Court Opinion

ID: 5760248
Source: CourtListenerOpinion
Date Created: 2022-01-12 17:13:18.69062+00
Date Added: 2024-06-11T08:41:31.943990
License: Public Domain

Catterson, J.
(dissenting). Because in my opinion the attorney’s letter of August 12, 1993 on behalf of the nonparty Yale Club waiters constituted a claim, and that claim was made outside the subject policy period, I respectfully dissent. I believe that disclaimer of coverage by Reliance was warranted, and that therefore the order appealed should be reversed.
The issues in this case arise out of a “claims-made” insurance policy (hereinafter referred to as the policy) issued by Reliance Insurance Company (hereinafter referred to as Reliance) to The Yale Club of New York City, Inc. (hereinafter referred to as the Yale Club). The policy’s effective dates were from November 23, 1993 through November 23, 1994. It covered only “claims first made during the policy period.”
In the policy, the term “claim” was not defined. “Loss” was defined as “any amount which the directors and officers [were] legally obligated to pay” because of their “[w]rongful [a]cts.” Reliance obligated itself to pay “all Loss” that arose from the directors/officers’ wrongful acts associated with claims that were “first made during the policy period.” Section VII of the policy, entitled “Notice of Claim,” provided in relevant part that:
“A. If, during the [p]olicy [p]eriod or [discovery [p]eriod, the [c]ompany or the [directors and Officers:
“(1) shall receive written or oral notice from any party that it is the intention of each party to hold the [directors and Officers, or any of them, responsible for a [w]rongful [a]ct; or
“(2) shall become aware of any occurrence which may subsequently give rise to a claim being made against the [d]irectors and Officers, or any of them, for a [w]rongful [a]ct,
*52“and if the [c]ompany or [directors and [o]fficers shall in either case during such period give written notice as soon as practicable to the [i]nsurer . . . then any claim which may subsequently be made against the [directors or [o]fficers arising out of such [w]rongful [a]ct, shall, for the purpose of this policy, be treated as a claim made during the [pjolicy [y]ear.”
On August 12, 1993, more than three months prior to the Reliance policy period, the Yale Club received a letter (hereinafter referred to as the Letter) from an attorney representing 11 Yale Club waiters “with respect to wage claims.”1
The Letter arrived after a series of conversations between the Yale Club and the waiters’ union regarding allegations made by the waiters concerning wrongfully distributed commissions. The Letter was sent on behalf of a group of waiters who had declined union representation regarding their individual claims.2
From its very first sentence, the Letter could not have been a plainer statement that its subject matter was the claim being made on behalf of certain named employees of the Yale Club. The sentence read: “Please be advised that our office represents the above named employees of the Yale Club with respect to wage claims.” In the Letter, the waiters claimed, among other things, “that they [had] been deprived of tips and bonuses which amount to hundreds of thousands, and probably, millions, of dollars.” The Letter further alleges that “[t]he deprivation of these monies constitute[s] criminal violations, as well as civil violations of RICO and the New York State Labor Law, and fraud and conversion.” It requests 13 sets of relevant documents and information, as well as insurance information. Significantly, the Letter states that pursuant to court rules “counsel is under an obligation to make a reasonable inquiry into the facts before filing a pleading with the courts.” It is reasonable to assume that were it not for “court rules,” counsel would have already filed the summons and complaint.
Subsequently, on February 14, 1994, the waiters commenced an action in the District Court for the Southern District of New *53York alleging tip withholding, denial of wages, nonpayment of overtime, RICO violations and racial discrimination. On February 22, 1994, upon receipt of the summons and complaint, the Yale Club notified Reliance. On April 12, 1994, Reliance denied coverage on the grounds that the claims against the Yale Club were first made in the Letter and therefore were made prior to the policy period.
On April 7, 2000, the Yale Club settled with the waiters for $370,000. Shortly thereafter Reliance went into liquidation and the Yale Club submitted a proof of loss to its Ancillary Receiver for the sum of the $370,000 settlement, plus $405,005.07 in attorney fees, as well as interest at 9% from May 2000. Like Reliance, the Ancillary Receiver of Reliance asserted that the date of the Yale Club’s receipt of the Letter constituted the date upon which the waiters’ claims were first made, and, since this date occurred prior to the policy period, denied coverage.
The Yale Club and the Ancillary Receiver attended a hearing on June 13, 2006, which culminated in a written decision dated August 17, 2006. In the decision, the referee determined that the Yale Club’s claim was covered by the Reliance policy. Specifically, the referee determined that the Letter “was merely a request for information” and that the claim was properly filed after the Reliance coverage began.
Upon the Yale Club’s motion to confirm, the court upheld the referee’s decision. The court did not determine whether the Letter constituted a claim. Rather, the court determined “that the [L]etter might have otherwise constituted a notice of claim under Section VII had it been sent during the policy period does not lead to the flawed conclusion that it was a notice of claim outside the policy period.”
On appeal, the Ancillary Receiver maintains that the content of the Letter supports a finding that the Letter was “a claim” made, and that such claim predated the Reliance policy and, thus, fell outside its coverage. The Club, relying on In re Ambassador Group, Inc. Litig. (830 F Supp 147 [ED NY 1993]), argues that the Letter was not “a claim” because the Letter did not make a demand for specific relief. Rather, the Yale Club asserts that the Letter “merely requested some documents and information.” While indicating indirectly that there was a possibility of a future lawsuit, the Letter was, essentially, a mere inquiry. The Yale Club argues that it properly gave notice of “a claim” to Reliance upon its receipt of a summons and complaint, which was after the policy period had started to run and thus, it is entitled to recovery from Reliance.
*54For the reasons set forth below, I agree with the position taken by the Ancillary Receiver on behalf of Reliance. It is well settled that an insurance policy is a contract between the insurer and the insured and governs the agreement between them. (See White v Continental Cas. Co., 9 NY3d 264, 267 [2007] [equating insurance policies with other written contracts], citing Teichman v Community Hosp. of W. Suffolk, 87 NY2d 514, 520 [1996].) Thus, Reliance, pursuant to the terms laid out in the policy, contractually obligated itself to cover only those claims that were first made within the policy period.
The majority’s assertion that the only issue on this appeal is whether there was a claim made during the policy period is incorrect. That would be a facile analysis since it is uncontested that the Yale Club informed Reliance of the summons and complaint during the policy period. The relevant question, however, is whether there was a claim made prior to the Reliance policy period such that Reliance may properly deny coverage because a claim was first made outside of the policy period. In my opinion, there was just such a claim made prior to the policy period in the Letter.
Courts have long recognized that undefined, unambiguous terms in an insurance policy are given their ordinary meaning. (White, 9 NY3d at 267.) Here, even though the word “claim” is not specifically defined in the Reliance policy, “claim” should be given its ordinary understanding of a demand by a third party against the insured for money damages or other relief owed. (See e.g. American Ins. Co v Fairchild Indus., Inc., 56 F3d 435, 439 [2d Cir 1995] [where the court interpreted a standard New York claim provision as being “an assertion by a third party that in the opinion of that party the insured may be liable to it for damages within the risk covered by policy” and stated that “(a claim) ‘must relate to an assertion of legally cognizable damage, and must be a type of demand that can be defended, settled and paid by the insurer’ ” (quoting Evanston Ins. Co. v GAB Bus. Servs., 132 AD2d 180, 185 [1st Dept 1987] [where “a claim” was specifically defined in the agreement])]; see also Home Ins. Co. of Ill. [N.H.] v Spectrum Info. Tech., Inc., 930 F Supp 825, 846 [ED NY 1996] [stating that “the term ‘claim’ as used in liability insurance policies is unambiguous and generally means a demand by a third party against the insured for money damages or other relief owed”], citing In re Ambassador Group, 830 F Supp at 155.)
In my view, to treat the Letter as anything other than a “claim” would require this Court to ignore the entire substance *55of the Letter. The second paragraph of the Letter commences: “They claim, among other things, that they have been deprived of tips and bonuses which amount to hundreds of thousands, and probably, millions, of dollars.” The paragraph continues to enumerate four ways the third-party waiters suspected that their wages and tips were being improperly withheld. The Letter continues with the claim that “[t]he deprivation of these monies constitute [s] criminal violations . . . and fraud and conversion.”
The fact that the waiters claimed that the Yale Club was guilty of conversion of their tips is necessarily the equivalent of demanding remuneration for those tips. (See PJI 3:10 [“A person who, without authority, intentionally exercises control over the property of another person and thereby interferes with the other person’s right of possession has committed a conversion and is liable for the value of the property”].)
Moreover, the Letter did not arrive in a vacuum: it arrived after a meeting between the Yale Club and the waiters’ union, after an attempted arbitration and after a discontinued lawsuit all regarding matters that were clearly related to the claims asserted in the Letter. Finally, the Letter describes itself as a mere court-mandated precursor to a lawsuit.
Further, I contend that both the Yale Club and the majority improperly cite to the nonbinding U.S. District Court opinion in Ambassador to support their contention that the Letter was not a claim because it was not a “demand for money or services.” In Ambassador, the state insurance commissioner sent two letters to the insurer stating that he “ha[d] uncovered facts which [led] him to conclude that certain former directors and officers were guilty of acts falling within the scope of coverage afforded by the . . . policy.” (In re Ambassador Group, Inc. Litig., 830 F Supp at 151.)3 The policy did not define the term “claim” and the District Court held that neither of the two letters in ques*56tion constituted a claim as the term is normally viewed. (Id. at 154-155.)
In reaching its decision, the Ambassador court relied heavily upon the fact that the policy characterized the reporting of a “claim” to the insurer as giving notice and the reporting of a “claim” directly to the directors and officers as the making of a claim. (Id. at 154.) The court also relied upon the fact that the letters under evaluation did not specify an alleged wrongdoing nor did they contain a demand for relief. (Id. at 155.) Thus, the Ambassador court found that the letters in question did not constitute a claim. (Id. at 156.)
Notwithstanding, Ambassador is distinguishable from the instant case insofar as in this case, the Letter very clearly alleges wrongdoing. Furthermore, in Ambassador, the letters were sent to the insurance company and here, the Letter was sent directly to the directors and the officers of the Yale Club who had knowledge of the ongoing dispute with the waitstaff over tips. This fact clearly undercuts the majority’s characterization that the Letter constituted merely a notice of a potential claim. (See also Retirement Fund of Fur Mfg. Indus, by Foner v Republic Ins. Co., 755 F Supp 625 [SD NY 1991], affd 948 F2d 1275 [2d Cir 1991] [disputed letter was not found to be a “claim” in part because the letter was sent to the insurer and not the party against whom a claim was later made].)
Finally, in my opinion, the majority is mistaken in taking its analysis no further than the determination that the summons and complaint filed during the policy period are the only relevant “claim.” Under the majority’s interpretation of the contract, since the summons and complaint constitute the claim, then the Letter would have triggered an obligation of notice of claim to Reliance pursuant to section VII (A) (1) had it arrived during the policy period. Obligation to give notice of a claim “as soon as practicable” would also have been triggered by the Club’s officers and directors becoming aware (during the policy period) of an occurrence that could give rise to a claim. The majority’s position is that neither eventuality occurred here.
However, the Club’s officers and directors were certainly aware by the time they received the Letter that the dispute with the waiters would give rise to a lawsuit. The fact that they were aware of this by the first day of the policy period rather *57than becoming aware of it on the first day of the policy period is a metaphysical distinction that should not be argued here and should not foreclose the insurer’s right to disclaim coverage. It would be the height of absurdity to differentiate between the acts of becoming aware and being aware of an occurrence as of the policy period. It is undisputed that as of the start of the policy period with Reliance, the Yale Club was aware that a lawsuit was pending on the grounds of alleged wrongdoings by its officers and directors. This triggered the obligation pursuant to the terms of the policy to give the insurer notice as soon as practicable, that is on the first day of the policy period, thus allowing the insurer the option of rescinding or cancelling the policy or excluding the event from coverage.
Moskowitz and Acosta, JJ., concur with Tom, J.E Friedman and Catterson, JJ., dissent in a separate opinion by Catterson, J.
Order and judgment (one paper), Supreme Court, New York County, affirmed, without costs.

. At the time the Letter was received in August 1993, the Yale Club had a one-year insurance policy with nonparty Lloyds, London, effective November 23, 1992 through November 23, 1993.

. It is clear that the Yale Club was aware that these waiters had declined union representation by virtue of a letter sent by the Yale Club to the vice-president of the waiters’ union on May 5, 1993 which acknowledged that several waiters “did not want to be represented by [the union].”

. More specifically, the first letter stated that the “Commissioner ha[d] uncovered facts which [led] him to conclude that certain former directors and officers were guilty of acts falling within the scope of coverage afforded by the . . . policy, resulting in losses to the estate of the Ambassador.” (Id.) The letter concluded that National Union was thereby “given notice of a claim.” (Id.) The second letter stated,
“[L]et me assure you that we have read carefully and researched thoroughly the coverages available under the subject policy. We are also aware that claims pressed against directors and officers on behalf of the Commissioner as receiver are to be presented directly to those directors and officers. We have written you in *56accordance with the policy provision regarding notice of occurrence and to allow you an opportunity to commence any investigation you feel necessary.” {Id. at 151-152.)