Opinion
0604308/2005.
July 27, 2007.
Before me are motions by i) plaintiff for summary judgment for a declaration that it has no obligation to defend or indemnify its insured defendant Rechev of Brooklyn, Inc. ("Rechev"), whose vehicle was involved in an accident with defendant Judith Klausner while said vehicle was being driven by defendant Boris Novik, and ii) Klausner for summary judgment in her favor and for an order directing plaintiff to satisfy the judgment entered in her favor on default against Rechev and Novik for $150,000.
Shortly after the subject accident of March 31, 2003, Klausner advised plaintiff thereof and, pursuant to a subsequent request of plaintiff, informed it of the pertinent facts. When the claim could not be settled, Klausner commenced an action in August 2004 in Kings County against Rechev and Novik and, although she was aware that plaintiff insured Rechev, did not inform plaintiff of the action until after she had procured an order for a default judgment on September 9, 2005. That order by Justice Rosenberg directed that a note of issue be filed and the matter proceed to inquest.
By letter dated September 23, 2005, Klausner's current counsel (who had replaced former counsel) informed plaintiff of the order for a default judgment. By its letter dated October 24, 2005, plaintiff disclaimed coverage due to the failure of its insured or Klausner to timely advise it of the underlying action. Klausner then proceeded to inquest and on March 29, 2006 obtained a judgment in the Supreme Court, Kings County, against Novik and Rechev for $150,000.
Plaintiff has stated that at all times after being notified of the order for a default judgment that it was, and remains, willing to provide coverage provided Klausner stipulated to vacate the default. Klausner has declined that offer (tr. pp. 4, 21).
While at oral argument it was stated that Klausner has interposed a counterclaim for $100,000 (tr. p. 20), the answer submitted in the papers does not assert any counterclaim. Neither Rechev nor Novik has appeared herein although served with process. Plaintiff's motion is therefore granted against them on default.
Discussion
Although plaintiff was timely notified of the accident, it is clear that "[d]istinct from notice of an accident, an insurer may also demand that it receive timely notice of a claimant's commencement of litigation, . . . [t]he purpose of such notice . . . (being) to provide the insurer with a fair and reasonable opportunity to appear and defend against a claim or exercise its right to settle the matter" [American Transit Insurance Company v. Sartor, 3 NY3d 71, 75 (2004)]. "The insurer's receipt of such notice is therefore a condition precedent to its liability under the policy . . . (and) [t]he failure to satisfy this requirement may allow an insurer to disclaim its duty to provide coverage." (id. p. 76).
A notice to an insurer by an injured party will satisfy the insured's obligation to give notice of a claim [Insurance Law § 3420(a)(3)]. Here the notice of disclaimer specifically asserted the failure of both the insured and Klausner to give timely notice of the litigation [see, General Accident Insurance Group v. Cirucci, 46 NY2d 862, 864 (1979)], and there is no viable claim that the notice of disclaimer was untimely.
Without doubt, the first notice of the underlying litigation, having been given approximately 14 months after the commencement thereof, was untimely. Klausner argues that prejudice must be shown to warrant the court enforcing the disclaimer. While in Matter of Brandon [Nationwide Mutual Insurance Company, 97 NY2d 491 (2002)], it was held that in order to disclaim for late notice of suit under Supplementary Uninsured Motorist coverage, prejudice must be shown, the Court of Appeals reiterated in The Argo Corporation v. Greater New York Mutual Insurance Company, 4 NY3d 332 (2005), that "[t]he rationale of the no-prejudice rule is clearly applicable to a late notice of lawsuit under a liability insurance policy . . . (as) [l]ate notice of lawsuit in the liability insurance context is so likely to be prejudicial . . . as to justify the no-prejudice rule." (P. 340). In that case no notice of claim was provided prior to the institution of the lawsuit.
In the very recent case of American Transit Insurance Company v. B.O. Astra Management Corp., 39 AD3d 432 (2007), the First Department affirmed a holding by Justice Acosta of this court [ 12 Misc. 3d 740 (2006)], that a showing of prejudice was required where although timely notice of litigation was not provided, a timely notice of claim was given, the court stating that "[h]aving received timely notice of claim, plaintiff insurer was not entitled to disclaim coverage based on untimely notice of the claimant's commencement of litigation unless it was prejudiced by the late notice . . . and such prejudice was not shown."
In the above-cited case, "American Transit received notice of the lawsuit before a default judgment had been entered (and thus) could have prevented the default" ( 12 Misc. 3d at p. 746) (emphasis supplied). In contrast, although here Klausner's counsel was aware that plaintiff was the insurer of the offending vehicle, no notice of the lawsuit was given to plaintiff until after counsel procured the entry of an order granting Klausner's application for a judgment on default. While, of course, plaintiff could, prior to the inquest, have applied to vacate the default by demonstrating the usual requirements of excusable neglect and a possible meritorious defense on the part of its insured, it is far from clear whether such a motion would be granted, and it could be prejudicial to plaintiff's rights to require it to appear for its insured under such circumstances.
Accordingly, plaintiff is entitled to summary judgment and it is declared that plaintiff has no duty to defend or indemnify Rechev or Novik and, if a counterclaim had been asserted by Klausner to recover upon the judgment entered against said defendants, Klausner would not be entitled to a recovery herein. In connection with this result, Klausner should take note of the statement of the Court of Appeals in American Transit Insurance Company v. Sartor, supra, where it stated (p. 78) that "a claimant, acting in a responsible manner by providing notice to the insurer under Insurance Law § 3420(a)(3), can singlehanded protect his or her recovery in the event a judgment eventually is entered against an insured."
The Clerk shall enter judgment accordingly.