Watson v. Aetna Cas. & Sur. Co.

• Decision Date: 13 July 1998
• Citation: 675 N.Y.S.2d 367,246 A.D.2d 57
• Parties: , 1998 N.Y. Slip Op. 7033 Christopher K. WATSON, Respondent, v. AETNA CASUALTY & SURETY COMPANY, Appellant.
• Court: New York Supreme Court — Appellate Division

Page 367

675 N.Y.S.2d 367

246 A.D.2d 57, 1998 N.Y. Slip Op. 7033

Christopher K. WATSON, Respondent, v. AETNA CASUALTY & SURETY COMPANY, Appellant.

Supreme Court, Appellate Division Second Department.

July 13, 1998.

Michael Majewski, P.C., Garden City, N.Y. (Nicole Norris Poole of counsel), for appellant.

Harold Chetrick, P.C., New York, N.Y., for respondent.

O'BRIEN J.P., SANTUCCI, JOY, and ALTMAN, JJ.

JOY, Justice.

In this action, the plaintiff, who claimed to have been injured at the premises of the defendant's insured and who obtained a default judgment against the insured on the issue of liability, seeks a judgment declaring that the defendant insurer must defend and indemnify its insured. The primary issue to be resolved is whether the plaintiff, as the injured party and a third-party to the insurance contract, has standing to bring this action. The defendant takes the position that he does not, due to the failure to comply with a condition set forth in Insurance Law § 3420, namely, the entry of a judgment on the issue of damages. We disagree, and, in affirming the order of the Supreme Court, we take this opportunity to resolve the conflict between our decisions in Latoni v. Mount Vernon Fire Ins. Co., 219 A.D.2d 698, 631 N.Y.S.2d 756, and Tepedino v. Zurich-American Ins. Group, 220 A.D.2d 579, 632 N.Y.S.2d 604.

The plaintiff, Christopher K. Watson, was allegedly injured on November 3, 1992, in a fall at the premises of John Mazzone, who carried liability insurance issued by the defendant Aetna Casualty & Surety Company (hereinafter Aetna). The plaintiff commenced a personal injury action against Mazzone in 1994, but Mazzone never answered and the plaintiff obtained a default interlocutory judgment against him on the issue of liability which was entered on June 5, 1995.

In the interim, on December 13, 1994, Aetna had received notice of the plaintiff's suit against Mazzone. By letter dated February 3, 1995, Aetna advised Mazzone that it was disclaiming coverage on the ground that it had not been given written notice of the accident "as soon as is practical" as required by the policy.

In November 1995 the plaintiff commenced the instant action, inter alia, for a declaration that Aetna was obligated to defend and indemnify Mazzone in the underlying personal injury action. After joinder of issue, the plaintiff moved for summary judgment, arguing that Aetna's disclaimer was invalid as against him and that Aetna should "be compelled" to defend and indemnify Mazzone in the underlying action. Aetna opposed the motion, arguing, inter alia, that the action should be dismissed for the plaintiff's lack of standing, insofar as he had not obtained a judgment against the insured on the issue of damages. Aetna relied on this court's decision in Latoni v. Mount Vernon Fire Ins. Co. (supra) and a decision of the Appellate Division, First Department, cited therein, which held that, in the absence of an unsatisfied money judgment against an insured, an injured party had no standing to bring an action for a judgment declaring that the insurer had a duty to defend and indemnify that insured. In addition, Aetna argued that its disclaimer was also valid as against the plaintiff.

The court granted the plaintiff's motion, determining that Aetna must defend and indemnify Mazzone in the plaintiff's action against him. The court rejected Latoni v. Mount Vernon Fire Ins. Co. (supra), as an "aberration" and found that the plaintiff had standing. The court further held that Aetna's notice of disclaimer as to the plaintiff was untimely as a matter of law.

This court's decision in Latoni v. Mount Vernon Fire Ins. Co. (supra) was based on a decision of the Appellate Division, First Department, entitled Clarendon Place Corp. v. Landmark Ins. Co., 182 A.D.2d 6, 587 N.Y.S.2d 311, which had interpreted Insurance Law § 3420 as barring any action, including one for a declaratory judgment, brought by an injured plaintiff before a money judgment against the tortfeasor had been obtained and had remained unsatisfied for 30 days.

Insurance Law § 3420(a)(2) requires every insurance policy or contract to contain a provision that in case judgment against the insured shall remain unsatisfied for 30 days after serving notice of entry, "an action may * * * be maintained against the insurer under the terms of the policy of contract for the amount of such judgment". Insurance Law § 3420(b)(1) then goes on to provide that subject to the conditions of Insurance Law § 3420(a)(2), an action may be maintained by any person who has "obtained a judgment against the insured * * * for damages for injury sustained or loss or damage occasioned during the life of the policy or contract" (Insurance Law § 3420[b][1] ).

The record in Latoni v. Mount Vernon Fire Ins. Co. (supra) indicates that the plaintiff therein commenced an action to recover damages for personal injuries sustained when she was struck by a large glass window pane which fell from a building. The defendants included the owner, the general contractor, and the window installer, Ability Store Front, Inc. (hereinafter Ability). Ability's insurer, Aetna, disclaimed coverage based on the cancellation of its policy four weeks before the incident took place. With court permission, another defendant, Profiles Perfect, was added, and its insurer, Mount Vernon Fire Insurance Company (hereinafter Mount Vernon Fire), disclaimed coverage because it was not notified of the occurrence as soon as practicable. The plaintiff thereupon commenced an action for a judgment declaring that Aetna and Mount Vernon Fire were obligated to defend and indemnify their insureds. The trial court granted the insurers' motions to dismiss the complaint, and this court affirmed, stating:

"The plaintiff has no present rights flowing from Insurance Law § 3420(b)(1) since she has not yet obtained a judgment against any of the respondents' insureds. Thus, the statutory conditions precedent to an action under the foregoing section have not been satisfied (see, Clarendon Place Corp. v. Landmark Ins. Co., 182 A.D.2d 6, 10, 587 N.Y.S.2d 311). Since the plaintiff has no legally cognizable interest in the insurance contracts at issue, there is no justiciable controversy between the plaintiff and the insurers to give her standing to bring this action (see, New York Pub. Interest Research Group v. Carey, 42 N.Y.2d 527, 399 N.Y.S.2d 621, 369 N.E.2d 1155). It was therefore proper for the Supreme Court to dismiss the complaint" (Latoni v. Mount Vernon Fire Ins. Co., supra, at 698, 631 N.Y.S.2d 756).

In Clarendon Place Corp. v. Landmark Ins. Co. (supra), a case decided by the Appellate Division, First Department, Clarendon Place Corporation (hereinafter Clarendon), as owner of a building, was named as a defendant in actions to recover for personal injuries and wrongful death arising out of the 1990 fire at the Happyland Social Club. The alleged insurers of the property, Landmark Insurance Company, Transamerica Insurance Company, and Federal Insurance Company, disclaimed coverage for the losses arising from the fire. Clarendon then commenced an action seeking a declaration that there was coverage, and joined as a defendant Robert S. Black, the Public Administrator of Bronx County, as the legal representative of 55 of the 87 fire victims. The insurers moved to dismiss the complaint as against Black on the ground, inter alia, that, as the legal representative of the estates of the fire victims, he had no legal interest in the insurance contracts sufficient to give him standing to participate in the action. The Supreme Court, Bronx County, dismissed the complaint as to Black, and the Appellate Division, First Department, affirmed.

The Appellate Division, First Department, noted that Insurance Law § 3420 created a cause of action on behalf of an injured person against the insurer which was in derogation of the common law and was thus subject to strict construction. The Appellate Division, First Department, held that no action, including one for a declaratory judgment, could be maintained by an injured plaintiff against the insurance company unless there was compliance with Insurance Law § 3420, requiring the obtaining of a judgment against the insured which was unsatisfied for 30 days. Thus, the Appellate Division, First Department, concluded, "Black and those he represents * * * have no rights against the insurers unless and until, at the very least, a judgment is entered against the insureds in the underlying tort actions" (Clarendon Place Corp. v. Landmark Ins. Co., supra, at 9, 587 N.Y.S.2d 311).

The Appellate Division, First Department, further stated that insofar as Black had "no present rights flowing from Insurance Law § 3420(b)(1) since the statutory conditions precedent to an action thereunder have not been satisfied", there was no justiciable controversy between Black and the insurers to give him standing (Clarendon Place Corp. v. Landmark Ins. Co., supra, at 10, 587 N.Y.S.2d 311). The request for declaratory relief was therefore premature since standing in the action was contingent on the happening of a future event beyond the control of the parties and which might never occur (Clarendon Place Corp. v. Landmark Ins. Co., supra; see also, Mount Vernon Fire Ins. Co. v. NIBA Constr., 195 A.D.2d 425, 600 N.Y.S.2d 936; Sincerbeaux v Nationwide Mut. Fire Ins. Co., 206 A.D.2d 907, 614 N.Y.S.2d 836; Hershberger v. Schwartz, 198 A.D.2d 859, 604 N.Y.S.2d 428).

In our opinion, the Clarendon Place rule, followed in the Latoni case, is not supported by the language of the statute and is overly rigid. We read Insurance Law § 3420 as prohibiting, by its plain terms, only a direct cause of action to recover money damages, and not prohibiting a declaratory judgment action by the plaintiff in the underlying tort action seeking a declaration that a disclaiming insurance company owes a duty to defend or indemnify the tortfeasor.

CPLR 3001...