ZELNO v. THE STATE OF NEW YORK, #2008-015-078, Claim No. 113231, Motion
Third-party action commenced pursuant to Court of Claims Act § § 9 (9-a) was dismissed
against insurance carrier which issued liability policy to the State. Questions of fact precluding
summary judgment in favor of insurer existed regarding timeliness of disclaimer on late notice
ground. As insurer has a right to trial by jury in this matter dismissal on jurisdictional grounds
Claimant(s): CARLTON W. ZELNO
Claimant short name: ZELNO
Footnote (claimant name) :
Defendant(s): THE STATE OF NEW YORK
Footnote (defendant name) :
Third-party claimant(s): THE STATE OF NEW YORK
Third-party defendant(s): TITAN ROOFING, INC., CONTINENTAL CASUALTY
COMPANY, LIBERTY SURPLUS INSURANCE CORP.,
AMERICAN INTERNATIONAL GROUP, INC. ST. PAUL
TRAVELERS SURPLUS, HARTFORD FIRE INSURANCE CO.,
NATIONAL UNION FIRE INSURANCE CO. OF PA,
BIRMINGHAM FIRE INSURANCE CO. OF PA.
Claim number(s): 113231
Motion number(s): M-74662
Judge: FRANCIS T. COLLINS
Claimant’s attorney: Martin, Harding & Mazzotti, LLP
By: Craig A. Cushing, Esquire
Defendant’s attorney: Honorable Andrew M. Cuomo, Attorney General
By: Saul Aronson, Esquire
Assistant Attorney General
Third-party defendant’s attorney: Colliau Elenius Murphy Carluccio Keener & Morrow
By: Marian S. Hertz, Esquire
Signature date: October 15, 2008
City: Saratoga Springs
See also (multicaptioned case)
Third-party defendant Continental Casualty Co. ("Continental") moves for summary
judgment pursuant to CPLR 3212 dismissing the third-party claim against it. Alternatively,
Continental argues that if triable issues of fact preclude a grant of summary judgment, the
third-party claim must be dismissed for lack of jurisdiction pursuant to Court of Claims Act § 9
(9-a). The third-party action was commenced by the defendant third-party claimant State of
New York ("State") pursuant to Court of Claims § 9 (9-a) seeking a declaration that Continental
and the other named third-party defendants are required to defend it in the primary claim brought
by claimant Carlton W. Zelno (claimant) against the State of New York and, if liability is
established, indemnify it for any sums it becomes legally obligated to pay.
Continental issued an Owners and Contractors Protective Liability policy to the State
with effective dates of coverage of October 15, 2002 through June 30, 2006. In support of its
motion for summary judgment dismissing the third-party claim, Continental argues that the State
failed to notify it of the occurrence, claim or suit involving Mr. Zelno "as soon as practicable"
as required by the policy conditions.
The Zelno claim has its genesis in a construction accident which occurred on September
22, 2005 at the State Capitol building in Albany. The State of New York entered into a contract
with Titan Roofing, Inc. ("Titan") for the rehabilitation of the roof of the Capitol building and
Titan entered into a subcontract with Monaco Restorations, Inc., the claimant's employer, to
perform certain of the work. Employees of Monaco were setting square stones weighing as
much as 3,600 pounds each on the roof of the building using a crane. The stones were secured
to the crane by straps and cables. The accident allegedly occurred after the straps and cables
were unhooked from a stone and the operator began to lower the crane, at which point the straps
became caught on the stone and began to pull the stone from the roof of the building. Two of
claimant's co-workers on the roof screamed to warn workers, including the claimant, who were
on the scaffold directly below the stone. Claimant alleges that he was knocked down and
trampled by his co-workers as they attempted to flee from the area. Although the stone slid
down the roof of the building, it came to rest in a granite gutter and therefore did not come in
physical contact with either the claimant or the scaffolding.
By notice of motion dated August 25, 2006 the claimant moved for permission to file a
late claim pursuant to Court of Claims § 10 (6). The motion was opposed by the State.
Claimant's motion was granted with respect to his proposed Labor law § 240 (1) cause of action
and was otherwise denied by Decision and Order of this Court filed January 10, 2007. The
claim was thereafter filed on January 19, 2007 and issue was joined by service of the State's
answer on February 22, 2007.
The State first notified Continental of the occurrence and/or claim by letter dated May
21, 2007 from Harry Czosnykowski, a Senior Investigator for the State (claimant's Exhibit B).
In the letter Mr. Czosnykowski identified the policy number and the effective dates of coverage
and enclosed a copy of the claim. Mr. Czosnykowski also enclosed a copy of a letter he wrote
to Titan, stating "[a]ttached hereto is a copy of a letter sent to your assured . . ." In fact, the
State of New York, not Titan, was Continental's insured.
By letter dated June 1, 2007 Continental sent a letter to Titan acknowledging the "initial
report of loss" (Continental's Exhibit B annexed to Reply Affirmation of Marian S. Hertz) .
The letter identified the policyholder as Titan Roofing, Inc.
By letter dated June 11, 2007 Mr. Czosnykowski sent a second letter to Continental
stating: "Pursuant to your request attached hereto is a copy of OGS Project Manual . . .
"Construction Work Rehabilitate Roof, North Quadrant, New York State Capitol" (Continental's
Exhibit C annexed to Reply Affirmation of Marian S. Hertz).
In correspondence dated June 20, 2007, and addressed to Mr. Czosnykowski,
Continental recited the conditions of the Owners and Contractors Protective (OCP) liability
policy relating the duties of the insured in the event of an occurrence, claim or suit and
disclaimed coverage on the ground that "[b]ased on the facts as currently known to Continental
Insurance Company, the loss is reported 'late' and per the 'duties' under the contract of insurance
constitutes a 'late report' " (State's Exhibit E). The facts upon which Continental premised its
conclusion that the "the loss is reported 'late' " are recited in the letter as follows:
"On June 1st 2007 Continental Casualty Company received a
letter from Harry Czosnykowski attaching a copy of a letter sent by Harry
Czosnykowski to Titan Roofing Company also dated May 21st 2007.
The correspondence included a copy of a Notice of Claim filed by Graig
Cushing, Esq [sic] against The State of New York and is dated January
19th 2007. Notations on the Notice indicate the State of New York
received it January 19th 2007 and assigned a number 06-045495-0."
The duties of the insured in the event of a loss, claim or suit are set forth in the policy
under "Section IV- Conditions" (Continental's Exhibit L, pp. 5-6) as follows:
"4. Duties In The Event Of Occurrence, Claim Or Suit
a. You must see to it that we are notified as soon as
practicable of an 'occurrence' which may result in a claim.
To the extent possible, notice should include:
(1) How, when and where the ‛occurrence' took place;
(2) The names and addresses of any injured persons and witnesses;
(3) The nature and location of any injury or damage arising
out of the ‛occurrence'.
b. If a claim is made or ‛suit' is brought against any insured,
(1) Immediately record the specifics of the claim or ‛suit'
and the date received; and
(2) Notify us as soon as practicable.
You must see to it that we receive written notice of the
claim or ‛suit' as soon as practicable.
c. You and any other involved insured must:
(1) Immediately send us copies of any demands, notices,
summonses or legal papers received in connection with the
claim or ‛suit'
(2) Authorize us to obtain records and other information;
(3) Cooperate with us in the investigation or settlement of
the claim or defense against the ‛suit'; and
(4) Assist us, upon our request, in the enforcement of any
right against any person or organization which may be
liable to the insured because of injury or damage to which
this insurance may also apply.
d. No insured will, except at that insured's own cost,
voluntarily make a payment, assume any obligation , or
incur any expense, other than for first aid, without our
In support of its motion for summary judgment dismissing the third-party claim against it,
Continental argues that the State's delay of one year and nine months in reporting the Zelno
"occurrence" vitiated coverage under the policy. Continental also argues that the claim was
reported late since the State's first notification to Continental in May of 2007 came nine months
after the State received the claimant's motion for leave to file a late claim in August 2006 and at
least four months after the State received the claim on January 19, 2007.
It is well settled that the provisions of a policy of liability insurance requiring notice of
the occurrence, claim or suit "as soon as practicable" are conditions precedent, the failure to
comply with which vitiate the policy as a matter of law (Argo v Greater N. Y. Mut. Ins. Co., 4
NY3d 332, 339 ; Security Mut. Ins. Co. of N.Y. v Acker-Fitzsimons Corp., 31 NY2d 436,
440 ). Thus, the insurance carrier need not demonstrate prejudice before disclaiming
based on late notice (Id.). It has been recognized, however, that there may be excuses that
explain or excuse a delay in providing the required notice such as lack of knowledge that an
accident occurred or a good faith belief that no liability exists (Security Mut. Ins. Co. of N.Y. v
Acker-Fitzsimons Corp., 31 NY2d at 441; Great Canal Realty Corp. v Seneca Ins. Co., Inc., 5
NY3d 742, 743-744 ). Here, the State does not dispute late notice of the occurrence or
claim but argues in opposition to the motion that Continental is precluded from denying coverage
because it failed to notify the State of its intention to disclaim coverage "as soon as is
reasonably possible" pursuant to Insurance Law § 3420 (d). In this regard Insurance Law §
3420 (d) provides:
"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".
An insurer's failure to notify an insured that it intends to deny or disclaim coverage on the
ground of late notice "as soon as is reasonably possible" precludes effective disclaimer and
constitutes a forfeiture of the affirmative defense of late notice (First Fin. Ins. Co. v Jetco Contr.
Corp., 1 NY3d 64, 67 ; One Beacon Ins. v Travelers Prop. Cas. Co. of Am., 51 AD3d
1198, 1200 ; Matter of Allstate Ins. Co. v Cruz, 30 AD3d 511, 512 ; Gregorio v
J.M. Dennis Constr. Co. Corp., 21 AD3d 1056, 1056 ). The Court of Appeals has made
clear that 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' " (First Fin. Ins.
Co. v Jetco Contr. Corp., 1 NY3d at 68-69, quoting Matter of Allcity Ins. Co. (Jiminez), 78
NY2d 1054, 1056 ). Where the ground for disclaimer was or should have been "readily
apparent" to the insurer upon receipt of the claim, any subsequent delay is unreasonable as a
matter of law (First Fin. Ins. Co. v Jetco Contr. Corp., 1 NY3d. at 69; Those Certain
Underwriters at Lloyds, London v Gray, 49 AD3d 1, 4 ). An insurer is obligated to act
promptly and bears the burden of justifying any ensuing delay (Id. at 69; Those Certain
Underwriters at Lloyds, London v Gray 49 AD3d at 4). Only in an exceptional case will an
insurer's written notice of disclaimer be determined to have been served in a timely manner as a
matter of law (Hartford Ins. Co. v County of Nassau, 46 NY2d 1028, 1030 ).
For Continental to prevail on its motion for summary judgment it must establish not only
that the notice provisions of the policy were violated but that "1) it was not 'readily apparent'
from the content of the of the [claim] that grounds for the disclaimer in fact existed; and 2) the
investigation . . . was promptly and diligently conducted" (Those Certain Underwriters at Lloyds,
London v Gray, 49 AD3d at 4). On the first point, Continental argues that upon receipt of the
May 21, 2007 letter from the State an investigation was necessary in order to determine whether
grounds for denial of coverage or disclaimer of liability existed. Counsel avers that "the States's
May 21, 2007 notice letter . . . does not reflect when the State was served or first learned about
the lawsuit - or the claim or occurrence - and in fact misidentifies Continental's insured" (Reply
Affirmation of Marian S. Hertz dated July 14, 2008, ¶ 5). However, upon receipt of the May
21st letter from the State, which included a copy of the claim, it was apparent that the accident
occurred approximately one year and eight months earlier and that a claim had been filed
approximately four months earlier. Nevertheless, it does appear that the State misidentified the
named insured in its initial correspondence notifying Continental of the Zelno claim. That
Continental may have been misled by the misidentification of its insured is apparent from the fact
that it addressed its acknowledgment letter of June 1, 2007 to Titan, not the State, incorrectly
designating Titan therein as its named insured. Under these circumstances there appears to be at
least a colorable argument that misidentification of the insured party engendered confusion and
thereby necessitated an investigation by Continental.
However, Continental failed to establish through the submission of admissible evidence
that its ensuing investigation was undertaken promptly and diligently. Only counsel’s
unsupported affirmation was offered to support these assertions. Continental failed to submit
the affidavit of someone with knowledge of the facts or any other admissible evidence from
which the Court could discern the date on which Continental’s investigation revealed the facts
necessary to disclaim coverage. Absent proof in admissible form, no conclusion may be
reached, as a matter of law, as to whether the purported investigation was promptly and diligently
undertaken after Continental first received notification of the claim (Zuckerman v City of New
York, 49 NY2d 557 ; CPLR 3212 [b]; First Fin. Ins. Co. v Jetco Contr. Corp., supra).
"Normally 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" (Hartford Ins. Co.
v County of Nassau, 46 NY2d at 1030; City of New York v Welsbach Elec. Corp., 49 AD3d
322 ; cf. Morath v New York Cent. Mut. Fire Ins. Co., 49 AD3d 1245 ; Gotham
Constr. Co., LLC v United Natl. Ins. Co., 35 AD3d 289 ; 2833 Third Ave. Realty Assoc. v
Marcus, 12 AD3d 329 ; West 16th St. Tenants Corp. v Public Serv. Mut. Ins. Co., 290
AD2d 278 , lv denied 98 NY2d 605 ). The facts submitted on the motion are
insufficient to support the conclusion, as a matter of law, that Continental's disclaimer of liability
was issued "as soon as reasonably possible" as required by Insurance Law § 3420 (d).
Continental's motion for summary judgment must therefore be denied.
Continental has alternatively asserted that in the event summary judgment dismissing the
third-party claim is denied, the third-party action against it must be dismissed as this Court lacks
jurisdiction to decide questions of fact in a declaratory judgment action.
The jurisdictional predicate for the assertion of jurisdiction by this Court in a declaratory
judgment action is Court of Claims Act § 9 (9-a), which gives the Court jurisdiction:
"To make a declaratory judgment as defined in section three
thousand one of the civil practice law and rules with respect to any
controversy involving the obligation of an insurer to indemnify or
defend a defendant in any action pending in the court of claims,
provided that the court shall have no jurisdiction to enter a
judgment against an insurer pursuant to this subdivision either: (i)
for money damages; or, (ii) if the insurer would otherwise have a
right to a jury trial of the controversy with respect to which the
declaratory judgment is sought" (emphasis added).
Thus, the existence of issues of fact on which “the insurer would otherwise have a right to
a jury trial” divests this Court of jurisdiction to resolve the matter. Dismissal is required on
jurisdictional grounds, therefore, if Continental would have a right to a trial by jury in the
CPLR 4101 provides that unless a jury trial is waived, issues of fact shall be tried by a
jury in the cases enumerated therein and in "any other action in which a party is entitled by the
constitution or by express provision of law to a trial by jury" (CPLR 4101 ). A declaratory
judgment action is not specifically enumerated in the statute nor was it in existence at the time of
the adoption of the NY Constitution (see State Farm Mut. Auto. Ins. Co. v Sparacio, 25 AD3d 777
; Martell v North Riv. Ins. Co., 107 AD2d 948 ). Rather, it is a modern remedial
device which can be either equitable or legal in nature (Id.). As a result, the determination of
whether a party is entitled to a trial by jury in such cases is made by reference to "which of the
traditional actions would most likely have been used to present the instant claim had the
declaratory judgment action not been created" (State Farm Mut. Auto. Ins. Co. v Sparacio, 25
AD3d at 778 - 779 [internal quotation and citations omitted]). In this matter, the most analogous
traditional form of action is one for breach of contract arising from the insurer's unjustified
refusal to defend and indemnify its insured under the applicable contract of insurance (Id.; Martell
v North Riv. Ins. Co., supra; Matter of Allcity Ins. Co., 96 Misc 2d 864 ). Inasmuch as
such an action is legal rather than equitable in nature, a right to trial by jury exists (Id.). As issues
of fact exist with regard to the timeliness of Continental's disclaimer of coverage, it is entitled to a
trial by jury, a fact which divests this Court of jurisdiction under Court of Claims Act § 9 (9-a)
(Sangirardi v State of New York, 152 Misc 2d 423 ; Auger v State of New York, Ct Cl,
January 19, 2005 [Claim No. 94487, Motion No. 69150, UID #2005-013-002] Patti, J.,
For the foregoing reasons, the third-party defendant's motion for summary judgment
dismissing the third-party claim on the merits is denied and its motion for dismissal of the claim
based on lack of subject matter jurisdiction pursuant to Court of Claims Act § 9(9-a) is granted.
October 15, 2008
Saratoga Springs, New York
HON. FRANCIS T. COLLINS
Judge of the Court of Claims
The Court considered the following papers:
1. Notice of motion dated March 5, 2008;
2. Affirmation of Marian S. Hertz dated March 5, 2008 with exhibits;
3. Affirmation of Saul Aronson dated July 8, 2008 with exhibits;
4. Reply affirmation of Marian S. Hertz dated July 14, 2008 with exhibits.