Safeguard Insurance Company v. Frank Trent et al., Appellate Division, Second Dept., Feb. 26, 1968

Factual and Procedural Background

An insurance company (plaintiff/appellant) sought a declaration that its disclaimer of liability under an automobile insurance policy issued to defendant Frank Trent was valid. The plaintiff appealed from a judgment of the Supreme Court, Suffolk County (dated January 27, 1967, entered on stipulated facts), which adjudged that plaintiff is "obliged to afford coverage to and satisfy any judgment which may be recovered by" defendants Angelo and others Petillo in their separate personal-injury action against Trent. The Appellate Division affirmed the judgment with costs. The court's findings recite: defendants Petillo delayed in giving notice of the accident (about seven months before retaining attorneys, and two additional months before notice to plaintiff); plaintiff received notice of the accident July 28, 1965, its investigator obtained a statement December 8, 1965, the plaintiff received a copy of the summons and complaint October 18, 1965, obtained extensions to answer on October 26 and December 15, 1965, and disclaimed on December 17, 1965. The court found plaintiff's delay in disclaiming was unreasonable and prejudicial and held plaintiff estopped and having waived the timely-notice defense under the circumstances.

Legal Issues Presented

Whether the plaintiffs (defendants Petillo) breached the policy condition by failing to give timely notice or to ascertain the identity of the insurer.
Whether the insurer's disclaimer was valid given the insurer's own delay in disclaiming and its conduct after receiving notice.
Whether the insurer is estopped or has waived the defense of failure of timely notice under the Insurance Law and controlling precedents.

Arguments of the Parties

The opinion does not contain a detailed account of the parties' legal arguments.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Lauritano v. American Fid. Fire Ins. Co., 3 A.D.2d 564	Obligation to do everything reasonably expected to ascertain insurer identity and give notice as soon as reasonably expected.	The court relied on this principle to find Petillo failed to do everything reasonably expected to ascertain the carrier or give prompt notice.
affd. 4 N.Y.2d 1028	Affirmation of the rule stated in the preceding citation.	Referenced as the affirmance of the cited principle in Lauritano.
Deso v. London Lancashire Ind. Co., 3 N.Y.2d 127	Delay in notice can constitute a breach of the conditions of the policy.	The court cited Deso to support the conclusion that unexplained delay by Petillo breached the policy conditions.
Appell v. Liberty Mut. Ins. Co., 22 A.D.2d 906	Similar principle that delay may breach policy conditions and related estoppel principles.	Used to support that delay by claimants amounted to breach and to illustrate estoppel/waiver issues tied to insurer conduct.
affd. 17 N.Y.2d 519	Affirmation of the Appell decision cited above.	Referenced as the affirmance of the Appell decision relied upon.
Allstate Ins. Co. v. Bianco, 28 A.D.2d 676	Estoppel where insurer's failure to disclaim leads claimants to proceed and incur expense in the underlying action.	Applied to find Petillo relied on plaintiff's failure to disclaim and proceeded with labor and expense of their action.
Wallace v. Universal Ins. Co., 18 A.D.2d 121	Where carrier unreasonably delays disclaimer due to failure to investigate, it cannot assert lack of timely notice.	Cited to support the conclusion that plaintiff waived or could not rely on the timely-notice defense because it failed to investigate or communicate reasonably.
affd. 13 N.Y.2d 978	Affirmation of Wallace.	Referenced as the affirmance of Wallace.
Cohen v. Atlantic Nat. Ins. Co., 24 A.D.2d 896	Principle that insurer's own unreasonable delay in disclaimer/investigation prevents it from taking advantage of a claimant's failure to give timely notice.	Relied upon to find plaintiff waived the timely-notice defense by failing to investigate or communicate within a reasonable time.
[52 Misc.2d 212]	Reference to the trial-court/stipulated-facts proceeding (as cited in the opinion).	Cited in the opinion; reflects the underlying proceeding record accompanying the judgment under review.

Court's Reasoning and Analysis

The court determined two parallel lines of fact and law. First, citing Lauritano, Deso and Appell, the court found defendants Petillo failed to act reasonably to ascertain the insurer's identity or to give notice as soon as reasonably possible; there was an unexplained delay measured from the accident date — approximately seven months before retaining counsel and two additional months before notice — which constituted a breach of policy conditions. Second, the court held that plaintiff-insurer, despite the claimants' delay, was estopped under Insurance Law § 167 from asserting nonliability because plaintiff received notice July 28, 1965, its investigator obtained a statement December 8, 1965, the insurer received the summons and complaint October 18, 1965, obtained extensions to answer (Oct. 26 and Dec. 15, 1965) and did not disclaim until Dec. 17, 1965; this delay (about five months from learning of the accident and two months after receipt of the summons) was unreasonable and prejudicial. The court further concluded plaintiff waived the timely-notice defense by failing to investigate or communicate with its assured within a reasonable time; relying on Wallace and Cohen, the court reasoned that an insurer that unreasonably delays investigation or disclaimer cannot assert the lack of timely notice. Balancing these conclusions, the court affirmed the lower-court judgment obliging the insurer to afford coverage.

Holding and Implications

Holding: Judgment affirmed; the insurer is estopped/has waived the defense of nonliability for failure of timely notice and is obliged to afford coverage and satisfy any judgment recovered by the Petillos (affirmed with costs).

Implications: The direct effect is that plaintiff-insurer must provide coverage and satisfy any judgment in the underlying personal-injury action. The opinion resolves the coverage dispute on these facts by applying existing precedent on notice, estoppel and waiver; it does not announce any broader new precedent beyond its application of those existing rules.

Show full summary ...

SAFEGUARD INSURANCE COMPANY, Appellant, v. FRANK TRENT et al., Defendants, and ANGELO PETILLO et al., Respondents.

In an action by an insurance company to declare valid its disclaimer of liability under a policy of automobile insurance issued by it to defendant Frank Trent, plaintiff appeals from a judgment of the Supreme Court, Suffolk County, dated January 27, 1967 and made upon stipulated facts, which adjudged that plaintiff is "obliged to afford coverage to and satisfy any judgment which may be recovered by" defendants Petillo in their separate action for injuries against defendants Trent. Judgment affirmed, with costs. Contrary to the findings of the trial court, we find that defendants Petillo failed to do everything reasonably to be expected of them to ascertain the identity of the insurance carrier or to give it notice of the accident as soon as could reasonably be expected ( Lauritano v. American Fid. Fire Ins. Co., 3 A.D.2d 564, affd. 4 N.Y.2d 1028). We find there was unexplained delay by defendants Petillo in giving such notice to plaintiff; and we hold that such delay constituted a breach of the conditions of the policy ( Deso v. London Lancashire Ind. Co., 3 N.Y.2d 127; Appell v. Liberty Mut. Ins. Co., 22 A.D.2d 906, affd. 17 N.Y.2d 519). The extent of the delay is measured from the accident date. Here defendants Petillo, without offering any explanation, waited about seven months after the occurrence to retain attorneys who did not give notice to plaintiff until two months thereafter. However, we also find and hold that plaintiff is estopped from asserting its nonliability under the statute (Insurance Law, § 167). Plaintiff received notice of the accident on July 28, 1965. Its investigator contacted its assured and received a statement of the accident on December 8, 1965. On October 18, 1965 plaintiff received a copy of a summons and complaint that had been served upon its assured by defendants Petillo. Plaintiff applied for and received extensions of time to answer that complaint on October 26, 1965 and again on December 15, 1965. On December 17, 1965, plaintiff disclaimed because it had not received timely notice. Plaintiff's delay of about five months from the time it learned of the accident and its two-month delay after receiving the summons and complaint, before it disclaimed, was unreasonable and prejudicial to defendants Petillo in their personal injury action. In reliance on plaintiff's failure to disclaim they proceeded with the labor and expense of prosecuting their action against defendants Trent ( Appell v. Liberty Mut. Ins. Co., supra; Allstate Ins. Co. v. Bianco, 28 A.D.2d 676). We further find that plaintiff waived the defense of timely notice because it did not investigate the accident or communicate with its assured within a reasonable time after receiving notice of the accident. Where the carrier itself has unreasonably delayed in making a disclaimer as a result of its own failure to make diligent efforts to comply with its own responsibilities and obligations under the policy of insurance, it cannot take advantage of a failure to give timely notice of accident ( Wallace v. Universal Ins. Co., 18 A.D.2d 121, affd. 13 N.Y.2d 978; Cohen v. Atlantic Nat. Ins. Co., 24 A.D.2d 896). Beldock, P.J., Brennan, Rabin, Benjamin and Munder, JJ., concur. [ 52 Misc.2d 212.]

SAFEGUARD INSURANCE COMPANY v. TRENT