Opinion
16806/08.
Decided April 7, 2011.
George W. Clarke, Esq., Dai Associates, PC, Flushing, New York, for Plaintiff.
Frank Mattera, Esq., Milber, Makris, Plousadis Seiden, LLP, Woodbury, New York, for Defendant.
Plaintiff Xingjian Construction, Inc. ("Xingjian") commences the instant declaratory judgment action against defendant Atlantic Casualty Insurance Company ("ACIC") alleging, inter alia, breach of a commercial general liability and umbrella insurance policy and for declaratory judgment declaring that ACIC is required to defend and indemnify plaintiff with respect to several actions which hereinafter shall be collectively referred to as "Underlying Action", which were filed against Xingjian .
Defendant now moves for an order pursuant to CPLR 3212 declaring that ACIC has no duty to defend or indemnify Xingjian with respect to the Underlying Action or the associated Accident. Plaintiff opposes the instant motion and argues, inter alia, that the insurer wrongfully denied coverage.
I. APPLICABLE LAW
The proponent of a motion for summary judgment carries the initial burden of production of evidence as well as the burden of persuasion ( Alvarez v. Prospect Hospital, 68 NY2d 320). Thus, the moving party must tender sufficient evidence to demonstrate as a matter of law the absence of a material issue of fact. Once that initial burden has been satisfied, the "burden of production" (not the burden of persuasion) shifts to the opponent, who must now go forward and produce sufficient evidence in admissible form to establish the existence of a triable issue of fact. The burden of persuasion, however, always remains where it began, i.e. with the proponent of the issue. Thus "if the evidence on the issue is evenly balanced, the party that bears the burden must lose" ( Director, Office of Workers Compensation Programs v. Greenwich Collieries, 512 US at 272; 300 East 34th Street Co. v. Habeeb, 248 AD2d 50 [1st Dept 1997]). A party moving for summary judgment is obliged to prove through admissible evidence that the movant is entitled to judgment as a matter of law ( Zuckerman v. City of New York, 49 NY2d 557).
The court's function on this motion for summary judgment is issue finding rather than issue determination ( Sillman v. Twentieth Century Fox Film Corp., 3 NY2d 395). Since summary judgment is a drastic remedy, it should not be granted where there is any doubt as to the existence of a triable issue ( Rotuba Extruders v. Ceppos, 46 NY2d 223). Thus, when the existence of an issue of fact is even arguable or debatable, summary judgment should be denied ( Stone v. Goodson, 8 NY2d 8; Sillman v. Twentieth Century Fox Film Corp., supra).
Facts appearing in the movant's papers which the opposing party does not controvert may be deemed to be admitted ( Sportchannel Assoc. v. Sterling Mets., L.P. , 25 AD3d 314 [1st Dept 2006]). If the facts are not disputed, and the only issue is one of law, summary judgment can be granted ( see, Farkas v. Cedarhurst Natural Food Shoppe Inc., 51 AD2d 793 [2d Dept 1976]).
The role of the court is to determine if bona fide issues of fact exist, and not to resolve issues of credibility.
II. DISCUSSION
Xingjian alleges in the Verified Complaint that Xingjian gave ACIC notice of the underlying claim and action that was brought by the parties in the Underlying Action against Xingjian for property damage arising out of the negligence of Xingjian for alleged construction work performed at a worksite at which Xingjian was employed. It is further alleged defendant insurer ACIC wrongfully denied coverage on the ground that Xingjian's notice of the occurrence was untimely and thereby refused to defend and/or indemnify Xingjian in the Underlying Action.
On behalf of Xingjian, Chao Fei Li testified at the examination before trial that he is the president of Xingjian, a carpentry construction contractor company and that he became aware that Xingjian was being sued when he received some legal papers in the mail in 2007. Initially, he did not know what the papers were since he does not read or speak English. Having been born in China, he only spoke and read Mandarin Chinese. He gave the papers to his English-speaking business acquaintance Howard Wu. Mr. Wu reviewed the papers and told him that the papers did not assert any claim with regard to any work in which Xingjian was involved. Mr. Wu indicated to Li that he would "take care of it", and on behalf of Mr. Li would advise the insurance company to appear and defend Xingjian. Li trusted Howard Wu and relied on the fact Mr. Wu would take steps to timely forward the legal papers to the carrier which he failed to do. Li avers that Xingjian was never involved in any construction work at the worksite involved in the Underlying Action, and therefore, Xingjian was wrongfully sued and could never be liable to any aggrieved party in the Underlying Action. The affidavit of service of the Underlying Action indicates that the summons and complaint were served on Xingjian on October 5, 2007. In 2008, Mr. Li was personally served with another set of legal papers. At this time he consulted with an attorney, who on his behalf contacted ACIC and notified it of Xingjian's claim against the policy. ACIC's first notice of the accident and underlying lawsuit came on May 5, 2008, seven months after the legal papers in the Underlying Action were received by Li. In a correspondence dated May 20, 2008, ACIC disclaimed coverage of Xingjian on numerous grounds including late notice and lack of coverage, noting that as ACIC disclaimed coverage it had no duty to defend Xingjian in the Underlying Action.
In addition to providing timely notice of the occurrence, under the policy, Xingjian is required to timely provide copies of the legal papers and suit to ACIC. Specifically, the policy provides in relevant part:
If a claim is made or "suit" is brought against any insured, you must:
(1) Immediately record the specifics or the claim or "suit" and the date received; and
(2) Notify us as soon as practicable You must see to it that we receive written notice of the claim or "suit" as soon as practicable.
(c) You and any other involved insured must:
(1) Immediately send us copies of any demands, notices, summonses or legal papers received in connection with the claim or "suit".
A. DEFENDANT HAS ESTABLISHED A PRIMA FACIE CASE.
1. An insured's Duty to Notify Insurer of Covered Occurrence.
It is well settled that an insurance policy provision requiring the insured to notify the insurer of a covered occurrence is a condition precedent to the company's duty to defend or indemnify claims against the insured and the failure to provide such notice typically precludes the insured from obtaining coverage under the subject insurance policy ( see, Kambousi Restaurant, Inc. v. Burlington Insurance Company, 58 AD3d 513 [1st Dept 2009]; 1700 Broadway Co. v. Greater New York Mutual Insurance Co., 54 AD3d 593, [1st Dept 2008]; White v. City of New York, 81 NY2d 955, 957). ("[T]he requirement that an insured notify its liability insurer of a potential claim as soon as practicable' operates as a condition precedent to coverage").
Moreover, the insurer is not required to demonstrate that it was prejudiced by the late notice in order to rely upon said ground in its disclaimer ( see, Travelers Ins. Co. v. Cohen , 61 AD3d 768 [2d Dept 2009]); 1700 Broadway Co. v. Greater New York Mutual Insurance Co., supra; St. Nicholas Cathedral of Russian Orthodox Church in North America v. Travelers Property Casualty Insurance Company, 45 AD3d 411 [1st Dept 2007]; Sorbara Const. Corp. v. AIU Ins. Co. , 41 AD3d 245 [1st Dept 2007] [Notice in compliance with the policy provisions is a condition precedent to the insurer's responsibility under the policy and it is therefore unnecessary for the insurer to show that it has been prejudiced by late notice]; Great Canal Realty Corp. v. Seneca Ins. Co., Inc. , 5 NY3d 742 ).
The court notes that in 2008 the Legislature amended
Insurance Law § 3420 to prohibit insurers from denying under certain policies issued on or after January 17, 2009, based on the failure of the insured to provide timely notice unless the insurer suffers prejudice as a result of the delay. As the policy here was issued to Xingjian by the carrier with effective dates of coverage of July 26, 2005 through July 26, 2006 prior to January 17, 2009, the amendments do not apply.
Plaintiff Xingjian, through Li had notice of the occurrence as well as notice of the occurrence and the Underlying Action on or October 5, 2007. Plaintiff does not dispute that it did not provide ACIC with written notice of the occurrence and the Underlying Action until May 20, 2008, some seven months after Xingjian was served with the legal papers in the Underlying Action.
Defendant has established a prima facie case that the insurance policy provision required plaintiff to notify ACIC of a covered occurrence as soon as practicable and plaintiff failed to provide such notice timely, thereby shifting the burden to plaintiff to raise a triable issue of fact.
B. PLAINTIFF RAISES TRIABLE ISSUE OF FACT
In opposition to the motion, plaintiff does not deny that Xingjian took seven months to provide ACIC with written notice of the occurrence and Underlying Action. Instead, plaintiff argues that since ACIC does not claim it suffered any prejudice from the seven-month delay, and since plaintiff is in fact wrongfully sued and is not liable to any party in the Underlying Action, plaintiff is entitled to a defense under the policy pursuant to prevailing law. Moreover, plaintiff asserts that it has a reasonable excuse and mitigating factors for plaintiff's failure to give notice to the insurer immediately after the plaintiff was served with a copy of the Underlying Action's Summons and Complaint. Finally, plaintiff argues that ACIC had a duty to defend it in the Underlying Action because one or more of the claims involved carpentry which is covered by the Policy.
III. ANALYSIS
A. PLAINTIFF HAS ESTABLISHED A REASONABLE EXCUSE ORMITIGATING FACTORS FOR HAVING INADVERTENTLY FAILED TO GIVE TIMELY NOTICE.
The burden is on the insured to prove compliance with the notice ( White v. New York, 81 NY2d 955). The insured has the burden to prove those facts that excuse any delay ( RMD Produce Corp. v. Hartford Cas. Ins. Co. , 37 AD3d 328 [1st Dept 2007] and to demonstrate that the delay was reasonable ( Great Canal Realty Corp. v. Seneca Ins. Co., Inc. , 5 NY3d 742 ; Argo Corp. v. Greater NY Mut. Ins. Co. , 4 NY3d 332 ). Argentina v. Otsego Mut. Fire Ins. Co., 86 NY2d 748).
When there is evidence of an excuse or mitigating circumstance recognized by the law, the question of the reasonableness of the insured's failure to promptly notify will generally be one for the jury ( Argentina v. Otsego Mut. Fire Ins. Co., supra).
The duty to give notice arises when, from the information available relative to the accident, an insured could glean a reasonable possibility of the policy's involvement ( Tower Ins. Co. of NY v. Lin Hsin Long Co. , 50 AD3d 305 [1st Dept 2008]; Paramount Ins. Co. v. Rosedale Gardens, Inc., 293 AD2d 235 [1st Dept 2002]). The event that triggered the Xingjian's obligation under the policy to give notice was on or about October 5, 2007 when Li was served with a copy of the Summons and Complaint ( Commodore International, Ltd. v. National Union Fire In. Co. of Pittsburgh, Pa, 184 AD2d 19 [1st Dept 1992]).
Here, plaintiff has presented evidence of an excuse or mitigating circumstances as justification for its failure to promptly notify ACIC.
B. JUSTIFICATION FOR LATE NOTICE
1. Good faith belief in non-liability
Plaintiff argues that its failure to give timely notice to ACIC should be excused because it has a good faith belief in non-liability. "[A]n insured's failure to give timely notice will be excused if it can show that it had a reasonable belief in its non-liability provided that notice of the occurrence was given as soon as practicable' after the insured received notice that a claim would, in fact, be made" ( see, D'Aloia v. Travelers Ins. Co., 85 NY2d 825, 826; Security Mut. Ins. Co. v. Acker-Fitzsimons Corp., 31 NY2d 436, 441).
The issue of whether the insured had a good faith belief in non-liability is ordinarily a question of fact ( Argentian v. Otsego Mut. Fire Ins. Co., supra). Li believed that there could be no claims against Xingjian, since Xingjian had performed no work at the worksite. A good faith belief in non-liability will serve as justification for late notice, provided that the insured acted as a reasonable and prudent person assessing liability under the facts and circumstances ( Argentina v. Otsego Mut. Fire Ins. Co., supra). Where the insured claims a good faith belief in non liability, the issue of whether a reasonable person envision liability is raised ( Kambousi Restaurant Inc. v. Burlington Ins. Co. , 58 AD3d 513 [1st Dept 2009] [insured's belief on non liability objectively reasonable]; U.S. Underwriters Ins. Co. v. Carson , 49 AD3d 1061 (reasonableness of 10 month delay before bar owner notified insurer about fatal accident raised question of fact). Here, plaintiff raises a triable issue of fact as to whether Xingjian had a good faith belief in non liability so as to justify it's late notice to ACIC.
2. Mitigating Circumstances due to Incapacity of the Insured.
Incapacity of the insured, under certain circumstances, may excuse failure to give timely notice ( see, 70A NY Jur 2d Insurance § 1854). Failure to provide timely notice was excused where the insured, a person of limited education who had never been advised of a change in carriers, gave notice to the wrong insurer ( Nat. Grange Mut. Ins. Co. v. Malone, 21 AD2d 881 [2d Dept 1964], affd 15 NY2d 1025; where the insured's physical condition made her completely dependent on others and she relied upon the driver, her nephew, told her about the accident ( Allstate Ins. Co. v. Alford, 14 AD2d 650 [3d Dept 1961]; see, Power Authority v. Westinghouse Electric Corp., 117 AD2d 336 [1st Dept 1986]).
Plaintiff has established that when Chao Fei Li, the president of Xingjian received the legal papers he did not know what they were as he did not read or speak English, that he only spoke and read Mandarin Chinese, and that he gave the papers to his English-speaking business associate Wu and relied on the fact Wu would take steps to timely forward the legal papers to the carrier which he failed to do. In this case, plaintiff raises triable issue of fact that Xingjian's late notice to ACIC may he excused because Li was non-English speaking and had to rely on others to notify the carrier. Li who did not speak or read English and had to rely on Wu who did speak English to notify the carrier, but failed to do so. Here, plaintiff raises a triable issue of fact as to whether Li's inability to read or understand English and his reliance on Wu to notify the carrier are sufficient mitigating circumstances to excuse Xingjian's late notice to ACIC.
C. REASONABLE POSSIBILITY OF COVERAGE UNDER THE POLICY
1. An Insurer's Duty to Defend.
Generally speaking, an insurer's duty to defend its insured is exceedingly broader than its duty to indemnify and will be required to do so where the subject complaint contains any facts and/or allegations which could potentially trigger coverage under the policy ( see, Judlau Contracting, Inc. v. Westchester Fire Insurance Company, 46 AD3d 482 [1st Dept 2007]; Sandy Creek Central School District v. United National Insurance Co., 37 AD3d 812 [2d Dept 2007]; BP Air Conditioning Corp. v. One Beacon Ins. Group , 8 NY3d 708; Automobile Ins. Co. of Hartford v. Cook , 7 NY3d 131 ).
An insurer may be absolved of its duty to defend the
insured where the insurer demonstrates (as is its burden) that, as a matter of law, there is no possible factual or legal basis upon which the subject claims could be covered under the applicable insurance policy ( see, Judlau Contracting, Inc. v. Westchester Fire Insurance Company, supra; Spoor-Lasher Co., Inc. v. Aetna Casualty Surety Co., 39 NY2d 875; City of Johnstown, NY v. Bankers Standard Ins. Co., 877 F2d 1146 [2d Cir 1989]). Accordingly, if any part of the claim arises from or arguably falls under a covered event, the insurer is required to provide a defense to the insured ( see, Frontier Insulation Contractors v. Merchants Mutual Insurance Co., 91 NY2d 169, 175; Seaboard Sur Co. v. Gillette Co., 64 NY2d 304).
Plaintiff counters that ACIC has a duty to defend plaintiff in the Underlying Action because at least one, if not more, of the claims alleged in the Underlying Action, i.e., negligence in the performance of the construction of a perimeter fence, an act of carpentry, present a reasonable possibility of coverage under the Policy ( see, Frontier Insulation Contractors, Inc. v. Merchs. Mut. Ins. Co., supra; Seaboard Sur. Co. v. Gillette Co., supra [duty to defend "rests solely on whether the complaint alleges any facts or grounds which bring action within protection purchased"]; Nat'l R.R. Passenger Corp. v. Steadfast Ins. Co., No. 06 Civ 6072, 2009 WL 562610, at *10 [SDNY Mar 5, 2009] ["If a complaint contains any facts or allegations which bring the claim even potentially within the protection purchased, the insurer is obligated to defend"]; see also, Underwriters at Lloyd's of London, 2003 WL 22999464, at *5] ["The duty to defend exists unless each and every claim asserted by the underlying complaints is either unambiguously not covered or unambiguously excluded from coverage"] [internal quotation marks omitted]). Plaintiff raises a triable issue of fact as to whether at least one or more of the claims in the Underlying Action present a reasonable possibility of coverage under the policy.
Accordingly, defendant's motion for summary judgment is hereby denied.
Short form order signed March 25, 2011.