Questions of Fact on Insured's Late Notice Preclude Summary Judgment to Insured and Its Broker

CGL – LATE NOTICE – NOTICE TO BROKER
International Contrs. Corp. v. Illinois Union Ins. Co.
(3rd Dept., decided 12/16/2010)

When the record is replete with conflicting testimony and documents regarding when, and to what extent, the insured informed its insurance broker of a carbon monoxide poisoning occurrence prior to commencement of the wrongful death actions against it, neither the insured nor broker is entitled to summary judgment.  So held both the Supreme Court and Appellate Division in this case. 

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

CGL – LATE NOTICE – NOTICE TO BROKER
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.

Action Against Broker for False Certificate of Insurance Dismissed

CGL – CERTIFICATE OF INSURANCE – BROKER LIABILITY
Tishman Constr. Corp. v. American Safety Indem. Co.
(Sup. Ct., New York Co., decided 10/16/2008)

An employee of one of Tishman's subcontractors, Manhattan Concrete Structures, was injured while working at a construction site.  The subcontract required required Manhattan to indemnify Tishman and its parent and subsidiary companies, and to procure insurance naming them as additional insureds.

When American Safety denied additional insured coverage to Tishman for that construction-site accident and related personal injury action, Tishman commenced this action against Manhattan's broker, John Joseph Insurance Brokerage, Inc., alleging causes of action for fraud and misrepresentation for the broker's alleged issuance of a false certificate of insurance (COI).  Tishman also sued American Safety, which successfully moved for summary judgment.

After discovery, the broker moved for summary judgment based on its arguments that: (1) it had not issued the COI in question; and (2) it had no legal relationship with Tishman sufficient to support any cause of action against it. Through an affidavit of its vice-president, the broker established:

• Manhattan never requested that the broker issue a COI to Tishman;
• it procured from American Safety a policy of insurance for Manhattan bearing policy number 10 AP-GL-00383;
• the COI listed an incorrect policy number -- 10APGL000;
• the fax number on the COI was not the broker's;
• the signature on the COI -- "John Joseph" was not the broker's; when the broker issues a COI, it is signed with the name of the individual broker, not the company; 
• no one by the name "John Joseph" has ever been associated with the broker; John and Joseph are the first names of the husbands of the broker's co-owners. 
  

In opposition to the broker's motion, Tishman pointed to the various references to "John Joseph" on the COI and to the fact that Manhattan's application for insurance from American Safety was signed by "John Joseph" as the producer.  Tishman did not, however, come forward with any proof that it had any relationship with the broker, that it received any verbal representation from the broker, or that the broker actually provided the COI to Tishman.

Based on this evidence, New York County Supreme Court Justice Shirley Werner Kornreich granted the broker's motion for summary judgment, holding:

An insurance broker cannot be held liable for a negligent misrepresentation in an insurance certificate to a party with whom the broker has no contractual relationship absent proof of a relationship approaching privity. Benjamin Shapiro Realty Co., LLC v. Kemper Nat’l Ins. Cos., 303 A.D.2d 245, 245-246 (1st Dep‘t 2003); Superior Ice Rink v. Nescon Contracting Corp., 40 A.D.3d 963 (2d Dep’t 2007). Moreover, a disclaimer stating that an insurance certificate is for information only bars a negligent misrepresentation claim. Benjamin Shapiro Realty Co., LLC v. Kemper Nat’l Ins. Cos., supra. In Benjamin Shapiro Realty and Superior Ice Rink, there was no dispute that the insurance broker had issued an incorrect certificate, and the Courts still held that a third party could not sue the broker for negligent misrepresentation based upon a certificate issued to its client, the insured.  Tishman has failed to come forward with evidence that the Broker was connected to Tishman by either word or deed.  See, Houbigant, Inc. v. Deloitte & Touche LLP, 303 A.D.2d 92,94 (1st Dep’t 2003) (before law permits negligence claim against professional by non-client third party, there must be “linking conduct” by word or action by professional to non-client).

The other basis of liability asserted by Tishman is intentional fraud or misrepresentation. There are cases which hold that a broker can be held liable for fraud, collusion or other special circumstances in the issuance of an insurance certificate. See, Griffin v. DaVinci Dev., LLC, 44 A.D.3d 1001 (2d Dep’t 2007); Binyan Shel Chessed, Inc. v. Goldberger Ins. Brokerage, Inc., 18 A.D.3d 590, 592 (2d Dep’t 2005)(summary judgment on fraud claim denied for need of discovery where broker allegedly made representations directly to plaintiff); Superior Ice Rink v. Nescon Contracling Corp., supra.  In order to recover for fraud, a plaintiff must prove the following elements: a representation of material fact, the falsity of that representation, knowledge by the party who made the representation that it was false when made, justifiable reliance by the plaintiff, and resulting injury. Global Mins. & Metals Corp. v. Holme, 35 A.D.3d 93, 98 (1st Dep‘t 2006). In this case, Tishman cannot prove the first element of fraud, a misrepresentation made to it by the Broker. Discovery is now complete. The Broker has come forward with evidence that it did not make a representation to Tishman. Tishman has failed to come forward with contrary evidence sufficient to raise an issue of fact. There is no proof that the Broker made a representation to Tishman or provided it with the Certificate. At most, an inference could be drawn that the Broker gave the Certificate to Manhattan. Hence, the Broker is entitled to dismissal of the complaint.

The court also declined to impose sanctions on Tishman for not voluntarily discontinuing this action against the broker and instead "requiring" it to move for summary judgment:

This is not a case where a party engaged in litigation misconduct or continued to press a claim after it had been rejected by the court (citations omitted).  Here, the court had denied the Broker’s first motion to dismiss and ordered discovery to proceed. While the Broker’s attorney did write to Tishman asking it to withdraw the complaint without the necessity of a summary judgment motion, in light of the unexplained etiology of the Certificate, the court does not consider Tishman’s conduct to be beyond the pale of legitimate advocacy.