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March 29, 2002


The opinion of the court was delivered by: Dearie, District Judge.


This case arises out of a fire that occurred on September 27, 1997 at the premises located at 164-05 107th Street, Jamaica, New York, owned by defendant Theresa Harris, in which Cassandra Lowe suffered injuries that led to her death. Willie Lowe, executor of the estate of Cassandra Lowe, has brought an action for negligence and wrongful death in the Supreme Court of the State of New York, County of Queens, against defendants Harris and Richardson. Plaintiff Mount Vernon Fire Insurance Company ("Mount Vernon") brings this declaratory judgment action to determine whether it must defend and indemnify Harris under an insurance policy issued to her covering the premises in question. Lowe moves for summary judgment dismissing the complaint against the defendants and directing plaintiff to defend and indemnify defendant Harris in the underlying state court action. Mount Vernon cross-moves for summary judgment. For the reasons explained below, defendant's motion for summary judgment is denied and plaintiff's cross-motion for summary judgment is granted.


At all times relevant to this suit, Theresa Harris was the owner of the premises located at 164-05 107th Street, Jamaica, New York (the "premises"). Prior to September 27, 1997, Mount Vernon had issued to Harris a liability insurance policy, numbered CL 2082989, providing coverage for the premises for the period from November 7, 1996 through November 7, 1997. Under Section IV(2)(a) of the policy, Harris was required to notify plaintiff "as soon as practicable of an `occurrence' or an offense which may result in a claim." Aff. of Bea Reale, Ex. A ("Reale Aff. ___").

On September 27, 1997, there was a fire at the premises. Cassandra Lowe was a tenant in the premises on that date. She suffered severe injuries in the fire that ultimately led to her death on October 6, 1997. On or about December 5, 1997, the estate of Cassandra Lowe retained the law firm of Andrea & Towsky, Esqs. ("Andrea & Towsky" or the "firm"). By letter dated that same day, December 5, 1997, and addressed to defendants Harris and Richardson, the firm notified Harris of the estate's claim under the aforementioned policy arising out of the fire of September 27. The letter also requested that Harris divulge the name and address of her insurance company and that she forward the letter to them "so that [the firm] may deal directly with them." Affirmation of Frank A. Andrea, Ex. C ("Andrea Affirmation ___").

On October 5, 1998, Willie Lowe, as the executor of the estate of Cassandra Lowe, commenced an action in the Supreme Court of New York, Queens County against Harris and Richardson. Plaintiff then commenced this action for declaratory judgment seeking from this Court a declaration that it is not required to defend or indemnify Harris in the underlying state court action. Both parties have moved for summary judgment.

In support of his motion, Lowe raises two arguments. First, Lowe claims that plaintiff delayed too long from the time it first received notice of the claim on March 4, 1998, until the time it finally sent its notice of disclaimer to Harris on April 23, 1998. Lowe asserts that the nearly two month delay was unreasonable and rendered the disclaimer ineffective as a matter of law. Second, Lowe argues that while the letter of disclaimer, if timely, may have been adequate as a defense against Harris's claim, it was not effective against Lowe, who, as an injured third party, asserted his own claim against plaintiff. Plaintiff counters that it disclaimed in a timely fashion after conducting a full inquiry into the claim. Plaintiff also argues that the disclaimer was effective against Lowe because he never notified Mount Vernon directly about his claim. Rather, notice of the claim came from the insured, not from Lowe, and therefore disclaiming as to Harris was effective against Lowe.


A party moving for summary judgment is entitled to judgment as a matter of law if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits . . . show that there is no genuine issue as to any material fact." Fed.R.Civ.P. 56(c). The burden to show that no genuine issue of material fact exists lies with the moving party, with all ambiguities resolved, and all inferences drawn, in favor of the non-moving party. Gallo v. Prudential Residential Servs. Ltd., 22 F.3d 1219, 1223 (2d Cir. 1994). When the evidence is so minimal that no rational juror could find in favor of the non-moving party, the Court should grant summary judgment. Id. at 1224.

A. Timeliness of Plaintiff's Disclaimer

Section 3420(d) of the New York State Insurance Law provides that if an insurer wishes to disclaim liability or deny coverage under one of its policies, the insurer must "give written notice as soon as is reasonably possible" to the insured. N.Y. Ins. Law § 3420(d) (McKinney 2000); see also Hartford Ins. Co. v. County of Nassau, 46 N.Y.2d 1028, 1029, 416 N.Y.S.2d 539, 389 N.E.2d 1061 (1979) (failure of the insurer to give notice as soon as is reasonably possible "precludes effective disclaimer or denial"). This rule holds true even if the insured fails, in the first instance, to provide the insurer with timely notice of the claim. E.g., Ward v. Corbally, Gartland & Rappleyea, 207 A.D.2d 342, 343, 615 N.Y.S.2d 430 (2d Dep't 1994); Kramer v. Interboro Mut. Indem. Ins. Co., 176 A.D.2d 308, 308, 574 N.Y.S.2d 575 (2d Dep't 1991). Accordingly, the onus is upon the insurer to justify any delay in notifying the insured of its disclaimer. Ward, 207 A.D.2d at 343, 615 N.Y.S.2d 430. The reasonableness of the delay is measured "from the time when the insurer was aware of sufficient facts to disclaim." Id. at 344, 615 N.Y.S.2d 430; see also In re Allcity Ins. Co. [Jimenez], 78 N.Y.2d 1054, 1056, 576 N.Y.S.2d 87, 581 N.E.2d 1342 (1991) (same).

Determining whether or not the delay in disclaiming was reasonable is generally a question of fact for the jury. See Hartford Ins. Co., 46 N.Y.2d at 1030, 416 N.Y.S.2d 539, 389 N.E.2d 1061. New York courts have held, however, that unexplained delays of two months or more are unreasonable as a matter of law. See id. at 1030, 416 N.Y.S.2d 539, 389 N.E.2d 1061; Ward, 207 A.D.2d at 344, 615 N.Y.S.2d 430; Kramer, 176 A.D.2d at 308, 574 N.Y.S.2d 575; New York Cent. Mut. Fire Ins. Co. v. Markowitz, 147 A.D.2d 461, 462-63, 537 N.Y.S.2d 571 (2d Dep't 1989). On the other hand, New York courts have also consistently recognized that a prompt, good faith investigation of the claim by the insurer may justify a delay that would normally be deemed unreasonable absent explanation. See, e.g., In re Prudential Prop. & Cas. Ins. Co. [Mathieu], 213 A.D.2d 408, 408, 623 N.Y.S.2d 336 (2d Dep't 1995) (delay of "slightly more than two months" to conduct an investigation deemed reasonable); Vesta Fire Ins. Corp. v. Seymour, No. 96-CV-3844, 1996 WL 1057158, at *6 (E.D.N.Y. Dec.17, 1996) (same for a period of "just over three months"); U.S. Underwriters Ins. Co. v. Congregation B'Nai Israel, 900 F. Supp. 641, 648-49 (E.D.N.Y. 1995) (same for a period of "over two months").

In this case, there is no question that plaintiff engaged in a prompt investigation of the claim. Both parties agree that plaintiff first became aware of the claim when it received the six page fax containing a copy of the firm's letter to Harris and Richardson on March 4, 1998, and that plaintiff promptly assigned the claim to Galsan for investigation. After receiving Harris's written statement on March 24, 1998, Galsan returned its report to plaintiff on March 27, 1998. Plaintiff finally disclaimed by letter dated April 23, 1998. Lowe's timeliness argument is not that the investigation took too long, but that the investigation need never have been commenced. Lowe points out that plaintiff's notice of disclaimer mentions only one basis for disclaiming coverage — Harris's failure to give notice of the fire "as soon as practicable" to plaintiff. Andrea Affirmation, Ex. H. According to Lowe, this ground for disclaimer was readily apparent to plaintiff immediately upon receiving a copy of the firm's letter on March 4, 1998. No investigation was necessary to confirm that Harris had delayed unreasonably in notifying plaintiff because it was clear that she knew about the fire and Lowe's claim at the very ...

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