Opinion
February 1, 1999
Appeal from the Supreme Court, Kings County.
Upon the papers filed in support of the motion and the papers filed in opposition and relation thereto, it is
Ordered that the motion is granted; and it is further,
Ordered that, upon reargument, the unpublished decision and order dated September 28, 1998, is recalled and vacated and the following decision and order is substituted therefor:
In an action, inter alia, for a judgment declaring that the defendants are obligated to defend and indemnify the plaintiffs in an action entitled EMA Multimedia, Inc. v. Anita S. Pulier, pending in the Superior Court of the State of California, Los Angeles County, the defendant Zurich Insurance Company appeals, as limited by its brief, from so much of an order of the Supreme Court, Kings County (G. Aronin, J.), dated June 9, 1997, as denied its motion to dismiss the complaint insofar as asserted against it, and the defendants Home Insurance Company and Risk Enterprise Management Limited separately appeal, as limited by their brief, from so much of the same order as, denied their cross motion to dismiss the complaint insofar as asserted against them.
Ordered that the order is modified, on the law, by deleting the provisions thereof Which denied those branches of the appellants' respective motion and cross motion which were to dismiss the plaintiffs' causes of action for a defense and indemnification based on claims arising from the line of credit transaction between Churchill Megasoft, Inc., and EMA Multimedia, Inc., and substituting therefor provisions granting those branches of the motion and cross motion; as so modified, the order is affirmed insofar as appealed from, without costs or disbursements, and the matter is remitted to the Supreme Court, Kings County, for entry of a judgment declaring that the appellants are not obligated to defend and indemnify the plaintiffs in connection with any causes of action in the underlying action based on the line of credit transaction.
The plaintiffs herein are defendants in an action, inter alia, to recover damages for legal malpractice, commenced by EMA Multimedia, Inc., and Michael Pace, in the Superior Court of California, Los Angeles County. Churchill Megasoft, Inc., an entity in which the plaintiff Anita S. Pulier owns a 25% interest, is also a defendant in that action. The plaintiffs commenced the instant action against, among others, Home Insurance Company (hereinafter Home) and its alleged successor Zurich Insurance Company for a declaration that they were entitled to a defense and indemnity in the California action under a professional liability policy issued by Home.
"[W]hen an exclusion clause is relied upon to deny coverage, the insurer has the burden of demonstrating that the `allegations of the complaint cast that pleading solely and entirely within the policy exclusions, and, further, that the allegations, in toto, are subject to no other interpretation'" ( Technicon Elecs. Corp. v. American Home Assur. Co., 74 N.Y.2d 66, 73-74, quoting International Paper Co. v. Continental Cas. Co., 35 N.Y.2d 322, 325; see also, Continental Cas. Co. v. Rapid-American Corp., 80 N.Y.2d 640; Neuwirth v. Blue Cross Blue Shield, 62 N.Y.2d 718, 719; Frank v. State-Wide Ins. Co., 151 A.D.2d 458, 460).
The defendants claimed that the professional liability policy excluded the alleged malpractice by the plaintiffs, relying on section (C) (I) (h) of the policy, which precludes coverage for legal malpractice claims "based upon or arising out of work performed by the insured with respect to any corporation" in which the insured "has any pecuniary or beneficial interest". Pursuant to this section ownership by an insured of 10% or more of the outstanding shares of a corporation is considered a pecuniary or beneficial interest. The claims of malpractice arose out of two separate financial transactions: (1) a $43,000 loan made by the plaintiff Salzman Salzman to EMA Multimedia, Inc., a plaintiff in the underlying malpractice action, and (2) a line of credit agreement involving the plaintiffs in the underlying malpractice action and Churchill Megasoft, Inc. (hereinafter Churchill), a Pulier family-owned corporation in which the plaintiff Anita S. Pulier had a 25% ownership interest.
The line of credit transaction falls within the exclusion of the policy, since the plaintiff Anita S. Pulier owned 25% of Churchill. However, because the defendants did not demonstrate that the $43,000 loan transaction would clearly fall within the exclusion, the Supreme Court properly denied those branches of their motion and cross motion which were to dismiss the claims arising from this transaction.
The defendants' remaining contentions are without merit.
Bracken, J. P., Ritter, Thompson and Krausman, JJ., concur.