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Halloway v. State Farm Insurance Companies11/28/2005
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and subject to revision before publication in the Official Reports.
HOWARD MILLER, J.P., THOMAS A. ADAMS, ROBERT A. SPOLZINO and STEVEN W. FISHER, JJ.
DECISION & ORDER
(Index No. 28977/02)
ORDERED that the order is reversed, on the law, with costs, the motion is denied, and, upon searching the record, summary judgment is awarded to the defendant, and the matter is remitted to the Supreme Court, Queens County, for the entry of a judgment declaring that the defendant is not obligated to defend and indemnify Newton S. Osborne in the personal injury action entitled Halloway v Osborne, pending in the Supreme Court, Queens County, under Index No. 19772/02.
On November 5, 2001, the plaintiff Winifred Halloway was a passenger in a vehicle owned and operated by Newton S. Osborne which collided with a vehicle owned by Ryder Trucks and operated by Craig McGraw. Osborne was insured by the defendant, State Farm Insurance Companies (hereinafter State Farm), pursuant to a policy which excluded coverage for liability arising out of the ownership and operation of a vehicle while it is being used to carry persons or property for a fee. Halloway and her husband subsequently retained counsel, who notified State Farm of the accident on December 7, 2001. The notice included a copy of the police report pertaining to the accident and stated, inter alia, that immediately after the accident Obsorne allegedly informed Halloway and another unidentified passenger "that there would be 'no charge' for fare." However, the police report and Osborne each indicated that there were no passengers in his vehicle, which prompted State Farm to conduct an investigation. On May 7, 2002, upon the completion of its investigation, State Farm notified the plaintiffs that it was disclaiming coverage for the accident based upon the livery vehicle exclusion.
The plaintiffs subsequently commenced an action to recover damages for personal injuries against Obsorne, McGraw, and Ryder Trucks, as well as this action for a judgment declaring that State Farm is obligated to defend and indemnify Osborne in the underlying personal injury action. The Supreme Court granted the plaintiffs' motion for summary judgment in the declaratory judgment action, finding, in effect, that the letter dated December 7, 2001, provided State Farm with sufficient facts to disclaim, and that its delay in disclaiming was therefore unreasonable (see Insurance Law § 3420 ).
"Pursuant to Insurance Law § 3420(d), an insurance carrier is required to provide the insured with timely notice of its disclaimer or denial of coverage on the basis of a policy exclusion and will be estopped from disclaiming liability or denying coverage if it fails to do so" (Brighton Cent. School Dist. v American Cas. Co. of Reading, Pa., 19 AD3d 528, 529, quoting Moore v Ewing, 9 AD3d 484, 487). The reasonableness of a delay in issuing a disclaimer must be determined from the time the insurer was aware of facts sufficient to disclaim (see Pawley Interior Contr. v Harleysville Ins. Cos., 11 AD3d 595).
Contrary to the conclusion of the Supreme Court, in view of the contradiction between Osborne's alleged statement at the time of the accident as related by the plaintiffs' attorney, and Osborne's subsequent denial that passengers were present and the police report, it was reasonable for State Farm to investigate the incident to determine, inter alia, whether the livery vehicle exclusion applied. Moreover its disclaimer was issued contemporaneously upon the completion of its investigation and,
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