Garcia v. Government Employees Insurance Co.

Sgroi, J.,

dissents, and votes to affirm the order appealed from, with the following memorandum, in which Austin, J., concurs: The issue presented in this case is whether an umbrella insurance policy provided by the defendant Government Employees Insurance Company (hereinafter GEICO) to Jeanne Rakowski was entire, such that it provided $2,000,000 of coverage in exchange for a premium of $505, or whether it was severable, such that it provided $1,000,000 of coverage in exchange for a premium of $306, and an additional $1,000,000 in coverage in exchange for an additional premium of $199. If the contract was severable, then Rakowski’s payment of $306 was sufficient to secure $1,000,000 of coverage for the entire policy period, a result which would avoid a forfeiture of Rakowski’s umbrella insurance protection for a portion of the policy period, as favored by the law (see Matter of Prudential Prop. & Cas. Ins. Co. [Pearce], 126 Misc 2d 1044, 1047 [Sup Ct, Nassau County 1985], affd 120 AD2d 597 [1986]). Since the question of whether the contract was entire or severable rests on the intention of the parties, and there are factual questions as to those intentions, as demonstrated by ambiguity in the policy, billing statements, and notice of cancellation, I would affirm the denial of GEICO’s summary judgment motion.

Jeanne Rakowski was issued a personal umbrella insurance policy by GEICO, effective October 10, 2003. The policy carried a limit of liability of $1,000,000, and covered Rakowski’s primary residence and a car. The policy was renewed for the policy period of October 10, 2004, to October 10, 2005. In March 2005, Rakowski made a change to the policy to add another vehicle, after which her total premium for the policy was $306.

*1026On August 29, 2005, GEICO sent to Rakowski renewal papers for her policy, for the period of October 10, 2005, to October 10, 2006, at the same premium of $306. The letter, enclosing the renewal policy urged Rakowski to consider increasing the limits of her umbrella policy. The following day, Rakowski contacted GEICO and requested an increase in the coverage limit from $1,000,000 to $2,000,000, as well as the addition of a rental property in Brooklyn. On August 31, 2005, GEICO sent Rakowski “Amended Declarations,” containing the same policy number that appeared on her prior umbrella policies. The Amended Declarations listed the limit of liability as $2,000,000 and included the Brooklyn property. As a separate line item, a premium of $199 for “additional coverage to second million” was listed. The premium of $199, when added to the original $306 premium, brought the total premium to $505.

On the same day, although Rakowski was on a “one-pay” rather than an installment payment plan, she was sent a bill for the “minimum amount due” in the amount of $306. On October 18, 2005, Rakowski was separately billed for $199. While Rakowski paid $306, she did not pay the additional $199. On November 4, 2005, GEICO issued a notice of cancellation for nonpayment of premium, advising that her “insurance as indicated below is hereby Cancelled as of 12:01 a.m.” on May 19, 2006. “Below” was a box containing the policy number and stating: “Please act now to prevent cancellation of your insurance protection.”

On the afternoon of May 19, 2006, Rakowski loaned her car to an employee and the car was involved in an accident in which the plaintiff was injured. The following day, GEICO called Rakowski to attempt to collect “the premium,” but no one answered the telephone.

Upon an award of damages to the plaintiff arising from the accident, the plaintiff requested payment by GEICO of the amount of the judgment that remained unpaid after exhaustion of primary insurance policies. When GEICO failed to pay, the plaintiff commenced this action against GEICO pursuant to Insurance Law § 3420 to recover the amount of the unsatisfied judgment against Rakowski. GEICO moved for summary judgment dismissing the complaint, asserting that the entire umbrella policy was cancelled hours before the accident. The plaintiff responded that the additional coverage attributable to the unpaid premium of $199 was severable, and thus, there was a $1,000,000 umbrella policy, paid for by Rakowski and in effect at the time of the accident. The Supreme Court denied the motion, concluding that issues of fact existed as to whether the policy was severable.

*1027“Fundamentally and primarily, the question of divisibility or severability rests upon the question of intention of the parties deducible from the stipulations of the contract and the rules of construction governing the ascertainment of that intention” (First Sav. & Loan Assn. of Jersey City, N. J. v American Home Assur. Co., 29 NY2d 297, 299 [1971] [internal quotation marks omitted]; see Christian v Christian, 42 NY2d 63, 73 [1977]). “As a general rule, a contract is entire when by its terms, nature, and purpose, it contemplates and intends that each and all of its parts and the consideration therefor shall be common each to the other and interdependent. On the other hand, the contract is considered severable and divisible when by its terms, nature, and purpose, it is susceptible of division and apportionment” (First Sav. & Loan Assn. of Jersey City, N. J. v American Home Assur. Co., 29 NY2d at 299-300 [internal quotation marks omitted]). Where “ ‘the language of a contract is ambiguous, its construction presents a question of fact which may not be resolved by the court on a motion for summary judgment’ ” (Majawalla v Utica First Ins. Co., 71 AD3d 958, 960 [2010], quoting Pepco Constr. of N.Y., Inc. v CNA Ins. Co., 15 AD3d 464, 465 [2005]).

Here, GEICO failed to eliminate triable issues of fact as to whether the parties intended their contract to be severable, such that the notice of cancellation would affect only the increased coverage. In particular, the Amended Declarations provided to the insured listed a separate premium “for additional coverage to second million.” Rakowski was then separately billed $306, the same amount as the premium for the first $1,000,000 of coverage, and $199, the amount listed as the premium “for additional coverage to second million.” These facts are equivocal as to whether the parties intended the coverage for the first $1,000,000 and the coverage for the second $1,000,000, “and the consideration therefor” to be “common each to the other and interdependent” or to be divisible (First Sav. & Loan Assn. of Jersey City, N. J. v American Home Assur. Co., 29 NY2d at 299; cf. Matter of Nationwide Mut. Ins. Co. [Mason—Lumbermens Mut. Cas. Co.], 37 AD2d 15, 19 [1971]; Matter of Prudential Prop. & Cas. Ins. Co. [Pearce], 126 Misc 2d at 1046).

The notice of cancellation was similarly equivocal. It advised that Rakowski’s “insurance as indicated below” was cancelled. While the box that appeared “below” contained the policy number, it advised Rakowski that she should “act now to prevent cancellation of [her] insurance protection” (emphasis added) as opposed to her insurance policy. These facts make *1028this matter distinguishable from First Sav. & Loan Assn. of Jersey City, N. J. v American Home Assur. Co. (29 NY2d 297 [1971]), in which the Court of Appeals held that an endorsement added to an insurance policy to increase the amount of coverage in consideration of an additional premium was not divisible from the underlying policy, and thus, that a notice of cancellation for nonpayment of the additional premium affected the entire policy. In that case, the endorsement recited that it was “attached to and forming part of [the] policy” (id. at 299). Thus, the contract in that case, unlike in the present case, explicitly provided that the initial policy and the endorsement of additional coverage formed one, inseparable contract (see id. at 300). Similarly, as the Court of Appeals emphasized, the notice of cancellation in that case, as opposed to that issued in the present case, “specifically referred to [the] policy ... in its entirety,” reciting “the policy . . . issued to you, is cancelled” (id. at 299-300).

Finally, the insured in First Sav. & Loan was billed a separate premium for additional coverage because the endorsement was added months after the policy period began and the premium was paid. Here, in contrast, no premium had been paid at the time Rakowski requested additional coverage. Yet, even though Rakowski was not on an installment payment plan, rather than sending a bill for $505, GEICO billed Rakowski $306, representing the premium charged for the first $1,000,000 of coverage, and, separately, $199, representing the additional $1,000,000 of coverage.' The deposition testimony of GEICO’s representative as to the alleged reasons Rakowski was billed in that manner, which concerned GEICO’s automated billing system, merely raises an issue of fact.

Similarly, as my colleagues in the majority point out, after Rakowski requested the changes to her policy, and, as GEICO characterizes it, rejected its offer of the renewal policy, GEICO issued an entirely new declarations page. Yet, GEICO did not list a premium of $505 for $2,000,000 of coverage. Under these circumstances, the fact that GEICO persisted in listing a $306 premium for $1,000,000 of coverage, and added a separate $199 premium for a second $1,000,000 of coverage is not, as a matter of law, irrevelant. The Amended Declarations, particularly when coupled with the separate billing statements, created a factual question as to whether the parties agreed that GEICO would provide Rakowski with $2,000,000 of coverage if she paid $505, or, if they agreed that GEICO would provide her with $1,000,000 of coverage if she paid $306, and $2,000,000 of coverage if she paid an additional $199.

*1029Significantly, “the test to determine whether an insurance contract is ambiguous focuses on the reasonable expectations of the average insured upon reading the policy” (Matter of Mostow v State Farm Ins. Cos., 88 NY2d 321, 326-327 [1996]; see Hansard v Federal Ins. Co., 147 AD3d 734 [2017]). “A contract is unambiguous if the language it uses has ‘a definite and precise meaning, unattended by danger of misconception in the purport of the [agreement] itself, and concerning which there is no reasonable basis for a difference of opinion’ ” (Greenfield v Philles Records, 98 NY2d 562, 569 [2002], quoting Breed v Insurance Co. of N. Am., 46 NY2d 351, 355 [1978]; see Hansard v Federal Ins. Co., 147 AD3d 734 [2017]). Here, focusing on the reasonable expectations of the average insured, it cannot be said that the language of the policy, with its accompanying separate billing statements, was “unattended by danger of misconception” as to whether Rakowski could secure $1,000,000 of coverage by paying $306 (Breed v Insurance Co. of N. Am., 46 NY2d at 355).

GEICO further argues that the fact that it would have been liable to pay up to $2,000,000 under the policy had the accident occurred before May 19, 2006, demonstrates that the policy was not severable. This contention begs the question, however. If the policy was not severable, then GEICO would have been obligated to pay that amount prior to May 19, 2006, because, prorating the $306 premium, Rakowski paid for $2,000,000 of coverage up to that date. On the other hand, if the policy was severable, GEICO would only have been obligated to pay that amount because it failed to cancel the additional coverage sooner, on the ground of nonpayment.

In sum, GEICO failed to demonstrate, prima facie, that the subject policy was entire and indivisible, and that the notice of cancellation therefore affected the whole policy, as opposed to merely the additional $1,000,000 of coverage. As previously noted, “[c]ancellation, in general, is tantamount to forfeiture and not favored in the law” (Matter of Prudential Prop. & Cas. Ins. Co. [Pearce], 126 Misc 2d at 1047). Since GEICO failed to establish its prima facie entitlement to judgment as a matter of law, we need not consider the sufficiency of the plaintiff’s opposition papers (see Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853 [1985]).

Accordingly, I would affirm the denial of GEICO’s motion for summary judgment dismissing the complaint.