument that notice of a potential claim was given to the defendant "as soon as practicable" is similarly unconvincing. Where an insurance policy requires that notice of an occurrence be given "as soon as practicable," notice must be given within a reasonable time in view of all of the circumstances (see Great Canal Realty Corp. v Seneca Ins. Co., Inc., 5 NY3d 742, 743 [2005]; 120 Whitehall Realty Assoc., LLC v Hermitage Ins. Co., 40 AD3d 719, 721 [2007]; Genova v Regal Mar. Indus., 309 AD2d 733, 734 [2003]). "The insured's failure to satisfy the notice requirement constitutes `a failure to comply with a condition precedent which, as a matter of law, vitiates the contract'" (Great Canal Realty Corp. v Seneca Ins. Co., Inc., 5 NY3d at 743, quoting Argo Corp. v Greater N.Y. Mut. Ins. Co., 4 NY3d 332, 339 [2005]; see Sputnik Rest. Corp. v United Natl. Ins. Co., 62 AD3d 689 [2009]). "[C]ircumstances may exist that will excuse or explain the insured's delay in giving notice, such as a reasonable belief in nonliability" (Genova v Regal Mar. Indus., 309 AD2d at 734; see Great Canal Realty Corp. v Seneca Ins. Co., Inc., 5 NY3d at 743-744; C.C.R. Realty of Dutchess v New York Cent. Mut. Fire Ins. Co., 1 AD3d 304, 305 [2003]).

In general, the existence of a good faith belief that the injured party would not seek to hold the insured liable, and the reasonableness of such belief, are questions of fact for the fact-finder (see Genova v Regal Mar. Indus., 309 AD2d at 734; C.C.R. Realty of Dutchess v New York Cent. Mut. Fire Ins. Co., 1 AD3d at 305). The burden of demonstrating the reasonableness of the excuse lies with the insured (see Genova v Regal Mar. Indus., 309 AD2d at 734). Nevertheless, summary judgment may be awarded to the insurer if, construing all inferences in favor of the insured, the evidence establishes, as a matter of law, that the insured's belief in nonliability was unreasonable or in bad faith (se...