Seeking Coverage for an ATV Accident -- Court Upholds Disclaimers of Business Auto, Personal Package, and Mobile Home Insurers

AUTO – HOMEOWNERS – CGL – ATV ACCIDENT – MOTORIZED LAND VEHICLE EXCLUSION – AGENT/BROKER E&O
Picone v. Great Northern Ins. Co.
(Sup. Ct., Suffolk Co., decided 11/3/2008)

This case involved one ATV, 5 insurers, and 3 agents or brokers.

On April 9, 2005, Daniel Flynn was injured while a passenger on an ATV owned by 1637 Realty Corp. and operated by Joseph Picone III, the son of the plaintiff, Joseph Picone, Jr.  The incident occurred on a parcel of real property owned by the plaintiff Little Joseph Realty Inc., located at 246 Old Long Eddy Road in Sullivan County. Joseph Picone Jr. owned a parcel of property located at 243 Ridge Road, which contained a mobile home, close to the property where the incident occurred.  The ATV was apparently kept at Picone’s property at 243 Ridge Road and was driven to 246 Old Long Eddy Road.  The plaintiffs notified their various insurance carriers of the incident, and the insurers subsequently disclaimed coverage. The plaintiffs then commenced this action seeking a judgment declaring that the insurance carriers were obligated to indemnify them for a settlement reached with Flynn.  The plaintiffs also asserted a claim against the defendant, JJB Brokerage, Inc., one of the their insurance brokers, alleging breach of fiduciary duty and negligence. The plaintiffs sought to recover costs and attorneys' fees and also sought punitive damages.

JJB Brokerage moved to dismiss the complaint for failure to state a cause of action, and four of the five insurers moved for summary judgment under the following policies:  

• Continental Casualty Company -- business auto policy to Joseph Picone & Son, Inc. 
• Great Northern Insurance Company -- personal package policy to Joseph Picone, Jr.
  
• Foremost Insurance Company -- mobile home policy Joseph Picone, Jr. for 243 Ridge Road
• General Star Indemnity Company -- CGL policy to Joseph Picone & Son, Inc. 

In response and opposition to JJB Brokerage's motion, plaintiffs cross-moved to amend their complaint, submitting a proposed amended complaint and an affidavit from Joseph Picone, Jr., who claimed that Jack Glickman, an agent for JJB with whom Picone had done insurance business for 20 years, advised Picone not to renew existing insurance policies covering his ATVs because Picone had sufficient coverage in his other policies.  In denying JJB's motion and granting plaintiffs' cross motion, Suffolk County Supreme  Court Justice Peter Mayer held:  

An insurance agent or broker has a common law duty to obtain requested coverage for a client within a reasonable amount of time or inform the client of the inability to do so (see Murphy v Kuhn, 90 NY2d 266; JKT Construction v United States Liab. Ins. Group, 39 AD3d 594 [2d Dept 2007]). Absent a specific request for coverage not already in a client’s policy, or the existence of a special relationship with the client, an insurance agent or broker has no continuing duty to advise, guide or direct a client to obtain additional coverage (see Murphy v Kuhn, supra; JKT Construction v United States Liab. Ins. Group, supra).  

Here, JJB contends that it did not owe a fiduciary duty to the plaintiffs and that the plaintiffs have failed to allege any special circumstances. In support of the cross-motion, the plaintiffs submit a proposed * * * This is not a case in which an agent failed to advise a client to obtain additional coverage. Rather, the plaintiffs allege that the broker advised them to cancel existing policies because those policies duplicated other coverage. These allegations, which must be accepted as true on a motion to dismiss (see Leon v Martinez, 84 NY2d 83, 87), are sufficient to state a cause of action (see NWE Corp v Atomic Risk Management, 25 AD3d 349 [1st Dept 2006]). However, the allegations, even if true, do not support a claim for punitive damages (see Grazioli v Encompass Ins. Co., 40 AD3d 696 [2d Dept 2007]; Johnson v Allstate Ins. Co., 33 AD3d 665 [2d Dept 2006]). Accordingly, the motion by JJB is granted solely to the cxtent that the plaintiffs’ demand for punitive damages is dismissed. The plaintiffs’ cross-motion to amend the complaint is granted.

Continental's business auto auto policy defined "auto" as "a land motor vehicle, trailer or semitrailer designed for travel on public roads but does not include ‘mobile equipment’."  Vehicle and Traffic Law § 2281 defines an ATV as "any self-propelled vehicle which is manufactured for sale or operation primarily on off-highway trails or off-highway competitions and only incidentally operated on public highways."  Thus, held Justice Mayer, an ATV, which is designed for off-road use, was not a covered auto within the meaning of the Continental policy.  Although the policy forms included a mobile equipment endorsement, it was blank and identified no ATVs or mobile equipment.

Great Northern's personal package policy, which covered the Ridge Road property as well as other real property and certain motor vehicles, contained an exclusion for "motorized land vehicles" which provided that "we do not cover any damages arising out of the ownership, maintenance, use, loading or towing of any motorized land vehicle * * * This exclusion does not apply to motorized land vehicles * * * used solely on and to service a residence premises shown in the Coverage Summary[.]"  Justice Mayer ruled that the exception did not apply because the the ATV was not used solely on a residence premises shown in the coverage summary as required by the policy.  The court also ruled that Great Northern's 7-week delay in disclaiming coverage did not violate Insurance Law § 3420(d) because the delay of less than two months to investigate exactly how and where the accident occurred was reasonable.

Foremost's mobile home policy contained an exclusion for liability arising from the use of a recreational land motor vehicle. Although the exclusion did not apply to a vehicle used on the insured’s premises, the accident did not occur on the insured’s Ridge Road premises, but on a separate parcel of property owned by Little Joseph Realty, which was not a named insured under the policy. Therefore, the court found that the exclusion was applicable to preclude liability coverage.

Finally, General Star's CGL policy, the declarations page of which identified 12 properties that the insured owned, rented or occupied and Item 12 listed “246 Old Long Eddy Road & 53 Kelfarns Bridge Rd. Hawkins, NY.”  The policy also contained a "Classification Limitation" which provided that the "policy does not apply to any damages for which the insured is legally 1iable, or costs or expenses, arising out of, resulting from, caused or contributed to by any operation or activity that is not described by a CLASSIFICATION shown under item 3 of the Declarations.”  The classification shown in item 3 of the policy's declarations for 246 Old Long Eddy Road and 53 Kelfarns Bridge Road was “Dwelling - One Family.” General Star contended that coverage was only available for liability ansing out of a one-family dwelling on the premises, and that the accident involving an ATV would not be covered.  However, noting that the record indicated that the loss location was vacant land and there was no dwelling on the premises, Justice Mayer found that "[t]his would appear to create an ambiguity as to what coverage is applicable to the two properties listed in item 12.  Since 246 Old Long Eddy Road is vacant, the classification limitation would have no meaning because no activities would be covered under the policy. Under these circumstances, General Star has not established its entitlement to judgment as a matter of law. Accordingly, the motion by General Star is denied."

JJB Brokerage and General Star held in; Continental, Great Northern and Foremost let out.