Friday, June 13, 2008

Policy Cancellation Prior to Total Fire Loss Upheld

Kaufmann v. Leatherstocking Coop. Ins. Co.
(3rd Dept., decided 6/12/2008)

How many of you would pay $87.40 to receive $92,243? In this case, had the plaintiff-insured made a minimum payment of $87.40 against his overdue homeowners policy premium by September 26, 2004, the fire destruction of his home 10 days later on October 6, 2004 would have been inside, rather than outside, his policy period to the tune of $92,243 in damages. But could've, would've, and should've in this case meant a disclaimer by Leatherstocking based on the policy's pre-loss cancellation, and the insured sued both Leatherstocking and the producing agent.

In AFFIRMING the Otsego County Supreme's grant of summary judgment to both defendants, the Third Department ruled that the cancellation notice was not defective under Insurance Law § 3425(c)(1)(A) for failing to set forth the amount due because that statutory section applies to auto, not homeowners, policies. The appellate court found that, in any event, the cancellation notice had cleary stated the minimum amount due. Additionally, the court credited the affidavits and testimony of Leatherstocking's former president, which established that the installment payment schedule was altered as a result of plaintiff's initial late payment, a circumstance fully disclosed on the billing statements he received, and that he failed to remit the necessary amount to keep the payments current thereafter. The court held:

Leatherstocking clearly met its burden of proving that the final notice of cancellation was properly mailed to plaintiff by submitting proof of the standard operating procedure for mailing such notices, as well as by submitting proof of the actual mailing of such notice to plaintiff through the affidavit of an employee with personal knowledge (see Thibeault v Travelers Ins. Co., 37 AD3d 1000, 1001 [2007]; Residential Holding Corp. v Scottsdale Ins. Co., 286 AD2d 679, 680 [2001]). Plaintiff's testimony that he never received the final notice is, without more, insufficient to rebut the presumption of receipt (see Badio v Liberty Mut. Fire Ins. Co., 12 AD3d 229, 230 [2004]). Consequently, Supreme Court properly granted summary judgment dismissing plaintiff's contract claims.

With respect to the insured's negligence or errors and omissions (E&O) claims against the producing agent based on the agent's alleged failure to notify the insured that his premium payments were past due, so as to avoid cancellation of the policy, the Third Department held:

Generally, insurance agents are not liable for actions other than obtaining insurance coverage for their insureds, unless a special relationship has been established between the parties (see Curanovic v New York Cent. Mut. Fire Ins. Co., 307 AD2d 435, 438 [2003]). Here, H & B and its principals submitted affidavits and deposition testimony establishing that no special arrangement was made with plaintiff through which they agreed to notify him of past due payments and plaintiff was specifically informed that he would be directly billed by Leatherstocking. Significantly, plaintiff did not submit proof sufficient to raise a question of fact on this issue as plaintiff's deposition testimony indicates that his claim is based upon conversations that he had with one of H & B's principals regarding an unrelated commercial policy. Consequently, Supreme Court properly granted summary judgment dismissing
plaintiff's negligence claim as well.

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