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1329 Realty LLC v. United States Liability Insurance Group

November 3, 2006

1329 REALTY LLC, PLAINTIFF,
v.
UNITED STATES LIABILITY INSURANCE GROUP D/B/A UNITED STATES LIABILITY INSURANCE COMPANY, DEFENDANT.



The opinion of the court was delivered by: John Gleeson, United States District Judge

FOR ONLINE PUBLICATION ONLY

MEMORANDUM AND ORDER

1329 Realty LLC ("1329 Realty"), the plaintiff here, was a defendant in a state court personal injury action in 2003. It was properly served with process in that case on August 22, 2003. It failed to answer or otherwise appear. In November 2003 it received a notice of motion for a default judgment, which was returnable on December 10, 2003. Once again, it did not appear, and 1329 Realty was adjudicated to be in default by the state Supreme Court on December 12, 2003. 1329 Realty's appeal of the default judgment failed; the Appellate Division found that it had failed to demonstrate a reasonable excuse for the default and failed to demonstrate that it lacked actual notice of the lawsuit. Before the inquest on the personal injury plaintiff's damages, 1329 Realty settled the case for $150,000.

In this case, 1329 Realty has sued its insurer, United States Liability Insurance Group ("United"). The case started out in state court, but United removed it to this Court. 1329 Realty claims that United was obligated to defend the personal injury action on 1329 Realty's behalf, and to indemnify it for any loss it sustained. However, because 1329 Realty failed to notify United of the personal injury action until December 2, 2003, more than three months after 1329 Realty admits it was served and just eight days before the return date of the default motion, I conclude that 1329 Realty has failed as matter of law to show that it provided reasonable notice to United of the lawsuit, as the terms of its policy required it to do. Accordingly, as set forth more fully below, I grant United's motion for summary judgment. 1329 Realty's cross-motion is denied.

BACKGROUND

On August 6, 2003, Milosz Jagiela filed a personal injury action against 1329 Realty in the Supreme Court for Kings County.*fn1 Jagiela claimed he had suffered injuries on June 15, 2003, when he fell while working at a property owned by 1329 Realty.

At the time of Jagiela's alleged injury, 1329 Realty had in place a comprehensive liability insurance policy for its property issued by United (effective from March 5, 2003 to September 5, 2003). That policy had a notice provision requiring 1329 Realty to notify United "as soon as practicable of an 'occurrence' or an offense which may result in a claim." Decl. of Israel Vider, Ex. D at 5. It further required that if a "claim is made or 'suit' is brought against" 1329 Realty, it must notify United in writing "as soon as practicable" and "[i]mmediately" send copies of all legal papers to United. Id. at 5-6.

On August 22, 2003, the summons and complaint for the action Jagiela v. 1329 Realty, LLC, No. 28961/03 (N.Y. Sup. Ct. Kings County filed Aug. 6, 2003), were served on 1329 Realty by delivery to the authorized agent for such service in the office of the Department of State for the State of New York. See id., Ex. M at 2. By operation of § 303(a) of the New York Limited Liability Company Law, service of process on 1329 Realty was "complete when the secretary of state [was] so served." 1329 Realty did not respond to the lawsuit. In late November 2003, it was served by mail with a motion for a default judgment. That motion had a return date of December 10, 2003. On December 2, 2003, nearly four months after the action was filed, and more than three months after service of the summons and complaint, 1329 Realty notified United of the Jagiela action and requested that it defend and indemnify 1329 Realty in that action.*fn2

Neither 1329 Realty nor United appeared in court to defend the action on December 10, 2006. After a two-day adjournment, the state court entered a default judgment against 1329 Realty.

By letter dated December 15, 2006, United notified 1329 Realty that United was disclaiming coverage on multiple grounds, including 1329 Realty's violation of the policy's requirement that it notify United as soon as practicable of any lawsuit against it.

1329 Realty moved in the state Supreme Court to vacate the default, to no avail. On appeal, the Appellate Division, Second Department affirmed, holding that 1329 Realty "failed to demonstrate a reasonable excuse for its default" and "failed to meet its burden of demonstrating that it lacked actual notice of the action in time to defend." Jagiela v. 1329 Realty, LLC, 792 N.Y.S.2d 873, 874 (2d Dep't 2005) (citations omitted). Before the inquest into damages, however, 1329 Realty and Jagiela settled the lawsuit for $150,000, and on the parties' request the Supreme Court vacated the default judgment against 1329 Realty.

DISCUSSION

United argues that it has no duty to indemnify 1329 Realty in the Jagiela action because it received unreasonably late notice of the Jagiela lawsuit from its insured. United advances further arguments in support of its motion for summary judgment, but I need not address those because I find 1329 Realty's late notice of claim to be dispositive.

For its part, 1329 Realty argues that the delay of over three months before it provided notice of the Jagiela action to United was reasonable because it did not have actual notice of the personal injury claim until late November, when it was served with the motion for a default judgment. In fact, 1329 Realty contends that the only unreasonable delay in this case was United's -- in sending ...


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