Selective Insurance Company of New York and SELECTIVE INSURANCE COMPANY OF SOUTH CAROLINA, Plaintiffs,
St. Catherine's Center for Children, and JANE DOE, an infant, by her Parents and Natural Guardians, JOHN and MARY DOE, individually and as interested parties, Defendants.
McElroy, Deutsch, Mulvaney & Carpenter, LLP Attorneys for
Plaintiffs (Michael J. Marone and Eric G. Siegel, of counsel)
DuCharme, Clark & Sovern, LLP Attorneys for St.
Catherine's Center for Children (Cheryl L. Sovern and
John W. Clark, of counsel)
Law, PLLC Attorneys for St. Catherine's Center for
Children (Cheryl L. Sovern, of counsel)
RICHARD M. PLATKIN A.J.S.C.
an action brought by plaintiffs Selective Insurance Company
of New York and Selective Insurance Company of South Carolina
(collectively, "Selective") for, among other
things, rescission of an insurance policy issued to defendant
St. Catherine's Center for Children ("St.
Catherine's") that provided abuse and molestation
coverage, including prior acts coverage. Selective alleges
that St. Catherine's materially misrepresented and
fraudulently concealed allegations of abuse and molestation
by its employees when applying for this coverage.
is complete, and a trial-term note of issue has been filed.
Selective now moves pursuant to CPLR 3212 for an order: (1)
rescinding and declaring void ab initio the abuse
and molestation coverage written for St. Catherine's,
including the prior acts endorsement; (2) determining that
St. Catherine's engaged in, and is liable for, common-law
fraud; (3) declaring that Selective does not have a duty to
defend or indemnify St. Catherine's in an underlying
action for sexual molestation that is pending in this Court;
and (4) dismissing St. Catherine's counterclaim for
declaratory relief. St. Catherine's opposes
Selective's motion and cross-moves pursuant to CPLR 3212
for the summary dismissal of plaintiffs' complaint and a
declaration that Selective is obliged to defend and indemnify
St. Catherine's in the underlying action.
Catherine's is a social services organization located in
Albany, New York that provides services to children and their
families. Among other programs, St. Catherine's operates
a day treatment program that serves elementary school
students with behavioral and special needs that cannot be met
in a traditional school setting.
issued a commercial insurance policy to St. Catherine's
("Policy") on June 21, 2016 that provided
prospective coverage for abuse and molestation claims
(see NYSCEF Doc No. 2 ["Complaint"],
Catherine's applied for the Policy through its
independent agent, Rose & Kiernan ("R & K")
(see id., ¶ 6). As part of the application
process, R & K submitted to Selective, on March 1, 2016,
an application entitled "HUMAN SERVICES - COMPREHENSIVE
APPLICATION" (NYSCEF Doc No. 55
["Application"]). In Section VI of the Application,
entitled "Abuse and Molestation," St.
Catherine's represented that it carried abuse and
molestation coverage from a different carrier (id.,
p. 5). St. Catherine's then answered "no" to
Question 12, which asked whether "any incidents resulted
in an allegation of sexual abuse" (id.).
Leary is a Selective underwriter who was involved in issuing
the Policy. On June 23, 2016, he spoke with R & K
regarding "a potential need for abuse or molestation
prior acts coverage for St. Catherine's because [its]
insurance program was going to switch from a claims made
coverage to occurrence based coverage" (NYSCEF Doc No.
53 ["Leary Aff."], ¶ 10). On the same date,
Leary contacted Nancy Adams of Selective to inquire whether
the insurer was authorized to write prior acts coverage in
New York (see id., ¶ 11), noting that the
underwriting guidelines did not authorize this type of
coverage (see id., ¶¶ 12-17). Adams
ultimately advised Leary that Selective could issue prior
acts coverage under limited circumstances, but cautioned that
"[i]f the insured has any incidents that they are aware
[of, ] [Selective] should not provide [the retroactive
coverage for] prior acts" (NYSCEF Doc. 57, p. 4).
8, 2016, R & K informed Leary that St. Catherine's
did not require prior acts coverage, as "[i]t is being
picked up on the prior policy" (id., p. 3).
Leary understood this to mean that St. Catherine's had
secured a supplemental extended reporting period
("SERP") from the prior carrier (see Leary
Aff., ¶ 20).  Based on the information received from
R & K and the representations made by St.
Catherine's, Selective issued the Policy on July 15, 2016
(see id., ¶ 21; NYSCEF Doc No. 59
Prior Acts Endorsement
K advised Leary on August 31, 2016 that St. Catherine's
did, in fact, require prior acts coverage for abuse and
molestation dating back to 2009 (see Leary Aff.,
¶ 22; NYSCEF Doc No. 60). "Because Selective did
not underwrite prior acts abuse or molestation coverage in
any state, including New York, Selective determined that the
only way to accommodate St. Catherine's request was to
create a manuscript endorsement to be approved through the
New York Free Trade Zone" (Leary Aff., ¶ 23).
to agreeing to extend retroactive coverage, Selective
requested additional information from St. Catherine's. In
this connection, Christopher Greagan of R & K wrote to
Leslie Siegard, the chief financial officer of St.
Catherine's, on September 22, 2016 to advise of the
"need to document to Selective that [St.
Catherine's] did not have any Sexual Misconduct claims
from 9/1/2009 to the present" (NYSCEF Doc No. 78). On
September 23, 2016, Siegard gave the following certification
on behalf of St. Catherine's: "I certify that there
have been no losses, accidents, violations or
circumstances that might give rise to a sexual misconduct
claim under the [prior] insurance policy... from 12:01
am on 09/01/2009 to present" (NYSCEF Doc No. 79
["Statement of No Loss"] [capitalization omitted,
Willenborg, the senior Selective manager involved in
underwriting the prior acts endorsement, emailed R & K on
November 30, 2016 to further discuss the requested coverage,
which is said to be of a type that Selective did not write
anywhere in the United States (see NYSCEF Doc No. 64
["Willenborg Aff."], ¶ 5; NYSCEF Doc No. 66).
The process of drafting the custom "manuscript
endorsement" for approval by the New York Free Trade
Zone was complex and continued into the first quarter of 2017
(Willenborg Aff., ¶ 7).
March 10, 2017, Willenborg received additional information
from R & K regarding the scope of risks involved in
writing the prior acts coverage (see id., ¶ 8).
Specifically, the communication confirmed that clergy members
did not provide direct care or services at St.
Catherine's (see id., ¶ 9; NYSCEF Doc No.
67). However, "[a]s a result of Selective's ongoing
concerns regarding not only reported claims, but also the
significant risk for events or allegations occurring between
2009 and 2016 that could lead to future claims or lawsuits,
Selective required St. Catherine's to execute a more
detailed certification of no known loss or potential
loss" (Willenborg Aff., ¶ 10; see NYSCEF
Doc No. 68).
March 20, 2017, Willenborg informed R & K that Selective
required a supplemental signed letter of no loss
(see Willenborg Aff., ¶ 13). The precise
language required by the insurer was sent to R & K on
March 22, 2017 (see NYSCEF Doc Nos. 68, 70), and the
executed certification (see NYSCEF Doc No. 71
["No-Loss Letter"]) was returned to Selective on
March 27, 2017.
No-Loss Letter, which appears on the letterhead of St.
Catherine's and is signed by its executive director,
Frank Pindiak, reads, in pertinent part:
As you know, after the inception of the Policy, we requested
that Selective provide "sexual misconduct" prior
acts coverage... for the period from September 2009 through
the inception date of the Policy. I understand that Selective
has agreed to issue this coverage, conditioned upon receipt
of the following certification from St. Catherine[']s.
On behalf of St. Catherine[']s, I hereby represent that
St. Catherine[']s made a due diligence inquiry into
whether there are any (i) claims, actions, lawsuits or
demands for which St. Catherine[']s or a third party may
potentially seek coverage under the Policy; and/or (ii)
facts, events, actions, inactions or circumstances that may
lead to claims, actions, lawsuits or demands for which St.
Catherine[']s or a third party may potentially seek
coverage under the Policy.
Based upon this due diligence inquiry, as of the date of this
letter, St. Catherine's is not aware of any (i) claims,
actions, lawsuits or demands for which St. Catherine's or
a third party may potentially seek coverage under the Policy,
or (ii) facts, events, actions, inactions or circumstances
that may lead to claims, actions, lawsuits or demands for
which St. Catherine's or a third party may potentially
seek coverage under the Policy.
St. Catherine's acknowledges that the statements and
representations made to Selective in this communication are
material to Selective's decision to issue the Policy,
with the requested "prior acts". St Catherine's
further acknowledges that Selective reserves all rights to
rescind the Policy, whether in whole or in part, based on its
discovery of contrary information (id., pp. 1-2).
On May 24, 2017, Willenborg informed R & K that
Selective's regulator had approved the language of the
manuscript endorsement (see Willenborg Aff., ¶
18). Based on the information provided by St.
Catherine's, including the Statement of No Loss dated
September 23, 2016 and the No-Loss Letter dated March 24,
2017, Selective reissued the Policy to include a "Sexual
Misconduct Liability Prior Acts Endorsement" (NYSCEF Doc
No. 73 ["Endorsement"]).
August 2017, St. Catherine's submitted a claim to
Selective seeking defense and indemnification in an action
filed against it in this Court (see Index No.
905151-17 ["Underlying Action"]). The Underlying
Action involves allegations by a former student (Jane Doe)
that she was the victim of sexual abuse and/or inappropriate
sexual contact by a St. Catherine's staff member (James
Roe) between February 1, 2016 and February 8, 2016
(see Complaint, ¶¶ 29-31; see
also NYSCEF Doc No. 5 ["UA Complaint"]).
Notably, the occurrence giving rise to Jane Doe's
allegations predates the effective date of the Policy, and,
therefore, potentially is subject to coverage only under the
prior acts Endorsement (see Complaint, ¶ 32).
review of the UA Complaint disclosed that the Justice Center
for the Protection of People with Special Needs
("Justice Center") had investigated Jane Doe's
allegations and found them to be substantiated (see
id., ¶ 33). Selective also learned that St.
Catherine's employees had reported Jane Doe's
allegations to the Albany Police Department ("APD")
and the Justice Center on March 3 and 4, 2016, respectively
(see id., ¶ 40). At Selective's request,
St. Catherine's provided the insurer with a copy of the
Justice Center's investigative report (see id.,
¶ 36; see also NYSCEF Doc No. 6 [Justice
its internal investigation, Selective eventually determined
that St. Catherine's "knew and could have reasonably
foreseen or anticipated that Roe's sexual misconduct...
might become the basis of a claim or suit" (Complaint,
¶ 49). Selective further determined that St.
Catherine's "knew that Roe's sexual misconduct
was the subject of the Justice Center's and the
[APD]'s investigation when [St. Catherine's]
submitted the two no known loss letters" (id.,
St. Catherine's refusal to voluntarily rescind the
Endorsement (see id., ¶¶ 51-52), Selective
commenced this action, seeking (1) a judgment declaring the
abuse and molestation coverage provided by the Policy and
Endorsement to be rescinded and void ab initio, (2)
monetary damages for St. Catherine's alleged fraud and
(3) a declaration that Selective is under no duty to defend
or indemnify St. Catherine's in the Underlying Action
(see id., ¶¶ 54-79). St. Catherine's
joined issue and interposed a counterclaim for a contrary
declaration (see NYSCEF Doc No. 89
is complete, and a note of issue was filed on July 18, 2019
(see NYSCEF Doc No. 48). The parties' motions
for summary judgment were submitted as of October 15, 2019,
oral argument was held on November 26, 2019, and this
Decision, Order & Judgment follows.
proponent of a summary judgment motion must make a prima
facie showing of entitlement to judgment as a matter of
law, tendering sufficient proof in admissible form to
eliminate any genuine material issues of fact from the case
(see Alvarez v Prospect Hosp., 68 N.Y.2d 320, 324
). If the movant meets its initial burden, the burden
shifts to the nonmoving party to demonstrate the existence of
disputed material facts or a legal defense to the claim
(see id.). On such a motion, all evidence must be
viewed in the light most favorable to the non-movant (see
Branham v Loews Orpheum Cinemas, Inc., 8 N.Y.3d 931, 932