The motion of the third-party plaintiff (Home Improvement) for an order pursuant to CPLR 3212 granting it a judgment declaring that the third-party defendant breached its duty to defend Home Improvement in the primary action and is liable to the third-party defendant for its defense costs in the sum of $8,900.22 is denied. The cross-motion of the third-party defendant (Selective) for an order pursuant to CPLR 3212 granting it summary judgment declaring that it had no duty to defend Home Improvement in the primary action is granted.

Home Improvement is a general contractor engaged in the construction business. Home Improvement was insured under a general commercial liability coverage policy issued by Selective. On January 2, 2002, a fire occurred at a residence owned by James and Tracy Rafferty, which residence was insured by State Farm. The Raffertys hired Home Improvement to perform the reconstruction work made necessary by the fire. State Farm believed it had a subrogation claim available against the general contractor and the electrical contractor that had constructed the Raffertys' residence. State Farm notified Home Improvement not to perform any repair work in the bedroom where the fire originated until after experts retained by the general contractor and the electrical subcontractor had the opportunity to inspect the bedroom and wiring. Those inspections took place.

State Farm paid the Raffertys for their loss on February 4, 2002. The State Farm adjuster advised Home Improvement that there was a need for State Farm's own expert to look at the bedroom area where the fire had started. The Raffertys were becoming impatient and during the second week of March the principal of Home Improvement contacted the State Farm claims adjuster and told him that he would wait only one more week for State Farm to complete its investigation. State Farm did not contact Home Improvement during that week and Home Improvement commenced making repairs to the bedroom. A State Farm representative telephoned Home Improvement to again state that another expert was coming to examine the bedroom and was told that Home Improvement had already cleared out the damaged materials.

State Farm commenced a subrogation action against the general contractor and electrical subcontractor, and also sued Home Improvement alleging spoilation of evidence. Home Improvement contacted Selective and requested coverage. Selective disclaimed coverage contending that the State Farm claim did not allege property damage as defined in the policy, there had been no occurrence giving rise to a property damage claim and the policy excluded coverage for property damage "expected or intended from the standpoint of the insured." Home Improvement commenced this third-party action against Selective seeking a declaration that it was entitled to a defense and indemnification. The primary action settled with Home Improvement making no payment to State Farm. By this motion and cross-motion, Home Improvement and Selective seek a declaration of their rights under the policy issued by Selective.

Under New York Law, an insurer's duty to defend an insured is determined by the [*2]allegations within the "four corners of the complaint" or where the insurer has actual knowledge that the law suit involves a covered event (Fitzpatrick v American Honda Motor Co., Inc., 78 NY2d 61). In other words, if the operative pleading makes allegations of wrongdoing by the insured that are baseless but arguably within the policy coverage the insurer has the duty to defend the insured. In addition, even if the allegations of the operative pleading do not make allegations within the coverage of the policy if the insurer has actual knowledge that the underlying circumstances of a law suit involve a covered event it is required to provide a defense. Here, the allegations of the State Farm complaint allege only intentional conduct on the part of Home Improvement. Therefore, no duty by Selective to defend Home Improvement arises under the "four corners of the complaint" rule. The inquiry becomes did Selective have actual knowledge of a covered event. On April 11, 2002, a Selective claims representative recorded an interview of Philip Pigliavento, the owner of Home Improvement, as to the events underlying the State Farm law suit. Mr. Pigliavento stated that he was aware that State Farm wished that the evidence in the bedroom be preserved for the purpose of litigation and that Home Improvement proceeded to make repairs in the bedroom despite that knowledge. New York Law recognizes two forms of spoilation of evidence, intentional spoilation and negligent spoilation. In support of its motion, Home Improvement contends that the record before the Court could be viewed as establishing negligent spoilation on the part of Home Improvement thereby negating the intentional conduct exclusion relied upon by Selective. The Court disagrees. Mr. Pigliavento knew that State Farm wanted the evidence in the bedroom preserved for litigation use, had his company go forward with destroying that evidence and it was foreseeable that such conduct could damage State Farm. Those circumstances establish sufficient intentional conduct to come within the exclusion relied upon by Selective (see generally, Capano Management Co. v Transcontinental Ins. Co., 78 FS2d 320[USDC, Delaware]).

All papers, including this decision and order, are being returned to the attorney third-party defendant. The signing of this decision and order shall not constitute entry or filing under CPLR 2220. Counsel is not relieved from the applicable provisions of that section relating to filing, entry and notice of entry.

This memorandum shall constitute both the decision and the order of the Court.

IT IS SO ORDERED.

DATED: ALBANY, NEW YORK

NOVEMBER 30 , 2004

// BERNARD J. MALONE, JR., J.S.C.

PAPERS CONSIDERED:

notice of motion dated October 22, 2004;

affidavit of Kathleen L. Werther sworn to October 22, 2004, with exhibits;

affidavit of Phil Pigliavento sworn to October 6, 2004, with exhibits; [*3]

notice of cross-motion dated November 1, 2004;

affirmation of Mr. Randolph Belkin dated November 1, 2004, with exhibits.