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

639
CA 12-00184
PRESENT: CENTRA, J.P., FAHEY, PERADOTTO, CARNI, AND SCONIERS, JJ.


STATE FARM FIRE & CASUALTY COMPANY,
PLAINTIFF-APPELLANT,

                    V                                     MEMORANDUM AND ORDER

MATTHEW RICCI, RAYMOND PINK AND MICHELLE PINK,
DEFENDANTS-RESPONDENTS.


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

CONWAY & KIRBY, LLP, LATHAM (ANDREW W. KIRBY OF COUNSEL), FOR
DEFENDANTS-RESPONDENTS RAYMOND PINK AND MICHELLE PINK.


     Appeal from an order of the Supreme Court, Oneida County (Anthony
F. Shaheen, J.), entered October 12, 2011 in a declaratory judgment
action. The order, insofar as appealed from, denied in part the
motion of plaintiff seeking partial summary judgment dismissing the
second, third, and fourth counterclaims of defendant Matthew Ricci.

     It is hereby ORDERED that the order so appealed from is
unanimously modified on the law by granting that part of plaintiff’s
motion for partial summary judgment dismissing the second counterclaim
of defendant Matthew Ricci to the extent that it alleges bad faith and
improper conduct by plaintiff and as modified the order is affirmed
without costs.

     Memorandum: Defendant Raymond Pink was a spectator at a youth
hockey game when a fight broke out among other spectators in the
stands. Defendant Matthew Ricci was one of those spectators, and
Raymond Pink was injured during the fight. Raymond Pink and his wife,
defendant Michelle Pink, subsequently commenced a personal injury
action (hereafter, underlying action) against, inter alia, Ricci,
seeking damages for the injuries that Raymond Pink sustained.
Plaintiff, State Farm Fire & Casualty Company (State Farm), insured
Ricci pursuant to a policy of homeowner’s insurance (policy) and
reserved its right to deny and disclaim coverage in the underlying
action in a letter sent to Ricci five days after State Farm received
its first notice of the underlying action. Four days after reserving
its right to deny coverage, State Farm advised Ricci that, based on
the question of coverage, Ricci had the right to select attorneys of
his choice to defend him at State Farm’s expense in the underlying
action. Ricci did not select independent counsel to defend him in
that action.
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                                                         CA 12-00184

     Approximately two years later, State Farm commenced this action
seeking, inter alia, a declaration of the rights of the parties under
the policy. Ricci joined issue by submitting an answer in which he
asserted four counterclaims, the second of which alleged that Ricci
“is entitled to have his attorney[s’] fees paid by [State Farm] with
reference to the cost of defending [the underlying] action,
particularly in view of the bad faith and improper conduct engaged in
by [State Farm] and its representatives and agents.” The Pinks
submitted an answer that did not allege that State Farm had acted in
bad faith.

     State Farm subsequently moved for partial summary judgment
dismissing Ricci’s second through fourth counterclaims. Supreme Court
granted only those parts of the motion with respect to the third and
fourth counterclaims. We modify the order by granting that part of
the motion with respect to Ricci’s second counterclaim to the extent
that it alleges bad faith and improper conduct by State Farm.

     “[I]n order to establish a prima facie case of bad faith [based
on a disclaimer of coverage], [a party] must establish that the
insurer’s conduct constituted a gross disregard of the insured’s
interests . . . In other words, [the party] must establish that the .
. . insurer engaged in a pattern of behavior evincing a conscious or
knowing indifference to the interests of the insured” (Bennion v
Allstate Ins. Co., 284 AD2d 924, 926 [internal quotation marks
omitted]; see Pavia v State Farm Mut. Auto. Ins. Co., 82 NY2d 445,
453-454, rearg denied 83 NY2d 779).

     Here, State Farm met its initial burden on that part of the
motion with respect to its alleged bad faith and improper conduct (see
generally Zuckerman v City of New York, 49 NY2d 557, 562). Within
days of receiving the complaint in the underlying action, State Farm
reserved its right to deny and disclaim coverage (see Progressive
Northeastern Ins. Co. v Farmers New Century Ins. Co., 83 AD3d 1519,
1520) and, shortly thereafter, it afforded Ricci the opportunity to
select attorneys of his choice to represent him in the underlying
action at State Farm’s expense (see Public Serv. Mut. Ins. Co. v
Goldfarb, 53 NY2d 392, 401; Hall v McNeil, 125 AD2d 943). State
Farm’s reservation of rights is based on the complaint and, after
reserving its right to deny and disclaim coverage, State Farm
maintained its defense of Ricci in the underlying action. By
commencing this declaratory judgment action, State Farm seeks merely
to clarify its obligations under the policy, and such an approach is
not only permissible but advisable (see Lang v Hanover Ins. Co., 3
NY3d 350, 356).

     With respect to the issue of State Farm’s alleged bad faith and
improper conduct, defendants failed to raise a triable issue of fact
sufficient to defeat the motion. Ricci has not submitted a brief in
this appeal, and we assume for the sake of argument that the Pinks
have standing to oppose it. Contrary to the contention of the Pinks,
State Farm’s failure to disclaim coverage in a timely manner is
insufficient to establish bad faith. To the extent that State Farm
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                                                         CA 12-00184

failed to notify the Pinks in a timely manner that it disclaimed
coverage based on a policy exclusion, the untimely disclaimer would be
ineffective with respect to the Pinks (see Arida v Essex Ins. Co., 299
AD2d 902, 903; cf. HBE Corp. v Sirius Am. Ins. Co., 63 AD3d 1509,
1510). Moreover, the declaratory judgment action is premised upon the
theory that the claim is not covered by the policy in the first
instance, and no disclaimer is required where a claim falls outside
the scope of coverage afforded by the policy (see Markevics v Liberty
Mut. Ins. Co., 97 NY2d 646, 648).

     Contrary to the Pinks’ further contention, Insurance Law § 3420
(former [d]) considers the time in which an insurer must disclaim
coverage, not the time in which an insurer may bring a declaratory
judgment action seeking a determination of its policy obligations. We
reject the contention of the Pinks that State Farm’s delay of
approximately two years between the time it reserved its right to
disclaim or deny coverage and its commencement of this action evinces
bad faith. In addition, there is no merit to the Pinks’ contention
that State Farm improperly relied on sealed records from the criminal
proceedings against Ricci in determining whether to deny coverage for
Ricci in the underlying action. There is no merit to the Pinks’
contention that the subject records were unsealed only with respect to
the underlying action (Pink v Ricci, 74 AD3d 1773). In fact, in the
underlying action, the Pinks moved for an order “directing that all
court and police records, statements, investigation and transcripts
involving the criminal proceeding against [Ricci] in the City of Rome
Court regarding the November 26, 2006 incident for which [he]
plead[ed] to assault in the third degree . . . [be] unsealed,” and
that relief was granted. We concluded in the appeal in the underlying
action that Ricci waived his statutory privilege of confidentiality
with respect to those records by asserting cross claims alleging that
he had been harmed by Raymond Pink and others acting in concert with
him (id. at 1774). Here, the Pinks contend that the cross claims were
asserted approximately one week after State Farm first learned of the
underlying action and several months before the records at issue were
first disclosed in the underlying action by the Pinks, who had
obtained them through a Freedom of Information Law request. Put
differently, nothing in the record suggests that State Farm obtained
the records at issue while they were sealed. We have considered the
Pinks’ remaining contentions with respect to State Farm’s alleged bad
faith and improper conduct, and we conclude that none has merit.

     We next turn to the issue whether the court erred in denying
without prejudice pursuant to CPLR 3212 (f) that part of the motion
with respect to Ricci’s second counterclaim to the extent that it
alleges bad faith and improper conduct by State Farm. “Although a
motion for summary judgment may be opposed on the ground ‘that facts
essential to justify opposition may exist but cannot then be stated’ .
. ., ‘the opposing party must make an evidentiary showing supporting
[that] conclusion, mere speculation or conjecture being
insufficient’ ” (Preferred Capital v PBK, Inc., 309 AD2d 1168, 1169;
see Newman v Regent Contr. Corp., 31 AD3d 1133, 1134-1135). Here, for
the foregoing reasons, the Pinks’ contention that State Farm acted in
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                                                         CA 12-00184

bad faith is merely speculative, and the court thus abused its
discretion in denying that part of the motion without prejudice and
with leave to renew following further discovery (see Welch Foods v
Wilson, 277 AD2d 882, 883; cf. Rincon v Finger Lakes Racing Assn.,
Inc., 11 AD3d 950).

     Finally, we conclude that the court properly denied that part of
the motion with respect to Ricci’s second counterclaim to the extent
that it seeks attorneys’ fees, inasmuch as “ ‘an insured who prevails
in an action brought by an insurance company seeking a declaratory
judgment that it has no duty to defend or indemnify the insured may
recover attorneys’ fees regardless of whether the insurer provided a
defense to the insured’ ” (RLI Ins. Co. v Smiedala, 77 AD3d 1293,
1295, quoting U.S. Underwriters Ins. Co. v City Club Hotel, LLC, 3
NY3d 592, 598).




Entered:   June 15, 2012                        Frances E. Cafarell
                                                Clerk of the Court
