Thursday, July 1, 2010

I Am He as You Are He as You Are Me and We Are All Together

Prince Seating Corp. v. QBE Ins. Co.
(2nd Dept., decided 5/11/2010)

Since this is an insurance coverage blog, I should probably start with a disclaimer:  I am not the walrus, have never written a song lyric (or anything else for that matter) to the rhythm of a police siren or while on an acid trip, have never sat on a cornflake or had my grade school study and interpret any writings of mine (at least to my knowledge), have never done anything to be called or been called "the Eggman", do believe in the concept of element'ry penguin, and agree that the song just wouldn't have been the same if entitled "I Am the Carpenter".

In insurance coverage parlance, "you" and "your" and "we", "our" and "us" have defined and generally understood meanings, right?  After all, insurance contracts long ago dropped the "party of the first part" and  "party of the second part" (hence "first-party coverage" and "third-party coverage") lingo.

New York Insurance Law § 3420(a)(3) requires bodily injury and property damage liability policies issued or delivered in this state to contain
(3)  A provision that notice given by or on behalf of the insured, or written notice by or on behalf of the injured person or any other claimant, to any licensed agent of the insurer in this state, with particulars sufficient to identify the insured, shall be deemed notice to the insurer.  (Emphasis added.)
Applicable policies that don't contain such a provision will be "deemed" to include one.

The legal difference between an insurance agent and broker is especially significant in regard to the notice requirements or conditions of a liability insurance policy.  New York case law is "legion", as some lawyers love to say, that  notice provided to an an insured's broker is not notice to its liability insurer.   This is not one of those cases. 

The ISO-standard Commercial General Liability Coverage Form contains the following notice of occurrence condition:
2.     Duties In The Event Of Occurrence, Offense, Claim Or Suit
a.  You must see to it that we are notified as soon as practicable of an "occurrence" or an offense which may result in a claim.
Who is the "we" in that condition?  Most would unhesitatingly say the insurance company, because the CGL form also states:
Throughout this policy the words "you" and "your" refer to the Named Insured shown in the Declarations, and any other person or organization qualifying as a Named Insured under this policy. The words "we", "us" and "our" refer to the company providing this insurance.  (Bold and underlining added.)
Most but not all.  Like the insured in this case, and the Second Department under this policy language.

Prince Seating Corp. provided notice of an underlying claim to its broker, Century Coverage Corp., rather than, as required by its insurance policy, to its insurer, QBE Insurance Company.  QBE disclaimed for late notice, and Prince Seating commenced this declaratory judgment action to upset that disclaimer. 

In AFFIRMING Supreme Court's (Jacobson, J.) denial of QBE's motion for summary judgment, the Second Department reiterated its 2006 holding in Jeffrey v. All City Ins. Co., that a policy provision which uses the pronouns “we” and “us” to describe who should be notified without clearly identifying the insurer as the party to whom those terms apply is ambiguous:
It is well settled that, absent some evidence of an agency relationship, even timely notice of an accident by an insured to a broker is not effective and does not constitute notice to the insurance company, as a broker is considered to be an agent only of the insured (see Security Mut. Ins. Co. of N.Y. v Acker-Fitzsimmons Corp., 31 NY2d 436; Matter of Temple Constr. Corp. v Sirius Am. Ins. Co., 40 AD3d 1109, 1111-1112; 120 Whitehall Realty Assoc., LLC v Hermitage Ins. Co., 40 AD3d 719, 721; Gershow Recycling Corp. v Transcontinental Ins. Co., 22 AD3d 460, 462; Rendiero v State-Wide Ins. Co., 8 AD3d 253). Moreover, absent a valid excuse, the failure to satisfy a provision in an insurance policy requiring notice of a covered occurrence, a condition precedent to the insurer's duty to defend and/or indemnify claims against the insured, vitiates the policy (see Empire City Subway Co. v Greater N.Y. Mut. Ins. Co., 35 NY2d 8; Security Mut. Ins. Co. of N.Y. v Acker-Fitzsimmons Corp., 31 NY2d at 440; Jeffrey v Allcity Ins. Co., 26 AD3d 355, 356; Centrone v Staste Farm Fire & Cas., 275 AD2d 728). In this case, there is no evidence that a principal-agent relationship between Century and QBE existed. 

However, the terminology of the policy, including the notice provision, in which the words "we," "us," and "our," referring to "the company providing this insurance," were used to describe who should be notified, is ambiguous. QBE was not clearly identified as the party to whom those terms applied. Given that ambiguity, there is an issue of fact as to whether "the contract should be interpreted to allow notice to [the] broker" (Jeffrey v Allcity Ins. Co., 26 AD3d at 356).
Check your policy language.  Do the "we", "our" and "us" clearly refer to the underwriting insurer usually listed on the policy's declarations page?  If not, notice to the insured's broker may be held to be notice to the insurer.

Element'ry penguin.  Man you should have seen them kicking Edgar Alan Poe.  And even though Paul was my favorite, thank you John (and whoever wrote "Marching to Pretoria") for today's post title.

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