The plaintiff, Evangelos Car Wash, Inc., is located at 2302 Arthur Kill Road, Staten Island, New York. On April 27, 2002, there was a collision between a motorcycle and a truck in front of 2286 Arthur Kill Road, about 200 feet from the car wash. A witness told the car wash owner, Konstantinos Siozios, that the motorcyclist hit the truck when he went into the opposite lane of traffic in an attempt to pass a slow moving vehicle. In May 2003, the motorcyclist, Andrew Reyes, commenced an action against the car wash. The complaint alleged that Reyes slid because the street was wet in front of the car wash.

On June 3, 2003, Reyes allegedly served the summons by leaving a copy of the summons and complaint at the car wash with the managing agent, John Loman. However, the car wash claimed that it never received the summons and complaint in June 2003 because no one by the name of John Loman worked at the car wash. In a letter dated December 2, 2003, Reyes attorney advised the car wash that it was in default. On March 5, 2004, the car wash was served with motion papers for a default judgment in the underlying action. On March 8, 2004, the car wash faxed a copy of the papers to its insurance broker. On March 16, 2004, the broker faxed Utica First a Notice of Claim.

Insurer Denies Coverage

In a letter dated March 18, 2004, Utica disclaimed coverage due to the late notice of the underlying action. The insurance policy provided that in case of an occurrence, or if an insured becomes aware of anything that indicates that there might be a claim, the insured must promptly give notice to us or our agent.

Additionally, the policy provided that if a claim is made or a suit is brought, the insured must promptly send [Utica First] copies of all legal papers, demands, and notices. The disclaimer set forth that the car wash knew of the potential claim at least by June 3, 2003, when it was served with the summons and complaint, if not on the date of the loss. Thus, Utica was denying coverage due to the insureds failure to notify it in a timely fashion.

In April 2004, the car wash commenced this declaratory judgment action seeking a declaration that Utica was obligated to defend and indemnify the plaintiff in the underlying action. Utica moved for summary judgment dismissing the complaint. The car wash cross-moved for summary judgment for a declaration that Utica was obligated to defend and indemnify the plaintiff in the underlying action.

The court held, first, that, When an insurance policy requires that notice of an occurrence or action be given promptly, notice must be given within a reasonable time in view of all of the facts and circumstances. Providing an insurer with timely notice of a potential claim is a condition precedent, and thus absent a valid excuse, a failure to satisfy the notice requirement vitiates the policy. An insureds reasonable, good-faith belief in non-liability may excuse a delay in notifying the insurer of an accident. The issue of reasonableness poses a legal question for the court, rather than an issue for the trier of fact.

Platiff Had Good-Faith Belief in its Non-Liability

In the instant case, the disclaimer stated: It is well established that you were aware of the potential claim if not on the date of loss, but as early as June 3, 2002, when you were served with a summons and complaint.

However, under the circumstances of this case, the plaintiff had a reasonable, good-faith belief in its non-liability. Neither the manner in which the plaintiff believed that accident occurred " the motorcyclist going into the opposite lane of traffic to pass a slower moving vehicle " nor where the accident occurred " 200 feet down the road from the car wash " would have made a prudent person believe that a personal injury claim would be pursued. Thus, the court finds that it was reasonable for the plaintiff not to notify the defendant of the occurrence on the date of or shortly after the accident.

The only other ground stated in the notice of disclaimer, was that the plaintiff was aware of the underlying action on June 3, 2003. However, the plaintiff explained that it was not served in June 2003, as no one by the name of John Loman was working at the car wash at that time. In fact, the motion for a default judgment in the underlying action was withdrawn and the plaintiff allowed to assert an answer, without a traverse hearing being held. Accordingly, the court finds that it was reasonable for the plaintiff not to notify the defendant of the claim in June, 2003.

In its papers in opposition to the plaintiffs cross-motion for summary judgment, the defendant now argues that even if the plaintiff was not served with the summons and complaint in June 2003, the plaintiff became aware of the underlying action in December 2003, when Reyes attorney mailed it a letter advising of the default. The defendant contends that the three month delay from December 2003 until March 2004, when the plaintiff notified its broker of the underlying action, was unreasonable as a matter of law. Since this ground was not raised in the letter of disclaimer, the defendant is now estopped from raising it in the instant action as a ground for disclaiming coverage.

The insureds motion for summary judgment was granted and it was declared that the insurer was obligated to defend and indemnify the plaintiff Evangelos Car Wash, Inc. in the underlying action of Reyes v. Evangelos Car Wash, Inc., Index No. 11635/2003. [IA]

Evangelos Car Wash, Inc. v Utica First Ins. Co., 2006 NY Slip Op 51495 (U), (Supreme Court, Richmond County) (McMahon, J.) (Index no. 11147/04)