The Rogak Report: 06 Jul 2010 ** Late Notice - Intentional Acts - Disclaimers **
MURDER COMMITTED BY INSURED'S SON QUALIFIES AS AN "ACCIDENT" FOR INSURANCE PURPOSES
Metropolitan Property & Casualty Ins. Co. v Marshall 2010 NY Slip Op 51149(U) Decided on July 6, 2010 Supreme Court, Nassau County Marber, J. Edited by Lawrence N. Rogak http://www.courts.state.ny.us/reporter/3dseries/2010/2010_51149.htm
Metropolitan, the umbrella insurer for defendant Marshall, brought this DJ action seeking a declaration that it does not have any obligation to defend or indemnify its insured, MARSHALL, in the underlying action by Fox in which those plaintiffs sued for the death of their wife and mother, Denise Fox. Denise Fox was murdered by the Defendant, MARSHALL's son, Evan on August 17, 2006. On that date, Evan resided in an upstate adult residential substance abuse and psychiatric facility in Brewster, New York but was on Long Island pursuant to a weekend pass which allowed him to visit his mother, the Defendant, Marshall.
"The Plaintiff's policy only affords the Defendant personal excess liability coverage in the amount of $250,000/$500,000 for automobile coverage and $300,000 for homeowners coverage. State Farm Insurance Company is the Defendant's primary insurance carrier. The Plaintiff's policy affords coverage for damages to others caused by an 'occurrence' for which the law holds an insured responsible . An 'insured' is defined as 'you or a relative residing in your household' and an 'occurrence' is defined by the policy as 'an accident . . . that results during the policy period in personal injury or property damage.' The policy provides that it does not apply, inter alia, to 'personal injury or property damage resulting from any intentional act committed by an insured or at the direction of any insured.' Finally, the policy requires the Defendant, MARSHALL to notify Metropolitan 'as soon as practicable of an occurrence that may be covered by the policy.'"
"On or about September 10, 2007, Fox's attorney notified the Defendant, MARSHALL via letter that they were contemplating an action against her and that she should so notify her homeowner's insurance carrier. The Defendant's criminal attorney, William Keahon, Esq., advised her that she would not face liability for the August 17, 2006 [event]. Notwithstanding the statement by Mr. Keahon, the Defendant notified her primary insurance carrier, State Farm of the event."
"In response to the notification by the Defendant, State Farm issued a letter on April 21, 2008 notifying the Defendant, MARSHALL that, according to State Farm, the Defendant was not legally liable for Denise Fox's death. State Farm further indicated in the April 21st letter that should an action be commenced against her, it would provide the Defendant, MARSHALL with a defense, and, if applicable, would pay for damages awarded against the Defendant, subject to the terms, conditions, and coverage exclusions of her policy."
"The Fox action was commenced on or about July 31, 2008 and the Defendant, MARSHALL was served with the Summons and Complaint on or about August 2, 2008. All of the claims advanced in the Fox action against the Defendant sound in negligence. Mr. Keahon immediately forwarded the Fox Summons and Complaint to State Farm which had assumed the Defendant's defense in that action. Mr. Keahon inquired of the Defendant as to State Farm's umbrella policies. The Defendant located the Plaintiff, METROPOLITAN's policy and placed the Plaintiff on notice of the incident for the very first time on August 18, 2008. By letter dated September 22, 2008, the Plaintiff disclaimed coverage to the Defendant, MARSHALL solely on the grounds of late notice. By letter dated September 24, 2008, the Plaintiff disclaimed coverage to Evan Marshall on several grounds."
"The Plaintiff maintained that Evan was not a resident of the Defendant's household on August 17, 2006, and therefore, was not 'an insured.' It further maintained that Evan's acts did not constitute an 'occurrence' under its policy and were nevertheless excluded as an 'intentional act.' The Plaintiff had assessed the Defendant's liability in the Fox action at zero percent."
"Evan Marshall did not live with his mother, the Defendant, MARSHALL on the date he murdered Denise Fox. Evan was out on a weekend pass. The Defendant, MARSHALL denies even knowing that her son, Evan Fox, was out on a weekend pass and maintains that she was not home on the date in question. Suffice it to say, it is not disputed that Evan Marshall was not a resident of the Defendant's home on the day he murdered Denise Fox. As such, he does not qualify as 'an insured.'"
"An insurer's disclaimer is strictly limited to those grounds stated in the notice of disclaimer, which disclaimer must clearly apprise the insured of the grounds on which the disclaimer is based. Village of Brewster v Virginia Sur. Co., Inc., 70 AD3d 1239, 1242 (2nd Dept. 2010), quoting City of Kingston v. Harco Natl. Ins. Co., 46 AD3d 1320, 1321 (3rd Dept. 2007), lv dism., 10 NY3d 822 (2008), quoting Maroney v. New York Cent. Mut. Fire Ins. Co., 10 AD3d 778, 780-781 (3rd Dept. 2004), aff'd., 5 NY3d 467 (2005). However, "A disclaimer pursuant to Insurance Law § 3420 (d) is required when the denial of coverage is based upon a policy exclusion without which the claim would be covered". Ciasullo v. Nationwide Ins. Co., 32 AD3d 889, 890 (2nd Dept. 2006), citing Matter of Worcester Ins. Co. v. Bettenhauser, 95 NY2d 185, 188-189 (2000); Handelsman v. Sea Ins. Co., 85 NY2d 96 (1994). A disclaimer pursuant to Insurance Law § 3420(d) is unnecessary when a claim falls outside the scope of the policy's coverage portion. Ciasullo v. Nationwide Ins. Co., supra, at p. 890, quoting Matter of Worcester Ins. Co. v Bettenhauser, supra, at p. 188, citing Zappone v Home Ins. Co., 55 NY2d 131, 134 (1982). Where the insurance policy does not contemplate coverage in the first instance, requiring payment of a claim upon failure to timely disclaim would impermissibly create coverage where it never existed. Matter of Worcester Ins. Co. v. Bettenhauser, supra, at p. 188, quoting Zappone v Home Ins. Co., supra, at p. 138."
"Here, under the subject policy, occurrences are defined as 'an accident.' An incident is an occurrence, i.e., an accident, if from the point of view of the insured the incident resulting in the injury was unexpected, unusual and unforeseeable. State Farm Fire and Casualty Company v. Whiting, 53 AD3d 1033 (4th Dept. 2008), quoting Miller v. Continental Ins. Co., 40 NY2d 675, 677 (1976), citing Automobile Ins. Co. of Hartford v. Cook, 7 NY3d 131, 137-138 (2006); Essex Ins. Co. v. Zwick, 27 AD3d 1092 (4th Dept. 2006). In deciding whether a loss is the result of an accident, it must be determined, from the point of view of the insured, whether the loss was unexpected, unusual and unforeseen. Agoado Realty Corp. v. United Intern. Ins. Co., 95 NY2d 141, 145 (2000), citing Miller v. Continental Ins. Co., supra, at p. 677."
"Since the insured here, the Defendant, MARSHALL, obviously did not expect and could not foresee her son murdering Denise Fox, that act was in fact an 'accident' from her point of view. See, RJC Realty Holding Corp. v. Republic Franklin Ins. Co., 2 NY3d 158 (2004)."
"Accordingly, contrary to the Plaintiff's position, its denial of coverage may not be predicated upon a lack of inclusion and absent a proper disclaimer, Marshall's claim is covered under the policy. Village of Brewster v. Virginia Sur. Co., Inc., supra, at p. 1242, citing City of Kingston v. Harco Natl. Ins. Co., supra; Maroney v. New York Cent. Mut. Fire Ins. Co., supra."
"The Plaintiff's reliance on the policy's exclusion for intentional acts fails. The Plaintiff failed to disclaim on that ground and may not rely on that policy exclusion now. Village of Brewster v. Virginia Sur. Co., Inc., supra, at p. 1242, citing City of Kingston v. Harco Natl. Ins. Co., supra; Maroney v. New York Cent. Mut. Fire Ins. Co., supra."
"Finally, the Plaintiff's reliance on late notice by the Defendant, MARSHALL, which was the only grounds advanced by the Plaintiff for its disclaimer, also fails. Typically, where notice to an excess liability carrier is in issue, the focus is on when the insured reasonably should have known that the claim against it would likely exhaust its primary insurance coverage and trigger its excess coverage, and whether any delay between acquiring that knowledge and giving notice to the excess carrier was reasonable under the circumstances. Ambra v. Awad, 62 AD3d 732 (2nd Dept. 2009), quoting Morris Park Contr. Corp. v. National Union Fire Ins. Co. of Pittsburgh, Pa., 33 AD3d 763, 765 (2nd Dept. 2006); see also, National Union Fire Ins. Co. of Pittsburgh, PA v. Connecticut Indem. Co., 52 AD3d 274, 276 (1st Dept. 2008)."
"The Defendant, MARSHALL has clearly established that there is no evidence to suggest that she should reasonably believe that the claims advanced against her in the Fox action will likely exhaust her primary insurance coverage and trigger her excess coverage. Both her attorney and her primary insurer have steadfastly advised her that she is not liable for Fox's claims. In fact, the Plaintiff, METROPOLITAN even assessed her liability at zero percent. The Defendant, MARSHALL's notice to the Plaintiff was accordingly, timely."
"It is hereby declared that under its policy with the Plaintiff as her excess carrier, the Plaintiff, METROPOLITAN is obliged to indemnify the Defendant, MARSHALL to the extent that she is held liable in the Fox action in excess of the coverage afforded under her primary policy held by State Farm."
Comment: Notice that this decision stands for several propositions. First, even though the murder committed by the insured's mentally ill son may have been "intentional" in that the son intended to commit murder, it is still an "accident" from the insured's standpoint because she did not expect it to happen. In this sense, "accident" means "unexpected event." So because it was an "accident," it is potentially covered, and requires a disclaimer if the insurer believes it has other grounds (such as late notice) to disclaim.
Second, the defense of late notice fails here because notice to an excess insurer (as Metropolitan was, here) is only necessary when the insured should reasonably believe that a claim will exhaust her primary policies. In this case, the evidence suggested (and both her primary and excess carriers expressed the opinion) that the insured had no liabilityin the underlying suit. If she has no liability, then she has no reason to believe that her primary policy will be exhausted, and therefore no obligation to report the claim to her excess insurer.
Finally, the insured's son, residing in a psychiatric facility, was held not to be a member of the household.