The following e-filed documents, listed by NYSCEF document number (Motion 001) 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 25, 28, 29, 30, 31, 32, 33, 34, 35, 36, 37, 38, 39, 40, 41, 42, 43, 44 were read on this motion to/for SUMMARY JUDGMENT. DECISION ORDER ON MOTION The motion by plaintiff for summary judgment is granted and the cross-motion by defendant is denied. Background This insurance coverage dispute relates to an underlying action in the Bronx. Plaintiff owns a condo in the Bronx and, while serving on the condo’s Board of Managers, allegedly made defamatory statements about another board member (Cheryl Keeling). Plaintiff purportedly said that Keeling should be removed from the board because she had not paid her common charges for many years. Keeling then brought a lawsuit after she was removed from the board. After a motion to dismiss, all claims were dismissed except for the defamation claims against plaintiff (and other board member). Initially, plaintiff received coverage under a separate policy issued by non party Wesco to the condo board. However, that policy applied to bodily injury and property damage and, apparently, Wesco disclaimed coverage for the defamation claims. In fact, Wesco commenced a declaratory judgment action against plaintiff in June 2020. Plaintiff claims that the condo purchased a commercial general liability insurance policy from defendant. Here, she seeks coverage under that policy and points to a section entitled “Personal and Advertising Injury Liability.” Plaintiff points out that this provision specifically refers to the types of actions asserted against her in the defamation lawsuit. In opposition and in support of its cross-motion for summary judgment, defendant claims that plaintiff’s failure to timely notify defendant about her claim deprived defendant of its ability to participate in the defense. Defendant argues that Wesco defended the action in way that benefitted it — it obtained dismissal of all the causes of action that were covered under Wesco’s policy. In reply, plaintiff claims that defendant has suffered no prejudice as a result of plaintiff’s late notice. She insists that defendant has not met its burden to show that its ability to defend the action has been materially impaired. Discussion Insurance Law §3420(c)(2)(C) states that “The insurer’s rights shall not be deemed prejudiced unless the failure to timely provide notice materially impairs the ability of the insurer to investigate or defend the claim.” Plaintiff admits that ordinarily, the burden would be on her to show that defendant was not prejudiced by the delay in her claim pursuant to Insurance Law §3420(c)(2)(A) but that, here, an endorsement to the policy shifted the burden to defendant. The endorsement states that the failure to give timely notice won’t invalidate a claim “unless the failure to provide such timely notice has prejudiced us [defendant]” (NYSCEF Doc. No. 16 at 171). Although the Court does not agree with plaintiff’s view that this provision necessarily intended to shift the burden under the Insurance Law, this issue is not dispositive. The central question on this motion is whether, as matter of law, the four-year delay between the time the Keeling lawsuit was commenced in 2016 and when plaintiff sought coverage from defendant constituted a delay that prejudiced defendant. Plaintiff claims she did not discover the existence of the policy until August 2020, right after she found out she was sued by Wesco (Wesco sought declaratory relief that it did not have to provide coverage). The Court grants the motion by plaintiff and denies the cross-motion. As an initial matter, the Court observes that plaintiff did not secure the subject policy and she claims she was never told by anyone on the board about the policy. Defendant did not rebut these claims by plaintiff. “[A] justifiable lack of knowledge of insurance coverage may excuse a delay in reporting an occurrence” (Winstead v. Uniondale Union Free School Dist., 201 AD2d 721, 723 [2d Dept 1994]). Plaintiff was not the president of the board nor did she have a role that involved the procurement of the policy. On these papers, there is no reason to believe that plaintiff knew or should have known about defendant’s policy with the board. Moreover, plaintiff had no reason to look for other coverage because Wesco took over the defense of the case. While defendant relies on the Wesco letter dated October 2016 which disclaims coverage for defamation (NYSCEF Doc. No. 33), that does not compel a different outcome because of the procedural history of the underlying Keeling case in the Bronx. A review of the First Department’s decision in that case shows that Wesco moved to dismiss the whole case, including the defamation causes of action (Keeling v. Salvo, 188 AD3d 463, 131 NYS3d 885(Mem) [1st Dept 2020]). There is a detailed discussion about the defamation claims and why they survived the motion to dismiss (id. at 463-64). So, from plaintiff’s perspective, there was no need to seek out other possible coverage when Wesco was trying to dismiss those claims (despite disclaiming coverage). The Court also observes that Wesco obviously felt it needed declaratory relief regarding its refusal to defend plaintiff any longer because it filed its own lawsuit against plaintiff on June 12, 2020. Plaintiff then sent a letter to defendant on August 18, 2020 seeking coverage. Although a four-year delay is certainly not insignificant, this is not a case where the plaintiff sat on her duty to seek applicable insurance coverage. She sought and obtained coverage and nearly had the entire case dismissed. Once Wesco brought a case against her, she sought additional coverage from defendant three months later. The Court also finds that despite the delay, defendant did not suffer any prejudice. This is a straightforward defamation case where Keeling contends certain comments were made and defendant insists that she never made the allegedly defamatory statements (NYSCEF Doc. No. 12, 4). Although defendant claims that Wesco defended the case in such a way as to dismiss only those claims its policy covered, there is no evidence to support that claim. Defendant does not explain what legal strategy it is no longer able to employ. This is not a case involving personal injuries where a defendant may want to utilize its preferred doctors for an IME or where the witnesses are no longer available. The case will come down to whether a fact finder 1) believes the statements were made and 2) if the statements were made, that they were made with the requisite intent to support a defamatory cause of action. Summary The instant motion requires the Court to consider the full circumstances. On the one hand, the Board of Managers paid for an insurance policy and the claims here clearly fit under the terms of that policy. On the other hand, there was a significant delay between the commencement of the Keeling action and when plaintiff sought coverage. But the factors present here — that plaintiff did not purchase or know about the policy and that she was initially provided with insurance coverage all suggest she did not unreasonably delay in seeking coverage from defendant. Accordingly, it is hereby ORDERED that the motion by plaintiff for summary judgment is granted, defendant’s affirmative defenses are severed and dismissed, and the cross-motion by defendant for summary judgment is denied; and it is further DECLARED that defendant must provide plaintiff with defense and indemnification in the Keeling action now pending in Bronx County Supreme Court under Index No. 302945/2016. CHECK ONE: X CASE DISPOSED NON-FINAL DISPOSITION GRANTED DENIED GRANTED IN PART X OTHER APPLICATION: SETTLE ORDER SUBMIT ORDER CHECK IF APPROPRIATE: INCLUDES TRANSFER/REASSIGN FIDUCIARY APPOINTMENT REFERENCE Dated: September 23, 2021
