United States District Court, W.D. New York
August 8, 2005.
BRUCE JENSEN and GRETCHEN JENSEN, Plaintiffs,
AUTOMOBILE INSURANCE COMPANY OF HARTFORD, CONNECTICUT, Defendant.
The opinion of the court was delivered by: KEN SCHROEDER, Magistrate Judge
DECISION AND ORDER
In accordance with 28 U.S.C. § 636(c), the parties have
consented to have the undersigned conduct all further proceedings
in this case, including entry of final judgment. Dkt. #12.
Currently before the Court is plaintiffs' motion for summary
judgment (Dkt. #26), declaring that defendant is obligated to
defend and indemnify plaintiffs in an action titled Mary and
Dennis Stanek, et al. v. Gretchen Jensen, which is pending in
New York State Supreme Court, County of Erie (Index No.
11826/01), and defendant's cross-motion for summary judgment
(Dkt. #31), declaring that defendant is not obligated to defend
or indemnify plaintiffs in the underlying action. For the
following reasons, plaintiffs' motion is denied and defendant's
motion is granted. BACKGROUND
The Automobile Insurance Company of Hartford Connecticut
("AIC"), insured Bruce and Gretchen Jensen pursuant to a
homeowner's policy issued September 15, 1998 and renewed to
September 15, 2000. Dkt. #33, ¶ 1. The policy provides defense
If a claim is made or a suit is brought against any
insured for damages because of bodily injury or
property damage caused by an occurrence to which this
coverage applies, even if the claim or suit is false.
Dkt. #31, Pt. 32, p. 17. An insured is defined to include the
policy holders and residents of the policy holders' household who
are relatives. Dkt. #31, Pt.32, p. 6. An occurrence is defined as
"an accident" which results in "bodily injury." Dkt. #31, Pt.32,
The policy excludes coverage for bodily injury "which is
expected or intended by any insured" or "arising out of business
pursuits of any insured." Dkt. #31-32, p. 17. The policy includes
the following language with respect to business pursuits:
NOTE: The furnishing of home day care services for
(1) a fee, or
(2) other compensation by the insured and rendering
of such services two or more days per week for a
period of two or more hours per day constitutes one
type of many different business pursuits.
This exclusion does not apply to:
(1) activities which are ordinarily incident to
* * *
Dkt. #31, Pt.32, p. 17. As a condition of coverage, the insured is subject to the
Duties After Loss. In case of an accident or
occurrence, the insured shall perform the following
duties that apply. You will help us in seeing that
these duties are performed:
a. give written notice to us or our agent as soon as
is practical, which sets forth:
(1) the identity of the policy and insured;
(2) reasonably available information on the time,
place and circumstances of the accident or
(3) names and addresses of any claimants and
* * *
Dkt. #31, Pt. 32, p. 20.
During the policy period, Ms. Jensen provided babysitting
services for a profit at her residence. Dkt. #35, ¶ 2.*fn1
During November or December of 1999 and again during January or
February of 2000, Gretchen Jensen personally witnessed
inappropriate behavior of a sexual nature by her son against
children in her care. Dkt. #35, ¶¶ 2-3. Ms. Jensen sought
treatment for her son and obtained a referral to counseling
services in February of 2000. Dkt. #35, ¶ 6.
In February or March of 2000, the mother of one of the children
in her care informed Ms. Jensen that "there was an incident
involving" her son. Dkt. #35, ¶ 4. In March of 2000, Gretchen Jensen moved daycare operations to
another residence to avoid further contact between her son and
the children in her care. Dkt. #35, ¶ 5. By that time, Ms. Jensen
was aware that Erie County was investigating possible misconduct
regarding daycare services provided at the Jensen's residence.
Dkt. #35, ¶ 7.
On July 17, 2000, Ms. Jensen was approached by police officers
regarding allegations that her son improperly touched and/or
abused children in her care. Dkt. #35, ¶ 8. On November 29, 2000,
Ms. Jensen's son was charged with sexual abuse and directed to
appear in Family Court. Dkt. #35, ¶ 9. Ms. Jensen was charged
with endangering the welfare of a child on June 14, 2001, and
pled guilty to that charge on June 18, 2001. Dkt. #35, ¶¶ 9,12.
On June 29, 2001, Ms. Jensen's son was convicted by way of a plea
to an act which, if committed by an adult, would constitute the
crime of sexual abuse in the second degree. Dkt. #35, ¶ 13.
The parents of three children receiving daycare services from
Gretchen Jensen commenced suit against Ms. Jensen in New York
State Supreme Court, Erie County on December 18, 2001. Dkt. #44,
Exh. A. Each of them allege that between September of 1999 and
July of 2000, Gretchen Jensen negligently supervised the children
in her care by permitting opportunities for her son to be alone
with the children, at which time her son had sexual and other
inappropriate contact with the children, and that Ms. Jensen
and/or her son subjected the children to verbal and/or physical
abuse and/or threats. Dkt. #44, Exh. A. Ms. Jensen was served with the Summons and Complaint in the
underlying personal injury action on January 8, 2002. Dkt. #35, ¶
15. She telephoned her insurance agent that day and delivered a
copy of the Summons and Complaint to her insurance agent on
January 9, 2002. Dkt. #35, ¶ 16. AIC received notice of the
personal injury action by letter from the insurance agent on
January 18, 2002. Dkt. #35, ¶ 16.
By letter dated January 22, 2002, AIC disclaimed
The complaint against you alleges various acts of
willful and intentional conduct involving sexual
abuse and/or other inappropriate contact by [your
son] with infants and verbal and/or physical abuse
and/or threats by you and/or your son.
Therefore, the plaintiffs' alleged damages do not
arise out of an occurrence as required by the
insuring agreement of your policy.
Dkt. #31, Pt. 31, p. 3. AIC also advised plaintiffs that "[i]n
addition to the fact that any alleged bodily injury, property
damage, or personal injury was not caused by an occurrence as
required for coverage to attach, the above-mentioned exclusions
[intentional acts and business pursuits] also apply and coverage
is therefore expressly excluded as a result." Dkt. #31, Pt. #1,
AIC also disclaimed coverage due to plaintiffs' failure to
provide timely notice of the claim. Dkt. #31, Pt.31, p. 4.
Specifically, AIC advised plaintiffs that
The Complaint states that the alleged incidents and
activities occurred between September 1999 and July
2000. However, the first notice to Travelers and/or
your agent was only after you were served with a
Summons and Complaint on January 8, 2002. Our
investigation indicates that you were aware of the activities alleged for quite some
time prior to the service of the Summons and
Complaint and that as a result of an investigation by
the District Attorney and/or other authorities, you
pled guilty to endangering the welfare of a child
back in June 2001 and your son's case was handled in
Family Court back at that time also. Therefore, you
have failed to comply with the policy condition
mentioned above and as a result, there is no coverage
for this matter and [AIC] will not defend or
indemnify you regarding it.
Dkt. #31, Pt.31, p. 4.
Plaintiffs commenced a third-party action against AIC on August
8, 2002, seeking declaratory judgment and alleging breach of
contract and breach of the duty of good faith and fair dealing.
Dkt. #31, Exh. 4. The third-party action was severed from the
personal injury action by stipulation entered September 6, 2002
and removed to this Court on September 9, 2002. Dkt. #31, Exh. 5
& 6. By stipulation entered January 22, 2003, the cause of action
for breach of the duty of good faith and fair dealing, as well as
claims for punitive or exemplary damages, were dismissed. Dkt.
On April 24, 2003, the plaintiffs in the underlying personal
injury action commenced suit against AIC in New York State
Supreme Court, County of Erie, seeking a declaration that AIC is
obligated to defend Gretchen Jensen in that action. Dkt. #31,
Exh. 11. AIC removed the action to this Court, where it was
assigned a case number of 03CV365. Dkt. #31, Exh. 12. That action
was consolidated with the Jensen's action against AIC by
stipulation entered August 9, 2004. Dkt. #32. DISCUSSION AND ANALYSIS
Duty to Defend
"It is well settled under New York law that an insurer's duty
to defend is `exceedingly broad.'" First Investors Corp. v.
Liberty Mut. Ins. Co., 152 F.3d 162, 165 (2d Cir. 1998),
quoting Continental Cas. Co. v. Rapid-Am. Corp., 80 N.Y.2d 640,
648 (1993). "An insurer must defend whenever the four corners of
the complaint suggest or the insurer has actual knowledge of
facts establishing a reasonable possibility of coverage." IBM
Corp. v. Liberty Mut. Fire Ins. Co., 303 F.3d 419, 424 (2d Cir.
2002), quoting Continental, 80 N.Y.2d at 648.
"Determining whether an insurer has a duty to defend requires
an examination of the policy language and the allegations of the
complaint to see if the underlying complaint alleges any facts or
grounds which bring the action within the protection purchased."
Id., quoting First Investors, 152 F.3d at 165-66. "In
determining whether a policy exclusion applies, the facts alleged
in the complaint, rather than the conclusory assertions found
therein, are controlling." Willard v. Preferred Mut. Ins. Co.,
242 A.D.2d 960 (4th Dep't 1997), lv. denied, 91 N.Y.2d 814
(1998); see Allstate Ins. Co. v. Mugavero, 79 N.Y.2d 153, 162
(1992) ("the analysis depends on the facts which are pleaded, not
the conclusory assertions.").
The insurer can only be excused from defending its insured
"because of the language of the policy exclusion if it could
establish, as a matter of law, that there is no possible factual
or legal basis on which the insurer might eventually be obligated
to indemnify him under any provision contained in the policy."
Villa Charlotte Bronte, Inc. v. Commercial Union Ins. Co.,
64 N.Y.2d 846, 848 (1985). So long as the claims asserted against
the insured may rationally be said to fall within the policy
coverage, whatever may later prove to be the limits of the
insurer's responsibility to pay, there is no doubt that it is
obligated to defend. Seaboard Surety Co. v. Gillete Co.,
64 N.Y.2d 304, 310-311 (1984). "It is well settled that `[w]here
there is ambiguity as to the existence of coverage, doubt is to
be resolved in favor of the insured and against the insurer.'"
IBM Corp., 303 F.3d at 424-25, quoting Handelsman v. Sea Ins.
Co. Ltd., 85 N.Y.2d 96, 101 (1994).
Absence of Occurrence/Intentional Injury Exclusion
AIC argues that, regardless of the theory of liability asserted
against Ms. Jensen, injury caused by the abuse of children is
deemed intentional as a matter of law. Dkt. #31, Pt.34, p. 11.
Accordingly, AIC asserts both that the allegations in the
complaint do not constitute an occurrence and that the exclusion
for expected or intended injury applies. Dkt. #31, Pt.34, pp. 11.
Ms. Jensen argues that because the claim asserted against her is
framed as negligence in the supervision of the children in her
care, AIC is obligated to provide a defense. Dkt. #40.
As an initial matter, the Court notes that since the
intentional act exclusion is "nothing more than a restatement of
the requirement that the harm be the result of an accident for
there to be coverage," the analysis is the same whether the
argument is that coverage did not exist in the first instance or
that coverage is excluded. Jubin v. St. Paul Fire & Marine Ins.
Co., 236 A.D.2d 712 (3d Dep't 1997). "In deciding whether a loss was the result of an accident, it
must be determined, from the point of view of the insured,
whether the loss was unexpected, unusual and unforeseen."
Allegany Co-op Ins. Co. v. Kohorst, 254 A.D.2d 744 (4th
Dep't 1998), citing Miller v. Continental Ins. Co.,
40 N.Y.2d 675, 677 (1976); see Agoado Realty Corp. v. United Int'l Ins.
Co., 95 N.Y.2d 141, 145 (2000). The emphasis in this inquiry is
not necessarily upon the intent to act, but upon the intent to
cause harm. This distinction is important because
Accidental results can flow from intentional acts.
The damage in question may be unintended even though
the original acts leading to the damage were
Allegany Co-Op, 254 A.D.2d at 744; see Continental v.
Rapid-American, 80 N.Y.2d at 649 ("Resulting damage can be
unintended even though the act leading to the damage was
intentional."). Thus, the "critical question is whether the harm
that resulted . . . could have been other than harm
`intentionally caused' within the meaning of the policy
exclusion." Mugavero, 79 N.Y.2d at 159.
In certain cases, the Court has determined that the theoretical
possibility that the insured lacked the subjective intent to
cause harm does not preclude a finding that such injuries are, as
a matter of law, intentionally caused. Progressive N. Ins. Co.
v. Rafferty, 17 A.D.3d 888 (3d Dep't 2005).
It is now well settled that there exists a narrow
class of cases in which the intentional act exclusion
applies regardless of the insured's subjective
intent. In such cases, the intentional act exclusion
[applies] if the injury [is] inherent in the nature
of the wrongful act. An injury is held to be inherent
in the nature of an act when the act is so exceptional that cause and effect cannot be
separated; that to do the act is necessarily to do
the harm which is its consequence; and that since
unquestionably the act is intended, so also is the
Id. (internal quotations and citations omitted). Sexual abuse
of children, nonconsensual sexual contact, sexual harassment and
domestic violence have all been determined to be examples of harm
inherent in the nature of the insured's intentional act as a
matter of law. Sidney Frank Importing Co. v. Farmington Cas.
Co., 1999 WL 173263 (Mar. 26, 1999) (sexual harassment),
aff'd, 199 F.3d 1323 (2d Cir. 1999) ; Mugavero,
79 N.Y.2d at 160 (sexual abuse of children); Doyle v. Allstate Ins. Co.,
255 A.D.2d 795
(4th Dep't 1998) (domestic violence); Pistolesi,
223 A.D.2d 94, 97 (3d Dep't), lv. denied, 88 N.Y.2d 816
(nonconsensual sexual contact).
In Mugavero, the New York Court of Appeals also addressed
claims of "negligence in caring for the children" asserted
against the wife whose husband allegedly sexually abused the
children she was babysitting. 79 N.Y.2d at 163-64. The
homeowner's policy in that case excluded "all claims which arise
out of the intentional acts of any one of the insureds." Id.
(emphasis in original). The Court concluded that the exclusion
applied to the negligence cause of action as well, stating:
What is excluded in this provision is a specifically
defined class of injury i.e., one intentionally
caused by an insured person. Inasmuch as the
injuries giving rise to the claims here were caused
by Edward Mugavero an insured person these
injuries are not covered.
Id. (emphasis in original). Subsequently, the New York Court of Appeals considered claims
of negligent supervision, management and control of the premises
against the building manager brought by a woman assaulted in an
apartment building and determined that
while the theory pleaded may be the insured's
negligent failure to maintain safe premises, the
operative act giving rise to any recovery is the
assault. While the insured's negligence may have been
a proximate cause of plaintiff's injuries, that only
resolves its liability; it does not resolve the
insured's right to coverage based on the language of
the contract between him and the insurer. Merely
because the insured might be found liable under some
theory of negligence does not overcome the policy's
exclusion for injury resulting from assault.
Mount Vernon Ins. Co. v. Creative Housing Ltd., 88 N.Y.2d 347,
352 (1996). Thus, "it is the nature of the underlying acts, not
the theory of liability, that governs." Sweet Home Cent. Sch.
Dist. v. Aetna Comm. Ins. Co., 263 A.D.2d 949
1999). Accordingly, the Court determined that "[b]ecause the
operative acts giving rise to any recovery are intentional acts,
i.e., assault and sexual abuse [by teacher against student], it
is of no import that the complaint in the underlying action
alleges only negligent hiring, retention and supervision on the
part of [school district]." Id.; see Green Chimneys Sch. for
Little Folk v. National Union Fire Ins. Co. of Pittsburgh,
244 A.D.2d 387 (2d Dep't 1997); Public Serv. Mut. Ins. Co. v. Camp
Raleigh, Inc., 233 A.D.2d 273
(1st Dep't 1996), lv.
denied, 90 N.Y.2d 801
(1997); Doe v. Allstate Ins. Co.,
187 A.D.2d 181, 184-85 (1st Dep't), lv. denied, 82 N.Y.2d 652
In the instant case, the complaint alleges that Ms. Jensen
negligently supervised the children in her care by permitting
opportunities for her son to be alone with the children, at which time her son had sexual and other
inappropriate contact with the children, and that Ms. Jensen
and/or her son subjected the children to verbal and/or physical
abuse and/or threats. Dkt. #44, Exh. A. Although the theory of
liability asserted against Ms. Jensen includes negligence, the
injuries giving rise to the negligence claim were caused by
verbal, physical and/or sexual abuse committed by an insured.
Because abuse against children is deemed intentional as a matter
of law, the injures sustained do not meet the accidental
component of the definition of occurrence and the policy
exclusion for bodily injury "which is expected or intended by any
Business Pursuits Exclusion
AIC argues that coverage is excluded because Ms. Jensen's
daycare was a business pursuit as defined by the policy. Dkt.
#31, Pt. 34, pp. 15-17. Plaintiffs assert that the exception to
the business pursuits exclusion for activities which are
ordinarily incident to non-business pursuits applies to the facts
of this case. Dkt. #29.
In Outwater v. Ballister, the New York State Appellate
Division assessed a business pursuits exclusion which provided an
exception for bodily injury resulting from activities in
conjunction with business pursuits which are ordinarily
considered nonbusiness in nature, stating:
While the language of this exception is not free of
ambiguity, as a general rule if the injury was caused
by an act that would not have occurred but for the
business pursuits of the insured, said act is beyond
the scope of the policy; however, if the injurious
act would have occurred regardless of the insured's business activity, the exception applies
and coverage is provided even though the act may have
had a causal relationship to the insured's business
253 A.D.2d 902
, 905 (3d Dep't 1998). Applying that principle to a
personal injury claim brought by a worker constructing a storage
shed, the Appellate Division reversed the trial court's award of
summary judgment to the insurance company because there was a
question of fact as to whether the shed would have been
constructed on the property regardless of the insured's farming
In Lamb v. Security Mut. Ins. Co., a child was bitten by a
dog while in the care of the insured. 278 A.D.2d 855, 856
(4th Dep't 2000). The Appellate Division determined that the
business pursuit exclusion applied to relieve the insurance
company of its duty to indemnify with respect to a cause of
action alleging negligent supervision of the child, but required
the insurance company to defend the insured because the complaint
also alleged strict liability for the actions of the dog and the
daycare provider's failure to supervise the dog and those
allegations were not incident to the business pursuit, i.e.,
care of the child.
In Gallo v. Grosvenor, a child was sexually assaulted by his
daycare provider's son. 175 A.D.2d 454, 455 (3d Dep't 1991). The
parents of the injured child claimed negligent supervision of the
daycare provider's son by the daycare provider. Id. at 456. The
homeowner's policy included an exclusion for business pursuits,
with an exception for bodily injury resulting from business
activities which were usually viewed as nonbusiness in nature. Id. The Appellate Division agreed
with the daycare provider that
while the activity for which [the daycare provider
is] sought to be held liable occurred during the time
that [the daycare provider] was engaged in her
business of baby-sitting, the supervision of her own
child was incident to a nonbusiness pursuit. . . .
Certainly, the care and supervision of [her] own
child was not incident to her business pursuit, that
is, the care of other children entrusted to her
during their parents' absence.
Subsequently, the Third Department defined the standard as
requiring that the injuries "could have been sustained only as a
result of conduct intrinsic to the provision of child care."
Tenkate v. Moore, 274 A.D.2d 934, 937 (3d Dep't 2000). In that
case, the complaint alleged that the child was injured as a
result of the negligent care and supervision exercised by
defendants while they were providing child care, but the
Appellate Division reversed the trial court's declaration that
the insurance company was not required to defend and indemnify
because it was possible that the injuries were inflicted by
another child present in the home (as in Gallo), or a fall down
a long flight of stairs, which the Court characterized as "a
feature ordinarily associated with nonbusiness pursuits and not
with the provision of child care." Id.
The Gallo and Tenkate opinions both cite Gulf Ins. Co v.
Tilley, 280 F. Supp. 60 (N.D. IN 1967), aff'd, 393 F.2d 119
(7th Cir. 1968). In the Tilley case, a child receiving
daycare at the insured's home spilled hot coffee on herself while
the insured was preparing breakfast for herself and a friend. The
district court interpreted the exception to the business pursuit exclusion
as saying that, as a general proposition, there will
be no liability coverage with respect to an insured's
`business pursuits,' but that, as an exception to
this broad rule, coverage will be extended to
liability which arises, even though connected in some
causal manner with the insured's `business pursuits,'
out of an act or omission that is ordinarily not
associated with or related to the insured's business
Id. at 64. Applying this principle to the facts presented, the
Tilley court determined that
It must be borne in mind that the particular activity
which allegedly proximately caused [the child's]
alleged injuries was that of preparing hot coffee.
The coffee was being prepared for [the insured's]
personal use and for the use of her friend. . . . In
any event, it is manifest that the preparation of hot
coffee is an activity that is not ordinarily
associated with a baby-sitter's functions and, when
viewed against the background of the excepting clause
. . . clearly appears as an activity which was
`incident to non-business pursuits'. . . .
Id. at 65. The Court of Appeals subsequently explained the
analysis as follows:
[I]f the injury was caused by an act that would not
have occurred but for the business pursuits of the
insured, that act is beyond the scope of the policy.
If, however, the injurious act would have occurred
regardless of the insured's business pursuit, the
exception applies and coverage is provided, even
though the act may have had a causal relationship to
the business pursuit.
Thoele v. Aetna Cas. & Sur., 39 F.3d 724
, 728 (7th Cir.
1994) (internal citations omitted).
In the instant case, the underlying complaint alleges that the
children were injured by virtue of Ms. Jensen's negligent
supervision of the children entrusted to her care, which afforded her son the opportunity to be alone with the
children and engage in sexual and other inappropriate conduct
with the children. Dkt. #44, Exh. A. Because the Court is
troubled by the prospect of different conclusions resulting from
the same underlying facts marshaled in support of different legal
theories, i.e., a claim that Ms. Jensen's negligent supervision
of the children in her care failed to protect them from abuse by
her son would appear to warrant a different result than a claim
that Ms. Jensen's negligent supervision of her son failed to
protect the children in her care from abuse by her son, the Court
finds those cases focusing on the relationship between the
injurious conduct and the business pursuit to set forth the more
appropriate analytical framework. Since the conduct alleged to
have caused injury in this case, to wit, sexual contact between
Ms. Jensen's son and the children in her care, is not intrinsic
to or commonly associated with the provision of childcare, the
Court finds that the exception applies and coverage is not
excluded pursuant to the business pursuits exception.
Notice of Occurrence
AIC argues that it properly disclaimed coverage on the ground
that plaintiffs failed to provide timely notice of the occurrence
as required by the homeowner's policy. Dkt. #31, Pt. 34, p. 6. In
response, plaintiffs argue that they had a reasonable belief of
nonliability because "they had no indication that any type of
civil suit would be brought against them prior to being served."
Dkt. #29. In support of this argument, Ms. Jensen avers that
neither she nor her husband contemplated the possibility of a
lawsuit and that they were unaware of the need to place their
insurance carrier on notice. Dkt. #26, Pt. 3, ¶¶ 7-9; Dkt. #37,
¶¶ 10-12. Ms. Jensen emphasizes that this was an emotional and stressful time which required that
all of her attention and effort be directed toward protecting the
safety of the children in her care and supporting the well-being
of her son. Dkt. #26, Pt. 3, ¶¶ 9, 11; Dkt. #37, ¶ 9, 12.
Notification provisions advance several important policies:
They enable insurers to make a timely investigation
of relevant events and exercise early control over a
claim. Early control may lead to a settlement before
litigation and enable insurers to take steps to
eliminate the risk of similar occurrences in the
future. When insurers have timely notice of relevant
occurrences, they can establish more accurate renewal
premiums and maintain adequate reserves.
State of N.Y. v. Blank, 27 F.3d 783
, 794 (2d Cir. 1994),
quoting Commercial Union Ins. Co. v. International Flavors &
Fragrances, Inc., 822 F.2d 267
, 271 (2d Cir. 1987). In
recognition of the importance of these policies, New York law has
consistently held that "[a]bsent a valid excuse, a failure to
satisfy the notice requirement vitiates the policy, and the
insurer need not show prejudice before it can assert the defense
of noncompliance." Security Mut. Ins. Co. v. Acker-Fitzsimons
Corp., 31 N.Y.2d 436, 440 (1972) (internal citations omitted);
see In re Allcity Ins. Co. and Jiminez, 78 N.Y.2d 1054, 1055
"There may be circumstances, such as lack of knowledge that an
accident has occurred or a reasonable belief in nonliability,
that will excuse or explain delay in giving notice, but the
insured has the burden of showing the reasonableness of such
excuse." White v. City of New York, 81 N.Y.2d 955, 957 (1993).
The appropriate inquiry is "on the insured's knowledge of events and reasonable
conclusions based on that knowledge." American Ins. Co. v.
Fairchild Indus., Inc., 56 F.3d 435, 439 (2d Cir. 1995). In
making that assessment, "it may be relevant on the issue of
reasonableness, whether and to what extent, the insured has
inquired into the circumstances of the accident or occurrence."
Security Mut. Ins., 31 N.Y.2d at 441. In other words, the
insureds must "exercise reasonable care and diligence in
ascertaining the facts about the alleged accident and in
evaluating their potential liability." Id. at 443.
"When the facts of an occurrence are such that an insured
acting in good faith would not reasonably believe that liability
will result, notice of the occurrence is given `as soon as
possible' if given promptly after the insured receives notice
that a claim will in fact be made." D'Aloia v. Travelers Ins.
Co., 85 N.Y.2d 825, 826 (1995); see Merchants Mut. Ins. Co. v.
Hoffman, 56 N.Y.2d 799, 801 (1982). For example, where the
insured's brother fell after stepping on a loose brick at the
insured's home, the New York Court of Appeals affirmed the
Appellate Division's determination that the insured's delay in
affording notice to the insurance carrier was reasonable,
Although the accident was serious enough to occasion
emergency room treatment, there was no evidence that
the insureds knew or had reason to believe that
permanent ongoing injury had occurred. Moreover, the
insured's postaccident inquiry into the injured's
condition did not reveal the existence of the kind of
harm that would naturally lead to a lawsuit. Finally,
the close familial relationship between the insureds
and the accident victim was of such a nature as to
support a finding that the insureds reasonably
believed that they would have been apprised if the
injured party had been contemplating a lawsuit.
Argentina v. Otsego Mut. Fire Ins. Co., 86 N.Y.2d 748, 750-51
(1995). In another case, involving a dog bite on a child's arm, the New
York Court of Appeals determined that
The record before us, which indicates that the
injured party's parents declined the insureds' offer
to pay medical expenses and indicated no intention to
sue, supports the affirmed finding below that notice
given by the insureds promptly after suit was
instituted against them was given "as soon as
possible," notwithstanding that the action was not
begun until nearly three years after the occurrence.
D'Aloia v. Travelers Ins. Co., 85 N.Y.2d at 826.
In yet a third case, the New York Court of Appeals
On the record before us, which involves an injury to
a child placed in foster care with the insureds by
the Department of Social Services which paid all
medical expenses of the child and indicated no
intention to sue, the weight of the evidence supports
the determination of the Appellate Division that
notice given by the insureds promptly after suit
instituted against them by their former foster child
was given "as soon as practicable," notwithstanding
that the action was not begun until after the foster
child reached his majority and until five years after
Merchants Mut. Ins. Co. v. Hoffman, 56 N.Y.2d 799, 801-02
In contrast, New York Courts have found that "no ordinarily
prudent person could reasonably have felt immune from potential
civil liability" where the insured's conduct toward a fellow
student "was serious enough to warrant the intervention of the
police" and caused "injuries serious enough to require
hospitalization." Winstead v. Uniondale Union Free Sch. Dist.,
201 A.D.2d 721, 723 (2d Dep't 1994); see also Allstate Ins. Co.
v. Grant, 185 A.D.2d 911 (2d Dep't 1992) (insured's belief in nonliability unreasonable where insured
"engaged in an altercation which resulted in personal injury to
[victim] and criminal charges against [insured].").
In the instant case, plaintiffs had actual knowledge of the
conduct giving rise to this claim in late 1999 and early 2000 by
virtue of Gretchen Jensen's personal observations of
inappropriate behavior of a sexual nature by her son against
children in her care. Dkt. #35, ¶¶ 2-3. Ms. Jensen was aware that
at least one parent had knowledge of her son's conduct as early
as February or March of 2000 and found it necessary, for the
protection of both the children and her son, to move her daycare
to another residence in March of 2000. Dkt. #35, ¶¶ 4-5 & Dkt.
#37, ¶ 5. She became aware of an investigation by Erie County in
March of 2000 and a criminal investigation of her son in July of
2000. Dkt. #35, ¶ 8. Criminal charges were brought against her
son for sexual abuse in November of 2000 and against her for
endangering the welfare of a child in June of 2001, both of which
resulted in guilty pleas in June of 2001. Dkt. #35, ¶¶ 9,12-13.
These events would have suggested the possibility of a civil
lawsuit to a reasonable person. As Ms. Jensen herself
acknowledges, this was an emotionally charged situation involving
her own son and several young children entrusted to her care. Ms.
Jensen personally observed the offensive conduct and her reaction
to that conduct, as set forth in her affidavit, acknowledges the
seriousness of the situation. She and her son both accepted
criminal responsibility for intrinsically injurious conduct and
their relationship with the victims was not such that they should
have reasonably believed themselves insulated from civil
liability for that conduct. CONCLUSION
For the foregoing reasons, plaintiffs' motion for summary
judgment (Dkt. #26), declaring that AIC is obligated to defend
and indemnify plaintiffs in the underlying action of Mary and
Dennis Stanek et. al. v. Gretchen Jensen, which is pending in
New York State Supreme Court, County of Erie (Index No.
11826/01), is DENIED, and defendant's cross-motion for summary
judgment (Dkt. #31), declaring that AIC is not obligated to
defend or indemnify plaintiffs in the underlying action is