Opinion
No. 00 Cv. 2273 (ILG)
October 4, 2002
MEMORANDUM ORDER
SUMMARY
This action arises out of a tragic occurrence in which the driver of a van transporting children to and from a daycare center forgot a child on the bus, who later was found dead due to excessive heat inside the van. The child's parents. as co-executors of the child's estate, brought an action in state court for negligence and wrongful death against the driver, the daycare center, and the individuals who operate the center. The insurance company that had issued a liability policy to those individuals, doing business as "European Child Care Corporation," then brought this action seeking a declaratory judgment that they are not liable for or required to defend the claim. Plaintiff moves for summary judgment that they are not obligated to defend or indemnify the insured defendants: those defendants have cross-moved for precisely the opposite conclusion.
DISCUSSION
No party disputes the facts of the incident itself. Plaintiffs claims rest upon two provisions in the insured defendants' insurance policy. The first — the `notice' provision requires the insured to notify the company "as soon as practicable" of an "occurrence" or offense Which may result in a claim. The second — the "exclusion" provision — precludes coverage for injury or damage:
"[a]rising out of the ownership. maintenance, use or
entrustment to others of any . . . "auto" . . . owned or
operated by or rented or loaned to any insured." (emphasis added).
Plaintiff argues that the undisputed fact that the insured defendants did not notify the company of the incident for 14 months constitutes a violation of the notice provision and thereby relieves it of any obligation to defend or indemnify them. Insured defendants respond that the late notice resulted from a good faith belief that they were not liable for any claims arising from the incident. As to the exclusion, plaintiff abandoned at oral argument the claim, untenable in any event, that the insureds owned, operated, rented or borrowed the van.
For the reasons that follow, the court denies plaintiffs motion and grants the insured defendants' cross-motion.
I. Notice
Under New York law, the insured defendants' conceded delay in notifying the insurance company would be excused if they held a good faith reasonable belief that they were not liable. See, e.g., Argentina v. Ostego Mut. Fund Fire Ins. Co., 86 N.Y.2d 748, 631 N.Y.S.2d 125 (1995). The only question, therefore, is the reasonableness of that belief.
Ordinarily, the issue of reasonableness is a question of fact for the trier of fact, but in appropriate cases it may be decided as matter of law. Argentina, 86 N.Y.2d at 750, 631 N.Y.S.2d at 126; Spasteel Prod. Co. v. Royal Ins., 722 N.Y.S.2d 827. 829 (App.Div. 2001); New Pines Inc. v. North River Ins. Co., 649 N.Y.S.2d 250, 252 (App.Div. 1996). Here, the insured defendant belief was entirely reasonable. They did not own, operate or supervise the operation of the van, nor was the driver their employee or even a hired independent contractor. Furthermore, they were told by the police and the district attorney that they bore no fault (Pearlman Rep. Aff. p. 2), and even their insurance broker did not advise them to contact the insurance company. ( Id.). Under the circumstances, their belief in their non-liability was reasonable and in good faith and therefore excuses the lateness of their eventual notification.
II. The exclusion
"Under New York law, an insurer seeking to invoke an exclusion clause to disclaim coverage bears the substantial burden of demonstrating that the allegations of the underlying complaint are `solely and entirely' within the policy exclusion." U.S. Underwriters Ins. Co. v. Zeugma Corp., 1998 WL 633679, *2 (S.D.N.Y.), citing Avondale Indus. Inc. v. Travelers Indem. Corp., 887 F.2d 1200, 1204-05 (2d Cir. 1989). "To negate coverage by virtue of an exclusion, an insurer must establish that [it] is stated in clear and unmistakable language, is subject to no other reasonable interpretation, and applies in the particular case." Id., citing Continental Casualty Co. v. Rapid-American Corp., 80 N.Y.2d 640, 652, 593 N.Y.S.2d 966, 972 (1993). "`[W]henever an ambiguity is found in the provisions of an insurance policy, any doubt about the existence of insurance coverage should be resolved in favor of the insured . . . ." Id., citing Soundview Assoc. v. New Hampshire Ins. Co., 215 A.D.2d 370, 370-71, 625 N.Y.S.2d 659, 660 (2d Dep't 1995).
Here, plaintiff contends that the exclusion should be held applicable to the claims against insured defendants because of the broad interpretation given by the New York courts to "arising from" language in a policy exclusion. New York courts apply a "but for" standard, according to which an exclusion applies, even as to claims not directly based on the subject of the exclusion. if the claim would not have arisen "but for" the thing excluded. See e U.S. Underwriters Ins. Co. v. Val-Blue Corp., 85 N.Y.2d 821, 623 N.Y.S.2d 834 (1995). They argue that the unsured defendants' claim is therefore barred. since the claims against them would not have arisen but for the operation of a motor vehicle. Plaintiffs reliance on this doctrine is misplaced, however. The "but for" doctrine arises only when something which falls within the exclusion gives rise to claims not directly based on that something. Here, in contrast, nothing falls within the exclusion. since the insured defendants neither owned, operated or borrowed any automobile involved in this case. The "but for" doctrine therefore does not apply, and the insured defendants' claims do not fall within the exclusion.
CONCLUSION
For all of the above reasons, plaintiffs motion for summary judgment is denied, and the insured defendants' cross-motion for summary judgment is granted.