Excess Carrier Ordered to Indemnify Its Insured in Suit Seeking Damages for Murder Committed by Insured's 31-Year-Old Non-Resident Son

HOMEOWNERS – PERSONAL EXCESS INSURER – "OCCURRENCE" – LATE NOTICE – INTENTIONAL ACT EXCLUSION
Metropolitan Prop. & Cas. Ins. Co. v. Marshall
(Sup. Ct., Nassau Co., decided 7/6/2010)

Metropolitan Property and Casualty Insurance Company insured Jacqueline Marshall under a personal excess liability policy written to afford $300,000 in coverage in excess of Marshall's primary homeowners coverage.  Here's the chronology of facts salient to this case:

• August 17, 2007  -- Marshall's 31-year-old non-resident son, Evan Marshall, away from his upstate adult residential substance abuse and psychiatric facility and on Long Island on a weekend pass to visit his mother, brutally murders, decapitates and dismembers his mother's 57-year-old next-door neighbor, Denise Fox.  Marshall reportedly did not know her son had come to Long Island to visit her for the weekend.  Just over a year later, Evan Marshall pleaded guilty to Murder in the First Degree and other crimes in connection with that murder. 
• September 10, 2007 -- Counsel for the Fox family notifies Marshall by letter that they were contemplating an action against her and that she should so notify her homeowner's insurance carrier.  The Marshalls' criminal attorney, William Keahon, Esq., advised Ms. Marshall that she would not face liability for the August 17, 2006 incident.  Notwithstanding Mr. Keahon's statement, Marshall notified her primary homeowners insurer, State Farm, of the event. 
•  April 21, 2008 -- State Farm issues a letter to Marshall notifying her that State Farm believed she was not legally liable for Denise Fox's death and indicating in that letter that should an action be commenced against her, State Farm would provide her with a defense, and, if applicable, would pay for damages awarded against Marshall, subject to the terms, conditions, and coverage exclusions of her homeowners policy. 
• July 31, 2008 --  Denise Fox's surviving husband and children commence a personal injury and wrongful death action against various defendants, including Jacqueline Marshall.  All of the claims alleged in the Fox action against Marshall sound in negligence.  Attorney  Keahon immediately forwards the Fox summons and complaint to State Farm and asks Marshall about the existence of any State Farm's umbrella policies.
• August 18, 2008 -- Having located her personal excess policy with Metropolitan, Marshall places Metropolitan on notice of the incident and lawsuit for the very first time. 
• September 22, 2008 -- Metropolitan disclaims coverage to Jacqueline Marshall solely on the grounds of late notice. 
• September 24, 2008 -- Metropolitan issues another disclaimer letter, denying coverage to Evan  Marshall on several grounds, including:  (1) that Evan Marshall was not a resident of the named insured's household on August 17, 2006, and therefore, was not "an insured" under the Metropolitan policy; (2) that Evan Marshall's acts did not constitute an "occurrence" under Metropolitan's policy; and (3) that those acts nevertheless were excluded as an "intentional act."  In that letter, Metropolitan assessed Jacqueline Marshall's liability in the Fox action at zero percent.
• December 22, 2008 -- Metropolitan commences this action seeking a declaration that it owes no coverage to Jacqueline Marshall under her personal excess policy with Metropolitan.  Metropolitan subsequently moves for summary judgment.  

Metropolitan's policy with Ms. Marshall afforded coverage "for damages to others caused by an 'occurrence' for which the law holds an insured responsible . . . ." "An insured" was defined as "you or a relative residing in your household" and an "occurrence" was defined by the policy as "an accident . . . that results during the policy period in personal injury or property damage."  The policy provided that it did 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 required that Marshall notify Metropolitan "as soon as practicable of an occurrence that may be covered by the policy."

In DENYING Metropolitan's motion for summary judgment,  Nassau County Supreme Court Justice Randy Sue Marber initially reiterated that a liability insurer's disclaimer is strictly limited to those grounds stated in teh insurer's disclaimer letter, which must clearly apprise the insured of the grounds on which the disclaimer is based:

"[A]n 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." "[A]n 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 (quotations omitted)." 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). "[I]n 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 (emphasis supplied). 

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.