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Nouveau Elevator Industries, Inc. v. Continental Casualty Insurance Co.

June 21, 2006


The opinion of the court was delivered by: Joseph F. Bianco, District Judge


Plaintiff, Nouveau Elevator Industries, Inc., brought this action against defendant, Continental Casualty Insurance Company, under this Court's diversity jurisdiction, seeking a declaratory judgment that defendant is obligated to defend or indemnify plaintiff with respect to a personal injury suit brought in state court. Plaintiff also seeks monetary damages on a pendent claim alleging that defendant denied insurance coverage in bad faith. The parties have crossmoved for summary judgment. Finding that a disputed issue of material fact exists as to whether the plaintiff received actual notice of the state lawsuit, a condition precedent to coverage under the policy at issue, the Court denies both parties' motions for summary judgment with respect to the declaratory judgment claim. With respect to the bad faith denial of coverage claim, defendant's motion for summary judgment is granted.


The following facts are undisputed unless otherwise indicated. Plaintiff, Nouveau Elevator Industries, Inc. ("Nouveau"), installs, services, and repairs elevators for customers in the New York metropolitan area. (See Declaration of William Wetzel ("Wetzel Decl."), ¶ 2.) On January 26, 2001, Hugh Douglas and Gloria Douglas filed a complaint against Nouveau in New York State court,*fn1 which alleged that Hugh Douglas suffered personal injuries on January 29, 1998, as a result of a malfunctioning elevator at Beth Israel Medical Center, which Nouveau is alleged to have negligently serviced (See Wetzel Decl. ¶ 5; Wetzel Decl. Ex. B.).

At the time of the alleged injury to Douglas, plaintiff was covered by a commercial general liability policy issued by the defendant, Continental Casualty Insurance Company ("CNA"). (See Wetzel Decl. Ex. A.). The policy, number 161912330, contained a notice provision, which contains the following notice requirements:

b. If a claim is made or a "suit" is brought against any insured, you must:

(1) Immediately record the specifics of 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";

(See Wetzel Decl. Ex. A, § IV(2).)

The parties do not dispute that neither Douglas, his counsel, nor Beth Israel Medical Center directly contacted and advised Nouvaeu of the accident, his alleged injuries, or the Complaint at the time that the Douglas suit was filed. (See Plaintiff's 56.1 Statement, ¶ 9.)*fn2 Rather, on May 18, 2001, in accordance with the dictates of N.Y. Bus. Corp. Law § 306(b)(1), the Summons and Complaint in the Douglas action were served on the New York State Secretary of State, who was designated in Nouveau's Certificate of Incorporation as their agent for service of process. (See Declaration of Stuart C. Levene ("Levene Decl.") Ex. D, ¶ 5.) The Secretary of State then mailed the process to the address set forth in Nouveau's Certificate of Incorporation for receipt of process served on the Secretary of State,*fn3 which was the address of Nouveau's counsel, Diamond & Fulco. (See Defendant's 56.1 Statement, ¶ 5.) However, at some point prior to that date, Diamond & Fulco changed their address, and Nouveau had failed to update this address with the Secretary of State. (See id., ¶¶ 6-7.) The envelope containing the process was returned by the U.S. Post Office, marked, "MOVED - NOT FORWARDABLE." (See Wetzel Decl. Ex. D.) Nouveau claims that, at the time of attempted service, they were not aware of the fact that their counsel's address on file with the Secretary of State had not been updated. (See Wetzel Decl. ¶ 8.)

According to the affidavit of Harvey Sorid, the plaintiff's attorney in the Douglas action, he mailed a copy of the Summons and Complaint directly to Nouveau on January 29, 2002. (See Levene Decl. Ex. I, Ex. J at 131-32.) Nouveau claims that it never received this mailing. (See Wetzel Decl. ¶ 12.)

During the pendency of the Douglas action, Mr. Sorid was litigating another case against Nouveau, Brenda Lanclos v. Nouveau Indus., Inc, Index. No. 1117/01 (N.Y. Sup. Ct., Kings Co.) (hereinafter referred to as the "Lanclos action"). (See Wetzel Decl. ¶ 11; Declaration of Daniel I. Goldberg ("Goldberg Decl.) Ex. B.) In the Lanclos action, Nouveau was represented by White Fleischner & Fino, LLP, who was retained pursuant to insurance coverage provided by CNA. (See Goldberg Decl. ¶¶ 7-8; Goldberg Decl. Ex. B.) Mr. Sorid testified that, during the course of the action, he mentioned to ...

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