Town of Smithtown v. National Union Fire Ins. Co.

• Decision Date: 01 March 1993
• Citation: 191 A.D.2d 426,594 N.Y.S.2d 318
• Parties: TOWN OF SMITHTOWN, et al., Respondents, v. NATIONAL UNION FIRE INSURANCE COMPANY, et al., Appellants.
• Court: New York Supreme Court — Appellate Division

Page 318

594 N.Y.S.2d 318

191 A.D.2d 426

TOWN OF SMITHTOWN, et al., Respondents, v. NATIONAL UNION FIRE INSURANCE COMPANY, et al., Appellants.

Supreme Court, Appellate Division Second Department.

March 1, 1993.

Serchuk & Zelermyer, New York City (Jeffrey G. Steinberg and Ilene Durst, of counsel), for appellants.

Sandra L. Sgroi, Town Atty., Smithtown (Peter D. Johnson, of counsel), for respondents.

Before THOMPSON, J.P., and SULLIVAN, MILLER and SANTUCCI, JJ.

MEMORANDUM BY THE COURT.

In an action, inter alia, for a judgment declaring the rights and obligations of parties under a contract of liability insurance, the defendants National Union Fire Insurance Company and American International Group, Inc., appeal, as limited by their brief, from so much of an order of the Supreme Court, Suffolk County (Brown, J.), entered July 5, 1990, as, upon searching the record, granted summary judgment in favor of the plaintiffs, declaring that the defendants are obligated to defend them under the insurance contract, denied that branch of the defendants' cross motion which was for summary judgment on behalf of American International Group, Inc., and held that the plaintiffs' motion for a protective order was academic.

ORDERED that the order is reversed insofar as appealed from, on the law, with costs, and that branch of the defendants' cross motion which was for summary judgment on behalf of American International Group, Inc., is granted, it is declared that American International Group, Inc., has no duty to defend or indemnify the plaintiffs, and the matter is remitted to the Supreme Court, Suffolk County, for a new determination with respect to the plaintiffs' motion for a protective order.

The plaintiffs brought this declaratory judgment action seeking a determination that the defendants had a duty to defend them in four actions brought by various school districts in Suffolk County, for their alleged failure to timely disburse tax money in accordance with the Suffolk County Tax Act (hereafter the SCTA) over a six-year period. Upon receiving the complaints, the plaintiffs notified the defendants of the lawsuits. The defendants thereafter disclaimed coverage, in part, due to failure to give notice of the claims "as soon as practicable". The instant litigation ensued.

Compliance with a proper notice-of-claim provision in an insurance policy is a condition precedent to all of an insurer's duty under the policy, including the duty to defend (see, Empire City Subway Co. v. Greater N.Y. Mut. Ins. Co., 35 N.Y.2d 8, 358 N.Y.S.2d 691, 315 N.E.2d 755; Commercial Union Ins. Co. v. Intl. Flavors & Fragrances, 822 F.2d 267 (2nd Cir.1987)), and the insurer need not show prejudice before it can assert the defense of noncompliance (see, Unigard Sec. Ins. Co. v. North Riv. Ins. Co., 79 N.Y.2d 576, 581, 584 N.Y.S.2d 290, 594 N.E.2d 571; Security Mut. Ins. Co. of N.Y. v. Acker-Fitzsimons Corp., 31 N.Y.2d 436, 440, 340 N.Y.S.2d 902, 293 N.E.2d 76; Reliance Ins. Co. of N.Y. v. Garsart Bldg. Corp., 131 A.D.2d 828, 829, 517 N.Y.S.2d 189). An insured's good-faith belief of nonliability, however, may excuse or explain a seeming failure to give timely notice of a claim against it as long as the belief is reasonable under...