        SUPREME COURT OF THE STATE OF NEW YORK
           Appellate Division, Fourth Judicial Department

616
CA 12-00261
PRESENT: SCUDDER, P.J., SMITH, CENTRA, LINDLEY, AND MARTOCHE, JJ.


RLI INSURANCE COMPANY, PLAINTIFF-RESPONDENT,

                    V                             MEMORANDUM AND ORDER

LESLIE SMIEDALA, ET AL., DEFENDANTS,
AND REGIONAL INTEGRATED LOGISTICS, INC.,
DEFENDANT-APPELLANT.


SLIWA & LANE, BUFFALO (KEVIN A. LANE OF COUNSEL), FOR
DEFENDANT-APPELLANT.

HURWITZ & FINE, P.C., BUFFALO (DAN D. KOHANE OF COUNSEL), FOR
PLAINTIFF-RESPONDENT.


     Appeal from a judgment (denominated order) of the Supreme Court,
Niagara County (Frank Caruso, J.), entered May 23, 2011. The
judgment, insofar as appealed from, denied the motion of defendant
Regional Integrated Logistics, Inc. for a declaration.

     It is hereby ORDERED that the judgment insofar as appealed from
is unanimously reversed on the law without costs, the motion of
defendant-appellant is granted and judgment is granted in favor of
defendant-appellant as follows:

          It is ADJUDGED and DECLARED that plaintiff is obligated
     to defend and indemnify defendant-appellant for the
     obligations it assumed pursuant to its indemnification
     agreement with defendant Michael J. Hale, and

          It is further ADJUDGED and DECLARED that a hearing to
     determine the legal services that should be apportioned
     between defendant-appellant and defendant Michael J. Hale is
     no longer necessary.

     Memorandum: Plaintiff commenced this action seeking judgment
declaring that it is not obligated to defend or indemnify defendant
Michael J. Hale and defendant-appellant, Regional Integrated
Logistics, Inc. (Regional), in the underlying personal injury action
and related third-party action under the commercial automobile
insurance policy issued by plaintiff to Regional. Defendant Leslie
Smiedala commenced the underlying personal injury action seeking
damages for injuries he allegedly sustained when the vehicle in which
he was a passenger collided with a vehicle driven by Hale, which Hale
had leased from Audi Financial Services and VW Leasing, Ltd.
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                                                         CA 12-00261

(Audi/VW), defendants-third-party plaintiffs in the underlying action.
Hale, an employee of Regional, was driving to the bank at the time of
the accident in order to make a deposit for Regional. Audi/VW
commenced the third-party action against Regional seeking contribution
and/or indemnification for any liability arising from Hale’s
negligence under the doctrine of respondeat superior.

     Hale and Regional moved for summary judgment declaring that
plaintiff must defend and indemnify them under the policy. Before
that motion was decided, Regional and Hale entered into an
indemnification agreement (R-H Agreement) pursuant to which Regional
agreed to indemnify and hold harmless Hale “from and against any and
all claims, damages, losses, expenses, liability and exposure,
including, but not limited to, counsel fees, costs and disbursements,
imposed upon or awarded against Hale as a result of and/or in
connection with” the motor vehicle accident. Although Supreme Court
denied the initial motion of Hale and Regional, the court thereafter
granted their motion for leave to reargue and, upon reargument,
granted the initial motion and issued the requested declaration. On a
prior appeal, we concluded that the court should have granted the
declaration only in favor of Regional but not Hale. We thus modified
the judgment accordingly (RLI Ins. Co. v Smiedala, 71 AD3d 1553 [first
appeal]).

     While the first appeal was pending, Hale and Regional moved for
summary judgment declaring that plaintiff was obligated to pay the
costs and legal fees incurred by them in defending the declaratory
judgment action commenced by plaintiff. The court granted that motion
but, on appeal, we modified the judgment by denying that part of the
motion with respect to Hale, based on our earlier determination that
plaintiff was not obligated to defend or indemnify Hale in the
underlying personal injury action (RLI Ins. Co. v Smiedala, 77 AD3d
1293 [second appeal]). We also remitted the matter to Supreme Court
“to determine the amount of reasonable attorneys’ fees to which
Regional is entitled in the declaratory judgment action following a
hearing, if necessary,” on the ground that the same attorney
represented Hale and Regional in the declaratory judgment action, and
it was not possible on the record before us to determine that part of
the attorneys’ fees attributable to each (id. at 1295).

     Following our decision in the second appeal, Regional moved for
summary judgment seeking a declaration that plaintiff was “obligated
to provide coverage to [Hale] for the contractual indemnification
agreement that [Regional] entered into with [Hale].” Regional also
sought a declaration that a hearing was no longer needed to determine
the amount of attorneys’ fees that should be attributed to Hale and
Regional. Regional contended in support of the motion, as it does on
this appeal, that plaintiff was “obligated to provide coverage for the
[R-H] [A]greement that Regional entered into with [Hale],” including
coverage for Regional’s obligation “to pay the counsel fees of
[Hale].” We conclude that the court erred in denying Regional’s
motion.

     We agree with Regional that our decision in the first appeal does
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                                                         CA 12-00261

not preclude us from deciding the merits of the issues raised on this
appeal inasmuch as our earlier decision neither addressed nor resolved
the contention that plaintiff is obligated to defend and indemnify
Regional for liabilities it assumed under the R-H Agreement (see New
York State Thruway Auth. v KTA-Tator Eng’g Servs., P.C., 78 AD3d 1566,
1567; Matter of El-Roh Realty Corp., 74 AD3d 1796, 1798).

     We further agree with Regional that the insurance policy issued
by plaintiff to Regional would cover the liability assumed by Regional
but for a policy exclusion providing that the insurance does not apply
to “[l]iability assumed under any contract or agreement.”
Nevertheless, the policy further provides that there is an exception
to that exclusion, which states that the exclusion does not apply to
liability “[a]ssumed in a contract or agreement that is an ‘insured
contract’ provided the ‘bodily injury’ or ‘property damage’ occurs
subsequent to the execution of the contract or agreement” (emphasis
added).

     We reject plaintiff’s contention that the liability coverage
section in the policy is not triggered by the R-H Agreement. “It is
well settled that a contract must be read as a whole to give effect
and meaning to every term . . . Indeed, ‘[a] contract should be
interpreted in a way [that] reconciles all [of] its provisions, if
possible’ ” (New York State Thruway Auth., 78 AD3d at 1567; see El-Roh
Realty Corp., 74 AD3d at 1799). If the policy had not been intended
to cover indemnification agreements such as the one at issue herein,
there would be no need to include an express provision excluding from
coverage indemnification agreements that were entered into after the
bodily injury or property damage occurred. Therefore, we must
interpret the policy in such a way that indemnification agreements are
encompassed by the coverage section. Regional does not dispute the
fact that the liability it assumed in the R-H Agreement would normally
be excluded from coverage because the R-H Agreement was executed after
the bodily injury or property damage occurred. Regional likewise does
not dispute that it violated a provision of the policy by assuming an
obligation without plaintiff’s consent. Regional correctly contends,
however, that plaintiff is precluded from relying on the exclusion or
the policy condition violated by Regional because plaintiff did not
timely disclaim coverage or deny liability.

     Insurance Law § 3420 (d) (2) requires an insurer who is seeking
to disclaim liability or to deny coverage to “give written notice as
soon as is reasonably possible of such disclaimer of liability or
denial of coverage to the insured.” The timely disclaimer requirement
applies whether the insurer is relying on a policy exclusion (see HBE
Corp. v Sirius Am. Ins. Co., 63 AD3d 1509, 1510) or the violation of a
policy condition (see Oster v Aetna Cas. & Sur. Co., 283 AD2d 409,
410), and “[t]he timeliness of an insurer’s disclaimer [or denial] is
measured from the point in time when the insurer first learns of the
grounds for disclaimer of liability or denial of coverage” (Matter of
New York Cent. Mut. Fire Ins. Co. v Steiert, 68 AD3d 1120, 1121; see
Continental Cas. Co. v Stradford, 11 NY3d 443, 449; Matter of Allcity
Ins. Co. [Jimenez], 78 NY2d 1054, 1056, rearg denied 79 NY2d 823;
George Campbell Painting v National Union Fire Ins. Co. of Pittsburgh,
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                                                        CA 12-00261

PA, 92 AD3d 104, 106).

     Regional established that plaintiff was notified as early as
April 2010 and on multiple occasions thereafter that Regional was
seeking coverage for the obligations it assumed under the R-H
Agreement. It is undisputed that plaintiff never formally disclaimed
liability or denied coverage, although we agree with plaintiff that
its opposition to the instant motion, which is dated December 10,
2010, may be deemed such a disclaimer or denial (see Allcity Ins. Co.,
78 NY2d at 1056; Matter of New York Cent. Mut. Fire Ins. Co. v
Gonzalez, 34 AD3d 816, 816). We conclude, however, that plaintiff’s
disclaimer and denial were untimely as a matter of law (see e.g. First
Fin. Ins. Co. v Jetco Contr. Corp., 1 NY3d 64, 70; Hartford Ins. Co. v
County of Nassau, 46 NY2d 1028, 1030, rearg denied 47 NY2d 951), and
thus plaintiff is obligated to defend and indemnify Regional for the
obligations Regional assumed in the R-H Agreement. Based on our
determination, we agree with Regional that a hearing is no longer
required to apportion the legal services associated with the defense
and indemnification of Regional and Hale.

     We note that we have not addressed Regional’s contention that a
potential third-party action by plaintiff against Hale would violate
the antisubrogation rule. That contention is not preserved for our
review inasmuch as Regional did not raise that contention in the
motion underlying this appeal. In view of our determination, we need
not address Regional’s remaining contention.




Entered:   June 8, 2012                        Frances E. Cafarell
                                               Clerk of the Court
