Citation Numbers: 55 N.Y.2d 131
Judges: Gabrielli, Meyer
Filed Date: 2/18/1982
Status: Precedential
Modified Date: 1/12/2023
OPINION OF THE COURT
The principle, declared in Schiff Assoc. v Flack (51 NY2d 692), that the failure to disclaim coverage does not create coverage which the policy was not written to provide, applies to liability policies as well as professional indemnity insurance, notwithstanding the provisions of subdivision 8 of section 167 of the Insurance Law. The words “deny coverage” in that subdivision refer to denial of liability predicated upon an exclusion set forth in a policy which, without the exclusion, would provide coverage ’ for the liability in question. It does not encompass denial that the policy as written could not have covered the liability in question under any circumstances. The order of the Appellate Division should, therefore, be affirmed, with costs.
Judith Zappone, her brother, Michael, and her father, Dominick, reside in the same household. Home Insurance Company issued an automobile liability policy to Judith covering a 1970 MG. Judith also owned a 1966 Mercedes Benz which was, however, insured not by Home but by Aetna Insurance Company. Home also insured a 1963 Chevrolet owned by Dominick. On July 20, 1975, Michael was involved in a collision while driving Judith’s Mercedes Benz with Judith’s permission. Aetna undertook the defense as to the claim arising out of the collision and has offered to pay up to the limits of its policy in settlement. In November, 1975, two of the persons injured in the collision sued Michael and Judith. Notice of the action and the accident was given to Home by the Zappones on January 6, 1976. Home, by letters dated January 20, 1976 predicated essentially on late notice, advised that it would investigate the matter but was reserving its rights. Not until April 14,
The Zappones and Aetna then brought this action for judgment declaring that the Zappones were entitled to excess coverage under the two Home policies and that Home’s disclaimer was invalid by reason of subdivision 8 of section 167 of the Insurance Law. Trial Term granted the judgment requested, but on appeal to. the Appellate Division that court, two Judges dissenting, reversed on the law and directed entry of judgment declaring that neither policy provided coverage for the incident of July 20, 1975 and that Home was not required by subdivision 8 of section 167 to give notice of denial of coverage. We affirm.
Subdivision 8 provides that: “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.” It is settled law that the subdivision applies whether the policy is primary or excess (Preisch v Continental Cas. Co., 55 AD2d 117, mot for lv to app den 41 NY2d 802), that if the subdivision applies it is the carrier’s burden to explain its delay in notifying of its disclaimer or denial (Hartford Ins. Co. v County of Nassau, 46 NY2d 1028, 1029), that a reservation of rights letter does not constitute compliance with the requirements of the subdivision (id.; Allstate Ins. Co. v Gross, 27 NY2d 263, 269), and that an unexplained delay of 15 months is unreasonable as a matter of law (Hartford Ins. Co. v County of Nassau, supra; Regional Tr. Serv. v Kemper Ins. Cos., 73 AD2d 1036). If the subdivision was intended to cover the situation of the instant case, therefore, Trial Term’s decision was correct.
We conclude, however, that the Legislature did not intend by its use of the words “deny coverage” to bring within the policy a liability incurred neither by the person insured nor in the vehicle insured, for to do so would be to impose
The parties have presented no legislative report or memorandum to explain the sense in which the words were used in the statute and our research has revealed none. Essentially then the arguments advanced are in terms of the plain meaning of the words on the one hand and on the other the unreasonableness of the result which would provide insurance coverage to a person and with respect to a vehicle for which no premium had ever been received by the carrier.
A carrier may deny liability because, for example, its insured has breached the terms of his policy by failing to co-operate in the defense of the lawsuit brought by the injured person or by failing to give notice of an accident or of the beginning of an action against the insured. It may deny liability because although the person and the vehicle are covered by the policy the circumstances of the accident bring a policy exclusion into play, for example, that the person injured is an employee of the insured whose injury arose out of and in the course of his employment or was injured while an automobile insured as a pleasure vehicle was being used as a public conveyance. It may deny liability because it made no contract of insurance with the person and for the vehicle involved in the accident in question or because, though there was such a policy at one time, it had, prior to the accident, been canceled by the insurer or terminated by act of the insured.
In the first instance, the policy covers the driver, the vehicle and the accident and the carrier will be liable unless it disclaims liability because of the insured’s breach. In the second, the policy covers the driver and the vehicle and the accident would be covered except for the specific policy exclusion and the carrier must deny coverage on the basis of the exclusion if it is not to mislead the insured and the injured person to their detriment. In the third, though the carrier may have some other relationship with the owner or driver of the vehicle, it has no contract with that person with respect to the vehicle involved and, there
In the interpretation of statutes the “[a]bsence of facial ambiguity is *** rarely, if ever, conclusive” (New York State Bankers Assn. v Albright, 38 NY2d 430, 436). Literal interpretation of the words used will not be accorded when to do so will occasion great inconvenience, or produce inequality, injustice or absurdity (Matter of Hogan v Culkin, 18 NY2d 330, 335; Matter of Petterson v Daystrom Corp., 17 NY2d 32, 38; Matter of Meyer, 209 NY 386, 389; McKinney’s Cons Laws of NY, Book 1, Statutes, § 111, pp 233-234). It is, moreover, always presumed that no unjust or unreasonable result was intended and the statute must be construed consonant with that presumption (Matter of Breen v New York Fire Dept. Pension Fund, 299 NY 8, 19; McKinney’s, Statutes, § 143), the court looking to the purpose of the legislation as a whole rather than its literal words (New York State Bankers Assn. v Albright, 38 NY2d 430, 437, supra).
The purpose for which subdivision 8 of section 167 was enacted was to avoid prejudice to the insured, the injured claimant and the Motor Vehicle Accident Indemnity Corporation, each of whom could be harmed by delay in learning of the carrier’s position (Allstate Ins. Co. v Gross, 27 NY2d 263, 267, supra). It was not, however, to provide an added source of indemnification which had never been contracted for and for which no premium had ever been paid. Here, as in State Farm Mut. Auto. Ins. Co. v Westlake (35 NY2d 587, 592), to hold Home for Michael’s accident in the Mercedes Benz on either of the policies written by Home on Judith’s MG or Dominick’s Chevrolet would be to
The case law construing the subdivision is not contrary to the conclusion we now reach. Indeed, as is conceded by appellants and the dissenting Judges below, in Perez v Hartford Acc. & Ind. Co. (31 AD2d 895, 896) the Appellate Division, First Department, held that “subdivision 8 of section 167 of the Insurance Law does not refer to a situation as in the case at bar where coverage had terminated due to a cancellation of the policy long before the happening of the accident”, and this court affirmed (26 NY2d 625). If the subdivision does not require notice with respect to a policy which has been terminated, it is difficult
The fallacy of the dissent’s contrary argument is revealed by its footnote 1 and its penultimate paragraph. A policy which covers neither the person nor the vehicle involved in an automobile accident does not create an insurer-insured relationship as to automobile liability by reason of that policy. The fact that there may be another policy on another vehicle does not create the relationship with which the statute deals any more than would a homeowner’s liability policy on a house or a premises liability policy on a store. Whether the relationship no longer exists because a policy otherwise covering person
For the foregoing reasons, the order of the Appellate Division should be affirmed, with costs.
. Preisch v Continental Cas. Co. (55 AD2d 117, mot for lv to app den 41 NY2d 802, supra), holding that a duty arises to give notice once the primary carrier has fulfilled its obligation, is not to the contrary.
. The cases relied upon by appellants and the dissenting Judges below do not undermine the conclusion now reached. Though Foremost Ins. Co. v Sotiriou (66 AD2d 812) and Security Ins. Group v Priestly (61 AD2d 795) appear to hold to the contrary with respect to the statutory exclusion from coverage of interspousal liability, review of the briefs in both cases shows that the distinction between types of noncoverage on which this decision rests was not argued in either case and that the reference to subdivision 8 of section 167 in the Foremost decision concerned the extension of that section to include accidents other than motor vehicle, not whether the policy covered at all. Moreover, Regional Tr. Serv. v Kemper Ins. Cos. (73 AD2d 1036, supra); State of New York v Fidelity & Cas. Co. (70 AD2d 687); and Newman v Ketani (54 AD2d 926) each concerned, as the report or the record in the case establishes, an exclusion from the policy rather than the absence of any coverage at all.
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