CITNALTA CONSTRUCTION CORP. and ASPEN SPECIALTY INSURANCE COMPANY, Plaintiffs,
GREAT AMERICAN ASSURANCE COMPANY, Defendant. Index No. 102953/11
DONNA M. MILLS, J.
In this action for a declaratory judgement concerning liability insurance coverage, plaintiff Citnalta Construction Corp. ("Citnalta") and, its insurer, Aspen Specialty Insurance Company ("Aspen") (collectively "Plaintiffs"), move for partial summary judgment, pursuant to CPLR 3212, declaring that defendant Great American Assurance Company ("Great American") has a duty to defend and indemnify it in an action entitled Verizon New York Inc. v Felix Indus. Inc. et al., Index No. 11443/2009 (N.Y. Sup. New York Cty.) ("the Underlyng Verizon Action"). Great American opposes and cross-moves for summary judgment in its favor, pursuant to CPLR 3212, dismissing the compliant in its entirety.
Citnalta had contracted with the New York City Transit Authority to perform work for the rehabilitation of the Fulton Street subway station in New York City ("Premises"). Citnalta, as the primary contractor for the construction project, subcontracted with Felix Associates, LLC ("Felix") for Felix to perform utility work at the Premises. After an alleged October 19, 2007 water leak that allegedly damaged telecommunication cables owned by Verizon, Verizon commenced an action against Citnalta and Felix, alleging that both entities were performing work at the Premises on October 19, 2007 and both entities were negligent in their performance of the work. Citnalta was served with the Verizon Action suit papers on October 19, 2009. Upon receipt of the Verizon Action suit papers, on November 2, 2009, Aspen, as the general liability insurer for Citnalta, tendered the defense and indemnification of Citnalta to Great American and Felix, pursuant to the subcontract between Citnalta and Felix. Great American disclaimed coverage to Citnalta based on a lack of evidence that Felix was negligent in the happening of the alleged property damage. Great American also disclaimed to Citnalta based on late notice of occurrence, claim and suit. In its cross-motion, Great American does not dispute the fact that Citnalta qualifies as an additional insured on the Great American policy issued to named insured Felix for the Verizon Action. Rather, Great American argues that additional insured coverage is vitiated for Citnalta because Citnalta provided late notice of the occurrence that is the subject of the Verizon Action to Great American.
APPLICABLE LAW & DISCUSSION
CPLR § 3212(b) requires that for a court to grant summary judgment, the court must determine if the movant's papers justify holding, as a matter of law, "that the cause of action or defense has no merit." It is well settled that the remedy of summary judgment, although a drastic one, is appropriate where a thorough examination of the merits clearly demonstrates the absence of any triable issues of fact (Vamattam v Thomas, 205 A.D.2d 615 [2nd Dept 1994]). It is incumbent upon the moving party to make a prima facie showing based on sufficient evidence to warrant the court to find movant's entitlement to judgment as a matter of law (CPLR § 3212 [b]). Once this showing has been made, the burden shifts to the party opposing the motion for summary judgment to produce evidentiary proof in admissible form sufficient to establish the existence of material issues of fact which require a trial of the action (Zuckerman v City of New York. 49 N.Y.2d 557, 562 ). Summary judgment should be denied when, based upon the evidence presented, there is any significant doubt as to the existence of a triable issue of fact (Rotuba Extruders v Ceppos, 46 N.Y.2d 223 ). When there is no genuine issue to be resolved at trial, the case should be summarily decided (Andre v
Pomeroy, 35 N.Y.2d 361, 364 ).
"Notice provisions in insurance policies afford the insurer an opportunity to protect itself" (Security Mut. Ins. Co. of N.Y. v Acker-Fitzsimons Corp., 31 N.Y.2d 436, 440 ), and "[t]he notice provision in the policy is a condition precedent to coverage and, absent a valid excuse, the failure to satisfy the notice requirement vitiates the policy" (Travelers Ins. Co. v VolmarConstr. Co., 300 A.D.2d 40, 42 [1st Dept 2002]). "The burden of justifying the delay by establishing a reasonable excuse is upon the insured" (Philadelphia Indem. Ins. Co. v Genesee Val. Improvement Corp., 41 A.D.3d 44, 46 ), and such excuses include the lack of knowledge of an accident (see Security Mut. Ins. Co. Of N.Y., 31 N.Y.2d at 441); a good faith and reasonable basis for a belief in nonliability (see Great Canal Realty Corp. v Seneca Ins. Co., Inc., 5 N.Y.3d 742, 743 ); and a good faith and reasonable basis for a belief in noncoverage (see Strand v Pioneer Ins. Co., 270 A.D.2d 600, 600-601 ).
Here, the Great American insurance policy issued to Felix afforded coverage only if there had been an "occurrence, " which is deemed as "an accident." It is undisputed that the October 19, 2007 underground water pipe rupture is the "occurrence" under the Great American policy, and based on the testimony of two of its own management-level employees, it is clear that Citnalta was aware of the "occurrence" or accident on the day it occurred.
As a condition precedent to coverage under the Great American policy, insureds claiming coverage have a duty to provide notice of an "occurrence" to Great American "as soon as practicable." Where a liability insurance policy requires notice "as soon as practicable", notice must be given to the carrier within a reasonable period of time. (Great Canal Realty Corp. v. Seneca, 5 N.Y.3d 742, 743 ). "The duty to give notice arises when, from the information available relative to the accident, an insured could glean a reasonable possibility of the policy's involvement (Paramount Ins. Co. v. Rosedale Gardens, 293 A.D.2d 235, 239-240 [1st Dept.2002]).
The obligation to give notice "as soon as practicable" of an occurrence that may result in a claim is measured by the yardstick of reasonableness (875 Forest Ave. Corp. v. Aetna Cas. & Sur. Co., 37 A.D.2d 11, 12, affd 30 N.Y.2d 726). In support of partial summary judgment by Plaintiffs for a declaratory judgment that Great American owes Citnalta a defense in the underlying Verizon Action, Citnalta argues that Great American can not disclaim coverage because it gave notice as soon as practicable. Citnalta contends that it first became aware of the October 19, 2007 water leak accident when it was served with the Verizon suit papers on October 19, 2009 and Great American was placed on timely notice on behalf of Citnalta when .a copy Of the suit papers was sent to Great American on November 2, 2009, a mere 14 days after being made aware of the occurrence.
In support of its cross motion for summary judgment, Great American contends that Plaintiffs had notice of the accident on the date it occurred as evidenced by the deposition testimony of two of Citnalta's employees (a supervisor and a project manager) who admitted to knowledge of a flood at or around the time it occurred at the subject location.
A legal question exists whether Citnalta's duty to provide notice of the October 19, 2007 "occurrence" is governed by the Great American policy requirement that Great American receive notice of the "occurrence" "as soon as practicable" in the standard policy, or is governed by the more liberal "Additional Conditions Endorsement, " which provides that the duty to notify of the "occurrence" "as soon as practicable" "applies only when the "occurrence is known to an executive officer or insurance manager, if you are a corporation.
Obviously, Citnalta relies upon the "Additional Conditions Endorsement” in the Great American Policy. It argues that its obligation to provide notice of the Underlying Verizon Action was not triggered until October 19, 2009, because that purportedly is the date of its insurance manager's and Citnalta's executive officers' first knowledge of the "occurrence." Great American contends that the "Additional Conditions Endorsement" does not apply ...