January 25, 2013
Property & Casualty Insurance Company Of Hartford, Plaintiff
Steven Levitsky and HANDELMAN WITKOWICZ & LEVITSKY, Defendants.
Lucy Billings, J.
Plaintiff, having issued a professional liability insurance policy to defendants, an attorney and his law firm, seeks a judgment declaring that, due to defendants' late notice of an occurrence likely to lead to a claim, plaintiff owes no duty to defend or indemnify defendants in an underlying action for legal malpractice arising from that occurrence. C.P.L.R. § 3001. Defendants counterclaim for a judgment declaring that plaintiff is obligated to defend and indemnify them and for attorneys' fees and expenses. Id. Plaintiff moves for summary judgment awarding a declaratory judgment on plaintiff's first claim and dismissing defendants' counterclaims. C.P.L.R. §§ 3001, 3212(b) and (e). Defendants cross-move for summary judgment on their counterclaims. C.P.L.R. § 3212(b). Defendants separately move to change the venue of this action to Monroe County for the convenience of material witnesses. C.P.L.R. §§ 510(3), 511.The parties stipulate that the court may consider all exhibits supporting and opposing summary judgment as authenticated and admissible for purposes of summary judgment and that the motion and cross-motion for summary judgment raise no factual issues, but only issues as to the insurance policy's construction. Finally, defendants stipulate that, if the court grants either the motion or the cross-motion for summary judgment, defendants' motion to change venue will be moot. After oral argument, for the reasons explained below, the court grants plaintiff's motion for summary judgment, denies defendants' cross-motion for summary judgment, C.P.L.R. § 3212(b) and (e), and denies as moot defendants' motion to change venue. C.P.L.R. §§ 510(3), 511.
I. UNDISPUTED FACTS
Defendants represented Paul Rowland as a plaintiff in an action in Monroe County for personal injuries sustained on October 24, 2003, while Rowland was performing construction work at a mall. On August 29, 2006, less than two months before the statute of limitations of three years expired, C.P.L.R. § 214(5), defendants commenced an action on Rowland's behalf against Wilmorite, Inc. Defendant Levitsky believed that Wilmorite owned the Eastview Mall where Rowland was injured, based on a sign at the premises and on "common knowledge that Wilmorite owns all the large malls in the Rochester area, including Eastview." Aff. of Steven Levitsky (Nov. 30, 2011) Ex. 8, at 1. On October 19, 2006, five days before the statute of limitations expired, Wilmorite answered Rowland's complaint, denying ownership of the mall where Rowland was injured. Almost 14 months later, at a deposition December 12, 2007, a witness on behalf of Wilmorite again denied that it owned the mall and claimed Great Eastern Mall, LP, was the owner.
That same witness, however, testified that Great Eastern Mall and Wilmorite worked closely together and shared an office address. Wilmorite was the construction manager on the site when Rowland was injured under a contract with Great Eastern Mall. Only then did defendants undertake any investigation and eventually learn that that contract required Great Eastern Mall to maintain insurance for Wilmorite covering personal injuries arising from employees' operations at the site. Based on that relationship between Great Eastern and Wilmorite, defendants believed Rowland still would be entitled to recover from Wilmorite, e.g., NY Labor Law §§ 200, 240(1); Walls v. Turner Constr. Co., 4 N.Y.3d 861, 864 (2005); Rizzuto v. Wenger Contr. Co., 91 N.Y.2d 343, 352-53 (1998), or, despite the expiration of the statute of limitations, to join Great Eastern Mall under the relation back doctrine. C.P.L.R. § 203(b). E.g., Buran v. Coupal, 87 N.Y.2d 173, 178 (1995); Cooley v. Urban, 6 A.D.3d 1077, 1078 (4th Dep't 2004).
On February 5, 2008, Wilmorite moved to dismiss Rowland's claims against it. On May 28, 2008, on Rowland's behalf, defendants opposed Wilmorite's motion and cross-moved to join Great Eastern Mall as a defendant. On July 30, 2008, the Supreme Court, Monroe County, granted Wilmorite's motion and denied Rowland's cross-motion. Defendants immediately advised Rowland to retain a new attorney. On August 19, 2008, Rowland's new attorney informed defendants that he had been retained for purposes of a possible malpractice claim against defendants. On May 4, 2009, Rowland commenced, through his new attorney, a malpractice action against defendants.
The professional liability insurance policy issued by plaintiff to defendants for the period covering their representation of Rowland contains the following notice provisions:
1.Reporting of circumstances which may give rise to a claim
If, during a policy period or applicable extended reporting period, an insured first becomes aware of a circumstance that may give rise to a claim, the insured must give written notice.... Claims subsequently made against an insured arising out of that circumstance will be considered to have been made and reported during the policy period....
2. Insured's duties in the event of a claim or circumstances which may give rise to a claim
a. You and any other involved insured must see to it that we are notified immediately, but in no event later than sixty (60) calendar days after the insured becomes aware of any circumstance which may give rise to a claim....
b. If a claim is received by an insured you must:
i. Immediately record the specifics of the claim and the date received; and
ii. Notify us as soon as practicable, not later than sixty (60) calendar days after such claim is first made.
You and any other involved insured must see to it that we receive written notice of the claim immediately, but in no event later than sixty (60) calendar days after the insured becomes aware that such claim has been made.
Aff. of Steven A. Coploff (Oct. 11, 2011) Ex. D § III(A), at 8, as modified by "New York Amendatory Endorsement" § VI(2), at 5 (emphases omitted).
Defendants first notified plaintiff of a "potential" claim August 29, 2008. Levitsky Aff. Ex. 8, at 2. From defendants' vantage point, defendants thus notified plaintiff of the potentialclaim 30 days after the Supreme Court granted Wilmorite's motion to dismiss Rowland's action and denied his cross-motion to join Great Eastern Mall, 10 days after Rowland's new attorney informed defendants Rowland was pursuing a possible malpractice claim, and several months before he commenced an actual malpractice action. Nevertheless, defendants' notice came more than one year and 10 months after Wilmorite's answer informed defendants that, with less than a week remaining before the statute of limitations expired, defendants had not sued the premises' owner and more than eight months after deposition testimony confirmed that fact, then more than a year after the statute of limitations expired.
In a letter dated September 18, 2008, plaintiff reserved its right to deny coverage due to defendants' failure to provide timely notice of a potential claim. Plaintiff nonetheless retained an attorney to defend defendants through the pretrial proceedings to date in Rowland's malpractice action.
II. DEFENDANTS' LATE NOTICE TO PLAINTIFF
The notice provisions are not ambiguous. Nothing in their plain language suggests that ¶ 2(b) supersedes ¶ 2(a) or that ¶ 2(a) applies only to a claim after the policy period has expired. Although ¶ 1 provides that "claims subsequently made against an insured arising out of that circumstance will be considered to have been made and reported during the policy period, " nothing in ¶ 1 suggests that the requirement to report circumstances that may give rise to a claim is limited to post-policy period claims. Coploff Aff. Ex. D § III(A), at 8 (emphases omitted). Nor do ¶ 1's terms indicate any modification of ¶ 2(a).
Defendants failed to comply with ¶ 2(a) of the notice provisions. Defendants became "aware of... circumstances which may give rise to a claim, " Coploff Aff. Ex. D, "New York Amendatory Endorsement" § VI(2), at 5 (emphasis added), if not when defendants received Wilmorite's answer denying ownership of the premises, then at most six days later, when the statute of limitations expired and defendants had failed to join the owner of the premises on which defendants' client was injured. Great Canal Realty Corp. v. Seneca Ins. Co., Inc., 5 N.Y.3d 742, 744 (2005); Tower Ins. Co. of NY v. Babylon Fish & Clam, Inc., 83 A.D.3d 547, 548 (1st Dep't 2011); Wilson v. Quaranta, 18 A.D.3d 324, 325-26 (1st Dep't 2005); Paramount Ins. Co. v. Rosedale Gardens, Inc., 293 A.D.2d 235, 240 (1st Dep't 2002). Defendants were obligated under the policy to notify plaintiff when a reasonable possibility of a claim under the policy arose, even if such a claim remained uncertain. Tower Ins. Co. of NY v. Babylon Fish & Clam, Inc., 83 A.D.3d at 548; Wilson v. Quaranta, 18 A.D.3d at 325-26; Paramount Ins. Co. v. Rosedale Gardens, Inc., 293 A.D.2d at 240.
Defendants bear the burden to show an excuse for their late notice, such as a reasonable good faith belief that no claim against them would be maintained. Great Canal Realty Corp. v. Seneca Ins. Co., Inc., 5 N.Y.3d at 743; Tower Ins. Co. of NY v. Babylon Fish & Clam, Inc., 83 A.D.3d at 547-48; Hermany Farms, Inc. v. Seneca Ins. Co., Inc., 76 A.D.3d 889, 890-91 (1st Dep't 2010), Paramount Ins. Co. v. Rosedale Gardens, Inc., 293 A.D.2d at 240. Once they became aware of circumstances that might produce a claim, however, it is irrelevant whether eventually they learned of evidence regarding Wilmorite's relationship with the owner of Rowland's injury site that led to a reasonable, good faith belief in his right to recover from Wilmorite or to join the owner. Defendants did not become aware of any relationship between Wilmorite and the owner until the December 2007 deposition, 14 months after defendants became aware of a potential claim, obligating them to notify plaintiff within 60 days. By the time of the deposition, defendants already had breached that policy requirement and lost entitlement to coverage. Great Canal Realty Corp. v. Seneca Ins. Co., Inc., 5 N.Y.3d at 743; Wilson v. Quaranta, 18 A.D.3d at 325; Paramount Ins. Co. v. Rosedale Gardens, Inc., 293 A.D.2d at 239, 242; C.C.R. Realty of Dutchess v. New York Cent. Mut. Fire Ins. Co., 1 A.D.3d 304, 305 (2d Dep't 2003).
Defendants suggest no excuse for their late notice other than a good faith belief that no claim against them would be maintained. As set forth above, however, defendants lacked any basis for such a belief until at least 14 months after defendants became aware of the potential claim from Wilmorite's answer, denying its ownership, and the expiration of the statute of limitations several days later, without joinder of the owner. Therefore defendants show no excuse for failing to notify defendants within at least 60 days after the statute of limitations expired. Great Canal Realty Corp. v. Seneca Ins. Co., Inc., 5 N.Y.3d at 743; Tower Ins. Co. of NY v. Babylon Fish & Clam, Inc., 83 A.D.3d at 547-48; Hermany Farms, Inc. v. Seneca Ins. Co., Inc., 76 A.D.3d at 890-91; Paramount Ins. Co. v. Rosedale Gardens, Inc., 293 A.D.2d at 240.
For the foregoing reasons, the court grants plaintiff's motion for summary judgment on plaintiff's first claim for a declaratory judgment, dismisses defendants' counterclaims, denies defendants' cross-motion for summary judgment, and denies as moot their motion to change venue. C.P.L.R. §§ 510(3), 511, 3001, 3212(b) and (e). The court adjudges and declares that plaintiff is not obligated to defend or indemnify them in Paul Rowland's underlying action against defendants for legal malpractice. C.P.L.R. § 3001. This decision constitutes the court's order and judgment (1) on plaintiff's first claim and (2) dismissing defendants' counterclaims. The court will mail copies to the parties' attorneys.