Town of Newfane v. General Star National Ins. Co.

• Decision Date: 19 November 2004
• Docket Number: CA 04-00480.
• Citation: 784 N.Y.S.2d 787,14 A.D.3d 72,2004 NY Slip Op 08347
• Parties: TOWN OF NEWFANE, Respondent, v. GENERAL STAR NATIONAL INSURANCE COMPANY et al., Appellants, et al., Defendants.
• Court: New York Supreme Court — Appellate Division

14 A.D.3d 72

784 N.Y.S.2d 787

2004 NY Slip Op 08347

TOWN OF NEWFANE, Respondent, v. GENERAL STAR NATIONAL INSURANCE COMPANY et al., Appellants, et al., Defendants.

CA 04-00480.

Appellate Division of the Supreme Court of the State of New York, Fourth Department.

November 19, 2004.

Appeals from a judgment (denominated order) of the Supreme Court, Niagara County (Ralph A. Boniello, III, J.), entered October 14, 2003. The judgment granted those parts of plaintiff's motion for partial summary judgment seeking a declaration that defendants General Star National Insurance Company and Selective Insurance have a duty to defend plaintiff in the underlying action.

Underberg & Kessler LLP, Buffalo (Colin D. Ramsey of counsel), for General Star National Insurance Company, appellant.

Brown & Kelly, LLP, Buffalo (Lisa T. Sofferin of counsel), for Selective Insurance, appellant.

Jaeckle Fleischmann & Mugel, LLP, Buffalo (Howard S. Rosenhoch of counsel), for respondent.

OPINION OF THE COURT

KEHOE, J.

In this matter of apparent first impression in this state, we are called upon to determine when, for purposes of invoking insurance coverage in an underlying action, the insured's alleged underlying act of malicious prosecution is deemed to have occurred — on the date on which the criminal prosecution was instituted, or on the date on which it was terminated in favor of the accused. We conclude that the tort was committed when the criminal prosecution was instituted. We thus conclude that there is no coverage for a claim of malicious prosecution under an insurance policy issued after the prosecution was instituted but in effect when the prosecution was terminated.

I.

Plaintiff, the Town of Newfane (Town), commenced this action against six insurers, seeking a judgment declaring that each is obligated to defend and indemnify the Town pursuant to a policy of insurance issued to the Town. Before us are appeals, perfected on separate records, by two insurers, defendant General Star National Insurance Company (General Star) and defendant Selective Insurance (Selective). Because both appeals are taken from a single order, we treat them together, although only the appeal of Selective involves the issue previously identified herein.

II.

Addressing first the appeal of General Star, we conclude that Supreme Court properly granted that part of the Town's motion for partial summary judgment declaring that General Star must defend the Town in the underlying action pursuant to the provisions of a public officials and employment practices liability policy issued by General Star to the Town. In comparing the allegations of the underlying complaint with the policy in question (see Touchette Corp. v Merchants Mut. Ins. Co., 76 AD2d 7, 9-10 [1980]), we conclude that the Town met its burden of establishing its entitlement to judgment as a matter of law (see generally Alvarez v Prospect Hosp., 68 NY2d 320, 324 [1986]). The Town made the requisite showing that at least one cause of action in the underlying complaint falls within the policy's coverage, thus establishing its entitlement to a defense of the entire underlying action (see Frontier Insulation Contrs. v Merchants Mut. Ins. Co., 91 NY2d 169, 175 [1997]). In particular, the Town established that the fourth and fifth causes of action of the underlying complaint, respectively entitled "Retaliation for First Amendment Exercise" and "Respondeat Superior Liability," are covered by section II (d) of the policy, which provides that the Town's employees are covered "for their acts in the cause and scope of their employment." In addition, the Town established that the seventh and ninth causes of action of the underlying complaint, alleging negligence and the violation of civil rights, are covered by policy sections I (1) (a) and VI (5), which provide that the Town is covered for claims against it arising out of the wrongful acts of public officials. Contrary to the contention of General Star, the policy exclusions set forth in section I (2) (e) for "false arrest, false imprisonment . . . [or] malicious prosecution" do not apply to those causes of action.

III.

Turning to the appeal of Selective, we note that the Town sought partial summary judgment declaring that Selective is obligated to defend and indemnify it in the underlying action pursuant to the provisions of a commercial general liability policy issued by Selective. Selective opposed the motion and cross-moved for summary judgment declaring that it has no duty to defend or indemnify the Town in the underlying action. The court granted that part of the Town's motion seeking partial summary judgment declaring that Selective is obligated to defend the Town in the underlying action, and the court denied Selective's cross motion. We conclude that the court should have denied that part of the Town's motion and granted Selective's cross motion.

IV.

The "Coverage Effective Date" for the Selective policy was April 26, 2000. By the terms of that policy, the Town has coverage for claims for "damages because of `personal injury,'" which the policy defines in relevant part as "injury, other than `bodily injury,' arising out of one or more of the following offenses: a. [f]alse arrest, detention or imprisonment; [or] b. [m]alicious prosecution." To be covered under the policy, the personal injury must have been "caused by an offense arising out of [the Town's] business," but "only if the offense was committed . . . during the policy period."^*

The underlying action was brought against the Town by Thomas Callahan in February 2002. The underlying complaint alleges the Town's liability for malicious prosecution, false arrest, and false imprisonment, among other torts that are undisputedly outside the coverage of the Selective policy and hence not relevant to Selective's appeal. The underlying complaint alleges that Callahan was "charged, arrested, and jailed under a warrant" on June 7, 1989 based on his alleged violation of Town Law § 268 and the Town's zoning ordinance; that the accusatory instrument against Callahan was subsequently amended on January 30, 1990; that Callahan was again jailed for several hours on April 9, 1990; that on June 6, 1990 he was convicted of 36 counts of violating Town Law § 268 and the Town's zoning ordinance; that he was sentenced and remanded to jail on July 23, 1990; that he was discharged from custody and released on his own recognizance later that day; that the judgment of conviction was reversed on appeal on July 2, 1991, at which time all but one count was dismissed; and that the criminal prosecution of Callahan on that remaining count lay dormant until November 28, 2000, when his motion to dismiss "for lack of a speedy trial and timely prosecution" was granted, resulting in the formal dismissal of that remaining count the next day.

V.

As is the case with respect to the appeal of General Star, the issue on Selective's appeal is whether the underlying complaint "contains any facts or allegations which bring the claim even potentially within the protection purchased" (Technicon Elecs. Corp. v American Home Assur. Co., 74 NY2d 66, 73 [1989], rearg dismissed 74 NY2d 843 [1989], rearg denied 74 NY2d 893 [1989], citing Ruder & Finn v Seaboard Sur. Co., 52 NY2d 663, 669-670 [1981], rearg denied 54 NY2d 753 [1981]; see Frontier Insulation Contrs., 91 NY2d at 175). If it does, then the insurer is under a duty to defend, which we note is broader than the insurer's duty to indemnify (see Seaboard Sur. Co. v Gillette Co., 64 NY2d 304, 310 [1984]; Ruder & Finn, 52 NY2d at 669). Conversely stated, an insurer may escape the duty to defend under the policy "only if it c[an] be concluded as a matter of law that there is no possible factual or legal basis on which [the insurer] might eventually be held to be obligated to indemnify [the insured] under any provision of the insurance policy" (Spoor-Lasher Co. v Aetna Cas. & Sur. Co., 39 NY2d 875, 876 [1976]; see Servidone Constr. Corp. v Security Ins. Co. of Hartford, 64 NY2d 419, 424 [1985]).

We note that the Town does not respond to Selective's contention on appeal that there is no coverage under the policy for the underlying causes of action for false arrest and false imprisonment, and in any event we agree with Selective that those "offenses" were "committed" outside the effective date of the coverage in question (see generally National Cas. Ins. Co. v City of Mount Vernon, 128 AD2d 332, 335-338 [1987]). The sole remaining issue before us on Selective's appeal is whether there is coverage for the underlying cause of action for malicious prosecution where the criminal prosecution was initiated before the effective date of the policy but terminated in favor of the accused during the policy period. We conclude as a matter of law that there is no coverage for an underlying malicious prosecution cause of action under such circumstances. We reach that conclusion based on the language of the policy, mindful that our task in any case involving issues of contractual interpretation is to ascertain the intent and uphold the reasonable expectations of the parties as expressed in the unequivocal language employed by them (see Breed v Insurance Co. of N. Am., 46 NY2d 351, 355 [1978], rearg denied 46 NY2d 940 [1979]; Throgs Neck Bagels v GA Ins. Co. of N.Y., 241 AD2d 66, 69 [1998]; see also Album Realty Corp. v American Home Assur. Co., 80 NY2d 1008, 1010 [1992], rearg denied 81 NY2d 784 [1993]; Bird v St. Paul Fire & Mar. Ins. Co., 224 NY 47, 51 [1918]).

We further note that our determination of the issue accords with the great weight of authority from other jurisdictions (see City of Erie, Pa. v Guaranty Natl. Ins. Co., 109 F3d 156, 160-165 [1997] [applying Pennsylvania law]; Royal Indem. Co. v Werner, 979 F2d 1299, 1300 [1992] [applying Missouri law]; Ethicon, Inc. v Aetna Cas. & Sur. Co., 688 F Supp 119, 123-127 [1988] [applying New Jersey law]; Southern Md. Agric. Assn., Inc. v...