“This is an insurance coverage dispute concerning whether plaintiff Tower must defend and indemnify its insured, defendant Babylon Fish & Clam, Inc. (Babylon), under an occurrence-based commercial general liability insurance policy. The underlying lawsuit is a wrongful death action brought by defendant Sandra Menken, individually and as executor of the estate of Michael J. Menken, arising out of an alleged food-poisoning incident at Babylon’s restaurant on July 16, 2007. Tower alleges that Babylon forfeited its right to coverage under the policy by waiting nearly a year before reporting the incident to Tower, in violation of the policy condition that the insured give notice of a claim ‘as soon as is practicable.’” “On or about June 26, 2008, almost one year after the incident, Babylon, through its broker, notified Tower of the incident by forwarding the underlying summons and complaint and a notice form. Tower disclaimed coverage by letter dated July 23, 2008, alleging that Babylon failed to give timely notice of the claim. Tower alleged that Babylon was aware of the occurrence giving rise to the underlying action on or about August 12, 2007, yet failed to notify Tower until June 27, 2008.”

“We agree with Tower that notice of the occurrence was untimely as a matter of law. Tower established that its insured, Babylon, failed to report the incident for nearly one year. In response, Babylon failed to demonstrate that a reasonably prudent person, upon learning of the incident, would have a good faith, objective basis for believing that litigation would not be commenced (see Ferreira v Mereda Realty Corp., 61 AD3d 463 [2009]). Having failed to do so, the insurer was entitled to summary judgment in its favor declaring that it had no duty to defend or indemnify Babylon.”

“Further, the record evidence shows that Babylon should have reasonably anticipated that a claim would be asserted. Mrs. Menken notified Babylon less than one month after the incident that her husband had become sick due to food he ate at the restaurant. This statement, whether or not true, should have reasonably alerted the insured that a claim was possible. On the following day, according to Melissa Laroque, Babylon’s president, an inspector from the Suffolk County Department of Health Services came to inspect the restaurant based on a report that a patron had become ill as a result of eating clams. Laroque further admitted that the health inspector returned two days later, on August 15, 2007, at which time he informed her that the sick patron was the decedent, Michael Menken, and advised her of ‘some deficiencies’ uncovered by his inspection.”

“The insured claims that it reasonably believed, based on the health inspector’s alleged statements about the decedent’s prior health condition and favorable inspection of the restaurant, that it bore no liability for the decedent’s injuries and death. However, the relevant legal standard is ‘not whether the insured believes he will ultimately be found liable for the injury, but whether he has a reasonable basis for a belief that no claim will be asserted against him’ (SSBSS Realty Corp. v Public Serv. Mut. Ins. Co., 253 AD2d 583, 584 [1998]).” All concur except Gonzalez, P.J., who concurs in a separate memorandum as follows:

GONZALEZ, P.J. (concurring) “I concur with the majority’s result, granting plaintiff ’s motion for summary judgment declaring that it is not obligated to defend its insured, defendant Babylon, in the underlying litigation.”

“However, I would find that it was Babylon’s failure to conduct any inquiry into the details of the alleged food poisoning after having been made aware of the patron’s illness that requires this result. In Great Canal Realty Corp. v Seneca Ins. Co., Inc. (5 NY3d 742, 743-744 [2005]), the Court of Appeals stated that, while an insured’s reasonable ‘good-faith belief of nonliability’ may excuse a failure to give timely notice, ‘it may be relevant on the issue of reasonableness, whether and to what extent, the insured has inquired into the circumstances of the accident or occurrence’. The Court found that the insured in that case had failed to raise a triable issue of fact as to whether its delay in giving notice was reasonably founded upon a good-faith belief of nonliability.”

“In this case, in the week after Babylon received an oral complaint from the wife of a patron who alleged that her husband suffered food poisoning from a meal at its restaurant, the Suffolk County Department of Health Services conducted two inspections of the premises. Yet Babylon did not notify its insurer of the incident until approximately a year later, after it was sued by the wife of the patron, who had died four days after allegedly eating at the restaurant. Although it was incumbent upon Babylon to follow up on the patron’s complaint to determine whether it could face liability for the patron’s alleged food poisoning, it undertook no independent investigation in this regard. Thus, like the plaintiff in Great Canal Realty Corp., Babylon failed to raise an issue of fact as to the reasonableness of its claimed belief of nonliability.

Medical Provider’s License Revoked

Matter of Tribeca Med., P.C. v New York State Dept. of Health

Proceeding pursuant to CPLR article 78 (initiated in this Court pursuant to Public Health Law § 230-c [5]) to review a determination of the Administrative Review Board for Professional Medical Conduct which annulled petitioner’s certificate of incorporation. In June 2008, the Bureau of Professional Medical Conduct issued a statement of charges alleging that petitioner, a professional service corporation engaged in the practice of medicine, committed professional misconduct under Education Law § 6530 (16) by failing to comply with the provisions of Business Corporation Law § 1503 which prohibit non-physicians from owning or controlling medical service corporations.

On July 21, 2008, the notice of hearing and statement of charges were served on petitioner via the Secretary of State, as petitioner’s authorized agent for that purpose. Petitioner did not submit an answer, nor did it appear at either the September 3, 2008 prehearing conference or the September 15, 2008 hearing before a Hearing Committee of respondent State Board for Professional Medical Conduct. In an October 3, 2008 decision, the Hearing Committee sustained the charge of misconduct and, as a penalty, directed that petitioner’s certificate of incorporation be annulled.

Petitioner thereafter sought review before respondent Administrative Review Board for Professional Medical Conduct (hereinafter ARB), arguing that it had been unaware of the charge against it, therefore the Hearing Committee’s determination should be nullified and petitioner be permitted to serve an answer. The ARB denied petitioner’s request and affirmed, prompting this CPLR article 78 proceeding.

We confirm. Notably, petitioner does not contend that personal jurisdiction was not obtained over it or that the Secretary of State was not properly served (see generally Associated Imports v Amiel Publ., 168 AD2d 354, 354 [1990], lv dismissed 77 NY2d 873 [1991]); instead, petitioner maintains that the ARB unreasonably refused to open the default and allow it to serve an answer. While we agree with petitioner’s assertion that the ARB possessed the discretionary “authority to remand a case to the [Hearing Committee] for reconsideration or further proceedings,” including relieving petitioner of its default (Public Health Law § 230-c [4] [b]; see e.g. Matter of Stratford, 2000 NY Phys Dec LEXIS 54, at *6-*7; see also Matter of Lake Placid Club v Abrams, 6 AD2d 469, 473 [1958], affd 6 NY2d 857 [1959]), we find nothing in the record indicating that petitioner had any meritorious defense to the statement of charges (see CPLR 317; Eugene Di Lorenzo, Inc. v A.C. Dutton Lbr. Co., 67 NY2d 138, 141-142 [1986]; Maines Paper & Food Serv. v Farmington Foods, 233 AD2d 595, 596 [1996]) and conclude that the ARB’s denial of such relief under the circumstances herein was not “arbitrary and capricious, affected by an error of law or an abuse of discretion” (Matter of Singh v New York State Dept. of Health Bd. of Professional Med. Conduct, 74 AD3d 1391, 1392 [2010] [internal quotation marks and citations omitted]). Accordingly, the ARB’s determination regarding petitioner’s  application will not be disturbed. Nor are we persuaded by petitioner’s contention that the penalty of annulment of its certificate of incorporation was so disproportionate to the complained-of conduct as to shock one’s sense of fairness (see Matter of Sundaram v Novello, 53 AD3d 804, 808 [2008], lv denied 11 NY3d 708 [2008]). Significantly, the ARB found that the record proof “demonstrated that unqualified persons incorporated and operated” petitioner. Thus, given the record before us, we find no basis to disagree with the ARB’s further conclusion that annulment constituted an appropriate penalty under the circumstances. Kavanagh, McCarthy and Garry, JJ., concur. ADJUDGED that the determination is confirmed, without costs, and petition dismissed.

Ambiguity of the Word “Resides” Creates Issue of Fact as to Whether Homeowners are Entitled to Coverage

Dean v Tower Ins. Co. of N.Y.

When an insured buys a house but is delayed in moving in because a problem is discovered in the house which must be fixed before they can live in it, do they “reside” in the house for purposes of their homeowner’s policy? The Appellate Division says that at least in the case of this policy, the term “resides” is ambiguous. — LNR

Order, Supreme Court, New York County (Joan A. Madden, J.), entered May 7, 2010, which granted defendant’s motion for summary judgment dismissing the complaint and denied plaintiffs’ cross motion for summary judgment on liability, unanimously modified, on the law, defendant’s motion denied, the complaint reinstated, and otherwise affirmed, without costs.

Defendant failed to satisfy its prima facie burden on its motion for summary judgment. Because the “residence premises” insurance policy fails to define what qualifies as “resides” for the purposes of attaching coverage, the policy is ambiguous in the circumstances of this case, where the plaintiffs-insureds purchased the policy in advance of closing but were then unable to fulfill their intention of establishing residency at the subject premises due to their discovery and remediation of termite damage that required major renovations. “[B]efore an insurance company is permitted to avoid policy coverage, it must satisfy the burden which it bears of establishing that the exclusions or exemptions apply in the particular case, and that they are subject to no other reasonable interpretation” (Seaboard Sur. Co. v Gillette Co., 64 NY2d 304, 311 [1984]).

Accordingly, the ambiguity in the policy must be construed against defendant under the facts of this case, and precludes the grant of summary judgment in its favor (see Ace Wire & Cable Co. v Aetna Cas. & Sur. Co., 60 NY2d 390, 398 [1983]). Marshall v Tower Ins. Co. of N.Y. (44 AD3d 1014 [2007] is inapposite because it did not address whether the term “residence premises” is ambiguous in light of the policy’s failure to define “resides.” Moreover, unlike here, the plaintiff in Marshall had no intention of living at the premises (see Marshall v Tower Ins. Co. of N.Y., 12 Misc 3d 117OA [Sup Ct 2006]). An issue of fact as to whether plaintiffs misrepresented their intention to reside in the subject premises as contemplated by the policy precludes a grant of summary judgment to both parties.

We have considered the parties’ remaining contentions and find them to be without merit.