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City of New York v. Continental Casualty Co.12/13/2005
to obtain the insured's cooperation, and (3) that the insured's attitude demonstrated "willful and avowed obstruction" (id. quoting Thrasher, 19 NY2d at 168). Mere inaction by the insured is not a sufficient basis for a disclaimer (see Matter of Empire Mut. Ins. Co. [Stroud], 36 NY2d 719 ).
Continental's reliance on Argo Corp v Greater N.Y. Mut. Ins. Co. (4 NY3d 332 ) is misplaced. In Argo, the insured was notified of a lawsuit against it in February 2000 but did not notify the insurer until May 2001. The Court of Appeals held that this delay was unreasonable as a matter of law and refused to depart from the general rule that an insurer need not show prejudice before disclaiming on late notice of a lawsuit. Significantly, the insurer in Argo was not previously given notice by another insured of the accident which gave rise to the lawsuit in question. In addition, the insured offered no excuse for waiting 14 months after service of the complaint upon the Secretary of State as their agent, 6 months after service of the default motion upon them, more than 3 months after default was entered and until almost after service of the note of issue upon them, before giving its insurer notice.
The facts of this case are more in accord with Matter of Brandon (Nationwide Mut. Ins. Co.) (97 NY2d 491 ). There, the carrier received timely notice of claim but late notice of a lawsuit. The carrier disclaimed on the basis of the late notice of suit. While recognizing that early investigation protects carriers from fraud and serves the insurers' need to set reserves and take an early position in settlement negotiations, the Court of Appeals reasoned that notice of claim served these purposes. The Court concluded that based upon the facts in Brandon, the late notice of legal action should not be given the same preclusive effect as late notice of claim without some showing of prejudice.
While it is true that the City adopted a lackadaisical attitude in forwarding the suit papers, its actions fall far short of the standard necessary to sustain Continental's disclaimer. Continental was given timely notice of the occurrence by Welsbach. It also was actively participating in the litigation before Con Edison impleaded the City, and was served with a copy of the complaint against the City by Con Edison when it was originally served. Under these facts, Continental's disclaimer was improper.
With respect to the City's request for costs and fees incurred by it in the defense of the second third-party action, that issue is remanded to ascertain the amount of those costs and fees.
Accordingly, the order and judgment (one paper) of the Supreme Court, New York County (Leland DeGrasse, J.), entered July 22, 2004, which denied plaintiff's motion for summary judgment and granted summary judgment to defendant, should be reversed, on the law, without costs, plaintiff's motion granted, defendant's cross motion denied, a declaration made in plaintiff's favor, and the matter remanded for further proceedings in accordance with the opinion herein.
All concur.
THIS CONSTITUTES THE DECISION AND ORDER OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.
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