Webster ex rel. Webster v. Mount Vernon Fire Ins., Docket No. 03-7490(L).
| Decision Date | 22 April 2004 |
| Docket Number | Docket No. 03-7490(L).,Docket No. 03-7491(XAP). |
| Citation | 368 F.3d 209 |
| Parties | Gregory WEBSTER an Infant Under the Age of 14 Years, by His Father and Natural Guardian Ezra WEBSTER, Plaintiff-Appellee-Cross-Appellant, v. MOUNT VERNON FIRE INSURANCE COMPANY, Defendant-Third-Party-Plaintiff-Appellant-Cross-Appellee, Linton Grant, Ina Grant and Parkway Elementary School, Third-Party-Defendants-Appellees. |
| Court | U.S. Court of Appeals — Second Circuit |
Steven Verveniotis, Miranda & Sokoloff, LLP (Benjamin P. Malerba, on the brief), Mineola, NY, for defendant-third-party-plaintiff-appellant-cross-appellee.
Michael D. Ribowsky, Richmond Hill, NY, for plaintiff-appellee-cross-appellant.
Gerold Mallow, Mallow, Konstam & Hager (David Mallow, on the brief), New York, NY, for third-party defendants-appellees.
Before: POOLER, MESKILL, and SOTOMAYOR, Circuit Judges.
Mount Vernon Fire Insurance Company ("Mount Vernon") appeals from a judgment of the United States District Court for the Eastern District of New York (Ross, J.) granting summary judgment to plaintiff Gregory Webster. Webster was injured in 1996 while attending Parkway Elementary School, a corporation jointly owned by Linton and Ina Grant. He subsequently sued the Grants for negligence in state court and obtained a default judgment of $203,055 against them. Webster then filed this lawsuit against Mount Vernon pursuant to New York Insurance Law § 3420(a)(2), alleging that because the Grants held a commercial liability insurance policy with Mount Vernon, Mount Vernon was required to indemnify the Grants in the amount of the damages awarded by the state court judgment. The district court held that, inter alia, because Mount Vernon had not properly disclaimed coverage on the policy as to Ina Grant, the insurer was liable for the amount of the judgment obtained against the Grants. At the same time, however, the court rejected Webster's assertions that Mount Vernon's disclaimer to Linton was untimely, and that Mount Vernon was obligated to disclaim as to Webster even though he never provided notice of his claim.
We hold that (1) Mount Vernon was not obligated to disclaim coverage as to Ina Grant because she never complied with the policy's notice provisions; (2) Mount Vernon timely disclaimed coverage as to Linton Grant; and (3) Mount Vernon was not obligated to disclaim coverage as to Webster because he never provided notice of the occurrence. We therefore find that Mount Vernon was not obligated to indemnify the Grants for the damage award obtained against the Grants by Webster.
On October 10, 1996, plaintiff Gregory Webster, then six years old, was injured when he fell down the stairs at Parkway Elementary School, a non-profit corporation jointly owned and operated by Linton and Ina Grant. At the time, Linton Grant held a commercial liability insurance policy with Mount Vernon that provided him with coverage for liability arising from bodily injuries occurring on his business premises. Linton's policy provided that "[y]ou and your spouse are insureds, but only with respect to the conduct of a business of which you are the sole owner." Ina, as Linton's spouse, was therefore insured against liability arising from the operation of any of Linton's solely owned businesses. The policy also provided that in the event of a potential claim, "you must see to it that we are notified as soon as practicable of an `occurrence' or an offense which may result in a claim." Moreover, "[y]ou and any other involved insured must ... immediately send us copies of any ... legal papers received in connection with the claim or `suit.'" Despite the fact that Webster's accident occurred on the school's premises and exposed the Grants and the school to liability, the Grants did not notify Mount Vernon of the accident when it occurred.
On October 20, 1996, ten days after the accident, Linton received a letter from Gregory Webster's father, threatening to file a lawsuit against the school. Linton forwarded the letter to his insurance broker, but did not provide any notice of the letter or the accident directly to Mount Vernon. The broker apparently did not forward the letter to Mount Vernon.
Almost five years later, in April 2001, Webster sued the Grants and Parkway Elementary School in New York Supreme Court for damages arising from his injuries. On May 8, 2001, Linton provided notice of the Webster accident and lawsuit to Mount Vernon for the first time. The notice of claim identified Linton as the only insured. That notice did not mention Ina as a possible insured with respect to the accident, and it is undisputed that Ina never independently notified Mount Vernon of the claim. Mount Vernon investigated Linton's claim and determined that Linton knew about the accident when it occurred in 1996, and that he had no excuse for the five-year delay in notification. Mount Vernon therefore sent a disclaimer of coverage to Linton on May 30, 2001, explaining that Linton's notice was untimely under the terms of the policy. The disclaimer did not mention Ina or Webster, and Mount Vernon did not directly disclaim coverage as to either Ina or Webster. Meanwhile, the Grants failed to appear in court to defend against Webster's suit, and in December 2001, the New York Supreme Court entered a default judgment against them in the amount of $203,055.
In April 2002, Webster filed this action against Mount Vernon in New York Supreme Court, asserting that Mount Vernon was liable for the amount of the state court judgment under New York Insurance Law § 3420(a)(2), which provides that if an injured party obtains a judgment against an insured party and the judgment remains unsatisfied for thirty days, "an action may ... be maintained against the insurer under the terms of the policy or contract for the amount of such judgment not exceeding the amount of the applicable limit of coverage under such policy or contract." Mount Vernon removed the suit to the Eastern District of New York on the basis of diversity of citizenship. See 28 U.S.C. § 1332.
Mount Vernon then impleaded Linton and Ina Grant and Parkway Elementary School, seeking a declaration that Mount Vernon was not obligated to indemnify or defend the Grants because the Grants failed to comply with the notice provisions of the policy.1 Mount Vernon's complaint also sought costs and attorneys' fees. After minimal document discovery was completed, the parties agreed that no further discovery was necessary, and Webster and Mount Vernon filed cross-motions for summary judgment. The Grants moved to dismiss the third-party complaint.
Because § 3420(a)(2) conditions the insurer's liability for the judgment against the insured on whether the insurer would be liable to the insured under the terms of the policy, the parties' arguments focused on the terms of the Grants' policy and the parties' compliance with those terms. The district court granted summary judgment to Webster, holding that Mount Vernon was obligated to provide coverage to Ina Grant for her liability arising from the accident. This conclusion was based on the court's determination that Ina Grant's failure to provide independent notice of the accident to Mount Vernon did not relieve the insurer of its obligation to disclaim coverage as to her because Mount Vernon had received actual notice of the accident from Linton. Because Mount Vernon's disclaimer to Linton was addressed to him alone, the district court concluded that Mount Vernon had failed to timely disclaim coverage as to Ina, and was therefore estopped from denying coverage to her. The court found that Webster was therefore entitled to collect his state court judgment through Mount Vernon's indemnification of Ina's liability.
The district court made a number of other rulings that Webster challenges in his cross-appeal. First, the court found that Mount Vernon had validly disclaimed coverage as to Linton because he had failed to give timely notice of the accident, and compliance with the notification procedures in the insurance policy is a condition precedent to the insurer's liability under the policy. The court also rejected Webster's argument that Mount Vernon had failed to issue the disclaimer within a reasonable time, finding that Mount Vernon's investigation, and the consequent delay, was necessary to determine whether the insurer could disclaim coverage. Second, the court concluded that Mount Vernon had no obligation to notify Webster of its disclaimer, because Webster never provided notice of the occurrence to Mount Vernon. Finally, the court held that Webster was not entitled to prejudgment interest on the $203,055 in damages for which Mount Vernon was liable, because New York law does not provide for prejudgment interest in personal injury suits.
Based on its rulings, the district court granted both summary judgment motions in part, dismissed Mount Vernon's third-party complaint as moot, and entered a judgment against Mount Vernon in the amount of $203,055.2
On appeal, Mount Vernon challenges the district court's conclusion that Mount Vernon was obligated to disclaim coverage specifically as to Ina Grant, and that its failure to do so estopped it from denying coverage to her. Mount Vernon argues that because Ina did not provide independent notice of the accident to Mount Vernon, and Linton's notice to Mount Vernon cannot be imputed to Ina, Mount Vernon was not obligated to disclaim coverage as to her.3
Webster, for his part, argues in his cross-appeal that the district court erred in holding that Mount Vernon's disclaimer was valid as to Linton because Mount Vernon's delay of twenty-two days in conveying its disclaimer, measured from the date that it received Linton's notice of claim, rendered it untimely as a matter of law. Webster also challenges the district court's conclusion that Mount Vernon had no obligation to disclaim...
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