SANIDOWN INC., Plaintiff,

v.

FIREMAN’S FUND INSURANCE COMPANY and Buckingham Badler Associates Inc., Defendants.

 

Oct. 11, 2007.

 

DAVID SCHMIDT, J.

Upon the foregoing papers, Buckingham Badler Associates Inc. (Badler) moves, pursuant to CPLR 3212, for an order granting summary judgment dismissing plaintiff’s complaint and all cross-claims against it. In the alternative, Badler seeks an order granting summary judgment on its cross claim against co-defendant Fireman’s Fund Insurance Company (FFIC), and dismissing FFIC’s cross claim against it. FFIC cross-moves, pursuant to CPLR 2215 and 3212, for an order granting it summary judgment on each and every claim. Lastly, Sanidown Inc. (Sanidown) also cross-moves, pursuant to CPLR 3212, for an order granting summary judgment as against both FFIC and Badler.

 

On or about June 25, 2001, plaintiff and Badler entered into an agreement whereby Badler, as its insurance broker, would secure insurance coverage for plaintiff’s property at 400 Winans Avenue, in Hillside, New Jersey (hereinafter referred to as the “Winans Avenue location”), and at four other locations. FFIC, an insurance carrier, consequently issued an Ocean Marine cargo insurance policy to plaintiff. The policy insured the designated locations against, inter alia, loss of stock, goods, and contents of fire in the amount of three million ($3,000,000.00) dollars.

 

In the beginning of July 2003, Sanidown contacted Badler in order to change and replace the covered location of its insurance from the Winans Avenue property to 1831 Burnett Avenue, in Union, New Jersey (hereinafter referred to as the “Burnett Avenue property”). On or about July 22, 2003, Badler faxed a commercial policy change request to FFIC with a cover sheet that stated “Please amend insured’s mailing address as per change request attached.”FFIC issued an endorsement to the policy which provides as follows: “It is hereby understood and agreed that the assured’s address is amended as follows: 1831 Burnett Avenue, Union, NJ 07083” (hereinafter referred to as “endorsement 11”). On or about September 10, 2003, Badler sent a second endorsement request, which it annexed to its motion papers with proof of confirmation, to FFIC requesting that it delete the Winans Avenue location as an insured location and replace it with the Burnett Avenue location.The policy was renewed on June 25, 2004, and again on June 25, 2005.On June 29, 2005, Sanidown suffered a loss at the Burnett Avenue location. The following day, Badler transmitted a report to FFIC notifying it of the fire at the Burnett Avenue location. On July 1, 2005, Badler also sent a fax to FFC stating the following,

 

 

On December 15, 2004, plaintiff incurred a loss (unrelated to the present action) regarding three ocean freight containers stolen at a pier. They submitted a claim report, listing the Burnett Avenue location as it’s mailing address.

 

We sent an endorsement on 9/10/03 amending the mailing address to 1831 Burnett Avenue, and to delete location 400 Winans Avenue and replace it with 1831 Burnett Ave. Please send us a copy of this endorsement.

On July 111, 2005, FFIC acknowledged receipt of the loss at the location in Union, New Jersey. In doing so, FFIC stated that it appeared that the location of the loss was not a covered location within the policy, that FFIC’s investigation of the loss had commenced and it would “proceed to handle the claim under a reservation of rights.”On September 16, 2005, seventy-nine (79) days after being notified of the loss, FFIC issued a letter disclaiming coverage disclaimer because “the fire occurred at a location that is not covered under the Policy.”Plaintiff subsequently commenced the present action against defendants.

 

 

Badler’s Motion For Summary Judgment

 

Badler argues that it obtained all the insurance requested by Sanidown and passed on all of it’s requests to FFIC. According to Badler, as the insurance broker, it merely requests insurance from carriers, and does not guarantee coverage which the carrier denies for reasons beyond Badler’s control. Badler asserts that FFIC wrongfully denied coverage for plaintiff’s claim because (1) the policy’s language explicitly covers plaintiff’s goods; (2) Badler sent a change of address form to FFIC, which should have covered the new location of the company, and (3) FFIC is estopped from disclaiming coverage because it unduly delayed issuing a denial of plaintiff’s claim for over 10 weeks. First, Badler argues that the policy does not limit its coverage to the enumerated five locations, and broadly covers any loss at any place in the world. In support, it refers to paragraph 23 of the policy, entitled “Geographic Limits,” which states that “[S]hipments are insured at and from places in the world to places in the world” with the exception of countries “which are the subject of trade or economic embargoes” imposed by United States law.

 

Second, Badler maintains that on two occasions prior to the fire, in July and September of 2003, it instructed FFIC in writing to change the insured location from the Winans Avenue location to the Burnett Avenue location. In support, Badler attaches the facsimile transmission confirmations. Badler argues that, after receiving FFIC’s July 2003 change of address notice, the policy’s subsequent endorsement (endorsement 11) specifically amends plaintiff’s “address,” rather than designating its “mailing address” to Burnett Avenue. Badler argues that FFIC now denies coverage for the address that it acknowledges in endorsement 11, and that FFIC continued to renew the policy and to receive, and accept, plaintiff’s premiums.In the alternative, Badler contends that endorsement 11 should be interpreted against FFIC, as the drafter, to mean that the covered location, rather than the mailing address, was changed.

 

 

Badler also argues that FFIC acknowledged receipt of, and paid for an unrelated claim at the Burnett Avenue location. Accordingly, Badler argues that the unrelated claim also put FFIC on notice of the change of location covered under the policy. FFIC, however, argues that the Burnett location was simply listed as the mailing address.

 

With respect to plaintiff’s complaint against it, Badler argues that it should not be held responsible for FFIC’s improper conduct in disclaiming coverage. It also asserts that plaintiff has failed to demonstrate any evidence of any negligence or improper conduct by Badler. According to Badler, it obtained the appropriate insurance for plaintiff, and plaintiff concedes that Badler transmitted the address change requests to FFIC, and that FFIC issued an endorsement which contained the requested coverage. Lastly, Badler maintains that insurance brokers are not fiduciaries for their customers and that their obligation is merely to obtain the insurance requested by the customer.

 

 

FFIC’s Cross Motion For Summary Judgment

 

FFIC asserts that the Burnett Avenue location was never listed as a covered location under Section III of the policy, and that it was never listed in any subsequent endorsements. It argues that the policy’s language clearly states that it only covers specified storage locations. According to the FFIC, it issued an August 19, 2003 endorsement to the policy to regarding the listed storage locations (hereinafter referred to as “endorsement 13”), which re-listed the five storage coverage locations under the policy and listed Winans Avenue location was listed (the Burnett Avenue premises was not listed). FFIC argues that it did not receive Badler’s September 10, 2003 fax requesting to change the coverage location prior to July 1, 2005, when it requested a copy of FFIC’s endorsement of the purported request. It asserts that FFIC has no record of receiving the September 10, 2003 fax and Request Form, nor is there a record in it’s files prior to July 1, 2005  In addition, according to Badler’s March 31, 2004 email to FFIC (prior to the June 25, 2004 renewal of the policy) Badler stated that there were “no changes in the insured’s operation or exposure.”

 

 

FFIC also notes that Badler’s July 1, 2005 facsimile was allegedly sent to Jerry Morgero, Jr., who, by affidavit, avers that he has never worked in the Ocean Cargo Marine Department, and that he did not receive the facsimile. FFIC also notes that the facsimile requests receipt and confirmation that “the amendments will be made accordingly.”The parties agree that FFIC’s acknowledgment of the facsimile never occurred.

 

In any event, FFIC contends that there is no coverage because the change request was never approved, and the Burnett location was never accepted and endorsed as a covered location. FFIC contends that Badler merely submitted a request to it, which is subject to FFIC’s approval, and that it would have first needed to evaluate the risk of changing a covered location before deciding whether to approve it. In support, FFIC refers to it’s request form, which states that “This is an acknowledgment of your request. Upon approval, the company’s records will be adjusted accordingly …” Lastly, with respect to coverage, FFIC maintains that the policy does not apply to goods stored in a warehouse.

 

In addition, FFIC argues that it acted reasonably in response to the alleged loss because it received notice of the claim on June 30, 2005 and acknowledged the notice on July 6, 2005. On July 11, 2005 FFIC sent a letter to Badler stating that it appeared that the location of the fire was not a covered location under the policy, however, it had begun an investigation of the matter under a reservation. FFIC maintains that, upon completion of its investigation, it promptly denied coverage.

 

 

Plaintiff’s Cross Motion For Summary Judgment

 

With respect to its motion against FFIC, plaintiff argues that FFIC is estopped from denying coverage based upon it’s failure to timely disclaim coverage under the policy. It contends that FFIC untimely and unreasonably issued a disclaimer seventy-nine days after acknowledging receipt of the claim, because declining coverage did not require the FFIC’s intensive investigation of plaintiff’s damages, and it’s basis for denying coverage was or should have been readily apparent to it as of June 30, 2005, as all they had to do was compare the applicable insurance policy to the notice of loss, which were available to it on June 30, 2005. According to plaintiff, FFIC spent 79 days visiting the location and requesting proof of loss in determining “the interest of the goods insured and loss thereto,” however, there was no point to the investigation if FFIC believed the location was not even covered.

 

In addition, plaintiff argues that it’s endorsement stating that “Assured’s address is amended” never differentiated between mailing address and/or location address, which led it to believe that the Burnett Avenue location was the covered location. Plaintiff also refers to endorsement 10, which added Commerce Bank and NJ Economic Development Authority as the mortgagee of the Burnett Avenue location to the insurance policy, effective April 14, 2003, to argue that it is nonsensical for FFIC to claim lack of notice with regards to coverage of the location when it endorsed the request to add Commerce Bank and NJ Economic Development Authority as additional insureds to secure a loan for a building purchased at Burnett Avenue.

 

With respect to its motion against Badler, plaintiff argues that Badler breached its common law and fiduciary duty of care to plaintiff and should be held liable for its failure to obtain coverage. Plaintiff asserts that it is undisputed that it purchased insurance, paid its premiums, properly requested of Badler to amend its coverage, and timely notified FFIC of its loss. According to plaintiff, Badler breached its common law duty to it by not properly changing the covered location. Plaintiff contends that Badler did not do its job in obtaining a clear written endorsement to ensure that the Burnett Avenue premises was covered, and that, although requests were made, no written amendment was received by Badler reflecting the requested change of coverage. Plaintiff maintains that, not only did Badler fail to confirm the change and notified plaintiffs of such change, Badler also failed to timely correct FFIC’s endorsement 13, which incorrectly listed the old location as covered by the policy.

 

 

Discussion

 

The proponent of a motion for summary judgment must demonstrate entitlement to judgment as a matter of law, tendering sufficient evidence to eliminate any material issues of fact (Alvarez v. Prospect Hosp., 68 N.Y.2d 320, 324 [1986];Winegrad v. New York Univ. Med. Ctr., 64 N.Y.2d 851, 853 [1985];Zuckerman v. City of New York, 49 N.Y.2d 557, 562 [1980];Sillman v. Twentieth Century-Fox Film Corp., 3 N.Y.2d 395, 404 [1957] ). Summary judgment is a drastic remedy that deprives a litigant of his or her day in court, and it should only be employed when there is no doubt as to the absence of triable issues (Kolivas v. Kirchoff, 14 AD3d 493 [2005];see alsoAndre v. Pomeroy, 35 N.Y.2d 361, 364 [1974] ). Also, the party opposing a motion for summary judgment is entitled to every favorable inference that may be drawn from the pleadings, affidavits and competing contentions of the parties (Nicklas v. Tedlen Realty Corp., 305 A.D.2d 385 [2003];see alsoAkseizer v. Kramer, 265 A.D.2d 356 [1999];Henderson v. City of New York, 178 A.D.2d 129, 130 [1991];Gibson v. American Export Isbrandtsen Lines, 125 A.D.2d 65, 74 [1987];Strychalski v. Mekus, 54 A.D.2d 1068, 1069 [1976];McLaughlin v. Thaima Realty Corp., 161 A.D.2d 383, 384 [1990] ). Further, parties seeking summary judgment have the burden of establishing their prima facie entitlement to judgment as a matter of law by affirmatively demonstrating the merit of their claim or defense, rather than by pointing to gaps in the plaintiff’s proof (Nationwide Prop. Cas. v. Nestor, 6 AD3d 409, 410 [2004];Katz v. PRO Form Fitness, 3 AD3d 474, 475 [2004];Kucera v. Waldbaums Supermarkets, 304 A.D.2d 531, 532 [2003] ). Lastly, if the existence of an issue of fact is even arguable, summary judgment must be denied (Museums at Stony Brook v. Vil. of Patchogue Fire Dept., 146 A.D.2d 572 [1989] ).

 

The Court first turns to plaintiff’s motion seeking summary judgment against Badler, and to Badler’s cross-motion seeking dismissal of plaintiff’s complaint as against it.

 

As to the merits of plaintiff’s motion, it’s claims as against Badler are predicated on Badler’s alleged breach of its duty to it, as its broker, to represent its interest in providing the insurance coverage for the Burnett premises. Plaintiff maintains that Badler failed to exercise reasonable diligence in ensuring the insurance coverage that FFIC was to provide to it. Plaintiff argues that Badler improperly advised it and omitted to obtain the appropriate type of insurance, based upon the information that it gave to Badler, which would have provided it with coverage for its loss.

 

“[I]nsurance agents have a common law duty to obtain requested coverage for their clients within a reasonable time or inform the client of the inability to do so” (Murphy v. Kuhn, 90 N.Y.2d 266, 270 [1997] ). An insurance broker’s duty is to procure insurance coverage based upon the specific terms of the request of the client for such coverage (see Murphy, 90 N.Y.2d at 270;Loevner v. Sullivan & Strauss Agency, 35 AD3d 392, 393 [2006];Empire Indus. Corp. v. Insurance Cos. of N. Am., 226 A.D.2d, 580, 581 [1996];Chaim v. Benedict, 216 A.D.2d 347, 347 [1995] ). Absent a specific request for coverage or level of coverage, an insurance broker is not liable to an insured for any failure to procure any particular type or amount of coverage not already in the policy (see Murphy, 90 N.Y.2d at 270;Madhvani v. Sheehan, 234 A.D.2d 652, 654 [1996];Empire Indus. Corp., 226 A.D.2d at 581;Chaim, 216 A.D.2d at 347;Barco Auto Leasing Corp. v. Montano, 215 A.D.2d 617, 618 [1995];Hjemdahl-Monsen v. Faulkner, 204 A.D.2d 516, 517 [1994];Erwig v. Cook Agency, 173 AD 439, 439-440 [1991] ).

 

Here, plaintiff specifically requested that Badler notify FFIC to properly change the covered location to reflect the Burnett Avenue location. Accordingly, plaintiff argues that Badler simply did not do its job in obtaining the written endorsement to ensure that the Burnett premises was covered, or in correcting any subsequent endorsements that it received.

 

Badler, however, argues that plaintiff received subsequent documents, such as endorsement letters, which specifically omitted the Burnett Avenu e location. An insured, upon receipt of its insurance policy, is bound by the terms, conditions, and limits of coverage reflected in the policy, whether or not he or she reads them (see Metzger v. Aetna Ins. Co., 227 N.Y. 411, 415-416 [1920];L.C.E.L. Collectibles, 228 A.D.2d at 197;Worcester Ins. Co. v. Hempstead Farms Fruit Corp., 220 A.D.2d 659, 660 [1995];Rotanelli v. Madden, 172 A.D.2d 815, 817 [1991];American Motorists Ins. Co. v. Salvatore, 102 A.D.2d 342, 345 [1984] ). Plaintiff is conclusively presumed to have known, understood, and assented to the terms of the requirements of the insurance policy which it received (see Nicholas J. Masterpol, Inc. v. Travelers Co., 273 A.D.2d 817, 818 [2000];M & E Mfg. Co., 258 A.D.2d at 12;Madhvani, 234 A.D.2d at 654-655;Leiberthal v. Agency Ins. Brokers, 216 A.D.2d 816, 817 [1995] ). Therefore, Badler argues that plaintiff is bound by the contents of the policy and had constructive knowledge of its contents based upon its receipt of the policy (see Worcester Ins. Co., 220 A.D.2d at 660).

 

The Court finds that there is a question of fact as to whether Badler properly performed its obligations to plaintiff by failing to receive a written amendment reflecting the requested change of coverage, and by failing to timely correct FFIC’s endorsment 13, which incorrectly listed the old location as covered by the policy. Whether Badler breached its obligation to honor the plaintiffs’ request to obtain such insurance to cover that location is an unresolved issue of fact that precludes an award of summary judgment (see American Ref-Fuel Co. v. Resource Recycling, 281 A.D.2d 574, 575, [“[a]n agent or broker may be held liable for neglect in failing to procure insurance with liability limited to that which would have been borne by the insurer had the policy been in force”’][citations omitted]. Accordingly, both plaintiff’s request for summary judgment as against Badler, and Badler’s request for summary judgment as against plaintiff, must be denied.

 

 

FFIC’s Disclaimer

 

As is relevant herein, pursuant to Insurance Law §  3420(d):

 

“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.”

 

“A failure by the insurer to give such notice as soon as is reasonably possible after it first learns of the accident or of grounds for disclaimer of liability or denial of coverage, precludes effective disclaimer or denial” (Hartford Ins. Co. v. County of Nassau, 46 N.Y.2d 1028, 1029 [1979],recons denied47 N.Y.2d 951 [1979] ). While the question whether a notice of disclaimer of liability or denial of coverage has been sent as soon as is reasonably possible is normally a question of fact which depends on all the facts and circumstances, especially the length of and the reason for the delay, “where … there is absolutely no explanation for the delay provided by the insurer, a delay of two months is, as a matter of law, unreasonable”(id. at 1030;see also Mendoza v. Am. Country Ins. Co., 19 AD3d 300, 301 [2005],appeal denied6 NY3d 701 [2005] [defendant’s unexplained delay in disclaiming coverage for six months after having been notified of the lawsuit against its insured was untimely, and thus ineffective]; Alvarez v. Allstate Ins. Co., 5 AD3d 270 [2004],recons. denied79 N.Y.2d 823 [1991] [defendant’s eight-month delay in disclaiming coverage is unreasonable as a matter of law] ).

 

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 (see e.g. Allcity Ins. Co. v. Jimenez, 78 N.Y.2d 1054 [1991] ).“It is the insurer’s burden to explain the delay in notifying the insured of its disclaimer” (see Pawley Interior Contr. v. Harleysville Ins. Cos., 11 AD3d 595 [2004];accord Moore v. Ewing, 9 AD3d 484, 488 [2004] [it is the responsibility of the insurer to explain its delay, and an unsatisfactory explanation will render the delay unreasonable as a matter of law] ).

 

The court finds that there is a question of fact concerning whether FFIC disclaimed as soon as reasonably possible to plaintiff’s claim for property damage (Spoleta Const. Corp. v. CNA Ins. Co., 4 Misc.3d 1010(A) [2004] ). Although FFIC learned about the existence of the claim on June 30, 2005, it waited until September 16, 2005 to issue a letter disclaiming coverage on the grounds that the location was “not covered under the policy.” FFIC argues, however, that it sent plaintiff a letter containing a reservation of rights while it investigated the details of plaintiff’s claim in order to make a determination of coverage. However, FFIC attaches no supporting documentation whatsoever regarding the investigation that it undertook to determine coverage. As a result, FFIC also fails to substantiate the length of time that it took to issue a letter disclaiming coverage based on FFIC’s investigation, or the reason for such delay. Accordingly, an issue of fact is raised as to whether FFIC untimely delayed issuing the disclaimer (Hartford Ins. Co. v. Nassau County, 46 N.Y.2d 1028, 1030 [1979][internal quotations omitted][“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”]; see also Allstate Ins. Co. v. Gross, 27 N.Y.2d 263 [1970];cf. Artis v. Aetna Cas. & Sur. Co., 256 A.D.2d 429 [1998] ). As a result, that portion of plaintiff’s motion seeking summary judgment as against FFIC is denied.

 

Moreover, that portion of Badler’s motion seeking summary judgment on its cross-claim against FFIC is denied. The Court is unable to grant summary judgment and hold that, as a matter of law, FFIC is estopped from denying coverage (see e.g. General Acc. Ins. Co. of Am. v. Metropolitan Steel Indus., Inc., 9 AD3d 254 [2004];National Indem. Co. v. Ryder Truck Rental, 230 A.D.2d 720 [1996];O’Dowd v. American Sur. Co. of NY, 3 N.Y.2d 347, 355 [1957] ).

 

This constitutes the order and decision of the court.