BROOKLYN HOSPITAL CENTER v. Argonaut Insurance Company, defendant-respondent. (1999)

In an action for a judgment declaring that the defendants are obligated to defend and indemnify the plaintiff in a medical malpractice action entitled Sherman v. Waltman, pending in the Supreme Court, Kings County, (1) the plaintiff appeals from so much of an order and judgment (one paper) of the Supreme Court, Kings County (Bellard, J.), entered March 11, 1998, as denied that branch of its motion which was for summary judgment declaring that the defendant Argonaut Insurance Company has a duty to defend and indemnify it in the underlying medical malpractice action, and granted the cross motion of the defendant Argonaut Insurance Company for summary judgment declaring that it is not so obligated, and (2) the defendant Centennial Insurance Company cross-appeals, as limited by its brief, from so much of the same order and judgment as granted that branch of the plaintiff's motion which was for summary judgment declaring that it has a duty to defend and indemnify the plaintiff in the underlying medical malpractice action, and granted the cross motion of the defendant Argonaut Insurance Company for summary judgment on its cross claim and declared that Argonaut Insurance Company is not obligated to defend and indemnify the plaintiff.

ORDERED that the order and judgment is affirmed insofar as appealed and cross-appealed from, without costs or disbursements.

 The defendant Centennial Insurance Company (hereinafter Centennial) contends that the Supreme Court erred in concluding that it is required to defend and indemnify the plaintiff Brooklyn Hospital Center (hereinafter the hospital) in the underlying medical malpractice action.   We disagree.   Although Centennial's policy did not insure the hospital at the time the alleged acts of malpractice occurred, principles of equitable estoppel may preclude an insurer from disclaiming coverage where it undertakes the defense of the case without reserving its rights, “in reliance on which the insured suffers the detriment of losing the right to control its own defense” (Schiff Assocs. v. Flack, 51 N.Y.2d 692, 699, 435 N.Y.S.2d 972, 417 N.E.2d 84).   Thus, “when an insurer assumes the defense of an action on behalf of the insured, with knowledge of facts constituting a defense to the coverage of the policy and without disclaiming liability or giving notice of a reservation of its right to deny coverage, it may be estopped from later asserting that the policy does not cover the claim” (Touchette Corp. v. Merchants Mut. Ins. Co., 76 A.D.2d 7, 12, 429 N.Y.S.2d 952).   Here, the record reveals that Centennial had notice of facts which would have revealed that it did not cover the claim against the hospital as early as June 1986, when the bill of particulars in the underlying malpractice action was served.   However, Centennial completely assumed the defense of the medical malpractice action for more than 11 years, until the eve of trial.   Under these circumstances, the Supreme Court properly held that Centennial is equitably estopped from denying coverage (see, Indemnity Ins. Co. of N. Am. v. Charter Oak Ins. Co., 235 A.D.2d 521, 653 N.Y.S.2d 135;   Hovdestad v. Interboro Mut. Indem. Ins. Co., 135 A.D.2d 783, 522 N.Y.S.2d 895;  Dryden Mut. Ins. Co. v. Michaud, 115 A.D.2d 150, 495 N.Y.S.2d 509;   Hartford Ins. Group v. Mello, 81 A.D.2d 577, 437 N.Y.S.2d 433).

 The delay by the defendant Argonaut Insurance Company (hereinafter Argonaut) of approximately 43 days in notifying the hospital of its disclaimer was not unreasonable under the circumstances here (see, Structure Tone v. Burgess Steel Products Corp., 249 A.D.2d 144, 672 N.Y.S.2d 33;  Allstate Ins. Co. v. Aetna Cas. & Sur. Co., 191 A.D.2d 665, 595 N.Y.S.2d 552;  cf., Hartford Ins. Co. v. County of Nassau, 46 N.Y.2d 1028, 416 N.Y.S.2d 539, 389 N.E.2d 1061).   Argonaut submitted the affidavit of its claims examiner, who explained the steps taken to investigate this matter when it first received notice in January 1997 that a claim was being made for coverage based upon medical malpractice allegedly committed in 1973.

 We note that neither the hospital nor Centennial has standing to allege that Argonaut's disclaimer was invalid because it was not sent to the plaintiffs in the underlying medical malpractice action (see, Khan v. Convention Overlook, Inc., 253 A.D.2d 737, 677 N.Y.S.2d 377;  Batchie v. Travelers Ins. Co., 130 A.D.2d 536, 515 N.Y.S.2d 271).

The parties' remaining contentions are without merit.

MEMORANDUM BY THE COURT.