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Parkset Plumbing & Heating Corp. v. Reliance Insurance
Citations: 87 A.D.2d 646; 448 N.Y.S.2d 739; 1982 N.Y. App. Div. LEXIS 15977
Court: Appellate Division of the Supreme Court of the State of New York; March 28, 1982; New York; State Appellate Court
A declaratory judgment action was initiated to determine the obligation of insurance companies to defend Parkset Plumbing & Heating Corp. in a lawsuit filed by Mitchell Gardens No. 3 Cooperative Corp. The Supreme Court, Queens County, ruled in favor of Parkset, ordering the insurers to provide defense and indemnification. However, this judgment was reversed on appeal. The appellate court declared that the insurers were not obligated to defend or indemnify Parkset and were not responsible for covering attorney’s fees related to the defense or the declaratory judgment action. Parkset had been performing plumbing installations for Mitchell Gardens from January to October 1973 and was insured by Aetna Casualty and later by Reliance Insurance Company. During the installation, issues arose when tenants reported being scalded by malfunctioning showers. After investigating, Parkset identified defective shower heads as the cause but failed to notify the insurers of these incidents. Mitchell Gardens subsequently sued Parkset in 1978 for breach of contract and negligent performance, claiming issues dated back to June 1974. Parkset did not inform its insurers of any demands or complaints until after receiving the lawsuit. The appellate court emphasized that the insurers have a broad duty to defend, even in debatable coverage situations. However, it determined that the underlying complaint from Mitchell Gardens was based on contract rather than negligence. The mere mention of negligence in the complaint did not transform it into a negligence claim that would invoke coverage under the liability policies, which were not intended to serve as performance bonds. Consequently, the insurers were found not liable for defense or indemnification in this matter.