Sphere Drake Ins. Co. P.L.C. v. Y.L. Realty Co.
| Decision Date | 17 October 1997 |
| Docket Number | No. 95 Civ. 2777(BSJ).,95 Civ. 2777(BSJ). |
| Citation | 990 F.Supp. 240 |
| Parties | SPHERE DRAKE INSURANCE COMPANY, P.L.C., Plaintiff, v. Y.L. REALTY COMPANY, Kadish Mazel Realty Corporation, David Bradley Management, Janice & Richard Investments, Inc., Gloria Estrada, an Infant Under the Age of 14 Years, by her Mother and Natural Guardian, Cruz Salgado and Cruz Salgado, Individually, Defendants. |
| Court | U.S. District Court — Southern District of New York |
Bivona & Cohen, P.C. by Mitchell R. Goldklang, New York City, for Plaintiff.
Talisman, Rudin, Eskenazi & Delorenz, P.C. by Mark A. Eskenazi, Mineola, NY, for Defendants.
This case involves the rights and responsibilities of an insurance company in defending a state negligence action. At issue is whether Sphere Drake Insurance Company, P.L.C. ("Sphere Drake") is obligated to defend and indemnify its insured in a New York action involving the named defendants in the current case. Pending is Sphere Drake's motion for summary judgment, pursuant to Fed. R.Civ.P. 56. For the reasons stated below, Sphere Drake's motion is denied, and partial summary judgment for the defendants is granted.
Sphere Drake is a British insurance company that issued two general liability policies for a building located at 1121 Morrison Avenue, Bronx, New York. Y.L. Realty Company ("Y.L.Realty"), Kadish Mazel Realty Corporation ("Kadish Mazel"),1 David Bradley Management ("David Bradley"), and Janice & Richard Investments, Inc. ("Janice & Richard") at one time or another were the owners and/or managers of that building.2 David Bradley apparently became the managing agent of the building on March 5, 1992, following a foreclosure action by the Federal Home Loan Mortgage Corporation that resulted in the appointment of a receivership. On January 3, 1994, the building was resold to a new owner, who then appointed a new managing agent, not named in this suit.
The insurance policies issued by Sphere Drake for 1121 Morrison Avenue contain a notice provision, requiring the insured to provide notice of an "occurrence" to Sphere Drake "as soon as practicable." An "occurrence" is defined as "an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured." The policies further require the insured, in the event of a claim or suit, to "immediately forward to the company every demand, notice, summons or other process received by him or by his representative." The policies also contain a "Pollution Exclusion" clause, by which coverage is excluded for "bodily injury or property damage arising out of the actual, alleged, or threatened discharge, dispersal, release or escape of pollutants ... [a]t or from premises owned, rented or occupied by the named insured."
On or about January 10, 1994, Gloria Estrada and Cruz Salgado filed a lawsuit ("Estrada suit") in New York Supreme Court, Bronx County, alleging that from 1982 to 1992, Gloria Estrada "sustain[ed] severe, acute lead poisoning" as a result of "ingest[ing] flaking and rotting paint chips" in her apartment in the Morrison Avenue building (Estrada Compl. ¶ 11). The lawsuit named Kadish Mazel, David Bradley and Janice Richard Investments as defendants.
Sometime after the filing of the Estrada suit, Sphere Drake was notified of its duty as insurer of the building to defend the lawsuit and to indemnify the insured parties. Sphere Drake claims that this notification was not until October 28, 1994, over nine months after the complaint was originally filed. David Bradley disputes this, claiming that it forwarded a copy of the Estrada summons and complaint sometime around January 27, 1994, to an insurance broker who it believed was representing Sphere Drake. Subsequently, that brokerage firm notified Y.L. Realty and Kadish Mazel that it was not involved in insuring 1121 Morrison Avenue; David Bradley apparently only later learned of this information.
On April 21, 1995, Sphere Drake filed the current action, seeking a declaratory judgment that the insurance policies for 1121 Morrison Avenue did not cover the Estrada lawsuit. The declaratory judgement action seeks relief based on three grounds: (1) that Y.L. Realty, et al. failed to comply with the notice requirements in the policies; (2) that the Pollution Exclusion clause in the policies precludes coverage for the alleged lead poisoning to Estrada; and (3) that Estrada's alleged injuries occurred outside of the period of coverage in the policies. On October 18, 1995, Sphere Drake moved for summary judgment based on the first and second of these grounds — untimely notification and preclusion by the Pollution Exclusion clause. This memorandum addresses Sphere Drake's motion for summary judgment based on those two claims.
Summary judgement is appropriate only when "there is no genuine issue as to any material fact and ... the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). In deciding a motion for summary judgment, a court must resolve all ambiguities and draw all inferences in favor of the party against whom summary judgment is sought. Chambers v. T.R.M. Copy Ctrs. Corp., 43 F.3d 29, 36 (2d Cir.1994). Summary judgment may be entered against the moving party, even if his opponent has not cross-moved, if no genuine issues of material fact remain. Project Release v. Prevost, 722 F.2d 960, 968 (2d Cir.1983).
Compliance with a notice provision contained in an insurance contract is a condition precedent to recovery under New York law. Utica Mut. Ins., Co. v. Fireman's Fund Ins. Cos., 748 F.2d 118, 121 (2d Cir. 1984). Failure by the insured to comply with such a provision relieves the insurer of liability. Id. In determining compliance, the court considers if notification by the insured was reasonable under all the circumstances. Deso v. London & Lancashire Indem. Co., 3 N.Y.2d 127, 129, 164 N.Y.S.2d 689, 143 N.E.2d 889 (1957). Whether notice has been timely is generally a question of fact; only when delay is found to be wholly unexcused is notice held to be late as a matter of law. Id. at 129-30, 164 N.Y.S.2d 689, 143 N.E.2d 889; Power Auth. v. Westinghouse Elec. Corp., 117 A.D.2d 336, 502 N.Y.S.2d 420, 422 (1986).
Sphere Drake claims that its insured failed to comply with the notice provisions in the policies for 1121 Morrison Avenue as a matter of law. Specifically, Sphere Drake asserts that it did not receive notice of the Estrada suit until October 28, 1994, over nine months after the suit was filed.
David Bradley challenges this claim, questioning whether Sphere Drake first received notice of the Estrada suit on October 28, 1994, as claimed. David Bradley further asserts that it complied with the provisions of the policy by providing Sphere Drake with reasonable notice under the circumstances. David Bradley claims that it first received the summons and complaint in the Estrada suit on January 27, 1994, and that it immediately forwarded a copy of the papers to an insurance brokerage firm it believed was representing Sphere Drake. Only later did David Bradley learn that the brokerage firm was not involved in insuring 1121 Morrison Avenue and that it might not have forwarded the Estrada papers to Sphere Drake.
Based on these efforts, David Bradley asserts that it complied with the notice provisions in the insurance policies. In support of this assertion, David Bradley notes that it was the managing agent for 1121 Morrison Avenue from only March 5, 1992, to January 3, 1994. During that time, it claims, it had only limited access to insurance records due to the fact that its involvement resulted from a foreclosure action and subsequent appointment of a receivership.
Based on the parties' submissions it is clear that summary judgment is inappropriate as to this issue. A genuine dispute remains as to when Sphere Drake actually received notice of the Estrada claims and as to whether David Bradley gave reasonable notice under the circumstances. These questions remain triable issues of fact and cannot be decided as a matter of a law. Therefore, Sphere Drake's motion for summary judgment as to the notice provision is denied.
Sphere Drake's second claim for summary judgment is based on the Pollution Exclusion clause contained in the insurance policies. The relevant clause excludes coverage:
"1. To bodily injury or property damage arising out of the actual, alleged or threatened discharge, dispersal, release or escape of pollutants:
(a) At or from premises owned, rented or occupied by the named insured ...
Pollutants means any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste includes materials to be recycled, reconditioned or reclaimed."
Sphere Drake claims that this clause encompasses lead paint poisoning and therefore excludes coverage for claims in the Estrada suit. The Court disagrees with this broad interpretation and grants summary judgment to the defendants on the Pollution Exclusion clause issue.
It is well settled in New York that ambiguities in an insurance policy are to be construed against the insurer, particularly when found in an exclusionary clause. Ace Wire & Cable Co. v. Aetna Cas. & Sur. Co., 60 N.Y.2d 390, 398, 469 N.Y.S.2d 655, 457 N.E.2d 761 (1983). Seaboard Sur. Co. v. Gillette Co., 64 N.Y.2d 304, 311, 486 N.Y.S.2d 873, 476 N.E.2d 272 (1984).
Several courts recently have interpreted pollution exclusion clauses similar to the one at issue here. The overwhelming trend in...
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