161 A.D.2d 385 | N.Y. App. Div. | 1990
Order, Supreme Court, New York County (Shirley Fingerhood, J.), entered on or about December 13, 1988, which granted the defendants’ motion for reargument of an earlier order of the same court, and upon reargument granted the defendants’ respective motions for summary judgment dismissing the complaint, unanimously reversed, on the law, and the motions for summary judgment denied, without costs.
Plaintiff Continental Insurance Company issued a policy insuring a group of independent California raisin growers, owners of over 800 farms, against all risks, from the time of the harvesting of grapes through the processing, for the period
The insured farmers sustained heavy losses arising from severe rainstorms on September 24, 1982. Continental ultimately paid its insureds $42 million as compensation under the policy, and asserted claims for reinsurance, including a claim for $500,000 against RLI, in accordance with its policy. RLI refused payment, claiming that Continental had misrepresented material facts concerning weather conditions and prior losses. The instant action followed wherein Continental asserts, in its first cause of action, a claim against RLI for breach of the reinsurance contract, and, in its second and third causes of action, alternative claims against, its broker, Hodson, for negligence and breach of contract.
In the decision on the initial motion by RLI, and cross motion by Hodson, for summary judgment dismissing the complaint, the IAS court found that there were numerous issues of fact present and denied summary judgment. When defendants moved for reargument, in the main merely rehashing the points made on the original motions, the IAS court reversed itself and granted summary judgment dismissing the complaint based on a finding that plaintiff breached its warranty that there were no known or reported losses, materially increasing RLI’s risk of loss, and that by reason thereof plaintiff was precluded from recovery under the policy. Upon our review of the record, we find, contrary to the IAS court’s conclusion, that there is a question of fact as to whether plaintiff breached the warranty, in addition to other material questions of fact. Accordingly we reverse and deny the motions for summary judgment.
At the outset, there is an issue as to the effective date of the reinsurance contract. In order to reduce its exposure under the policy, Continental’s representatives contacted various reinsurance brokers, including Hodson, earlier in September, for the purpose of obtaining facultative reinsurance from various sources. Continental divided the risk into "layers” for the purpose of placing the reinsurance. On September 15, 1982, Hodson’s representative, Molatto, obtained from RLI’s agent, McTaggart, an agreement to authorize placement of facultative reinsurance on plaintiff’s insurance for 5% of the first excess layer of $10 million over the first primary layer of responsibility of $10 million. Plaintiff claims that the reinsur
Moreover, even assuming that the warranty (WNKRL) did exist and that it was breached by plaintiff, a significant issue exists concerning the materiality of such breach. The defendants’ claims of a breach are based on the plaintiff’s failure to report several relatively minor incidents of damage, or "wet-tings”, to raisins on several farms, caused by small amounts of rainfall earlier in September, and the subsequent possibility of the rotting of 20 to 25 tons of raisins, as evidenced by postcard notifications from 55 farmers to plaintiff between September 8th and 16th. The repetition and highlighting of such claims, on the reargument motion, was the basis for the IAS court’s finding that plaintiff materially breached the warranty and its grant of summary judgment to defendants.
However, a breach of warranty does not defeat recovery under an insurance contract "unless such breach materially increases the risk of loss, damage or injury within the coverage of the contract” (Insurance Law § 3106 [b]). Ordinarily, the question of the materiality of a misrepresentation or breach of warranty is a question of fact for the jury (see, e.g., Sebring v Fidelity-Phenix Fire Ins. Co., 255 NY 382). It is only where the evidence concerning the materiality is clear and substantially uncontradicted that the question is a matter of law for the court to decide (see, Process Plants Corp. v Beneficial Natl. Life Ins. Co., 53 AD2d 214, affd 42 NY2d 928). Here the question of the materiality of any breach by the plaintiff in failing to report these earlier losses is not clear or uncontradicted. The policy here at issue is a $10 million excess layer over and
The IAS court primarily focused on RLI’s liability, and essentially coupled defendant broker Hodson’s possible liability with that of RLI instead of independently evaluating Hodson’s obligations to plaintiff in the context of their broker-client relationship. The record discloses questions of fact as to whether Hodson itself was negligent, or violated its instructions, in giving a warranty on plaintiff’s behalf and/or in failing to properly bind a policy on September 15. These issues precluded the granting of summary judgment dismissing plaintiff’s alternate claims against Hodson. Concur—Sullivan, J. R, Rosenberger, Asch, Ellerin and Smith, JJ.