Supreme Court of the State of New York
County of Bronx

Hon. Jerry L. Crispino

Motion by defendant in this declaratory judgment action seeking summary judgment and the dismissal of the within complaint and, plaintiff's cross-motion seeking partial summary judgment as to both the defense costs expended to date and the defense costs going forward are decided.

Based upon the papers submitted herein, it is undisputed that a lead-based paint liability insurance policy was entered into between the parties herein. Said policy was to run from June 20, 1999 through June 20, 2000. Under the terms of that policy, the defendant was required to defend and indemnify plaintiff from any claims made which were covered during the term of the policy.

Pursuant to a summons and complaint dated October 26, 1999, Michael Marcial, an infant by his mother and natural guardian, Ignacia Pacheco, commenced an action against Nussbaum Realty Company, LLC and 2619 Realty LLC, the plaintiff's herein. Said action was brought in New York County and seeks damages for exposure and ingestion of lead paint. Thereafter, on or about December 7, 1999 Fidelity and Guaranty Insurance Company ("FGIC"), refused and declined to defend and/or indemnity 2619 Realty in the Marcial action. As a result "2619" commenced the within action seeking a declaratory judgment against "FGIC". Now, defendant "FGIC" seeks summary judgment and dismissal of said declaratory judgment action.

In support of this application defendant has submitted a copy of the summons and complaint of the personal injury action commenced in New York County. Said complaint lists three causes of action. The initial cause of action alleges that while the infant plaintiff resided in premises owned, operated and controlled by Nussbaum Realty, he was injured as a result of exposure to lead paint. The second cause of action, asserted against 2619 Realty, states that the infant/plaintiff did, on occasion, stay in an apartment owned and operated by 2619 and was injured therein. The third cause of action is based upon a claim of loss of services. As a result therefrom, "FGIC", the defendant herein asserts that summary judgment is appropriate.

In reliance on the language contained in the personal injury complaint, "FGIC" asserts that the injury complained of in the New York County action is not covered by the lead paint insurance contract. In support thereof "FGIC" directs the court to paragraphs #14 and #16 of the insurance agreement.

Paragraph 14, defines the term "permanent resident" as anyone lawfully residing in a unit or apartment as his or her sole dwelling. Paragraph 18 reads that a "tenant" means anyone who is lawfully residing in a leased unit or apartment of the insured building on or after the retroactive date. It further goes on to state that a person is lawfully residing in a unit or apartment if a) he or she is in compliance with the terms of a written lease with the named insured; and b) he or she is a permanent resident of such unit o apartment during the terms of the lease. Therefore, movant concludes that pursuant to the language of the personal injury complaint, said claim is not covered pursuant to the terms of the insurance agreement. As a result, "FGIC" claims that summary judgment and dismissal of a declaratory judgment is appropriate. This Court does not agree.

In Frontier Insulation Contractors, Inc. v. Merchants Mutual Insurance Company, 91 NY2d 169, cited both parties herein, the Court of Appeals stated that the duty of an insurer to defend its insured arises whenever the allegations within the four corners of the underlying complaint potentially give rise to a covered claim, or where the insurer "has actual knowledge of facts establishing a reasonable possibility of coverage" citing Fitzpatrick v. American Honda Motor Co., 78 NY2d 61.

To be relieved of its duty to defend on the basis of a policy exclusion, the insurer bears the heavy burden of demonstrating that the allegation of the complaint cast the pleadings wholly within that exclusion, that the exclusion is subject to no other reasonable interpretation, and that there is no possible factual or legal basis upon which the insurer may eventually be held obligated to indemnify the insured under any policy provision, Frontier Construction v. Merchants Mutual Insurance, supra, Continental Casualty Company v. Rapid-American Corp., 80 NY2d 640; and Allstate Insurance Company v. Zuk, 78 NY2d 41.

Here, defendant "FGIC", contends that pursuant to the language contained in the personal injury complaint, the underlying claim is not covered pursuant to an exclusion in the underlying policy.

In opposition to the within motion and in support of its cross-motion, 2619 Realty cites Allstate Insurance Co. v. Mugavero, 79 NY2d 153. Therein the Court stated that an insurer must afford its insured a defense unless it can show that the allegations of the complaint put it solely within the policy exclusion, see also International Paper Co. v. Continental Casualty Company, 35 NY2d 322.

Here, the undefined term of sole dwelling creates possible interpretation which cannot as a matter of law, exclude coverage. Further, an insurer's duty to defend is broader than its duty to indemnify, Frontier, supra. Additionally, the language contained in a complaint verified by the infant/plaintiff's attorney, is insufficient to warrant the granting of defendant's motion.

Accordingly, based upon the facts herein, plaintiff's cross-motion is granted only to the extent of directing defendant FGIC to defend 2619 Realty in the New York County personal injury action, Index #24867/99 upon service of a copy of this order with notice of entry. At that time, counsel for "FGIC" shall be given all documents necessary to properly defend their client. Questions as to indemnification are not before the Court at this time. Moreover, an insurer may be contractually bound to defend even though it may not ultimately be bound to pay, either because its insured is not factually or legally libel or because the occurrence is later proved to be outside the policy's coverage, Frontier, supra, Fitzpatrick v. American Honda Motor Co., supra.

Branch of cross-motion which seeks a judgment in the sum of $16,204.90 for reasonable attorneys fees incurred to date is granted to the extent of directing a hearing upon the resolution of the underlying action to determine the reasonable amount incurred which shall be reimbursed to 2619 from "FGIC".

Additionally, based upon the aforementioned, defendant's motion of summary judgment is denied.

This constitutes the decision and order of this Court.