Opinion
7981/04.
Decided November 8, 2004.
Plaintiff City of New York (the City) moves, pursuant to CPLR 3212, for an order granting it summary judgment on its claim that defendant Lumbermens Casualty Co. (Lumbermens) is required to defend the City in the actions entitled Colosi, et al. v. Lelia, et al., Index No. 5982/00, Supreme Court, Queens County (the Colosi action) and Seargent, et al. v. City of New York, et al., Index No. 49684/02, Supreme Court, Bronx County (the Seargent action). Lumbermens opposes the instant motion on the ground that the City failed to provide a timely notice of claim in regard to both the Colosi and Seargent actions and, in any event, Lumbermens is not obligated to provide a defense for the City in said actions because the claims asserted therein did not "arise out of the operations" of the primary insured, Amboy Bus Co., Inc. (Amboy).
Pursuant to contracts between Amboy and the City's Board of Education, Amboy provided transportation services for students to and from the City's public schools. The contracts required Amboy to obtain, inter alia, comprehensive general liability insurance. As a result, Amboy purchased from Lumbermens a general liability policy (policy number 5AA 045 303-00) with maximum coverage of $2 million per occurrence for a period of twelve months with an effective date of December 31, 1998 (the Policy). Under the Additional Insured Endorsement of the Policy, an insured includes "any person or organization as required by written contract." In regard to the insurance coverage provided to any person or organization listed as an additional insured under the Policy, such additional insured is considered as "an insured but only with respect to liability arising out of your [the primary insured's] operations or premises owned by or rented to you." The City and the City's Board of Education are identified as additional insureds under the Policy.
On or about May 14, 1999, Sabrina Colosi (Colosi) was allegedly injured when the Amboy school bus in which she was a passenger collided with an automobile. On or about March 29, 2000, the City was served with a summons and complaint in the Colosi action. The complaint alleges that Colosi suffered a "serious injury" as a result of defendant Amboy's negligent operation of a motor vehicle. The complaint further alleges liability on the part of the City and the Board of Education due to the alleged failure of a teacher at Colosi's school to obtain proper medical care for her subsequent to the accident. By letter dated June 13, 2000, the New York City Law Department notified Kemper Insurance Company, the parent company of Lumbermens, of the City's receipt of the Colosi complaint. By letter dated August 29, 2002, Kemper, on behalf of Lumbermens, disclaimed coverage for the Colosi action under the Policy. The disclaimer letter stated that in regard to the negligence claims brought against the City in the Colosi action:
These are allegations of negligence which do not arise out of [Amboy's] use and operations of an auto. Any liability arising out of these allegations would be the result of the City of New York, New York City Board of Education's sole negligence. As such it would not trigger coverage under [the Policy].
On or about December 22, 1999, Andrew Seargent (Seargent) was allegedly struck and injured by another student while they were both passengers on an Amboy school bus. On or about December 12, 2002, the City and the Board of Education were served with a summons and complaint in the Seargent action. The complaint alleges, in relevant part, that Seargent was a passenger on an Amboy bus when he was injured; that Amboy was in the business of transporting school children; that Amboy had contracted with the City to provide such transportation for the City's Board of Education; that Seargent was injured by another student on the school bus and that defendants were "negligent, wanton, reckless and careless, in, among other things, . . . allowing, causing and/or permitting dangerous, hazardous, unsecure and/or unsafe conditions to exist on the . . . bus motor vehicle."
On or about February 25, 2003, the Law Department of the City of New York forwarded the summons and complaint in the Seargent action to Lumbermens. To date Lumbermens apparently has not disclaimed coverage, or conversely, acknowledged any duty to defend the City in the Seargent action.
It is well settled that "an insurer's duty to defend its insured arises whenever the allegations in a complaint state a cause of action that gives rise to the reasonable possibility of recovery under the policy" ( Fitzpatrick v. American Honda Motor Co., 78 NY2d 61, 65). "If the allegations of the complaint are even potentially within the language of the insurance policy, there is a duty to defend" ( Town of Massena v. Healthcare Underwriters Mutl. Ins. Co., 98 NY2d 435, 443). Moreover, "[i]f any of the claims against [an] insured arguably arise from covered events, the insurer is required to defend the entire action" ( Frontier Insulation Contrs., Inc v. Merchants Mutl. Ins. Co., 91 NY2d 169, 175). Although "[t]he duty to defend is measured against the allegations of pleadings" ( Servidone Const. Corp. v. Security Ins. Co. of Hartford, 64 NY2d 419, 424), the "characterization of the causes of action alleged in a complaint are not controlling [rather] we . . . determine the nature of the claims based upon the facts alleged and not the conclusions which the pleader draws therefrom" (Curtis v. Nutmeg Ins. Co., 204 AD2d 833, 834, lv dismissed, 84 NY2d 1027 [internal quotation marks and citations omitted]). Given the "exceedingly broad nature of the duty to defend" ( Syvertsen v. Great American Ins. Co., 267 AD2d 854, 856), however, "an insurer can be relieved of its duty to defend [only] if it establishes as a matter of law that there is no possible factual or legal basis on which it might eventually be obligated to indemnify the insured under any policy provision" ( Allstate Ins. Co. v. Zuk, 78 NY2d 41, 45).
In the event that an insurer elects to disclaim coverage, it is well settled that "where the insurance policy in question would otherwise cover the particular occurrence, but for an exclusion in the policy, Insurance Law § 3420(d) mandates that, under certain circumstances, the insurance carrier give written notice as soon as reasonably possible of the denial of liability predicated on the exclusion" ( American Ref-Fuel Company of Hempstead v. Employers Insurance Company of Wausau, 265 AD2d 49, 51; accord Matter of Transportation Insurance Companies v. Sellitto, 267 AD2d 462 ["An insurer is required to give written notice of any disclaimer or denial of coverage 'as soon as is reasonably possible' after it first learns of the accident or grounds for disclaimer"]). Accordingly, "an insurance company may not disclaim coverage if it fails to give its insured notice of the disclaimer 'as soon as is reasonably possible'" ( 79th Realty Co. v. Wausau Ins. Companies, 7 AD3d 507, quoting Insurance Law § 3420[d]). "This rule applies even if the insured has, in the first instance, failed to provide the insurer with a timely notice of claim" ( id.).
In the instant case, Lumbermens did not timely disclaim coverage for either the Colosi action or Seargent action. In regard to the Colosi action, Lumbermens does not dispute that its disclaimer letter was issued more than two years after it received a notice of claim from the City which requested that Lumbermens defend it in connection with said action. Rather, Lumbermens argues that such notice of claim was untimely as it was not sent to Lumbermens until thirteen months after the subject accident and three months after the City had received the summons and complaint in said action. Additionally, Lumbermens argues that the only claims within the Colosi action which reference the City as a defendant are those alleging that a teacher failed to get proper medical attention for Colosi after the accident and accordingly, that any claims against the City in that action were the result of the independent negligence of the City and the Board of Education and therefore did not "arise out of the operations" of Amboy, the primary insured, and were not covered under the Policy.
Lumbermens' arguments, however, are misplaced. It is well established that the rule requiring an insurance company to disclaim coverage as soon as is reasonably possible "applies even if the insured has, in the first instance, failed to provide the insurer with timely notice of the claim" ( 79th Realty Co., 7 AD3d at 507). Accordingly, even assuming, without deciding, that the City was untimely in serving its notice of claim in regard to the Colosi action, Lumbermens would still be barred from disclaiming coverage if it failed to give its insured notice of the disclaimer as soon as was reasonably possible ( id.).
The court finds that Lumbermens' two year delay in disclaiming coverage was unreasonable as a matter of law ( see 79th Realty Co., 7 AD3d at 507 [nine month delay in disclaiming coverage unreasonable as a matter of law]; State v. General Star Indemnity Company, 299 AD2d 537, 539 lv denied 99 NY2d 508 [13 month delay in disclaiming coverage unreasonable as a matter of law]; Matter of Allstate Ins. Co. v. Arpaia, 276 AD2d 628 [insurer waived right to invoke applicable exclusion where insurer did not disclaim coverage until more than five months had elapsed from its receipt of the notice of claim]; American Ref-Fuel Company of New York, 265 AD2d at 54 ["delay of over four months rendered the disclaimer of coverage untimely as a matter of law"]). The ground upon which Lumbermens premised its disclaimer, namely that the claims against the City did not "arise out of the operations" of Amboy, "was readily apparent when [Lumbermens] first received the notice of claim [from the City] and it failed to explain [its] delay [in disclaiming]" ( 79th Realty Co., 7 AD3d at 507; accord State v. General Star Indemnity Co., 200 AD2d at 539 ["No explanation was offered by [insurer] to justify the lengthy delay for its disclaimer, which was unreasonable as a matter of law"]). Accordingly, "the plaintiff is entitled to summary judgment declaring that [Lumbermens] is obligated to reimburse it for the defense costs incurred in the [Colosi] action" (79th Realty Co., 7 AD3d at 507).
Due to Lumbermens' failure to timely disclaim coverage, the court need not reach a determination as to the substantive coverage issues raised by Lumbermens, namely that the claims brought against the City in the Colosi complaint did not arise out of the operations of Amboy, the primary insured. The court notes, however, that the term "arising out of," in the insurance coverage context, is "ordinarily understood to mean originating from, incident to or having connection with . . ." ( Cone v. Nationwide Mut. Fire Ins. Co., 75 NY2d 747 [1989]; see generally also New Hampshire Ins. Co. v. Jefferson Ins. Co., 213 AD2d 325 [1995] [court found that negligent hiring claim was not an independent basis for liability of camp, but rather was based on an injury resulting from the operation of a vehicle by camp's employee, and therefore "arose out of" the use of a vehicle for purposes of policy coverage and exclusions). Absent the alleged initial negligent operation of the bus by an employee of Amboy, Colosi would have no claim against the City for a teacher's alleged failure to obtain medical treatment for Colosi subsequent to the accident ( see New Hampshire Ins. Co., 213 AD2d at 330). Accordingly, even if this court were to review Lumbermens' substantive coverage claims, Lumbermens' conclusory statements that the City gave untimely notice of the Colosi action, coupled with its failure to demonstrate that the subject claims did not "potentially give rise to a covered claim" ( see Maroney v. New York Central Mutual Fire Ins. Co., ___ AD2d ___, NY Slip Op 06676 [2004]), would, in any event, be insufficient to defeat the City's motion for summary judgment.
In regard to the Seargent action, the City asserts that although it made a notice of claim to Lumbermens by letter dated February 25, 2003, it had not received a written disclaimer of coverage by June 2004, when the instant motion was filed by the City. Lumbermens does not refute that such disclaimer has yet to be provided to the City, but instead contends that the City "has not demonstrated that the subject assault [of Seargent] arose out of Amboy's services as determined by contract." This argument, however, is unavailing. "[Lumerbermens] waived its right to invoke the [subject] exclusion by failing to timely disclaim coverage pursuant to Insurance Law § 3420(d)" ( Matter of Allstate, 276 AD2d at 628). Accordingly, whether the claims asserted in the Seargent action fall within the ambit of the Policy's coverage, or are outside of its purview by virtue of their alleged failure to have arisen out of the operations of Amboy, is irrelevant for purposes of the instant motion for summary judgment. Accordingly, as the City has demonstrated that Lumbermens failed to timely disclaim coverage for the Seargent action — and in fact appears to have not yet issued an official disclaimer in regard to said action — the City is also entitled to summary judgment on its claim that Lumbermens owes it a defense in the Seargent action.
Due to Lumbermans' failure to timely disclaim coverage, the court need not reach a determination as to the substantive coverage issues raised by Lumbermens, namely that the claims brought against the City in the Seargent complaint did not arise out of the operations of Amboy. The court notes, however, that the complaint does contain claims which allege that the defendants, including Amboy, were, inter alia, "negligent, wanton, reckless and careless, in among other things, . . . allowing, causing and/or permitting dangerous, hazardous, unsecure and/or unsafe conditions to exist on the aforesaid school bus motor vehicle [and] in allowing, causing and/or permitting infant plaintiff to be injured on said school bus." Although Seargent's injuries are alleged in the complaint to have been directly caused by an assault by another student, and, Amboy might, for instance, ultimately be found merely to have furnished the condition or occasion for the subject assault (see e.g. Fariello v. City of New York Bd. of Education, 199 AD2d 461 [1993]), as opposed to being actively negligent, Lumbermens has failed to demonstrate that, upon looking only at the allegations contained in the complaint, "there is no possible factual or legal basis on which it might eventually be obligated to indemnify its insured under any policy provision" ( Allstate Ins. Co. v. Zuk, 78 NY2d at 45 [emphasis added]). Accordingly, even if the court were to review Lumbermens' substantive coverage arguments in regard to the Seargent action, it would find said arguments insufficient to defeat the City's instant motion for summary judgment.
Lumbermens also argues that more discovery is needed in this action and accordingly, summary judgment is premature. Lumbermens has failed, however, to elucidate what additional material and relevant evidence it expects to glean through further discovery. It has not refuted, or given any excuse for, its two year delay in disclaiming coverage for the Colosi action or its more than sixteen month delay in disclaiming coverage for the Seargent action (a delay which is apparently still ongoing), nor does it claim that any evidence in regard to these delays would be obtained through further discovery. In regard to its substantive claim that the Colosi and Seargent actions are excluded from coverage under the Policy because the claims against the City contained therein do not "arise out of" the operations of Amboy, the primary insured, a court must look to the four corners of the complaint to determine if any of the allegations contained within "potentially give rise to a covered claim" (Maroney, NY Slip Op at 06676). Therefore, additional discovery is not necessary to determine whether or not "the [subject] complaint[s] contain any facts or allegations which bring the claim[s] even potentially within the protection purchased" ( Hotel Des Artistes v. General Accident Ins. Co. of America, 9 AD3d 181, 187 [internal quotation marks and citations omitted]). Moreover, as previously discussed, the court need not reach the substantive coverage issues raised because Lumbermens' disclaimers of coverage in both the Colosi action and the Seargent action were untimely ( see generally Matter of Allstate, 276 AD2d at 628).
As a result, the City is entitled to summary judgment declaring that Lumbermens is obligated to reimburse it for the defense costs in both the Colosi action and the Seargent action. Accordingly, pursuant to Article 22 of the Judiciary Law, in accordance with the provision of part 122 of the rules of the Chief Administrator of the Courts, the issue of reimbursement is assigned to a Judicial Hearing Officer in the JHO Part to determine the amount the City is to be reimbursed by Lumbermens for reasonable litigation expenses and attorneys' fees it has incurred in the defense of the Colosi and Seargent actions. The court directs the Clerk of the Part to schedule said hearing for a date no later than 90 days from service of a copy of this order with notice of entry.
The foregoing constitutes the decision and order of the court.