BLUE RIDGE INSURANCE COMPANY v. BIEGELMAN (2007)

In an action for a judgment declaring the rights of the parties concerning a homeowners' liability insurance policy, the plaintiff appeals, as limited by its brief, from so much of an order of the Supreme Court, Westchester County (Jamieson, J.), entered December 6, 2005, as denied its motion for summary judgment on its first cause of action.

ORDERED that the order is reversed, on the law, with costs, the plaintiff's motion for summary judgment on its first cause of action is granted, and the matter is remitted to the Supreme Court, Westchester County, for the entry of a judgment declaring that the plaintiff is not obligated to indemnify the defendants Alan J. Biegelman and Mindy Biegelman or contribute pro rata to the costs of environmental remediation incurred by them in connection with the leakage of oil from an underground storage tank at their premises.

 Where an insurance policy requires that notice of an occurrence be given promptly, notice must be given within a reasonable time in view of all of the circumstances.   Absent a valid excuse for a delay in furnishing notice, failure to satisfy the notice requirement vitiates coverage (see Great Canal Realty Corp. v. Seneca Ins. Co., 5 N.Y.3d 742, 800 N.Y.S.2d 521, 833 N.E.2d 1196;  Eagle Ins. Co. v. Zuckerman, 301 A.D.2d 493, 753 N.Y.S.2d 128).   The insurer need not establish that it was prejudiced by the late notice, save in certain situations not applicable here (see Argo Corp. v. Greater N.Y. Mut. Ins. Co., 4 N.Y.3d 332, 794 N.Y.S.2d 704, 827 N.E.2d 762).

 The plaintiff established its prima facie entitlement to judgment as a matter of law by demonstrating that it was not notified of the occurrence until approximately 21 months after it was discovered (see White v. City of New York, 81 N.Y.2d 955, 957, 598 N.Y.S.2d 759, 615 N.E.2d 216;  Jordan Constr. Prods. Corp. v. Travelers Indem. Co. of Am., 14 A.D.3d 655, 656, 789 N.Y.S.2d 298).   Once the plaintiff established its prima facie entitlement to judgment, the burden shifted to the defendants to adduce a triable issue of fact as to whether there existed a reasonable excuse for their delay (see Argentina v. Otsego Mut. Fire Ins. Co., 86 N.Y.2d 748, 750, 631 N.Y.S.2d 125, 655 N.E.2d 166).   The defendants failed to do so.   Contrary to the contention of the insured defendants Alan J. Biegelman and Mindy Biegelman (hereinafter the insureds), their broker's mistake in notifying the wrong insurance carrier of the occurrence is not a valid excuse for late notice (see Eagle Ins. Co. v. Zuckerman, supra at 495, 753 N.Y.S.2d 128;  Martini v. Lafayette Studios Corp., 273 A.D.2d 112, 710 N.Y.S.2d 39;  YShaw Temple A.M.E. Zion Church v. Mount Vernon Fire Ins. Co., 199 A.D.2d 374, 376, 605 N.Y.S.2d 370).

 The insureds further assert that they lack expertise concerning home heating oil tank systems, and therefore did not know when the leak originated, that they could be held liable for it, or that its timing implicated their policy with the plaintiff.   While the reasonableness of an insured's good faith belief that he or she was not liable for an occurrence is a matter ordinarily left for determination by the finder of fact (see Argentina v. Otsego Mut. Fire Ins. Co., 86 N.Y.2d 748, 750, 631 N.Y.S.2d 125, 655 N.E.2d 166;  Morris Park Contr. Corp. v. National Union Fire Ins. Co. of Pittsburgh, Pa., 33 A.D.3d 763, 822 N.Y.S.2d 616), summary judgment may be granted where the evidence, construing all inferences in favor of the insured, establishes as a matter of law that the belief was unreasonable or in bad faith (see Genova v. Regal Mar. Indus., 309 A.D.2d 733, 765 N.Y.S.2d 266;  Travelers Ins. Co. v. Volmar Constr. Co., 300 A.D.2d 40, 43, 752 N.Y.S.2d 286).

The evidence submitted in opposition to the plaintiff's motion established that the defendant Hanover Insurance Company (hereinafter Hanover) notified the insureds, within days of the discovery of the leak, that their policies with prior insurance carriers could be implicated.   Therefore, at the very least, the insureds “should have realized that there was a reasonable possibility of the subject policy's involvement,” and the proffered excuse is unreasonable as a matter of law (C.C.R. Realty of Dutchess v. New York Cent. Mut. Fire Ins. Co., 1 A.D.3d 304, 305, 766 N.Y.S.2d 856;  see Rondale Bldg. Corp. v. Nationwide Prop. & Cas. Ins. Co., 1 A.D.3d 584, 769 N.Y.S.2d 46).

Having failed to offer a valid excuse for the insureds' delay in providing notice of the occurrence to the plaintiff, the defendants failed to raise a triable issue of fact as to the reasonableness of such delay.

Contrary to Hanover's contention, its rights as against the plaintiff are derived solely through subrogation, and it is subject to the defenses applicable against the insureds (see Humbach v. Goldstein, 229 A.D.2d 64, 66-67, 653 N.Y.S.2d 950;  Hartford Acc. & Indem. Co. v. CNA Ins. Cos., 99 A.D.2d 310, 472 N.Y.S.2d 342).   Accordingly, because the insureds may not recover from the plaintiffs, neither may Hanover.

Therefore, summary judgment should have been awarded to the plaintiff.   In light of this determination, the plaintiff's remaining contention has been rendered academic.

Since this is a declaratory judgment action, the matter must be remitted to the Supreme Court, Westchester County, for the entry of a judgment declaring that the plaintiff is not obligated to indemnify the defendants Alan J. Biegelman and Mindy Biegelman or contribute pro rata to the costs of environmental remediation incurred by them in connection with the leakage of oil from an underground storage tank at their premises (see Lanza v. Wagner, 11 N.Y.2d 317, 334, 229 N.Y.S.2d 380, 183 N.E.2d 670, appeal dismissed 371 U.S. 74, 83 S.Ct. 177, 9 L.Ed.2d 163, cert. denied 371 U.S. 901, 83 S.Ct. 205, 9 L.Ed.2d 164).