Royal Waste Servs., Inc. v. Interstate Fire & Cas. Co.

• Decision Date: 31 January 2014
• Docket Number: Index No. 112999/2010
• Court: New York Supreme Court
• Parties: ROYAL WASTE SERVICES, INC., REGAL RECYCLING CO., INC., ROYAL RECYCLING SERVICES, INC., and M&P REALI ENTERPRISES, INC., Plaintiffs v. INTERSTATE FIRE & CASUALTY COMPANY, a Fireman's Fund Insurance Company, FIREMAN'S FUND RISK MANAGEMENT SERVICES, INC., and FIRST MERCURY EMERALD INSURANCE SERVICES, INC. (pertaining to underlying actions entitled Dahan, et al. v. Regal Recycling Co., Inc., et al., Index No. 17828/2010 (Sup. Ct. Kings Co.), and Rivas v. M&P Reali Enterprises Inc., et al., Index No. 10386/2010 (Sup. Ct. Queens Co.)), Defendants

2014 NY Slip Op 30386

ROYAL WASTE SERVICES, INC., REGAL RECYCLING CO., INC.,
ROYAL RECYCLING SERVICES, INC.,
and M&P REALI ENTERPRISES, INC., Plaintiffs
v.
INTERSTATE FIRE & CASUALTY COMPANY,
a Fireman's Fund Insurance Company,
FIREMAN'S FUND RISK MANAGEMENT SERVICES, INC.,
and FIRST MERCURY EMERALD INSURANCE SERVICES, INC.
(pertaining to underlying actions entitled
Dahan, et al. v. Regal Recycling Co., Inc., et al.,
Index No. 17828/2010 (Sup. Ct. Kings Co.),
and Rivas v. M&P Reali Enterprises Inc., et al.,
Index No. 10386/2010 (Sup. Ct. Queens Co.)), Defendants

Index No. 112999/2010

SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK: IAS PART 46

FILED: February 13, 2014
DATED: January 31, 2014

DECISION AND ORDER

LUCY BILLINGS, J.

I. BACKGROUND TO PLAINTIFFS' CLAIMS

Plaintiffs procured two excess liability insurance policies from defendants Interstate Fire & Casualty Company and First Mercury Emerald Insurance Services, Inc., each policy with a limit of $5,000,000 over plaintiffs' general liability insurance coverage for February 5, 2009, to February 5, 2010. Plaintiffs allege that their exclusive broker, John Rocco, procured both insurance policies, delivered them to plaintiffs, and also procured plaintiffs' financing agreement with Kings Premium Service Corp. for the payment of these two policies' premiums. Plaintiffs further allege that they paid the initial premiums for

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the excess coverage policies directly to Rocco and that this payment, along with the payments Kings Premium Service made to Rocco, amounted to payment of the full year of premiums for both policies. Plaintiffs maintain that they continued to make payments to Kings Premium Service from February to December 2009 according to their financing agreement, but were unaware that Rocco failed to transmit to Interstate Fire & Casualty and to First Mercury Emerald payments that plaintiffs made or Kings Premium Service made to him.

On June 29, 2009, three persons died from exposure to hydrogen sulfide fumes released from a drywell on plaintiffs' premises. Darel Dahan, an employee of S. Dahan Piping and Heating Corp., which plaintiff Regal Recycling Co., Inc., hired to unclog a drain at the bottom of a drywell filled with liquid, lost consciousness while in the drywell where the fumes inadvertently were released. Shlomo Dahan, the owner of S. Dahan Piping and Heating Corp., and plaintiffs' employee Rene Rivas entered the drywell to attempt a rescue, but both were overcome by the fumes as well.

In the underlying wrongful death actions commenced by the decedents' estates, plaintiffs are defended by attorneys appointed by plaintiffs' general liability insurer. On December 18, 2009, plaintiffs' attorney for these underlying actions notified Interstate Fire & Casualty of the deaths and the actions against plaintiffs. Interstate Fire & Casualty disclaimed any obligation to provide excess liability coverage because the

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insurer cancelled plaintiffs' excess liability policy effective April 23, 2009, due to nonpayment of premiums. Even if the policy was in effect at the time of the deaths, Interstate Fire & Casualty disclaimed coverage because plaintiffs' late notice to their insurer of the claims against plaintiffs violated the policy's conditions.

On January 14, 2010, plaintiffs requested First Mercury Emerald to defend and indemnify plaintiff Regal Recycling, Services, Inc., pursuant to this insurer's excess liability policy. First Mercury Emerald also disclaimed its obligation to provide excess liability coverage citing cancellation of its policy due to plaintiffs' nonpayment of the premiums and, in any event, plaintiffs' late notice of the deaths in violation of the policy's conditions.

II. THE PARTIES' MOTIONS

Plaintiffs move for summary judgment and declaratory relief that defendants are obligated to provide excess liability coverage for the claims against plaintiffs arising out of the deaths June 29, 2009. C.P.L.R. §§ 3001, 3212(b). Plaintiffs claim defendants' cancellation of plaintiffs' coverage due to nonpayment was unlawful, because plaintiffs made the policy premium payments to Rocco, the procuring broker, who became defendants' authorized agent pursuant to New York Insurance Law § 2121. Plaintiffs contend that Rocco's failure to remit the payments to defendants did not entitle them to cancel or rescind plaintiffs' policy because Insurance Law § 2121(a) treats the

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procuring broker as authorized by the insurer to accept payments on its behalf. Plaintiffs further contend that they never received the cancellation notices Interstate Fire & Casualty and First Mercury Emerald claim to have sent, and, in any event, these notices were deficient because they failed to specify the reasons for the cancellation and cite to the applicable Insurance Law provision. N.Y. Ins. Law § 3426(c)(1)(A) and (h).

Interstate Fire & Casualty opposes plaintiffs' summary judgment motion on the grounds that it is premature before disclosure of documents or depositions necessary for this defendant's opposition. C.P.L.R. § 3212(f). Interstate Fire & Casualty claims that CRC Insurance Services, Inc., an excess lines insurance broker, procured the Interstate Fire & Casualty and First Mercury Emerald policies after receiving an application from either AGC Insurance Services, Inc., or Transportation Coverage Specialist on plaintiffs' behalf. Interstate Fire & Casualty maintains that it never dealt with or even knew of Rocco and needs disclosure to determine the brokers and agents involved in procuring the insurance policies at issue.

Interstate Fire & Casualty also shows that it mailed the cancellation notice to plaintiffs April 16, 2009. It claims that, because its policy was written by an unlicensed insurer through the excess lines market, its notice to plaintiffs canceling that policy is not subject to Insurance Law § 3426(c)'s cancellation notice requirements and thus is not deficient under the law.

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Defendant First Mercury Emerald cross-moves for summary judgment dismissing all claims against this defendant. C.P.L.R. § 3212(b). It claims that plaintiff Royal Waste Services, Inc., authorized CRC Insurance Services, the excess insurance broker, and AGC Insurance Services, which applied for the excess insurance policies on plaintiffs' behalf, as the exclusive broker and agent and that this defendant delivered its excess liability policy to CRC Insurance Services, not Rocco. Therefore, after plaintiffs' initial deposit of their first premium payment, their subsequent premium payments were not to First Mercury Emerald's broker or agent. First Mercury Emerald contends that its broker CRC Insurance Services requested the insurer to cancel the policy because insufficient funds prevented CRC Insurance Services from depositing plaintiffs' first premium payment. Based on this nonpayment of the insurer's policy premiums and Insurance Law § 3426(c)'s inapplicability to a notice canceling an excess liability policy, the cancellation notice was valid and undisputedly was received by plaintiffs. Since plaintiffs also unreasonably delayed in notifying First Mercury Emerald of the underlying claims against plaintiffs, they violated its policy, too, even if the policy remained in force when the claims arose.

Distinct from Interstate Fire & Casualty, First Mercury Emerald claims that, because its policy provides only excess liability coverage, plaintiffs lack standing to maintain this declaratory judgment action, and First Mercury Emerald is not obligated to defend plaintiffs in the underlying actions until

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plaintiffs have exhausted their general liability insurance limits. First Mercury Emerald also separately insists that its policy's hazardous materials and pollution exclusions apply to and bar the excess coverage sought for the underlying actions.

III. STANDARDS FOR SUMMARY JUDGMENT

To obtain summary judgment, the moving party must make a prima facie showing of entitlement to judgment as a matter of law, through admissible evidence eliminating all material issues of fact. C.P.L.R. § 3212(b); Vega v. Restani Constr. Corp., 18 N.Y.3d 499, 503 (2012); Smalls v. AJI Indus., Inc., 10 N.Y.3d 733, 735 (2008); JMD Holding Corp. v. Congress Fin. Corp., 4 N.Y.3d 373, 384 (2005); Giuffrida v. Citibank Corp., 100 N.Y.2d 72, 81 (2003). Only if the moving party satisfies this standard, does the burden shift to the opposing parties to rebut that prima facie showing, by producing evidence, in admissible form, sufficient to require a trial of material factual issues. Morales v. D & A Food Serv., 10 N.Y.3d 911, 913 (2008); Hyrnan v. Queens County Bancorp, Inc., 3 N.Y.3d 743, 744 (2004). If the moving party fails to meet its initial burden, the court must deny summary judgment despite any insufficiency in the opposition. JMD Holding Corp. v. Congress Fin. Corp, 4 N.Y.3d at 384; Romero v. Morrisania Towers Hous. Co. Ltd. Partnership, 91 A.D.3d 507, 508 (1st Dep't 2012); Chubb Natl. Ins. Co. v. Platinum Customcraft Corp., 38 A.D.3d 244, 245 (1st Dep't 2007); Atlantic Mut. Ins. Co. v. Joyce Intl., Inc., 31 A.D.3d 352, 352 (1st Dep't 2006). See Roman v. Hudson Tel. Assoc., 15 A.D.3d

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227, 228 (1st Dep't 2005). In evaluating the evidence for purposes of each party's motion, the court construes...