Appeals: Renata Cabrera v. New York Apple Tours

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NYAT Operating Corp., etc., Plaintiff, Renata Cabrera, Plaintiff-Respondent, v GAN National Insurance Company, et al., Defendants-Appellants.
2295, 2295A, 2295B, 600462/02
SUPREME COURT OF NEW YORK, APPELLATE DIVISION, FIRST DEPARTMENT
2007 NY Slip Op 9675; 46 A.D.3d 287; 847 N.Y.S.2d 179; 2007 N.Y. App. Div. LEXIS 12379
December 6, 2007, Decided
SUBSEQUENT HISTORY: Appeal denied by NYAT Operating Corp. v. GAN Nat'l Ins. Co., 2008 N.Y. LEXIS 1830 (N.Y., June 25, 2008)
PRIOR HISTORY: NYAT Operating Corp. v. Gan Natl. Ins. Co., 8 Misc. 3d 975, 800 N.Y.S.2d 272, 2005 N.Y. Misc. LEXIS 1279 (2005)

CASE SUMMARY

PROCEDURAL POSTURE: Defendant insurer appealed a judgment by the New York County Supreme Court (New York) in favor of plaintiff intervenor and against plaintiff insured in a declaratory judgment action involving the insurer's obligation to defend and indemnify the insured. The order, inter alia, on the insured's default, dismissed the complaint, and granted the intervenor's cross-motion for summary judgment on her cause of action against the insurer.

OVERVIEW: The intervenor obtained a judgment in the underlying action against the insured for having negligently hired and retained an employee who sexually assaulted her. The appellate court found, inter alia, that the dismissal of the insured's complaint as a result of its default in opposing the insurer's CPLR 3126 motion did not stop the intervenor from asserting coverage for the sexual assault. Because the insured's liability in the underlying action was based on its negligent hiring and retention of the employee, the sexual assault was a covered "accident" within the meaning of the policy, and the exclusion for injuries did not apply. Any right that the insurer had to disclaim on the ground that it did not receive timely notice of the assault was lost when it did not give either the insured or the intervenor notice of disclaimer on such ground as soon as reasonably possible. Accordingly, the intervenor was properly granted summary judgment for the compensatory portion of the underlying judgment plus interest from the date of entry of the underlying judgment. The insurer's other arguments were considered and found to be unavailing.

OUTCOME: The judgment was unanimously affirmed, and the order dismissing the action and computing the intervenor's damages and interest was unanimously dismissed.

CORE TERMS: disclaimer, notice, underlying action, underlying judgment, plus interest, summary judgment, sexual assault, timely notice, unanimously, disclaim, insured, default, assault.

COUNSEL:
Katten Muchin Rosenman LLP, New York (Philip A. Nemecek of counsel), for appellants.
Sivin & Miller, LLP, New York (Edward Sivin of counsel), for respondents.

JUDGES: Tom, J.P., Saxe, Friedman, Gonzalez, Catterson, JJ.

OPINION: [**287] [***180] Judgment, Supreme Court, New York County (Debra A. James, J.), entered July 25, 2006, in a declaratory judgment action involving defendant insurers' (GAN's) obligation to defend and indemnify plaintiff insured (NYAT) in an underlying action in which plaintiff-intervener (Cabrera) obtained a judgment against NYAT for having negligently hired and retained an employee who sexually assaulted her, in favor of Cabrera and against GAN in the principal amount of $ 997,448, plus interest, costs and disbursements, unanimously affirmed, with costs. Appeal from order, same court and Justice, entered May 31, 2005, which, inter alia, on NYAT's default, granted GAN's motion pursuant to CPLR 3126 to dismiss the action to the extent of dismissing NYAT's complaint, and granted Cabrera's cross motion for summary judgment on her cause of action against GAN under Insurance Law § 3420(b)(1), and appeal from order, same court (Steven E. Liebman, Special Referee), entered July 11, 2006, which computed Cabrera's damages and interest, unanimously dismissed, without costs.

The dismissal of NYAT's complaint as a result of its default in opposing GAN's CPLR 3126 motion does not stop Cabrera from asserting NYAT's coverage under the subject commercial general liability policy for the sexual assault committed against her by NYAT's employee (Zimmerman v Tower Ins. Co. of N.Y., 13 AD3d 137, 788 N.Y.S.2d 309 [2004]; see Stumpf AG v Dynegy Inc., 32 AD3d 232, 233, 820 N.Y.S.2d 24 [2006]). On the merits, because NYAT's liability in the underlying [***181] action was based on its negligent hiring and retention of the employee, not respondeat superior, the sexual assault was a covered "accident" within the meaning of the policy, and the exclusion for injuries expected or intended from the standpoint of the insured does not apply (RJC Realty Holding Corp. v Republic Franklin Ins. Co., 2 NY3d 158, 808 N.E.2d 1263, 777 N.Y.S.2d 4 [2004]). It does [**288] not avail GAN to argue that the assault was foreseeable (cf. id. at 164). Any right GAN had to disclaim on the ground that it did not receive timely notice of the assault was lost when it did not give either [*2] NYAT or Cabrera notice of disclaimer on such ground as soon as reasonably possible (Tully Constr. Co., Inc. v TIG Ins. Co., 43 A.D.3d 1150, 842 N.Y.S.2d 528 [2d Dept 2007]); see Milbank Hous. Dev. Fund v Royal Indem. Co., 17 A.D.3d 280, 280-281, 794 N.Y.S.2d 23 [2005]). That GAN had such ground to disclaim was readily apparent as soon as it learned of Cabrera's lawsuit against NYAT commenced two and half years earlier (see Milbank, id. at 281); yet, GAN never served a notice of disclaimer. Inst ead, it served a reservation of rights letter on NYAT, which has no relevance to the question of timely notice of disclaimer (Hartford Ins. Co. v County of Nassau, 46 NY2d 1028, 1029, 389 N.E.2d 1061, 416 N.Y.S.2d 539 [1979]), and, if its answer herein be deemed a notice of disclaimer, it was untimely as a matter of law (see id. at 1029-1030). Accordingly, Cabrera was properly granted summary judgment for the compensatory portion of the underlying judgment, up to the $ 1 million limit of the policy, plus interest from the date of entry of the underlying judgment (see Kleynshvag v GAN Ins. Co., 21 AD3d 999, 1000-1001, 801 N.Y.S.2d 383 [2005]; Levit v Allstate Ins. Co., 308 AD2d 475, 477, 764 N.Y.S.2d 452 [2003]). We have considered GAN's other arguments and find them unavailing.

THIS CONSTITUTES THE DECISION AND ORDER OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.

ENTERED: DECEMBER 6, 2007

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