ZELNO v. THE STATE OF NEW YORK, #2008-015-078, Claim No. 113231, Motion No.
Third-party action commenced pursuant to Court of Claims Act § § 9
(9-a) was dismissed against insurance carrier which issued liability policy to
the State. Questions of fact precluding summary judgment in favor of insurer
existed regarding timeliness of disclaimer on late notice ground. As insurer
has a right to trial by jury in this matter dismissal on jurisdictional grounds
CARLTON W. ZELNO
Footnote (claimant name)
THE STATE OF NEW YORK
Footnote (defendant name)
THE STATE OF NEW YORK
TITAN ROOFING, INC., CONTINENTAL CASUALTY COMPANY, LIBERTY SURPLUS INSURANCE CORP., AMERICAN INTERNATIONAL GROUP, INC. ST. PAUL TRAVELERS SURPLUS, HARTFORD FIRE INSURANCE CO., NATIONAL UNION FIRE INSURANCE CO. OF PA, BIRMINGHAM FIRE INSURANCE CO. OF PA.
FRANCIS T. COLLINS
Martin, Harding & Mazzotti, LLPBy: Craig A. Cushing, Esquire
Honorable Andrew M. Cuomo, Attorney General
EsquireAssistant Attorney General
Colliau Elenius Murphy Carluccio Keener & MorrowBy: Marian S. Hertz, Esquire
October 15, 2008
See also (multicaptioned
Third-party defendant Continental Casualty Co. ("Continental") moves for
summary judgment pursuant to CPLR 3212 dismissing the third-party claim against
it. Alternatively, Continental argues that if triable issues of fact preclude a
grant of summary judgment, the third-party claim must be dismissed for lack of
jurisdiction pursuant to Court of Claims Act § 9 (9-a). The third-party
action was commenced by the defendant third-party claimant State of New York
("State") pursuant to Court of Claims § 9 (9-a) seeking a declaration that
Continental and the other named third-party defendants are required to defend it
in the primary claim brought by claimant Carlton W. Zelno (claimant) against the
State of New York and, if liability is established, indemnify it for any sums
it becomes legally obligated to pay.
Continental issued an Owners and Contractors Protective Liability policy to the
State with effective dates of coverage of October 15, 2002 through June 30,
2006. In support of its motion for summary judgment dismissing the third-party
claim, Continental argues that the State failed to notify it of the occurrence,
claim or suit involving Mr. Zelno "as soon as practicable" as required by the
The Zelno claim has its genesis in a construction accident which occurred on
September 22, 2005 at the State Capitol building in Albany. The State of New
York entered into a contract with Titan Roofing, Inc. ("Titan") for the
rehabilitation of the roof of the Capitol building and Titan entered into a
subcontract with Monaco Restorations, Inc., the claimant's employer, to perform
certain of the work. Employees of Monaco were setting square stones weighing as
much as 3,600 pounds each on the roof of the building using a crane. The stones
were secured to the crane by straps and cables. The accident allegedly occurred
after the straps and cables were unhooked from a stone and the operator began to
lower the crane, at which point the straps became caught on the stone and began
to pull the stone from the roof of the building. Two of claimant's co-workers
on the roof screamed to warn workers, including the claimant, who were on the
scaffold directly below the stone. Claimant alleges that he was knocked down
and trampled by his co-workers as they attempted to flee from the area.
Although the stone slid down the roof of the building, it came to rest in a
granite gutter and therefore did not come in physical contact with either the
claimant or the scaffolding.
By notice of motion dated August 25, 2006 the claimant moved for permission to
file a late claim pursuant to Court of Claims § 10 (6). The motion was
opposed by the State. Claimant's motion was granted with respect to his
proposed Labor law § 240 (1) cause of action and was otherwise denied by
Decision and Order of this Court filed January 10, 2007. The claim was
thereafter filed on January 19, 2007 and issue was joined by service of the
State's answer on February 22, 2007.
The State first notified Continental of the occurrence and/or claim by letter
dated May 21, 2007 from Harry Czosnykowski, a Senior Investigator for the State
(claimant's Exhibit B). In the letter Mr. Czosnykowski identified the policy
number and the effective dates of coverage and enclosed a copy of the claim.
Mr. Czosnykowski also enclosed a copy of a letter he wrote to Titan, stating
"[a]ttached hereto is a copy of a letter sent to your assured . . ." In fact,
the State of New York, not Titan, was Continental's insured.
By letter dated June 1, 2007 Continental sent a letter to Titan acknowledging
the "initial report of loss" (Continental's Exhibit B annexed to Reply
Affirmation of Marian S. Hertz) . The letter identified the policyholder as
Titan Roofing, Inc.
By letter dated June 11, 2007 Mr. Czosnykowski sent a second letter to
Continental stating: "Pursuant to your request attached hereto is a copy of OGS
Project Manual . . . "Construction Work Rehabilitate Roof, North Quadrant, New
York State Capitol" (Continental's Exhibit C annexed to Reply Affirmation of
Marian S. Hertz).
In correspondence dated June 20, 2007, and addressed to Mr. Czosnykowski,
Continental recited the conditions of the Owners and Contractors Protective
(OCP) liability policy relating the duties of the insured in the event of an
occurrence, claim or suit and disclaimed coverage on the ground that "[b]ased on
the facts as currently known to Continental Insurance Company, the loss is
reported 'late' and per the 'duties' under the contract of insurance constitutes
a 'late report' " (State's Exhibit E). The facts upon which Continental
premised its conclusion that the "the loss is reported 'late' " are recited in
the letter as follows:
"On June 1st 2007 Continental Casualty Company received a letter from Harry
Czosnykowski attaching a copy of a letter sent by Harry Czosnykowski to Titan
Roofing Company also dated May 21st 2007. The correspondence included a copy
of a Notice of Claim filed by Graig Cushing, Esq [sic] against The State
of New York and is dated January 19th 2007. Notations on the Notice indicate
the State of New York received it January 19th 2007 and assigned a number
The duties of the insured in the event of a loss, claim or suit are set forth
in the policy under "Section IV- Conditions" (Continental's Exhibit L, pp. 5-6)
"4. Duties In The Event Of Occurrence, Claim Or Suit
a. You must see to it that we are notified as soon as practicable of an
'occurrence' which may result in a claim. To the extent possible, notice should
(1) How, when and where the ‛occurrence' took place;
(2) The names and addresses of any injured persons and witnesses; and
(3) The nature and location of any injury or damage arising out of the
b. If a claim is made or ‛suit' is brought against any insured, you
(1) Immediately record the specifics of the claim or ‛suit' and the
date received; and
(2) Notify us as soon as practicable.
You must see to it that we receive written notice of the claim or ‛suit'
as soon as practicable.
c. You and any other involved insured must:
(1) Immediately send us copies of any demands, notices, summonses or legal
papers received in connection with the claim or ‛suit'
(2) Authorize us to obtain records and other information;
(3) Cooperate with us in the investigation or settlement of the claim or defense
against the ‛suit'; and
(4) Assist us, upon our request, in the enforcement of any right against any
person or organization which may be liable to the insured because of injury or
damage to which this insurance may also apply.
d. No insured will, except at that insured's own cost, voluntarily make a
payment, assume any obligation , or incur any expense, other than for first aid,
without our consent."
In support of its motion for summary judgment dismissing the third-party claim
against it, Continental argues that the State's delay of one year and nine
months in reporting the Zelno "occurrence" vitiated coverage under the policy.
Continental also argues that the claim was reported late since the State's first
notification to Continental in May of 2007 came nine months after the State
received the claimant's motion for leave to file a late claim in August 2006 and
at least four months after the State received the claim on January 19, 2007.
It is well settled that the provisions of a policy of liability insurance
requiring notice of the occurrence, claim or suit "as soon as practicable" are
conditions precedent, the failure to comply with which vitiate the policy as a
matter of law (Argo v Greater N. Y. Mut. Ins. Co., 4 NY3d 332, 339
; Security Mut. Ins. Co. of N.Y. v Acker-Fitzsimons Corp., 31 NY2d
436, 440 ). Thus, the insurance carrier need not demonstrate prejudice
before disclaiming based on late notice (Id.). It has been recognized,
however, that there may be excuses that explain or excuse a delay in providing
the required notice such as lack of knowledge that an accident occurred or a
good faith belief that no liability exists (Security Mut. Ins. Co. of N.Y. v
Acker-Fitzsimons Corp., 31 NY2d at 441; Great Canal Realty Corp. v Seneca
Ins. Co., Inc., 5 NY3d 742, 743-744 ). Here, the State does not
dispute late notice of the occurrence or claim but argues in opposition to the
motion that Continental is precluded from denying coverage because it failed to
notify the State of its intention to disclaim coverage "as soon as is
reasonably possible" pursuant to Insurance Law § 3420 (d). In this regard
Insurance Law § 3420 (d) provides:
"If under a liability policy delivered or issued for delivery in this state, an
insurer shall disclaim liability or deny coverage for death or bodily injury
arising out of a motor vehicle accident or any other type of accident occurring
within this state, it shall give written notice as soon as is reasonably
possible of such disclaimer of liability or denial of coverage to the
insured and the injured person or any other claimant".
An insurer's failure to notify an insured that it intends to deny or disclaim
coverage on the ground of late notice "as soon as is reasonably possible"
precludes effective disclaimer and constitutes a forfeiture of the affirmative
defense of late notice (First Fin. Ins. Co. v Jetco Contr. Corp., 1 NY3d
64, 67 ; One Beacon Ins. v Travelers Prop. Cas. Co. of Am., 51 AD3d
1198, 1200 ; Matter of Allstate Ins. Co. v Cruz, 30 AD3d 511, 512
; Gregorio v J.M. Dennis Constr. Co. Corp., 21 AD3d 1056, 1056
). The Court of Appeals has made clear that the " 'timeliness of an
insurer's disclaimer is measured from the point in time when the insurer first
learns of the grounds for disclaimer of liability or denial of coverage' "
(First Fin. Ins. Co. v Jetco Contr. Corp., 1 NY3d at 68-69, quoting
Matter of Allcity Ins. Co. (Jiminez), 78 NY2d 1054, 1056 ). Where
the ground for disclaimer was or should have been "readily apparent" to the
insurer upon receipt of the claim, any subsequent delay is unreasonable as a
matter of law (First Fin. Ins. Co. v Jetco Contr. Corp., 1 NY3d. at 69;
Those Certain Underwriters at Lloyds, London v Gray, 49 AD3d 1, 4
). An insurer is obligated to act promptly and bears the burden of
justifying any ensuing delay (Id. at 69; Those Certain Underwriters at
Lloyds, London v Gray 49 AD3d at 4). Only in an exceptional case will an
insurer's written notice of disclaimer be determined to have been served in a
timely manner as a matter of law (Hartford Ins. Co. v County of Nassau,
46 NY2d 1028, 1030 ).
For Continental to prevail on its motion for summary judgment it must establish
not only that the notice provisions of the policy were violated but that "1) it
was not 'readily apparent' from the content of the of the [claim] that grounds
for the disclaimer in fact existed; and 2) the investigation . . . was promptly
and diligently conducted" (Those Certain Underwriters at Lloyds, London v
Gray, 49 AD3d at 4). On the first point, Continental argues that upon
receipt of the May 21, 2007 letter from the State an investigation was necessary
in order to determine whether grounds for denial of coverage or disclaimer of
liability existed. Counsel avers that "the States's May 21, 2007 notice letter
. . . does not reflect when the State was served or first learned about the
lawsuit - or the claim or occurrence - and in fact misidentifies Continental's
insured" (Reply Affirmation of Marian S. Hertz dated July 14, 2008, ¶ 5).
However, upon receipt of the May 21st letter from the State, which included a
copy of the claim, it was apparent that the accident occurred approximately one
year and eight months earlier and that a claim had been filed approximately four
months earlier. Nevertheless, it does appear that the State misidentified the
named insured in its initial correspondence notifying Continental of the Zelno
claim. That Continental may have been misled by the misidentification of its
insured is apparent from the fact that it addressed its acknowledgment letter of
June 1, 2007 to Titan, not the State, incorrectly designating Titan therein as
its named insured. Under these circumstances there appears to be at least a
colorable argument that misidentification of the insured party engendered
confusion and thereby necessitated an investigation by Continental.
However, Continental failed to establish through the submission of admissible
evidence that its ensuing investigation was undertaken promptly and diligently.
Only counsel’s unsupported affirmation was offered to support these
assertions. Continental failed to submit the affidavit of someone with
knowledge of the facts or any other admissible evidence from which the Court
could discern the date on which Continental’s investigation revealed the
facts necessary to disclaim coverage. Absent proof in admissible form, no
conclusion may be reached, as a matter of law, as to whether the purported
investigation was promptly and diligently undertaken after Continental first
received notification of the claim (Zuckerman v City of New York, 49 NY2d
557 ; CPLR 3212 [b]; First Fin. Ins. Co. v Jetco Contr. Corp.,
"Normally the question whether a notice of disclaimer of liability or denial
of coverage has been sent 'as soon as is reasonably possible' is a question of
fact which depends on all the facts and circumstances, especially the length of
and the reason for the delay" (Hartford Ins. Co. v County of Nassau, 46
NY2d at 1030; City of New York v Welsbach Elec. Corp., 49 AD3d 322
; cf. Morath v New York Cent. Mut. Fire Ins. Co., 49 AD3d
1245 ; Gotham Constr. Co., LLC v United Natl. Ins. Co., 35 AD3d 289
; 2833 Third Ave. Realty Assoc. v Marcus, 12 AD3d 329 ;
West 16th St. Tenants Corp. v Public Serv. Mut. Ins. Co., 290 AD2d 278
, lv denied 98 NY2d 605 ). The facts submitted on the motion
are insufficient to support the conclusion, as a matter of law, that
Continental's disclaimer of liability was issued "as soon as reasonably
possible" as required by Insurance Law § 3420 (d). Continental's motion
for summary judgment must therefore be denied.
Continental has alternatively asserted that in the event summary judgment
dismissing the third-party claim is denied, the third-party action against it
must be dismissed as this Court lacks jurisdiction to decide questions of fact
in a declaratory judgment action.
The jurisdictional predicate for the assertion of jurisdiction by this Court in
a declaratory judgment action is Court of Claims Act § 9 (9-a), which gives
the Court jurisdiction:
"To make a declaratory judgment as defined in section three thousand one of the
civil practice law and rules with respect to any controversy involving the
obligation of an insurer to indemnify or defend a defendant in any action
pending in the court of claims, provided that the court shall have no
jurisdiction to enter a judgment against an insurer pursuant to this subdivision
either: (i) for money damages; or, (ii) if the insurer would otherwise have a
right to a jury trial of the controversy with respect to which the declaratory
judgment is sought" (emphasis added).
Thus, the existence of issues of fact on which “the insurer would
otherwise have a right to a jury trial” divests this Court of jurisdiction
to resolve the matter. Dismissal is required on jurisdictional grounds,
therefore, if Continental would have a right to a trial by jury in the Supreme
CPLR 4101 provides that unless a jury trial is waived, issues of fact shall be
tried by a jury in the cases enumerated therein and in "any other action in
which a party is entitled by the constitution or by express provision of law to
a trial by jury" (CPLR 4101 ). A declaratory judgment action is not
specifically enumerated in the statute nor was it in existence at the time of
the adoption of the NY Constitution (see State Farm Mut. Auto. Ins.
Co. v Sparacio, 25 AD3d 777 ; Martell v North Riv. Ins. Co.,
107 AD2d 948 ). Rather, it is a modern remedial device which can be
either equitable or legal in nature (Id.). As a result, the
determination of whether a party is entitled to a trial by jury in such cases is
made by reference to "which of the traditional actions would most likely have
been used to present the instant claim had the declaratory judgment action not
been created" (State Farm Mut. Auto. Ins. Co. v Sparacio, 25 AD3d at 778
- 779 [internal quotation and citations omitted]). In this matter, the most
analogous traditional form of action is one for breach of contract arising from
the insurer's unjustified refusal to defend and indemnify its insured under the
applicable contract of insurance (Id.; Martell v North Riv. Ins.
Co., supra; Matter of Allcity Ins. Co., 96 Misc 2d 864
). Inasmuch as such an action is legal rather than equitable in nature, a
right to trial by jury exists (Id.). As issues of fact exist with regard
to the timeliness of Continental's disclaimer of coverage, it is entitled to a
trial by jury, a fact which divests this Court of jurisdiction under Court of
Claims Act § 9 (9-a) (Sangirardi v State of New York, 152 Misc 2d
423 ; Auger v State of New York, Ct Cl, January 19, 2005 [Claim No.
94487, Motion No. 69150, UID #2005-013-002] Patti, J., unreported).
For the foregoing reasons, the third-party defendant's motion for summary
judgment dismissing the third-party claim on the merits is denied and its motion
for dismissal of the claim based on lack of subject matter jurisdiction pursuant
to Court of Claims Act § 9(9-a) is granted.
October 15, 2008
Springs, New York
HON. FRANCIS T. COLLINS
Judge of the Court of
The Court considered the following papers:
Notice of motion dated March 5, 2008;
Affirmation of Marian S. Hertz dated March 5, 2008 with exhibits;
Affirmation of Saul Aronson dated July 8, 2008 with exhibits;
Reply affirmation of Marian S. Hertz dated July 14, 2008 with exhibits.