Coverage Pointers - Volume XII, No. 1
Welcome to the first issue of Volume 12 of Coverage Pointers.
You Want More? We Have More: LinkedIn - NY Insurance
For those who cuddle up with our newsletter every Friday but are just not happy about waiting two weeks for an issue, there is another (interactive) option. Your Editor is the founder and moderator of the NY Insurance Group on LinkedIn and if you had been following the discussions over in that forum over the last couple of weeks, you would have remained up to date on the No Fault reform issues. Come join us over there.
No Fault Reform? Not Likely This Year
It is sad to report that the attempts at real No Fault reform have failed, at least so far, to produce favorable legislation. At the end of weeks of long and spirited debate, the bill produced for consideration by the Legislature nodded kindly at the physician's collection lawyers, brought smiles to the faces of the plainitffs' bar and dramatically disappointed the insurance industry. As of this writing, the bills have been sent to Committee, and as the long budget battle continues to rage, they might still see the light of day before year's end.
In the some ways, the bill increases the opportunities for fraud, unfortunately, by continuing to penalize insurers for late disclaimers. It opens up the door to purposeful over-billing with the carriers being precluded from denying benefit bills that are 9% over the fee schedule. There was a hope among members of the insurance industry that the bill would provide overturn Presbyterian Hosp. v. Maryland Casualty Company, 90 NY 2d 274 (1997), the Court of Appeals decision that penalized carriers by the penalty of preclusion for late, incomplete or technically flawed denials. The bill does not provide a clean preclusion language and thus it encourages the submission of over-reaching bills with the hope of hollering "gotcha" if an insurer commits a technical violation.
The serious injury threshold language in Section 5 is as follows and adds two categories to the current definition. They are in
(d) "Serious injury" means a personal injury which results in death; dismemberment; significant disfigurement; a fracture; loss of a fetus; COMPLETE TEAR OR RUPTURE OF A NERVE, TENDON, LIGAMENT, CARTILAGE OR MUSCLE; A TEAR, RUPTURE OR IMPINGEMENT OF A NERVE, TENDON, LIGAMENT, CARTILAGE OR MUSCLE WHICH RESULTS IN A SIGNIFICANT IMPAIRMENT OF A BODY ORGAN, MEMBER, FUNCTION OR SYSTEM; permanent loss of use of a body organ, member, function or system; permanent consequential limitation of use of a body organ or member; significant limitation of use of a body function or system; or a medically determined injury or impairment of a non-permanent nature which prevents the injured person from performing substantially all of the material acts which constitute such person's usual and customary daily activities for not less than ninety days during the one hundred eighty days immediately following the occurrence of the injury or impairment.
While the "surgical procedure" language is no longer in the bill and while the New York State Trial Lawyers Association's proposal to ban summary judgment motions on "serious injury" threshold is not part of the proposal, the language on "serious injury" is very problematic.
In a nutshell, any injury to a nerve, tendon, ligament, cartilage or muscle would constitute a tear, rupture or impingement. Now, despite the present requirement of permanency for injuries to a body "organ or member" under the current definition, the new definition removes that requirement.
Have a strained ring pinky with a microscopic tear of a ligament or muscle? Does it significantly impair your ability to play the piano for a couple of weeks? You too might have a serious injury, if this bill is adopted. If you want to see the text of the bill, S8414 and A11596, click here.
Thought You Needed to Know This One: Mile High Club Celebrates One Hundredth Anniversary
Walter Brookins was taught at school by Katherine Wright, sister of the Wright brothers. Brookins was one of the Wright's first "test pilots" and the first instructor for the Wright Exhibition Team. On June 14, 1910, he set a new world's altitude record for at 4,380 feet. On July 10, 1910 at
Mike Perley offers another in his occasional but important articles relating to strategies for effective defense handling of Medicare issues, in his
The mantra for defendants in the age of Medicare Secondary Payer enforcement is to adopt the
Earl ("Earl's Pearls") Cantwell provide a cogent analysis of the "Economic Loss Doctrine," reviewing recent cases involving the right (vel non) to sue professionals with whom one is not in privity.
From Steve Peiper, the Purveyor of Property Insurance
Greetings! Despite the courts entering their annual summer hibernation, yours truly is exiting his. Although we have two interesting property cases to review this week, take an opportunity to look at the Third Department's decision regarding counter-claims against a carrier prosecuting a subrogation action. Although the carrier will not be responsible for losses caused by its insured, the Court notes that the innocent carrier may well have its subrogation award reduced by the culpable conduct of its insured/subrogor. An interesting read; well for some of us at least.
Best wishes for now. See you again in two weeks.
One Hundredth Anniversary of Most Famous Baseball Poem
Any real baseball fan knows that the most famous baseball double-play combination involved shortstop Joe Tinker, second baseman Johnny Evers and first baseman Frank Chance, the three men who made up the right side of the Chicago Cubs infield in the early part of the 20th century. The poem, which has enshrined them in the memory of so very many, written by Franklin Pierce Adams, was first published 100 years ago today in the New York Evening Mail, known as Baseball's Sad Lexicon:
These are the saddest of possible words:
"Tinker to Evers to Chance."
Trio of bear cubs, and fleeter than birds,
Tinker and Evers and Chance.
Ruthlessly pricking our gonfalon bubble,
Making a Giant hit into a double -
Words that are heavy with nothing but trouble:
"Tinker to Evers to Chance."
Editor's Note: For you Jeopardy aficionados, the trivia answer that often travels with this poem is Harry Steinfeldt, the reliable third-baseman who was ignored by Mr. Adams in his review of the Cubs infield. Steinfeldt died of a cerebral hemorrhage at age 37, in 1914. By the way, a "gonfalon" is a pennant, if you didn't know.
OK, One More:
SEES TAFT, THEN GETS SHAVED
FOR FIRST TIME IN 47 YEARS
SPECIAL TO THE POST-STANDARD - I. Porter Brown, one of the oldest residents of
I. Porter gazed after the fast moving machine just in time to see the President turn around.
"By gum." he cried, "first time in my life I seen a real live President." Ruminating on his good fortune, he entered a barber shop. "An' I reckon I'll celebrate," he continued.
This is how it came about that I. Porter Brown, for forty-seven years, the possessor of enough beard to fill a mattress, is tonight absent-mindedly passing his hand across the region of his chin as he tells about the President he saw during his recent visit to town.
Editor's Note: For those who may not remember, Nicholas Longworth was President Theodore Roosevelt's son-in-law, having married his daughter Alice. A Member of Congress (and later, Speaker) he led the Republican House revolt against Joseph Cannon which was recounted in our
From Audrey Seeley, Our No Fault Team Leader:
The decisions in this edition are slim, perhaps due to the July 4th holiday, but there is a trend that we have spotted for Upstate arbitrations pertaining to durable medical equipment! One particular plaintiff's firm that predominantly files for arbitration Upstate is now apparently pulling the medical journals the insurer's peer reviewers are relying upon and arguing the insufficiency of the medical journals. The decisions cited in this edition illustrate the success the plaintiff is having with this argument. There were three themes which emerged from the decisions. The first is the reliance upon extremely old articles that were recognized as not the current standard in medicine. The second was reliance upon articles that had been withdrawn before the peer review report was written. The third is the citation and reliance upon articles which have no relevance to the issue at hand. It is recommended that in defending durable medical equipment cases that you are familiar with the articles cited by your peer reviewer. If you have any questions pertaining to this issue please feel free to send me an email at email@example.com
Headlines for This Week's Issue:
KOHANE'S COVERAGE CORNER
Dan D. Kohane
- Passenger Not Covered under Auto Policy for Opening Door on Bicyclist
- Interesting One: Malpractice Payment Does Not Substitute for Auto Liability Coverage When SUM Coverage Involved
- Additional Insured Status Established When Insured/Subcontractor's Employee Injured on Job; Various Defenses to Coverage Fail
- Cross-Liability Endorsement Means What it Says
- Broker's Negligence in Failing to Procure Requested Coverage Not Proximate Cause of Underinsured Loss When Options Were Given to Insured Prior to Loss to Secure Missing Coverage
MARGO'S MUSINGS ON SERIOUS INJURY UNDER
Margo M. Lagueras
- Opinion Based on Examination Performed 3 ½ Years Before Writing, and Not Specifying ROM at Time of Writing, Is Deficient
- Affirmation in Opposition Prepared Years After Accident Cannot Be Reconciled With Negative ROM Findings
- Even ROM Findings for a Pinky Finger Must Be Compared to the Norm
- Defendants Brought the Motion, Had the Burden, and Failed to Meet It
- Finding of Serious Injury as to One Body Part Permits Consideration for All Injuries
- Treating Physician Successfully Rebuts Findings of Degenerative Changes
AUDREY'S ANGLES ON NO-FAULT
- Peer Reviewer's Reliance Upon Medical Journals Questioned
- Peer Reviewer's Report Found Unpersuasive Due to Medical Journals Cited
- Peer Reviewer's Reliance Upon Withdrawn Medical Journal Fatal to Conclusion of Lack of Medical Necessity
PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper
- AI Status Under a CGL Does NOT Translate to AI Status Under the Commercial Property Policy
- A Settlement is a Settlement, Doctrine of Accord and Satisfaction Bars Insured's Attempt to Renegotiate
- Subrogee Can Be Liable Under Defendant's Counter-Claims, But Measure Damages Only Permits an Offset of the Subrogee's Award
FIJAL'S FEDERAL FOCUS
Katherine A. Fijal
- Applying Illinois Law - An Insurer's Duty to Defend
Jennifer A. Ehman
- Discovery that Renoir Painting Was a Forgery Is Not a Loss Under a Valuable Articles Endorsement to a Homeowners Policy
- Court Determines that a Forty-Seven Day Delay in Disclaiming Coverage Based on Speed Racing Exclusion Is Late
LIENING TOWER OF PERLEY
Michael F. Perley
Keeping Your Ducks in a Row
Earl K. Cantwell
Economic Loss Doctrine Redux
Hurwitz & Fine, P.C. is a full-service law firm
providing legal services throughout the State of New York
Dan D. Kohane
INSURANCE COVERAGE TEAM
Dan D. Kohane, Team Leader
Michael F. Perley
Katherine A. Fijal
Audrey A. Seeley
Steven E. Peiper
Margo M. Lagueras
Jennifer A. Ehman
FIRE, FIRST-PARTY AND SUBROGATION TEAM
Andrea Schillaci, Team Leader
Jody E. Briandi
Steven E. Peiper
Audrey A. Seeley, Team Leader
Margo M. Lagueras
Jennifer A. Ehman
Jody E. Briandi, Team Leader
Scott M. Duquin
Index to Special Columns
Kohanes Coverage Corner
Margos Musings on Serious Injury
Audreys Angles on No Fault
Peiper on Property and Potpourri
Fijals Federal Focus
Liening Tower of Perley
7/1/10 Kohl v. American Transit Insurance Company
Court of Appeals
Passenger Not Covered under Auto Policy for Opening Door on Bicyclist
We reported on the Second Department decision in Volume 10, No.18. Our report advised:
Taxi Passenger Not Entitled to Coverage for Injuring Bicyclist When Alighting from Cab
Interesting case. Passenger opened door of taxi and injured bicyclist who struck door. Court held that policy for cab, issued under Vehicle & Traffic Law Section 370, only needs to insure owner and operator of cab and not passenger, so passenger is not entitled to a defense. Cases cited by court acknowledge that exiting car is part of use and operation of vehicle so there will be coverage for owner and operator.
Editors Note: Id love to see the policy on this one.
The Court of Appeals must have read the Editors Note and gave us the policy language in affirming the Second Departments decision. The policy provided that it "shall inure to the benefit of any person legally operating" the insured vehicle in the business of the insured. The Court held that the word "operating" cannot be stretched to include a passenger's riding in the car or opening the door.
Appellate Division, First Department
Interesting One: Malpractice Payment Does Not Substitute for Auto Liability Coverage When SUM Coverage Involved
The tortfeasor had $50,000 in liability coverage but plaintiffs counsel blew the statute of limitations. Instead, the lawyers malpractice carrier offered and eventually paid the $50,000. The plaintiff then tried to pursue an underinsured claim against its own carrier.
A split court ruled that the SUM case cannot be pursued. An insurer is obligated to pay under SUM coverage if the bodily injury liability insurance limits of its insured's policy exceed those of the other policy, subject to the condition that "the limits of liability of all bodily injury liability bonds or insurance policies applicable at the time of the accident shall be exhausted by payment of judgments or settlements." In other words, the auto liability carrier has to exhaust its policy limits. Here, because of the malpractice, it paid nothing so the SUM carriers coverage is not triggered.
Editors Note: The malpractice case against the lawyer should have been for the lost liability coverage and then the lost SUM coverage, we suppose.
7/1/10 Hunter Roberts Construction Group, LLC v. Arch Insurance
Appellate Division, First Department
Additional Insured Status Established When Insured/Subcontractors Employee Injured on Job; Various Defenses to Coverage Fail
Hunter was construction manager for the Bear Stearns Fit Out project and subcontracted with Petrocelli, an electrical contractor. he subcontract required Petrocelli to defend and indemnify Hunter against all claims "which arise out of" or "are connected" with Petrocelli's work and to provide Hunter with insurance.
In March 2007, Chevola, a Petrocelli employee, tripped over a hole and fell while retrieving a can of spray paint. Petrocelli was insured with Arch and the policy added any person or organization for whom it was performing operations, so long as there was a written contract requiring AI status and so long as the liability arose out of your work at the location designated
Chevola sued Hunter in November and Hunter notified Petrocelli and Arch of ther lawsuit in January. Zurich, Hunters carrier, also notified Arch in January.
It took four months for Arch to deny coverage asserting that (1) the subcontract was not an "insured contract"; (2) Hunter breached the duty to cooperate by failing to provide statements "that would clarify certain details regarding the timeliness of [Hunter's] notice to Arch and the circumstances of the incident"; (3) Hunter failed to notify Arch "as soon as practicable" of the occurrence in that the accident occurred on March 13, 2007 and notice was given 10 months later; and (4) Chevola's injury did not "arise out of" Petrocelli's work.
Where, as here, the loss involves an employee of the named insured, who is injured while performing the named insured's work under the subcontract, there is a sufficient connection to trigger the additional insured "arising out of" operations' endorsement and fault is immaterial. On the subject of the late notice defense, Arch waited four months before it raised it, so it waived its right to complain. The disclaimer on failure to cooperation fails because Arch did not establish the heavy burden necessary to establish non-cooperation by offering proof of three unreturned calls. Arch did not carry its "very heavy burden" of demonstrating that it acted diligently in seeking to bring about the insured's cooperation, that its efforts were reasonably calculated to obtain the insured's cooperation and that the attitude of the insured, after his cooperation was sought, was one of willful and avowed obstruction.
6/29/10 DRK, LLC v. The Burlington Insurance Company
Appellate Division, First Department
Cross-Liability Endorsement Means What it Says
The Cross-Liability Exclusion states that the insurance does not apply to any actual or alleged bodily injury to an employee of any insured. It means what it says, even with a "separation of Insureds" provision contained in the policy.
6/29/10 Cosmos, Queens Ltd. v. Matthias Saechang Im Agency
Appellate Division, First Department
Brokers Negligence in Failing to Procure Requested Coverage Not Proximate Cause of Underinsured Loss When Options Were Given to Insured Prior to Loss to Secure Missing Coverage
A robbery took place in July 2007 of a store selling jewelry, clothing and other goods. Before May 2006, the store owner was insured for business and personal property up to $1,240,000. Before May 2006, the owner had asked insurance broker Im to obtain "apples to apples" insurance coverage plaintiff currently had from another company. Im obtained a policy for plaintiff from LIG Insurance.
A year later the LIG policy automatically renewed and after the renewal, Im told the owner that the policy did not include coverage for theft of jewelry or that it was limited to $2500. that the coverage for such a loss was only a maximum of $2,500. The insured asked Im to obtain $1 million in coverage but LIG would only sell $200,000. Im suggested that the owner purchase jewelers block insurance by Im did not want to incur the additional expense. Of course, a robbery ensued and the owner was underinsured so the broker was sued.
While Im obtained substantially inferior coverage, he breached the duty owed to plaintiff. However, options were given to resolve the gap in coverage before the loss which the policyholder refused to take. Accordingly, the brokers negligence was not a proximate cause of the loss.
MARGOS MUSINGS ON SERIOUS INJURY UNDER NEWYORK NO FAULT
Margo M. Lagueras
7/1/10 Shackett v. Nappi
Appellate Division, Third Department
Opinion Based on Examination Performed 3 Years Before Writing, and Not Specifying ROM at Time of Writing, Is Deficient
Plaintiff was granted partial summary judgment on his 90/180-day claim. Defendants were granted partial summary judgment with regard to the permanent loss of use claim but denied with regard to the permanent consequential limitation and significant limitation of use categories.
On appeal, defendants are granted summary judgment and plaintiff is denied, resulting in the dismissal of the complaint. Here is what happened:
In support of his permanent consequential limitation and significant limitation of use claims, plaintiff relied on the opinion of his neurologist. However, that opinion was deficient because it was based on an examination from 3 years earlier and, although it might support a cervical ROM limitations related to the accident in question, it did not state the ROM at the time of the writing. Additionally, the neurologists recent records showed plaintiff had full cervical ROM, thereby defeating the claims under those two categories.
In support of his 90/180-day claim, plaintiff relied on the medical records of two neurologists, as well as on his own deposition testimony. Even though a neurologist found him to be totally disabled from work during the applicable period, no distinction was made between the limitations caused by the subject accident and those caused by an accident one year earlier. In fact, the restrictions placed on plaintiff after both accidents were identical, without any indication that plaintiffs condition had improved after the first accident. Plaintiff himself also did not differentiate the limitations after each accident in his deposition testimony. Therefore, even with objective medical evidence to support the 90/180-day claim, the prior accident served as a pre-existing condition which interrupted the chain of causation between the subject accident and the alleged injury. As such, defendantsentire cross-motion was granted and the complaint dismissed.
7/1/10 Travis v. Batchi
Appellate Division, First Department
Affirmation in Opposition Prepared Years After Accident Cannot Be Reconciled With Negative ROM Findings
A few weeks after having right knee ACL reconstruction, partial medial and lateral meniscectomy and chrondroplasty, plaintiffs physician reported she had full strength and range-of-motion of the knee. Some years after the accident, an affirmation from the physician, prepared in opposition to the defendants motion, noted plaintiff sustained permanent injury to the knee. Absent some explanation, the two cannot be reconciled and the claim must fail. As to the claim under the 90/180-day category, plaintiff admitted she worked from home beginning two months after the accident until five months after the accident, at which point she returned to the office. She did not, however, provide any specifics as to what parts of her job or other activities were curtailed so she failed to meet her burden under that category also.
6/29/10 Baena v. Almonte
Appellate Division, Second Department
Even ROM Findings for a Pinky Finger Must Be Compared to the Norm
No exceptions. Here, plaintiffs examining orthopedic surgeons affirmed report failed because not only was the examination it was based upon conducted four years after the accident, but the range-of-motion findings of the plaintiffs right fifth finger were not compared to what was normal. In addition, there were no contemporaneous findings offered to show limitations of the finger so the trial court was reversed and summary judgment granted to defendant.
6/29/10 Mondevil v. Kumar
Appellate Division, Second Department
Defendants Brought the Motion, Had the Burden, and Failed to Meet It
Defendants brought their motion relying on the affirmed medical report of their examining orthopedic surgeon who examined plaintiff two years after the accident and found significant range-of-motion limitations in the plaintiffs cervical and lumbar spine. Defendants fail to meet their burden resulting in the failure of their motions without need to consider plaintiffs opposing papers.
6/29/10 Sin v. Singh
Appellate Division, Second Department
Finding of Serious Injury as to One Body Part Permits Consideration for All Injuries
The well established is that once there is an issue of fact as to serious injury with regard to one body part, here the cervical and lumbar regions of the spine, plaintiffs can seek to recover for all the injuries allegedly sustained in the accident. In this case, the treating chiropractors affidavit raised an issue of fact with regard to the permanent consequential limitation and/or significant limitation of use categories, based on contemporaneous and recent examinations and review of MRI films revealing bulging discs. The chiropractor opined that the limitations were permanent, significant and causally related and this opened the door to the alleged shoulder and knee injuries.
6/29/10 Tai Ho Kang v. Young Sun Cho
Appellate Division, Second Department
Treating Physician Successfully Rebuts Findings of Degenerative Changes
Plaintiffs treating physicians affirmation was sufficient to raise a triable issue of fact because it was based on both contemporaneous and recent examinations, and a review of MRI films revealing bulging discs, and because it concluded that the limitations in the cervical and lumbar regions were permanent and causally related to the accident. However, he also rebutted the findings of defendants radiologist who stated that the findings were degenerative by specifically stating that they were not degenerative but rather that they were caused by the accident.
6/30/10 Elite Medical Supply v. Respondent
Arbitrator Kent L. Benziger, Erie County
Peer Reviewers Reliance Upon Medical Journals Questioned.
The eligible injured person was involved in a November 7, 2009, motor vehicle accident resulting in injuries to her neck, mid-back, low back, and shoulder. MRI studies of the cervical, thoracic, and lumbar spine revealed disc herniations at the cervical and lumbar levels. A lower extremity EMG/NCV study revealed moderate chronic right sided radiculopathy.
The eligible injured person treated with a chiropractor, John Ward, D.C., for her injuries, who prescribed her a LSO brace, cervical traction unit, and TENS unit.
The insurer denied the durable medical equipment based upon the peer review of Dr. Harvey Siegel. The assigned arbitrator determined that Dr. Siegels report was not persuasive. The assigned arbitrator reasoned that Dr. Siegel did not set forth an established accepted medical standard. With regard to the opinion of lack of medical necessity for the cervical traction unit, Dr. Siegel cited to a medical study that found the units beneficial. Also, Dr. Siegel cited to medical journal articles that were no longer accepted and other articles discussed the effectiveness of lumbar supports in the work place as opposed to treating trauma from a motor vehicle accident.
Further, Dr. Siegel failed to thoroughly discuss the medical evidence and the eligible injured persons complex medical findings to establish lack of medical necessity.
6/30/10 Elite Medical Supply v. Respondent
Arbitrator Kent L. Benziger, Erie County
Peer Reviewers Report Found Unpersuasive Due to Medical Journals Cited.
The Applicant prescribed to the eligible injured person an LSO brace and TENS unit after an October 4, 2009, motor vehicle accident. The Applicant opined that the durable medical equipment was medically necessary as it would decrease pain and increase stability in the neck and lumbar spine.
The insurer denied the durable medical equipment based upon the peer review of Dr. Joseph Elfenbein. Dr. Elfenbein opined that there was no evidence of back instability or neurological impairment warranting the equipment. Dr. Elfenbein cited to a number of medical journal articles to support his position and establish the standard of care in the industry.
The assigned arbitrator determined that the peer review report was not persuasive based upon evidence the Applicant submitted that the Practice Guidelines #14 from the US Dept. of Health and Human Services was no longer viewed as guidance for current medical practice. Also, another article was found to contradict the peer reviewers opinion. Further, the assigned arbitrator indicated that the insurer submitted a number of medical articles that were completely irrelevant to this case.
6/25/10 Elite Medical Supply v. Respondent
Arbitrator Veronica K. OConnor, Erie County
Peer Reviewers Reliance Upon Withdrawn Medical Journal Fatal to Conclusion of Lack of Medical Necessity.
The Applicant sought reimbursement for a lumbar traction belt and cervical traction collar prescribed to the eligible injured person after a June 21, 2009, motor vehicle accident. The insurer denied the durable medical equipment based upon a peer review conducted by Dr. Julio Westerband.
The assigned arbitrator found the peer review report not to be persuasive on the ground that Dr. Westerbands report relied upon a medical journal article that had been withdrawn before the report was drafted. Further, while the insurer submitted the replacement abstracts, those abstracts actually did not support Dr. Westerbands opinion of lack of medical necessity.
Appellate Division, Third Department
AI Status Under a CGL Does NOT Translate to AI Status Under the Commercial Property Policy
As with many cases, there is a litany of good stuff in this one. First off, the Third Department dismissed plaintiffs claims against every Travelers subsidiary under the sun except for the actual underwriting company that issued the policy. In so holding, the Court noted that a principal/parent carrier will not be liable for the acts of a subsidiary underwriting company unless they exercise some direct intervention in the claim.
Second, the Court ruled that just because the landlord/owner qualify as an additional insured under the tenants liability coverage does not mean that the same status of additional insured transfers over to the tenants first party property policy. The two, as you might imagine, are apples and oranges.
Finally, pursuant to the plain and unambiguous terms of the policy the subject premises was not insured. Rather, by the terms of the policy, the insured was only covered for business personal property and the building (but only if the building was identified in the Declarations). Where the Declarations sheet was blank with respect to premises coverage, the Third Department concluded that no such coverage existed.
Appellate Division, Third Department
A Settlement is a Settlement, Doctrine of Accord and Satisfaction Bars Insureds Attempt to Renegotiate
This matter arises out of fire loss at the insureds inn. Upon review of the claim, the insured decided to forego rebuilding and instead opted for an actual cash value payout of the loss. As with any claim, plaintiff retained an expert to assist with the valuation of the business, and the carrier likewise retained their own expert. After several months of intensive negotiations, both sides reached a resolution to close out the claim.
However, plaintiff commenced the current action, in part, to recover additional expenses that they maintain should have been part of the original agreement. Not so fast says the Third Department. Where there is a meeting of the minds, and an agreed to resolution, as here, the doctrine of accord and satisfaction bars any litigation of previously resolved matters. Absent plaintiff establishing a mistake as to items not included in the original settlement agreement, the agreed sum must stand.
Appellate Division, Third Department.
Subrogee Can Be Liable Under Defendants Counter-Claims, But Measure Damages Only Permits an Offset of the Subrogees Award
As you know, we rarely discuss subrogation cases in this column due to most of the decisions be so fact driven. This case, however, looks at interesting legal point. In this matter, Peerless paid a water damage claim to its insured Rainers Gourmet. After issuing the payment, Peerless then commenced a subrogation claim against the landlord of the building. The landlord then counter-claimed against Peerless arguing that it was Peerless insured, Rainers, that was responsible for the loss.
Peerless, having no tort liability, opposed the counter-claim on the ground that it was not a proper party. Instead, Peerless maintained that any claim for recovery should be levied against Rainers directly. The Third Department disagreed with Peerless position by holding that a subrogee obtains both the benefits of its subrogor as well as its potential liabilities. All was not lost for Peerless, however, as the Court ruled that the counter-claiming landlord could not obtain an affirmative award. Rather, any liability attributable to the subrogor (Rainers) would simply offset any potential recovery awarded to Peerless.
7/1/10 Santas Best Craft, LLC v. St. Paul Fire & Marine Ins. Co.
United States Court of Appeals for the Seventh Circuit
Applying Illinois Law An Insurers Duty to Defend.
The underlying action arises out of a license for twinkling Christmas lights. JLJ, Inc. and its licensee Inliten, LLC. [collectively JLJ] sued Santas Best Craft, LLC [SBC] over its marketing of Stay-On lights. JLJ alleged that SBC copied JLJs Stay Lit lights packaging design and that SBC sold Stay-On lights using false and deceptive language.
The suit filed against SBC in federal court in the southern district of Ohio alleged causes of action based on Lanham Act trademark infringement, false designation of origin, false advertising, trademark dilution and deceptive trade practices.
SBC sought defense and indemnification from St. Paul. St. Paul claimed that false representation claims were not covered by the policy under the insuring clause and that two policy exclusions, relating to intellectual property and material previously made known or used, meant that it owed no defense for the remaining claims. SBC filed its declaratory judgment action to compel St. Paul to provide a defense. St. Paul counterclaimed for a declaratory judgment that it had no duty to defend.
The Seventh Circuit agreed with the district court that the St. Paul CGL policy required St. Paul to defend the plaintiffs. It held that the insurer owed a duty to defend because the allegation may potentially give rise to a claim for unauthorized use of a slogan. St. Paul argued that JLJ had no ownership or exclusive right to the slogans on the packages and, therefore, cannot have asserted unauthorized use/infringement of slogan claim. The court pointed out that the JLJ complaints contain allegations that SBC copied certain JLJ slogans, suggesting the JLJ had some claim of ownership over them thereby triggering the duty to defend.
St. Paul then argued that coverage was precluded by the intellectual property exclusion which disallows coverage for injury or damage . . . that results from any actual or alleged infringement or violation of any of the following rights or laws: . . . trade dress, trademark, other intellectual property rights or laws. The exclusion contained an exception for unauthorized use of . . . trademarked slogan . . . of others in your advertising. It was St. Pauls position that because the conduct the plaintiffs identify as making out a claim for infringement of slogan is all conduct that, in the language of St. Pauls policy, results from a trade dress claim the intellectual property exclusion precludes coverage.
The court held that unless a slogan infringement claim would not have arisen but for the trade dress violation claim, which it found it did not, it could not find that the exclusion for trade dress claims excuses St. Paul from a duty to defend the underlying action. The court also agreed with the finding of the district court that even if the intellectual property exclusion did apply, the trade mark exception would require St. Paul to defend the action given the uncertainty whether the court in the underlying action would have decided the slogan qualified as trade-markable.
St. Paul also claimed that its material previously made known or used exclusion applies to defeat a duty to defend with respect to one policy period. The district court disagreed holding that St. Paul was obligated to defend because coverage was triggered for another policy period and the insurer must defend if even one allegation of liability falls within the policys coverage. The Seventh Circuit held that St. Paul did have a duty to defend but not indemnify under the policy period where the exclusion applied.
An issue also arose as to whether St. Paul breached its duty to defend. The district court held that because St. Paul timely filed a cross-motion and a counter-claim seeking a declaration that it did not have a duty to defend there was no breach of its duty to defend. Under Illinois law, an insurer has three options if it contests its duty to defend: (1) seek a declaratory judgment regarding its obligations before trial of the underlying action; (2) defend the insured under a reservation of rights; or (3) refuse either to defend or to seek a declaratory judgment at the insurers peril that it might later be found to have breached its duty to defend and estopped from asserting defenses as to payment based on non-coverage. Illinois courts also have three tests to measure timeliness of the declaratory action. It must be filed: (1) before the underlying action is resolved; (2) before settlement or trial is imminent; and (3) within a reasonable time of being notified of the underlying suit. The court held that St. Paul satisfied all the timeliness tests.
Finally, the court held that St. Paul may need to reimburse the JLJ settlement payment. St. Paul argued, as held the district court that the plaintiffs failed to designate which of the claims addressed by the settlement were covered by St. Paul CGL policy and therefore, St. Paul properly declined to reimburse the settlement. The plaintiffs argue that they have no burden to allocate.
The Seventh Circuit decided that consisted with Illinois policy that a coverage action should not require the insureds to conclusively establish their own liability in the interest of promoting settlement, the proper inquiry is whether the claims were not even potentially covered by the insurance policy. Since this issue had not been previously decided in the Illinois court, the Seventh Circuit predicted that Illinois court, in cases in which it is possible that none of the settlement was attributable to the dismissal of claims for damage covered by the insurer, would evaluate whether a primary focus of the claims that were settled was a potentially covered loss (burden on the insured). Conversely, if it can be established that the claims were not even potentially covered (burden on the insurer), then the insurer is not required to reimburse the settlement. The court held that because in this case the parties contest whether the settlement was made in anticipation of covered claims, the burden should be on the insured to prove coverage of the settlement in the first place and then on the insurer to prove the existence of exclusions barring coverage. The court remanded to allow the district court to consider the record evidence of whether a primary focus of the underlying action was a covered loss.
6/24/10 Flaum v. Great Northern Ins. Co.
Supreme Court, Westchester County
Discovery that Renoir Painting Was a Forgery Is Not a Loss Under a Valuable Articles Endorsement to a Homeowners Policy
In 1979, plaintiff purchased a Renoir painting for $50,000. As of 2005, the painting was insured by a rider to the plaintiffs homeowners insurance policy issued by defendants under a Valuable Articles endorsement.
In 2008, plaintiff sought to sell the painting at Christies auction house only to be told that it was a forgery. Plaintiff then placed a claim with defendants for the loss of value of the painting. Defendants denied the claim.
In considering this issue, the court determined that plaintiff did not conclusively establish that the painting was in fact a forgery. Thus, according to the court, it was not even clear that a loss had occurred. Further, even assuming it was a forgery, according to the court, plaintiff failed to show how their loss was covered under the terms of the policy. Plaintiff did not sustain a physical loss as the Renoir painting still hung in the plaintiffs personal residence in substantially the same condition as when it was purchased. Additionally, there was no claim that the Renoir has been lost, damaged, or destroyed. Lastly, the court noted that if a loss had actually occurred it would have occurred in 1979 on the date of purchase and prior to the policy at issued here.
6/15/10 MIC Property & Casualty Corp. v. Avila
Supreme Court, Suffolk County
Court Determines that a Forty-Seven Day Delay in Disclaiming Coverage Based on Speed Racing Exclusion Is Late
This case arises out of an October 3, 2005 drag racing accident. Plaintiff brought this action for an Order upholding its disclaimer based on an applicable exclusion. Defendants then moved for summary judgment based on Insurance Law 3420(d)(2).
The evidence presented indicated that plaintiff first learned of the accident on October 4, 2005. The next day plaintiff spoke with the vehicle owner. On October 10, 2005, it received a police accident report. On October 11, 2005, plaintiff received a letter of representation indicating that the accident resulted from a speed contest. Plaintiff then issued a reservation of rights letter. Thereafter, on October 12, 2005, it learned that the driver of its insured vehicle was arrested. Unfortunately, plaintiff did not disclaim coverage until November 22, 2005. Thus, according to the court, plaintiffs forty-seven day delay in denying coverage was late as a matter of law. In the courts view, there was no reasonable explanation for the delay.
Additionally, the court reasserted the all important lesson that a reservation of rights letter holds no relevance to the question of whether plaintiff timely sent a notice of disclaimer of liability or a denial of coverage.
Keeping Your Ducks in a Row
(Strategies for Effective Defense Handling of Medicare Issues)
The mantra for defendants in the age of Medicare Secondary Payer enforcement is to adopt the Chicago voting approach to Medicare Issues; address it early and often. Below are some concepts that I believe can assist defendants, their clients and insurance carriers in handling Medicare issues effectively. If you practice in New York, you may want to pay particular attention to the section below entitled Beware of Prompt Payment Statutes.
Get the Medicare Information Yourself
Where a plaintiff is Medicare eligible, obtain an authorization to correspond directly with the Center for Medicare and Medicaid Services (CMS). This allows you to obtain ongoing information from CMS concerning the amount of Medicare payments to the plaintiff. This will allow you to independently determine whether or not all the payments claimed by CMS are, in fact, related to the accident involved in your case. With this information in hand you can effectively address Medicare payments when negotiating a settlement.
Talk About Past Medicare Payments
When discussing a case, either generally or specifically, with regard to settlement, make sure that Medicare is an integral part of the discussion. Addressing Medicares conditional payments to the plaintiff should never be a last minute topic. From the plaintiffs standpoint, the net recovery is the important part of the case. Last minute discussion of Medicare issues will only complicate the process and may result in settlement negotiations falling apart. By making Medicare an early part of the discussion, the plaintiff and his or her attorney will be able to negotiate the case intelligently.
Include Medicare Issues in Your Closing Documents
Some plaintiffs attorneys are currently taking the position that they can settle a case on a pain and suffering basis alone, deliver a pain and suffering release and leave Medicare out of the process. Such actions by plaintiffs counsel do not extinguish the defense obligation to reasonably consider the interests of Medicare in any settlement. Significantly, a pain and suffering release will not extinguish the defense obligation to reasonably consider the interests of Medicare in the event of a direct action by the federal government. The responsibility of attorneys at that point certainly includes the responsibility to protect the interests of their client as well as the carrier. If the insurance companys policy limits are exhausted, the United States Government, while looking to the carrier for payment, may also look directly to a defendant. Accepting a pure pain and suffering release is a risky proposition.
Document Your Analysis of Future Medical Treatment
In cases where medical treatment and services will be required at a time when the plaintiff is Medicare eligible, defendants, and for that matter, plaintiffs, need to document their analysis of future Medicare liability. Where statutes such as No-Fault provide adequate continuing care for treatment related to the accident, there may be a tendency to let the matter slide. In New York, where there is a $50,000 limit on all No-Fault benefits, parties who do nothing run the risk of having their settlement questioned by the government if the No-Fault benefits are unexpectedly exhausted. In that case, unless there is documentation among all parties regarding the adequacy of the No-Fault benefits, the U.S. Attorney could easily point the finger at the defendant for failing to reasonably consider the interests of Medicare. It reminds me of an adage that was taught to me by my contracts professor in law school: If it goes without saying, say it. It will take little time to document the decisions you make with regard to a Medicare Set Aside, or the absence of one. This documentation can be extraordinarily valuable if your decisions are ever questioned.
Beware of Prompt Payment Statutes
In New York, payment is to be made on a settlement within 21 days of the receipt of the Release and Stipulation. Sometimes the parties will stipulate in open court as to the terms of a settlement. If there is no mention of the interests of Medicare during that stipulation, a plaintiffs attorney may well attempt to use the prompt payment statute to enter judgment against the defendant for the amount of the settlement, interest and costs. Thus, where such statutes exist, it is necessary to ensure that all the conditions of a settlement are placed in a stipulation. Only then can you avoid being on the wrong side of an enforcement action.
These are just a few of the ideas that have come to my mind in consulting with defendants and carriers on Medicare issues. I invite your comments and suggestions based upon your experiences. We are all in this together.
Economic Loss Doctrine Redux
The economic loss doctrine generally bars claims for economic losses between parties who do not stand in privity or have a contractual relationship. This scenario generally applies to the architect/designer - contractor relationship which is generally why contractors cannot sue design professionals for damages due to design defects. This doctrine is coming increasingly under attack through the use of concepts such as negligent misrepresentation and even statutory provisions, but a contractor seeking a remedy for design difficulties is still likely to fare better by invoking contract remedies then suing a non-contractual party. Often, a state by state analysis is required to determine the validity of and any exceptions to the economic loss doctrine in each jurisdiction.
For example, in Wyoming, the Supreme Court held in 1996 that the economic loss doctrine was viable to bar claims. In Rissler & McMurry v. Sheridan Area Water Supply Joint Powers Board, 929 P.2d 1228 (Wyoming 1996), a contractor digging trenches encountered subsurface water and utility lines not shown on the plans. The contractor sued the project engineer for negligence and negligent misrepresentation, but the court disallowed the suit. In part, the court ruled that the contractor did have a contract with the project owner and had the opportunity through that contract to allocate the risks associated with the work, and seek any contractually allowed remedies. In a more recent case, Excel Construction, Inc. v. HKM Engineering, Inc., 2010 Wyoming LEXIS 38 (March 23, 2010), the Court was asked to revisit the issue with the contractor trying to convince the Wyoming Supreme Court to modify its ruling in Rissler, but the Court refused. The Court repeated the mantra that construction parties do not need special protection from losses arising from risks which are inherent in performance of the contract. This is the traditional holding and rationale of the economic loss doctrine.
Several recent cases from Colorado, Utah and Washington have essentially upheld the economic loss doctrine to bar suits by contractors against engineering and design professionals even when confronted with alleged misrepresentation claims and other theories increasingly being used to test the economic loss doctrine.
However, there are some recent cases from Montana, Michigan and Arizona where courts have allowed economic loss recovery against a design professional where the designer knew, or should have known, that the contractor or subcontractor was at financial risk if it relied upon plans, drawings, specifications and other information supplied by the design professional.
Therefore, a state by state survey, literally, is needed to determine the existence of the economic loss doctrine, the scope of the doctrine, and whether there are any statutory or judicial in roads or exceptions which have been crafted to modify the doctrine and at least potentially allow suit against design professionals by non-contracting parties not in privity.
7/29/10 Cargill Inc. v. Ace American Insurance Company
Minnesota Supreme Court
The Minnesota Supreme Court Overrules Its Prior Decision In Iowa National And Holds That A Primary Insurer That Provides A Duty To Defend Has An Equitable Right To Contribution From Other Insurers With Triggered Policies
Cargill, Inc. sued several insurers, including Liberty Mutual, in federal district court claiming that each insurer had a joint and several duty to defend and indemnify it against lawsuits which alleged property damage and bodily injury as a result of exposure to Cargills contaminated poultry litter. Cargill filed a summary judgment motion on the duty to defend and Liberty Mutual filed a cross-motion for summary judgment asking the court to require Cargill to enter into a loan receipt agreement or, in the alternative, to declare that such an agreement was unnecessary in order for Liberty Mutual to seek contribution of incurred defense costs from other liable insurers. The district court ruled in favor of Liberty Mutual but certified for appellate review the question of whether a court can order primary insurers with policies that insure and are triggered by the same risk to be equally liable for an insureds defense costs where there is otherwise no privity between them in light of the Minnesota Supreme Courts previous ruling in Iowa National Mut. Ins. Co. v. Universal Underwriters Ins. Co (holding that an insurer who undertakes a defense is responsible for its own defense costs and cannot later seek reimbursement from the other). The Minnesota Court of Appeals answered the certified question in the affirmative. On further review, the Minnesota Supreme Court rejected its holding in Iowa National, opining that the Iowa National rule is no longer an appropriate result when multiple insurers may be obligated to defend an insured [and] is contrary to principles of equity. Affirming the appellate courts decision, the Court concluded that a co-primary insurers right to contribution from other primary insurers with a duty to defend is supported by public policy and is the better reasoned position.
Submitted by: Thomas K. Hanekamp and Devin C. Maddox (Tressler LLP)
6/29/10Harper v. Fidelity and Guaranty Life Insurance Company
Wyoming Supreme Court
Summary Judgment Was Properly Granted To Insurer That Refused To Pay Life Insurance Benefits Due To Applicants Material Inaccuracies In A Simplified Underwritten Product, Whether Or Not His Inaccuracies Were Intentional
In this case, the decedent died soon after applying for a life insurance product where the underwriter relied solely on the applications medical condition representations and a medical information bureau report. The insurer denied the surviving wifes claim for death benefits after its claims investigation revealed the applicant had misstated and omitted certain medical conditions, several of which were unrelated to the cause of death. The wife then sued the insurer, asserting multiple claims for lack of materiality, duty to investigate, promissory estoppel, breach of the covenant of good faith and fair dealing and the reasonable expectations doctrine. The Wyoming Supreme Court affirmed the trial courts grant of a defensive summary judgment on all grounds. It held that as a matter of law: (i) the misstatements and omissions were material whether or not the decedent intended them; (ii) the insurer was entitled to rely on the application and had no duty to investigate the health disclosures, since it had no notice of the inaccuracies; (iii) the insurer had acted in good faith and was within its contractual rights because it had a reasonable basis for rescinding the policy after discovering the material inaccuracies; and (iv) the reasonable expectations doctrine was inapplicable, since the plaintiff had not demonstrated that the policy was ambiguous and since her husband had verified his application as true and correct, knew that the insurer was relying on his answers and had acknowledged the policys contestability clause.
Submitted by: Gerald Kline and Raymond Moss (Sims Moss Kline & Davis LLP) assisted by Eric Van Atta and MJ Mitchell
The Sullivan Law Group, LLP, New York (Suzanne M. Saia of
counsel), for appellants.
DeLuca & Forster, Cranford, NJ (Daniel Louis Grossman of
counsel), for respondent.
Order, Supreme Court, New York County (Jane S. Solomon, J.), entered November 23, 2009, which upon reargument, adhered to its prior order, entered August 18, 2009, denying defendants' motion for summary judgment dismissing the complaint, unanimously reversed on the law, without costs, defendants' motion granted and the complaint dismissed. The Clerk is directed to enter judgment accordingly.
On July 7, 2007, plaintiff, a store selling jewelry, clothing and other merchandise, was robbed. Prior to May 2006, plaintiff was insured for losses of business and personal property up to $1,240,000. Sometime prior to May 2006, plaintiff's principal (Lee) asked the defendant Matthias Saechang Im (Im), an insurance broker, employed by defendant Matthias Saechang Im Agency, if he could obtain the same "apples to apples" insurance coverage plaintiff currently had from another company. Lee provided Im with documents evincing plaintiff's existing coverage and Im obtained a policy for plaintiff from LIG Insurance. Both Im and Lee were under the impression that the policy procured by Matthias covered losses arising from the theft of jewelry.
A year later the LIG policy automatically renewed for the period of May 2007 through May 2008, and after the renewal, Im informed Lee that plaintiff's policy did not include any coverage for losses arising from the theft of jewelry or that the coverage for such a loss was only a maximum of $2,500. Lee asked Im to obtain coverage from LIG for robbery-related jewelry losses in excess of $1 million but Im told Lee that at best, LIG would only provide $200,000 for robbery-related losses. Giving Lee two alternatives, Im suggested that plaintiff obtain jeweler's block insurance from another company, which would provide plaintiff with the requisite coverage for robbery-related jewelry losses, and sent Lee an application form to procure the same. Alternatively, Im told Lee that he could procure robbery-related jewelry coverage from LIG in the amount of $200,000 and sent Lee a letter for that purpose that Lee was to execute and return. Lee, aware that he had little to no robbery-related coverage, received the letter for procurement of additional insurance from LIG one to two months prior to the robbery but failed to execute and return it until nearly 5 p.m on the date of the robbery. Moreover, averring that he did not want to incur additional expense and that it would take months to procure jeweler's block insurance, Lee never returned the application, despite having received it a month prior to the robbery. LIG ultimately paid plaintiff $100,000 for the losses incurred in the robbery. Inasmuch as that amount did not fully cover plaintiff's losses, it then brought this action against the defendants for breach of contract and negligence.
Insurance agents and brokers have a common-law duty to obtain the coverage requested by a client within a reasonable time after the request is made or if unable to procure the requested coverage, to promptly notify the client (Hoffend & Sons, Inc. v Rose & Kiernan, Inc., 7 NY3d 152, 157 ; Murphy v Kuhn, 90 NY2d 266, 270 ; Bruckmann, Rosser, Sherrill & Co., L.P. v Marsh USA, Inc., 65 AD3d 865, 867 ; Verbert v Garcia, 63 AD3d 1149, 1149 ; Baseball Office of Commr. v Marsh & Mclennan, Inc., 295 AD2d 73, 79-80 ). In executing the insurance brokerage transaction, an agent or broker must exercise due care; thus, when an insurance policy does not cover a loss for which the broker was contracted to obtain coverage, the party who engaged the broker is entitled to recover damages (Bruckmann, Rosser, Sherrill & Co., L.P. at 866).
Here, Im obtained substantially inferior coverage, never apprising Lee of his inability to obtain the coverage requested until a year later, and only after the policy renewed for another year. Thus, Im breached the duty owed to plaintiff. Contrary to defendants' assertion, the fact that a year later Im informed Lee that LIG would not provide the coverage does not negate defendants' negligence, since by that time Im's failure to obtain the coverage requested or to otherwise promptly notify had subjected plaintiff to improper coverage for the previous and coming year.
However, it is clear that defendants' negligence was not the proximate cause of plaintiff's damages and, accordingly, they are entitled to summary judgment. Evidence establishing that a defendant's negligence was the proximate cause of the harm alleged is essential to proving liability (Sheehan v City of New York, 40 NY2d 496, 501 ); without it a defendant can not be held liable (Lee v New York City Hous. Auth., 25 AD3d 214, 220 , lv denied 6 NY3d 708 ; Lynn v Lynn, 216 AD2d 194, 195 ). Additionally, it is well settled that when the intervening act of another "is extraordinary under the circumstances, not foreseeable in the normal course of events, or independent of or far removed from the defendant's conduct, it may well be a superseding act which breaks the causal nexus" (Derdiarian v Felix Contr. Corp., 51 NY2d 308, 315 )
between defendant's action and the harm or act alleged (see Kush v City of Buffalo, 59 NY2d 26, 33 ; Sheehan at 503; Lee at 220).
The record evidence demonstrates that in an effort to rectify his failure, Im gave Lee two viable options, at least one of which would have completely covered plaintiff for the losses incurred. Lee, having in his possession the documents necessary to procure additional coverage and fully aware that, as it stood, he at best had minimal theft related insurance coverage, waited at least a month before taking any action. Thus, it was Lee's own inaction, which constituted a superseding act, which caused him to be inadequately insured on the date of plaintiff's loss. Defendants' negligence was thus not the proximate cause of plaintiff's damages and they are entitled to summary judgment (see Thompson & Bailey, LLC v Whitmore Group, Ltd., 34 AD3d 1001, 1003 , lv denied 8 NY3d 807  [cancellation of insurance policy was not due to any negligence on part of insurance broker but rather to plaintiff's own failure to act]; Resource v National Cas Co., 219 AD2d 627, 628  [plaintiffs' damages were not proximately caused by broker's failure to procure adequate insurance but rather by their independent decision to settle a claim which would have been covered by the policy]).
Ford Marrin Esposito Witmeyer & Gleser, L.L.P., New York
(Matthew C. Ferlazzo and James M. Adrian of counsel), for
Zisholtz & Zisholtz, LLP, Mineola (Robert Vadnais of
Order, Supreme Court, New York County (Ira Gammerman, J.H.O.), entered August 7, 2009, which, in a declaratory judgment action involving defendant insurer's obligation to defend and indemnify plaintiffs in an underlying action for personal injury, granted defendant's motion for summary judgment only with respect to the plaintiff that was the underlying plaintiff's employer and also the subtenant of the accident site, and, insofar as appealed from, denied defendant's motion with respect to the remaining plaintiffs, namely, the owner and main tenant of the accident site and the latter's managing member, and order, same court and Justice, entered December 22, 2009, which granted plaintiffs' motion for summary judgment in favor of the remaining plaintiffs, unanimously reversed, on the law, without costs, defendant's motion granted in full, plaintiffs' motion denied as academic, and it is declared that defendant has no obligation to defend or indemnify any of the plaintiffs herein in the underlying action. The Clerk is directed to enter a judgment so declaring.
The "Exclusion-Cross Liability" endorsement states that the subject insurance does not apply to any actual or alleged bodily injury to an employee of "any insured." This Court has held that such language unambiguously excludes coverage even where the injured party was an employee of another insured under the policy (see Tardy v Morgan Guar. Trust Co. of N.Y., 213 AD2d 296 ; Consolidated Edison Co. of N.Y. v United Coastal Ins. Co., 216 AD2d 137 , lv denied 87 NY2d 808 ). Neither the general "Separation of Insureds" provision contained in the policy, nor the separation of insureds doctrine (see Greaves v Public Serv. Mut. Ins. Co. 5 NY2d 120, 124-125 , explaining Morgan v Greater N.Y. Taxpayers Mut. Ins. Assn., 305 NY 243, 247-248 ), renders this exclusion ambiguous. The Separation of Insureds provision primarily highlights the named insured's separate rights and duties, as well as makes clear that the limits of the policy are to be shared by all of the insureds, i.e, that they are not each able to exhaust the limits of coverage but must share that limit equally; it does not negate bargained-for exclusions, or otherwise expand, or limit, coverage (see American Wrecking Corp. v Burlington Ins. Co., 400 NJ Super 276, 284, 946 A2d 1084, 1089 [NJ Super Ct, App Div 2008]).
In any event, the Cross Liability exclusion here clearly states, in bold and capital letters: "THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY," and therefore would modify the Separation of Insureds provision to the extent the two clauses were in conflict. Plaintiffs' reading of the Cross Liability exclusion, however, would impermissibly modify it to change "any insured" to "the insured" or to "the insured employer," or other such limiting language that simply is not in the policy (see Bretton v Mutual of Omaha Ins. Co., 110 AD2d 46, 49 , affd 66 NY2d 1020 ; RM Realty Holdings Corp. v Moore, 64 AD3d 434, 437 ). Furthermore, the Separation of Insureds provision is a general provision, while the Cross Liability exclusion is specific, and therefore the latter would control to the extent there is a conflict (see Muzak Corp. v Hotel Taft Corp., 1 NY2d 42, 46-47 ; see e.g. Greenwich Ins. Co. v Volunteers of Am.-Greater N.Y., Inc., 62 AD3d 557 ).
Salvatore J. Sciangula, for appellant.
Marjorie E. Bornes, for respondent.
The order of the Appellate Division should be affirmed with costs.
Kristopher Kohl, a passenger in a taxicab, was sued by a bicyclist who claimed that he was injured when Kohl opened the taxi's door. The Appellate Division correctly held that Kohl was not insured under the taxi owner's policy of automobile liability insurance. The policy says that it "shall inure to the benefit of any person legally operating" the insured vehicle in the business of the insured. The word "operating" cannot be stretched to include a passenger's riding in the car or opening the door.
Melito & Adolfsen P.C., New York (S. Dwight Stephens of
counsel), for appellants.
Malapero & Prisco, LLP, New York (Frank J. Lombardo of
counsel), for respondents.
Order, Supreme Court, New York County (Marylin G. Diamond, J.), entered September 18, 2009, which denied plaintiffs' motion for summary judgment declaring that defendant Arch Insurance Company (Arch) is obligated to defend and indemnify plaintiffs in the underlying personal injury action, unanimously reversed, on the law, without costs, the motion granted, and it is declared that Arch is obligated to defend and indemnify plaintiffs in the underlying personal injury action.
Plaintiffs, Hunter Roberts Construction Group, LLC and Hunter Roberts Construction Group, LLC d/b/a Hunter Roberts Interiors (Hunter), as construction manager for the Bear Stearns Fit Out project at 237 Park Avenue in Manhattan, subcontracted with defendant Petrocelli Electric Company (Petrocelli) to perform electrical work. The subcontract required Petrocelli to defend and indemnify Hunter against all claims "which arise out of" or "are connected" with Petrocelli's work and to obtain comprehensive general liability coverage naming Hunter as an additional insured.
On or about March 12, 2007, a Petrocelli employee, Robert Chevola, was working on the 7th floor of the building when he was allegedly "caused to trip and fall upon a hole in the floor." An accident report states that "[e]mployee was walking back to field office to get a can of spray paint. Employee was looking towards left at work being done when his left foot went into hole in floor causing him to trip and fall on to floor."
At the time of the accident, Petrocelli had in effect a commercial general liability policy from Arch which included as an additional insured:
"any person or organization for whom you are performing operations when you and such person or organization have agreed in writing in a contract or agreement that such person or organization is an additional insured on your policy. Such person or organization is an additional insured only with respect to liability arising out of:
"I) your work' at the location designated; . . ."
On November 21, 2007, Chevola commenced the underlying suit against Hunter and others. By letter dated January 7, 200, Hunter, quoting the indemnity clause of the subcontract, advised Petrocelli and Arch that it had "recently been notified" of Chevola's claim and asked them to "accept this tender as per the terms and conditions of the contract." Hunter added that "[i]f there is any information that we can provide to assist in the defense of this matter please don't hesitate to call." By letter dated January 8, 2008, Hunter's carrier, Zurich American Insurance Company (Zurich), sent a follow-up letter to Arch and Petrocelli also demanding a defense and indemnification on Hunter's behalf. Zurich asserted that Hunter was the construction manager on the project, whose primary role was to coordinate work schedules and insure the work was being performed according to specifications and plans; that Chevola, a Petrocelli employee, tripped and fell while working on the project; that Petrocelli was obligated to indemnify Hunter and provide primary and non-contributory coverage "for any and all claims . . . arising out of" the subcontract; and that New York courts have required coverage under such a clause where the underlying plaintiff is an employee of the named insured.
By letter dated January 25, 2008, Arch acknowledged receipt of the tender and issued a reservation of rights, stating it would investigate whether Hunter was covered and whether the notice was timely. By letter dated February 6, 2008, Arch requested the subcontract and again stated that it would undertake an investigation into the circumstances surrounding the occurrence and the timeliness of Hunter's notice.
By letter dated April 1, 2008, Zurich responded that it had already supplied the subcontract with its January 8, 2008 letter. Zurich quoted the subcontract's language requiring Petrocelli to name Hunter as an additional insured and asserted that "since . . . Chevola was an employee of Petrocelli who was allegedly injured in the course of the work for Hunter, the loss plainly arises out of Petrocelli's work." Zurich also stated that it was enclosing a copy of the contract hiring Hunter as construction manager.
By letter dated May 8, 2008, Arch, stating that it had "investigated this matter" and "developed enough information to formulate its final coverage position," disclaimed coverage. The alleged grounds for the disclaimer were that (1) the subcontract was not an "insured contract"; (2) Hunter breached the duty to cooperate by failing to provide statements "that would clarify certain details regarding the timeliness of [Hunter's] notice to Arch and the circumstances of the incident"; (3) Hunter failed to notify Arch "as soon as practicable" of the occurrence in that the accident occurred on March 13, 2007 and notice was given 10 months later; and (4) Chevola's injury did not "arise out of" Petrocelli's work.
By letter dated May 9, 2008, Zurich replied that it had complied with Arch's requests for proof that the subcontract required Petrocelli to name Hunter as additional insured and repeated that since Chevola "was an employee of Petrocelli, who was allegedly injured in the course of work for Hunter, the loss plainly arises out of Petrocelli's work." This action followed.
Hunter moved for summary judgment, asserting, among other things, that Arch's disclaimer was untimely. In opposition, Arch submitted the affirmation of counsel who alleged that the investigation was delayed because plaintiff did not respond to Arch's request for the contracts until April 1, 2008 and because two of the four Petrocelli employees who were either present or employed in a supervisory position on the date of incident were no longer employed by Petrocelli and Arch's investigator had to find them to take statements. Arch also submitted the affidavit of the investigator who averred that after he was retained on January 21, 2008, he contacted Hunter twice in January 2008 and once in February 2008 by telephone to discuss the incident and ascertain when Hunter received notice. The investigator allegedly asked to speak with the Project Manager for the Bear Stearns' project and at some later date was told that he would need to know the individual's name in order to speak to him. The investigator then resumed his investigation with Petrocelli until such time as he was able to find out who the Project Manager was. Arch also submitted the investigator's invoices.
The motion court found that the investigator's affidavit, along with the "invoices detailing his investigatory work and the difficulty he experienced in locating and speaking to Petrocelli employees, raise a triable issue of fact as to whether the notice of disclaimer was sent as soon as is reasonably possible.'" We now reverse.
Insofar as Arch's denial of coverage was based upon lack of coverage as an additional insured pursuant to the additional insured endorsement, a timely disclaimer was unnecessary (see Markevics v Liberty Mut. Ins. Co., 97 NY2d 646, 648 ; Perkins v Allstate Ins. Co., 51 AD3d 647, 649 ). However, the denial is without merit.
"Generally, the absence of negligence, by itself, is insufficient to establish that an accident did not 'arise out of' an insured's operations" (Worth Constr. Co., Inc. v Admiral Ins. Co., 10 NY3d 411, 416 ). Rather, the focus of an "arising out of" clause is not on the precise cause of the accident but on the general nature of the operation in the course of which the injury was sustained (see Regal Constr. Corp. v National Union Fire Ins. Co. of Pittsburgh, Pa., 64 AD3d 461 , affd _ NY3d _, 2010 NY Slip Op 4661 ). As the Court of Appeals explained in Regal, "We have interpreted the phrase arising out of' in an additional insured clause to mean originating from, incident to or having connection with. It requires only that there be some causal relationship between the injury and the risk for which coverage is provided" (2010 NY Slip Op 4661 at *3 [internal quotation marks and citation omitted]).
Where, as here, the loss involves an employee of the named insured, who is injured while performing the named insured's work under the subcontract, there is a sufficient connection to trigger the additional insured "arising out of" operations' endorsement and fault is immaterial to this determination (Tishman Constr. Corp. of N.Y. v CNA Ins. Co., 236 AD 2d 211 ; Tishman Interiors Corp. of N.Y. v Fireman's Fund Ins. Co., 236 AD2d 385 ; Consolidated Edison Co. of N.Y. v Hartford Ins. Co., 203 AD2d 83 ).
Worth Constr. Co. Inc. v Admiral Ins. Co. (10 NY3d 411 , supra), does not require otherwise. In Regal Constr. Corp., the Court of Appeals distinguished Worth, stating:
"Here, there was a connection between the accident and Regal's work, as the injury was sustained by Regal's own employee while he supervised and gave instructions to a subcontractor regarding work to be performed. That the underlying complaint alleges negligence on the part of URS and not Regal is of no consequence, as URS's potential liability for LeClair's injury ar[ose] out of' Regal's operation and, thus, URS is entitled to a defense and indemnification according to the terms of the CGL policy" (__ NY3d at __, 2010 NY Slip Op 4661, at *4).
Accordingly, Hunter, which had a written subcontract with Petrocelli that obligated Petrocelli to obtain comprehensive general liability coverage on Hunter's behalf, was an additional insured under the Arch policy's blanket endorsement, which covered the underlying claim.
As to the remaining grounds for Arch's disclaimer, under Insurance Law 3420(d)(2), an insurer wishing to deny coverage for death or bodily injury must "give written notice as soon as is reasonably possible of such disclaimer of liability or denial of coverage." When an insurer fails to do so, it is precluded from disclaiming coverage based upon late notice, even where the insured has in the first instance failed to provide the insurer with timely notice of the accident (see Hartford Ins. Co. v County of Nassau, 46 NY2d 1028, 1029 ; Delphi Restoration Corp. v Sunshine Restoration Corp., 43 AD3d 851 , lv dismissed 9 NY3d 1002 ).
The insurer bears the burden to explain the reasonableness of any delay in disclaiming coverage (see Moore v Ewing, 9 AD3d 484, 488 ). The reasonableness of any delay is computed from the time that the insurer becomes sufficiently aware of the facts which would support a disclaimer (see Pawley Interior Contr., Inc. v Harleysville Ins. Cos., 11 AD3d 595 ). Although the timeliness of such a disclaimer generally presents a question of fact (see Continental Cas. Co. v Stradford, 11 NY3d 443, 449 ), where the basis for the disclaimer was, or should have been, readily apparent before the onset of the delay, any explanation by the insurer for its delay will be insufficient as a matter of law (see First Fin. Ins. Co. v Jetco Contr. Corp., 1 NY3d 64, 69 ; West 16th St. Tenants Corp. v Public Serv. Mut. Ins. Co., 290 AD2d 278, 279 , lv denied 98 NY2d 605 ). Where the basis was not readily apparent, an unsatisfactory explanation will render the delay unreasonable as a matter of law (see Bovis Lend Lease LMB, Inc. v Royal Surplus Lines Ins. Co., 27 AD3d 84, 88 , citing First Fin. Ins. Co., 1 NY3d at 69). If the delay allegedly results from a need to investigate the facts underlying the proposed disclaimer, the insurer must demonstrate the necessity of conducting a thorough and diligent investigation (see Quincy Mut. Fire Ins. Co. v Uribe, 45 AD3d 661 ; Schulman v Indian Harbor Ins. Co., 40 AD3d 957 ).
In disclaiming coverage, Arch asserted that Hunter failed to notify Arch "as soon as practicable" of the occurrence in that the accident occurred on March 13, 2007 and notice was given 10 months later. Such a reason for disclaimer would have been apparent upon examination of Hunter's January 7, 2008 and/or Zurich's January 8, 2008 tenders. While Arch asserts that difficulties in its investigation of the claim caused the delay, it does not explain, given the facts made known to it by Hunter and Zurich's submissions, why anything beyond a cursory investigation was necessary to determine whether Hunter
had timely notified it of the claim (see Scott McLaughlin Truck & Equip. Sales, Inc. v Selective Ins. Co. of Am., 68 AD3d 1619 ). Accordingly, the four month delay in disclaiming on
this ground was unreasonable as a matter of law (see e.g. First Fin. Ins. Co., 1 NY3d at 66; State Ins. Fund v American Hardware Mut. Ins. Co., 64 AD3d 581 ; Pav-Lak Indus., Inc. v Arch Ins. Co., 56 AD3d 287 ; Saitta v New York City Tr. Auth., 55 AD3d 422, 423 ).
Arch's disclaimer on the ground Hunter failed to cooperate is also untimely. The basis for the claim is that when the investigator contacted Hunter by telephone twice in January 2008 and once in February 2008 and asked to speak with the project manager, he was told he would have to know the project manager's name. The disclaimer on this ground over two months later was not made as soon as reasonably practicable. In any event, the disclaimer was without merit.
An insurer seeking to disclaim for noncooperation has a heavy burden of proof and must demonstrate that "it acted diligently in seeking to bring about the insured's co-operation[,] . . . that the efforts employed by the insurer were reasonably calculated to obtain the insure[d]'s co-operation . . . and that the attitude of the insured, after his co-operation was sought, was one of willful and avowed obstruction'" (Thrasher v United States Liab. Ins. Co., 19 NY2d 159, 168 , quoting Coleman v New Amsterdam Cas. Co., 247 NY 271, 276 ; see also Matter of State Farm Indem. Co. v Moore, 58 AD3d 429, 430 ). "Strict scrutiny" of facts supporting the noncooperation defense is required to protect "innocent injured parties from suffering the consequences of a lack of coverage" (Matter of Liberty Mut. Ins. Co. v Roland-Staine, 21 AD3d 771, 772 ).
While the parties dispute when the subcontract was provided, the record reflects that Zurich provided Arch with the documentation requested no later than April 1, 2008, more than a month before the disclaimer. While Arch claims that Hunter impeded its investigator's progress, the investigator only alleges that he called Hunter's main telephone number three times and was told he would have to supply the name of the Project Manager if he wanted to speak with him. The investigator does not identify whom he spoke to and the calls are not reflected in his invoices. Nor is there any indication that the investigator ever appeared at Hunter's offices in person or that Arch ever made a specific demand that Hunter produce the Project Manager or any other witness on a date certain or that Arch ever advised Hunter that its alleged lack of cooperation was hindering the investigation. Nor did Arch demonstrate that further reasonable attempts to elicit Hunter's cooperation would be futile (see Thrasher, 19 NY2d at 168).
Thus, Arch has not carried its "very heavy burden" of demonstrating that it acted diligently in seeking to bring about the insured's cooperation, that its efforts were reasonably calculated to obtain the insured's cooperation and that the attitude of the insured, after his cooperation was sought, was one of willful and avowed obstruction (see State Farm Indem. Co. v Moore, 58 AD3d at 430-431; cf. Matter of New York Cent. Mut. Fire Ins. Co. (Salomon), 11 AD3d 315 ; State Ins. Fund v Merchants Ins. Co. of N.H., 5 AD3d 449 ).
These deficiencies are not cured by the affirmation of Arch's counsel, which lacks probative value (see S. J. Capelin Assoc. v Globe Mfg. Corp., 34 NY2d 338 ), or by the investigator's invoices. The first invoice shows that during the period of January 23, 2008 through February 19, 2008, the investigator received the assignment and attachments and attempted to contact Ricky Bilig, who allegedly witnessed the accident. There is no detail as to what these attachments were. The second invoice shows that during the period of February 19, 2008 through March 6, 2008, the investigator attempted to interview Bilig and visited Petrocelli, which said it would set up interviews with its employees Farrell and Eager. The third invoice shows that during the period of April 10, 2008 to April 15, 2008, the investigator interviewed Eager. The fourth invoice shows that on April 21, 2008, the investigator spoke with Farrell. The invoices do not reflect a lack of cooperation by Hunter nor do they establish that Arch did not have sufficient information in its possession to determine that Hunter's notice was untimely upon or shortly after the receipt of Hunter's tender.
Gruvman, Giordano & Glaws, L.L.P., New York City
(Louis P. Giordano of counsel), for appellants.
The DeLorenzo Law Firm, L.L.P., Schenectady (Mark A.
Myers of counsel), for respondent.
MEMORANDUM AND ORDER
Appeal from an order of the Supreme Court (Aulisi, J.), entered June 22, 2009 in Schenectady County, which partially granted petitioners' application pursuant to CPLR 7503 to stay arbitration between the parties.
Respondent was injured in a 2000 accident in which the automobile she was driving was rear-ended by another car. She retained a law firm to bring a personal injury suit and, when the firm failed to timely do so, her ensuing legal malpractice action against the firm settled for $50,000, the full limit of the other driver's automotive liability insurance [FN1] . Respondent then advised petitioners, her automotive insurer and its third-party administrator, that she intended to file a supplementary uninsured/underinsured motorist (hereinafter SUM) insurance coverage claim. After she demanded arbitration of that claim, petitioners commenced this proceeding seeking a stay of arbitration. Supreme Court granted the petition to the extent of temporarily staying arbitration pending a hearing on various issues, and petitioners appeal.
An insurer is obligated to pay under SUM coverage if the bodily injury liability insurance limits of its insured's policy exceed those of the other policy, subject to the condition that "the limits of liability of all bodily injury liability bonds or insurance policies applicable at the time of the accident shall be exhausted by payment of judgments or settlements" (Insurance Law 3420 [f]  [A]; see Matter of Federal Ins. Co. v Watnick, 80 NY2d 539, 546 ). The statute, in short, "requires primary insurers to pay every last dollar, and requires [respondent] to accept no less, prior to the initiation of an underinsurance claim" (Matter of Federal Ins. Co. v Watnick, 80 NY2d at 546). The primary insurer here, however, has paid nothing, as respondent was forced to recover damages in a separate legal malpractice claim. As the other driver's policy limit was not exhausted by payment, respondent's own SUM coverage does not come into play, and Supreme Court should have granted petitioners' application for a permanent stay.
In light of the foregoing, we need not consider petitioners' remaining arguments.
Cardona, P.J., Mercure and Kavanagh, JJ., concur.
Garry, J. (dissenting).
I respectfully dissent. The Insurance Law establishes the condition precedent to the recovery of benefits under supplementary uninsured/underinsured motorist insurance (hereinafter SUM) as follows: "As a condition precedent to the obligation of the insurer to pay under [SUM] coverage, the limits of liability of all bodily injury liability bonds or insurance policies applicable at the time of the accident shall be exhausted by payment of judgments or settlements" (Insurance Law 3420 [f]  [A] [emphasis added]). Supreme Court properly analyzed the plain language of this statute and assigned appropriate weight and emphasis to the phrase "limits of liability." The word "limits" is the subject of the sentence ("the limits of liability . . . shall be exhausted") and, as such, the controlling concept of the legislation. The majority, instead, places undue emphasis on the modifying phrase "all bodily injury . . . insurance policies" in holding that respondent must obtain the pertinent funds directly from the automobile carrier as a condition precedent to enforcing her contract with her own carrier. Had the Legislature intended to require exhaustion of the applicable policies as opposed to exhaustion of the limits, this purpose would be met by simply stating that "all bodily injury insurance policies . . . shall be exhausted." This is not what the statute requires; the modifying phrase instead defines the measure of benefits, nothing more, and neither precedent nor public policy supports construing the statutory language as the majority suggests.
In consideration of the significant public policy concerns which led to their enactment, statutes such as this one "must be interpreted as a whole, giving the words a meaning which serves rather than defeats the over-all legislative goals" (Matter of Allstate Ins. Co. v Shaw, 52 NY2d 818, 820 ). The Legislature's purpose in enacting Insurance Law 3420 (f) (2) was "to allow an insured to 'obtain the same level of protection for himself and his passengers which he purchased to protect himself against liability to others'" (Matter of Prudential Prop. & Cas. Co. v Szeli, 83 NY2d 681, 686 , quoting State Executive Dept Mem, 1977 McKinney's Session Laws of NY, at 2446). Respondent presumably obtained SUM coverage for that purpose, and the majority's "unnecessarily restrictive" interpretation (Matter of Vanguard Ins. Co. [Polchlopek], 18 NY2d 376, 381 ) not only denies her the benefit of her bargain, but fails to serve "the avowed purpose of SUM coverage . . . to protect the insured against accidents with both uninsured and underinsured motorists" (Butler v New York Cen. Mut. Ins Co., 274 AD2d 924, 926 ; see 11 NYCRR 60-2.1; Matter of Allstate Ins. Co. v Shaw, 52 NY2d 818, 820 ).
Upon this appeal, it is undisputed that respondent obtained the full amount of the "limits of liability" of the tortfeasor's bodily injury policy applicable at the time of the accident, albeit from another carrier. This unusual circumstance apparently presents a matter of first impression and, as Supreme Court correctly noted, no legal precedent establishes that the source of payment, as opposed to the amount of the payment, is a critical factor in the analysis. Instead, as respondent has obtained the full amount of the "limits of liability" of the applicable underlying bodily injury policy, the requisite statutory condition has been met, and the insurer's interests have been fully protected [FN2] . Accordingly, I would affirm the determination in full and allow the parties to proceed for determination of the remaining issues.
ORDERED that the order is modified, on the law, without costs, by reversing so much thereof as partially denied petitioners' application; application granted in its entirety and arbitration between the parties stayed; and, as so modified, affirmed.
Footnote 1: Respondent notified petitioners of the proposed settlement of her legal malpractice claim and requested their consent to the settlement, but allegedly received no response.
Footnote 2: The issue of notice remains to be determined.
Grant & Longworth, LLP, Bronx (Brett R. Hupart of counsel),
Baker, McEvoy, Morrissey & Moskovits, P.C., New York
(Stacy R. Seldin of counsel), for respondents.
Order, Supreme Court, New York County (Edgar G. Walker, J.), entered April 9, 2009, which granted defendants' motion for summary judgment dismissing the complaint as to plaintiff-appellant (plaintiff) for lack of a serious injury, unanimously affirmed, without costs.
The examination records of plaintiff's own treating physician/expert show that she had full strength and range of motion in the knee both a few weeks and a few months after the accident, after he performed a right knee ACL reconstruction, partial medial and lateral meniscectomy and chrondroplasty. Absent some manner of explanation, the negative findings cannot be reconciled with the physician's affirmation submitted in opposition to the motion prepared a few years after the accident, that plaintiff sustained a permanent injury to the knee as a result of the accident. Summary judgment in favor of defendants should be granted for this reason alone, at least with respect to the alleged knee injury (see Pou v E & S Wholesale Meats, Inc., 68 AD3d 446 ). Also fatal to plaintiff, on the issue of permanence of both the alleged knee and alleged back injuries, is the physician's failure to provide any objective medical test results showing current range-of-motion impairments (cf. Jimenez v Rojas, 26 AD3d 256, 257 ). Nor does plaintiff, who concedes that she worked from home beginning two months after the accident through her return to the office five months after the accident, and fails to detail the particular job and other activities that were supposedly curtailed, satisfy the 90/180 test (see Uddin v Cooper, 32 AD3d 270, 271 , lv denied 8 NY3d 808 ; Linton v Nawaz, 62 AD3d 434, 443 , affd on other grounds __ NY3d __, 2010 NY Slip Op 2835 ).
Baker, McEvoy, Morrissey & Moskovits, P.C., New York,
N.Y. (Stacy R. Seldin of counsel), for appellant.
William Pager, Brooklyn, N.Y., for respondents.
DECISION & ORDER
In an action to recover damages for personal injuries, etc., the defendant appeals from an order of the Supreme Court, Kings County (Knipel, J.), dated February 5, 2010, which denied his motion for summary judgment dismissing the complaint on the ground that the plaintiff John Baena did not sustain a serious injury within the meaning of Insurance Law 5102(d).
ORDERED that the order is reversed, on the law, with costs, and the defendant's motion for summary judgment dismissing the complaint is granted.
The defendant met his prima facie burden of establishing his entitlement to judgment as a matter of law by showing that the plaintiff John Baena (hereinafter the injured plaintiff) did not sustain a serious injury within the meaning of Insurance Law 5102(d) as a result of the subject accident (see Toure v Avis Rent A Car Sys., 98 NY2d 345; Gaddy v Eyler, 79 NY2d 955, 956-957). In opposition, the plaintiffs failed to raise a triable issue of fact as to whether the injured plaintiff sustained such a serious injury as a result of the subject accident.
In opposition to the defendant's summary judgment motion, the plaintiffs principally relied upon the affirmed medical report of Dr. Leon M. Bernstein, the injured plaintiff's examining orthopedic surgeon. That report failed to raise any triable issues of fact. In that report, which was based on an examination conducted approximately four years after the subject accident, Dr. Bernstein admitted that there were no "reported definite fractures." While Dr. Bernstein did set forth a range-of-motion finding concerning the injured plaintiff's right fifth finger, he failed to compare that finding to what was normal (see Johnson v Tranquille, 70 AD3d 645; Morris v Edmond, 48 AD3d 432). Moreover, neither the plaintiffs nor Dr. Bernstein proffered any competent medical evidence that revealed the existence of a significant limitation in the injured plaintiff's right fifth finger that was contemporaneous with the subject accident (see Catalano v Kopmann, 73 AD3d 963; Bleszcz v Hiscock, 69 AD3d 890; Taylor v Flaherty, 65 AD3d 1328; Fung v Uddin, 60 AD3d 992; Gould v Ombrellino, 57 AD3d 608; Kuchero v Tabachnikov, 54 AD3d 729; Ferraro v Ridge Car Serv., 49 AD3d 498).
Additionally, the plaintiffs failed to proffer any objective medical evidence that the injuries allegedly sustained by the injured plaintiff in the subject accident rendered him unable to perform substantially all of his usual and customary daily activities for not less than 90 days of the first 180 days subsequent to the subject accident (see Sainte-Aime v Ho, 274 AD2d 569).
The plaintiffs' remaining contentions are without merit.
Baker, McEvoy, Morrissey & Moskovits, P.C., New York, N.Y.
(Stacy R. Seldin of counsel), for appellants.
Michelstein & Associates, PLLC, New York, N.Y. (Mark D.
Plush of counsel), for respondent.
DECISION & ORDER
In an action to recover damages for personal injuries, the defendants Surinder Kumar and Paramjit Multani appeal from an order of the Supreme Court, Kings County (Ruchelsman, J.), dated March 3, 2010, which denied their motion for summary judgment dismissing the complaint insofar as asserted against them on the ground that the plaintiff did not sustain a serious injury within the meaning of Insurance Law 5102(d).
ORDERED that the order is affirmed, with costs.
The Supreme Court did not err in concluding that the appellants failed to meet their prima facie burden of showing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law 5102(d) as a result of the subject accident (see Toure v Avis Rent A Car Sys., 98 NY2d 345; Gaddy v Eyler, 79 NY2d 955, 956-957). In support of their motion, the appellants relied upon, inter alia, the affirmed medical report of their examining orthopedic surgeon. The surgeon noted in his report that he found significant limitations in the plaintiff's cervical and lumbar spine when he examined the plaintiff more than two years after the accident (see Smith v Hartman, 73 AD3d 736; Quiceno v Mendoza, 72 AD3d 669; Giacomaro v Wilson, 58 AD3d 802, 803; McGregor v Avellaneda, 50 AD3d 749, 749-750; Wright v AAA Constr. Servs., Inc., 49 AD3d 531).
Since the appellants failed to meet their prima facie burden, it is unnecessary to consider whether the papers submitted by the plaintiff in opposition were sufficient to raise a triable issue of fact (see Smith v Hartman, 73 AD3d at 736; Coscia v 938 Trading Corp., 283 AD2d 538).
Baker, McEvoy, Morrissey & Moskovits, P.C., New York, N.Y.
(Stacy R. Seldin of counsel), for appellants-respondents.
Sim & Park, LLP, New York, N.Y. (Sang J. Sim of counsel),
DECISION & ORDER
In an action to recover damages for personal injuries, the defendants Joginder Singh and Uilranjeet Singh appeal, as limited by their brief, from so much of an order of the Supreme Court, Kings County (Jacobson, J.), dated July 14, 2009, as denied those branches of their motion which were for summary judgment dismissing the complaint insofar as asserted against them to the extent that it alleged injuries to the plaintiffs' necks and backs and medically determined injuries or impairments of a non-permanent nature which prevented the plaintiffs from performing substantially all of the material acts which constituted the plaintiffs' usual and customary daily activities for not less than 90 days during the 180 days immediately following the occurrence of the injury or impairment, and the plaintiffs cross-appeal, as limited by their brief, from so much of the same order as granted those branches of the motion of the defendants Joginder Singh and Uilranjeet Singh which were for summary judgment dismissing the complaint insofar as asserted against those defendants to the extent that it alleged injuries to the right shoulder of the plaintiff Jessica Sin and the left knee of the plaintiff Richard Cardenas on the ground that they did not sustain a serious injury to those respective parts of their bodies within the meaning of Insurance Law 5102(d).
ORDERED that the order is modified, on the law, by deleting the provisions thereof granting those branches of the motion of the defendants Joginder Singh and Uilranjeet Singh which were for summary judgment dismissing the complaint insofar as asserted against them to the extent that it alleged that the plaintiff Jessica Sin sustained a permanent consequential limitation of use of a body organ or member or a significant limitation of use of a body function or system within the meaning of Insurance Law 5102(d) as to the alleged injury to her right shoulder, and that the plaintiff Richard Cardenas sustained a permanent consequential limitation of use of a body organ or member or a significant limitation of use of a body function or system within the meaning of Insurance Law 5102(d) as to the alleged injury to his left knee, and substituting therefor provisions denying those branches of the motion; as so modified, the order is affirmed insofar as appealed and cross-appealed from, with costs to the plaintiffs.
The plaintiffs were passengers in a taxi cab owned by the defendant Joginder Singh and operated by the defendant Uilranjeet Singh (hereinafter together the Singh defendants), when it collided with a motor vehicle owned by the defendant Elvin Estevez and operated by the defendant Ramona Estevez. After joinder of issue, the Singh defendants moved for summary judgment dismissing the complaint insofar as asserted against them on the ground that neither of the plaintiffs sustained a serious injury within the meaning of Insurance Law 5102(d) as a result of the subject motor vehicle accident.
In opposition to the Singh defendants' prima facie showing of their entitlement to judgment as a matter of law (see Gaddy v Eyler, 79 NY2d 955, 956-957), the plaintiffs raised a triable issue of fact as to whether they sustained a permanent consequential limitation of use and/or a significant limitation of use of the cervical and lumbar regions of their spines, by the submission of the affidavits of their treating chiropractor (see Williams v Clark, 54 AD3d 942, 943). The plaintiffs' treating chiropractor opined, based upon his contemporaneous and most recent examinations of the plaintiffs, as well as upon his review of the reports of magnetic resonance imaging scans, which showed bulging discs in the cervical and lumbar regions of each plaintiff's spine, that the plaintiffs' lumbar and cervical injuries and the observed range-of-motion limitations were permanent, significant, and causally related to the subject accident (see Williams v Clark, 54 AD3d at 943). Since the Supreme Court properly determined that there were triable issues of fact as to whether each of the plaintiffs sustained a serious injury to the cervical and lumbar regions of his or her spine, the plaintiffs are entitled to seek recovery for all injuries allegedly incurred as a result of the accident (see Marte v New York City Tr. Auth., 59 AD3d 398, 399). Accordingly, the Supreme Court erred in awarding summary judgment to the Singh defendants dismissing so much of the complaint insofar as asserted against them as alleged injuries to the right shoulder of the plaintiff Jessica Sin and the left knee of the plaintiff Richard Cardenas.
In light of the foregoing, we need not reach the Singh defendants' remaining contentions.
Sim & Park, LLP, New York, N.Y. (Sang J. Sim of counsel), for
Nicolini, Paradise, Ferretti & Sabella, Mineola, N.Y. (Barbara
L. Hall of counsel), for respondent.
DECISION & ORDER
In an action to recover damages for personal injuries, the plaintiff appeals, as limited by his brief, from so much of an order of the Supreme Court, Nassau County (LaMarca, J.), dated June 22, 2009, as granted the defendant's motion for summary judgment dismissing the complaint on the ground that he did not sustain a serious injury within the meaning of Insurance Law 5102(d).
ORDERED that the order is reversed insofar as appealed from, on the law, with costs, and the defendant's motion for summary judgment dismissing the complaint on the ground that the plaintiff did not sustain a serious injury within the meaning of Insurance Law 5102(d) is denied.
The defendant met his prima facie burden of showing that the plaintiff in that action did not sustain a serious injury within the meaning of Insurance Law 5102(d) as a result of the subject accident (see Toure v Avis Rent A Car Sys., 98 NY2d 345; Gaddy v Eyler, 79 NY2d 955, 956-957).
In opposition, the plaintiff raised a triable issue of fact based on the affirmation of Dr. Michael Trimba, the plaintiff's treating physician. Based on Dr. Trimba's contemporaneous and recent examinations of the plaintiff, which revealed significant limitations in the cervical and lumbar regions of the plaintiff's spine, and his review of the affirmed reports of magnetic resonance imaging scans of those regions of the plaintiff's spine, which revealed bulging discs at C5-6, C6-7, L4-5, and L5-S1, Dr. Trimba concluded that the injuries to the cervical and lumbar regions of the plaintiff's spine, and range-of-motion limitations observed during his examinations, were permanent and causally related to the subject accident. This submission alone was sufficient to raise a triable issue of fact as to whether he sustained a serious injury to the cervical and/or lumbar regions of his spine under the permanent consequential limitation of use and/or the significant limitation of use categories of Insurance Law 5102(d) as a result of the subject accident (see Barry v Valerio, 72 AD3d 996; Williams v Clark, 54 AD3d 942; Casey v Mas Transp., Inc., 48 AD3d 610; Green v Nara Car & Limo, Inc., 42 AD3d 430; Francovig v Senekis Cab Corp., 41 AD3d 643, 644-645; Acosta v Rubin, 2 AD3d 657).
Contrary to the defendant's assertion, the plaintiff adequately explained any lengthy gap in his treatment in his affidavit, in which he stated that his no-fault benefits were terminated in October 2007, and he could not afford further treatment thereafter (see Black v Robinson, 305 AD2d 438; see also Domanas v Delgado Travel Agency, Inc., 56 AD3d 717; Jules v Barbecho, 55 AD3d 548). To the extent that the defendant argues that the plaintiff failed to address the findings of his retained radiologist, Dr. Melissa Sapan Cohn, that the plaintiff's injuries to the cervical and lumbar regions of the plaintiff's spine were degenerative in nature, that contention is incorrect. In his affirmation, Dr. Trimba specifically stated that the plaintiff's injuries were not the result of degenerative processes, but were caused by the subject accident. Thus, Dr. Trimba adequately addressed the issue of degeneration and refuted the defendant's assertions in that respect (see Whitehead v Olsen, 70 AD3d 678; Modeste v Mercier, 67 AD3d 871).
Therefore, the Supreme Court erred in granting the defendant's motion for summary judgment dismissing the complaint
Calendar Date: April 23, 2010
Before: Cardona, P.J., Spain, Stein, McCarthy and Egan Jr., JJ.
Hite & Beaumont, P.C., Albany (John H. Beaumont
of counsel), for appellants.
Pennock, Breedlove & Noll, L.L.P., Clifton Park
(Sarah I. Goldman of counsel), for respondent.
MEMORANDUM AND ORDER
Appeal from an order of the Supreme Court (Devine, J.), entered September 9, 2009 in Albany County, which, among other things, partially denied defendants' cross motion for summary judgment.
Plaintiff commenced this action alleging that he sustained serious injuries as defined in Insurance Law 5102 (d) as a result of a July 24, 2001 motor vehicle accident. Plaintiff moved for summary judgment and defendants cross-moved for summary judgment dismissing the complaint. Supreme Court partially granted plaintiff's motion for summary judgment, holding that plaintiff established, as a matter of law, that he sustained a serious injury under the 90/180-day category of Insurance Law 5102 (d), and partially granted defendants' cross motion for summary judgment holding that the permanent loss of use claim should be dismissed. The court denied defendants' cross motion for summary judgment with respect to plaintiff's permanent consequential limitation of use and significant limitation of use claims, leaving them intact. Only defendants appeal.
First, we are persuaded by defendants' argument which plaintiff does not now directly dispute that plaintiff's permanent consequential limitation of use and significant limitation of use claims should also have been dismissed. Defendants correctly point out that the opinion of neurologist Robert Van Uitert, on which plaintiff relies, is deficient as a matter of law to establish these types of serious injury because his opinion was based on an examination that had occurred over 3 years prior to its writing (see Buster v Parker, 1 AD3d 659, 660-661 ; Weller v Munson, 309 AD2d 1098, 1099 , lv dismissed and denied 2 NY3d 782 ). Indeed, although Van Uitert's affirmation arguably supports a cervical injury resulting in loss of range of motion related to the July 2001 accident, he does not state with specificity plaintiff's range of motion at the time of the writing of the affirmation. Further, Van Uitert's most recent medical records indicate that plaintiff had recovered full range of motion in his neck, thereby precluding a finding of permanent consequential limitation of use and/or significant limitation of use (see Wolff v Schweitzer, 56 AD3d 859, 861-862 ; Pugh v DeSantis, 37 AD3d 1026, 1029 ).
Turning to the 90/180-day category, we conclude that plaintiff was not entitled to summary judgment and, indeed, that summary judgment should have been awarded to defendants. A serious injury under the 90/180-day category, is "'establish[ed] through objective medical evidence, [where] a nonpermanent, medically-determined injury . . . prevented [the plaintiff] from performing substantially all of [his or her] usual and customary daily activities for 90 of the first 180 days following the accident'" (Palmeri v Zurn, 55 AD3d 1017, 1019 , quoting Dongelewic v Marcus, 6 AD3d 943, 944 ). "'[E]ven where there is objective medical proof, when additional contributory factors interrupt the chain of causation between the accident and claimed injury such as . . . a preexisting condition summary dismissal of the complaint may be appropriate'" (Coston v McGray, 49 AD3d 934, 934 , quoting Pommells v Perez, 4 NY3d 566, 572 ; cf. Wolff v Schweitzer, 56 AD3d at 861).
In support of the alleged 90/180-day injury, plaintiff relies on his medical records from Van Uitert and neurologist John Bouillon, as well as his deposition transcript. Although the medical records provide evidence of cervical injury causally related to the 2001 accident and demonstrate that Bouillon significantly restricted plaintiff's activities during the pertinent period following the accident and found him to be totally disabled from work, plaintiff's proof fails to distinguish limitations caused by the 2001 accident from previous limitations. Plaintiff had been injured in a prior automobile accident in 2000. Significantly, Bouillon placed the exact same restrictions on plaintiff's activities following the 2000 accident as he did following the 2001 accident, without any indication that plaintiff's condition had significantly improved between the two. Likewise, the record reflects that plaintiff was completely disabled from working prior to the 2001 accident. Plaintiff's deposition transcript fails to remedy this defect as he does not differentiate the limitations he experienced following the 2001 accident from those he experienced following the 2000 accident. We hold, therefore, that defendants established, as a matter of law, that plaintiff did not demonstrate on this record the existence of a 90/180-day injury attributable to the 2001 accident (see Howard v Espinosa, 70 AD3d 1091, 1093-1094 ; Dean v Brown, 67 AD3d 1097, 1098-1099 ; Falkner v Hand, 61 AD3d 1153, 1154-1155 ).
Cardona, P.J., Stein, McCarthy and Egan Jr., JJ., concur.
ORDERED that the order is modified, on the law, with costs to defendants, by reversing so much thereof as granted plaintiff's motion for summary judgment on the 90/180-day cause of action and as denied defendants' cross motion for summary judgment dismissing the 90/180-day, permanent consequential limitation of use and significant limitation of use causes of action; plaintiff's motion denied in its entirety, defendants' cross motion granted in its entirety and complaint dismissed; and, as so modified, affirmed.
Calendar Date: May 26, 2010
Before: Peters, J.P., Rose, Lahtinen, McCarthy and Egan Jr., JJ.
Lazare, Potter & Giacovas, L.L.P., New York City
(Yale Glazer of counsel), for appellants.
Devereaux Baumgarten, New York City (Michael J.
Devereaux of counsel), for respondents.
MEMORANDUM AND ORDER
Appeal from an order of the Supreme Court (Cahill, J.), entered May 19, 2009 in Ulster County, which, among other things, partially denied certain defendants' motion to dismiss the amended complaint.
Plaintiff SUS, Inc. owned and operated the Sangiovese Restaurant in the Town of Pine Bush, Ulster County, and leased the property from plaintiff New Prospect Properties, LLC. In 2008, a fire completely destroyed the restaurant, including the building and its contents. At the time of the fire, SUS had an insurance policy providing commercial general liability (hereinafter CGL) insurance and businessowners' property insurance coverage. New Prospect was expressly named as an "[a]dditional [i]nsured" on an endorsement to SUS's CGL coverage, but was not named under SUS's business property coverage.
After certain claims made by plaintiffs under the policy were denied, they commenced the instant action against, among others, defendants St. Paul Travelers Group, Travelers Indemnity Company, Travelers Indemnity Company of America, St. Paul Travelers Companies, Inc., St. Paul Fire and Marine Insurance Company and Charter Oak Fire Insurance Company (hereinafter collectively referred to as the Travelers defendants). The Travelers defendants thereafter moved, pursuant to CPLR 3211 (a) (1) and (7), to dismiss the complaint except as against Charter Oak, alleging that none of the other Travelers defendants were insuring companies under the policy. They also sought to dismiss any claims for damage to the building itself as not covered under the policy, and to remove Sangiovese Restaurant and New Prospect as plaintiffs. Supreme Court granted that portion of the motion which sought removal of Sangiovese Restaurant as a plaintiff, and otherwise denied the motion. The Travelers defendants now appeal.
At this procedural point in the litigation, we afford the complaint a liberal construction, accept the facts alleged therein as true and give plaintiffs the benefit of every possible favorable inference (see Hurrell-Harring v State of New York, NY3d , , 2010 NY Slip Op 03798, *5 ; Leon v Martinez, 84 NY2d 83, 87-88 ; Lazic v Currier, 69 AD3d 1213, 1213-1214 ). "When the motion to dismiss is premised upon documentary evidence, 'such motion may be appropriately granted only where the documentary evidence utterly refutes [the] plaintiff's allegations, conclusively establishing a defense as a matter of law'" (Crepin v Fogarty, 59 AD3d 837, 838 , quoting Goshen v Mutual Life Ins. Co. of N.Y., 98 NY2d 314, 326 ; see Erie Ins. Group v National Grange Mut. Ins. Co., 63 AD3d 1412, 1413 ). Where, as here, we are called upon to determine whether a contract's provisions are ambiguous, we must determine "as a matter of law whether they lack a definite and precise meaning and provide a reasonable basis for a difference of opinion" (Weston v Cornell Univ., 56 AD3d 1074, 1075  [internal quotation marks and citations omitted]; see Pozament Corp. v AES Westover, LLC, 27 AD3d 1000, 1001 ; CV Holdings, LLC v Artisan Advisors, LLC, 9 AD3d 654, 656 ).
The Travelers defendants argue that the complaint must be dismissed except as against Charter Oak because the policy's clear and unambiguous language provides that only Charter Oak, and none of the other Travelers defendants, issued the policy. In support of the motion, defendants proffered the applicable insurance policy together with the "Businessowners Property Coverage Special Form" and additional insured endorsements. Both the Common Policy Declarations and Businessowners Coverage Part Declarations plainly list Charter Oak as the "[i]nsuring [c]ompany." Furthermore, the "Common Policy Conditions" portion of the policy expressly provides, under the section entitled "Insuring Companies," that "[i]n return for payment of the premium, we agree with the Named Insured to provide the insurance afforded by a Coverage Part forming part of this policy. That insurance will be provided by the company indicated as insuring company in the Common Policy Declarations. . . The companies listed below . . . have executed this policy" (emphasis added). Three of the six Travelers defendants, including Charter Oak, are listed below that language.
Despite plaintiffs' contention to the contrary, we cannot conclude that the word "we" in the first sentence of the aforementioned provision is ambiguous. Although plaintiffs suggest that the term "we" could reasonably be interpreted to mean that "the companies listed below" agreed to provide the insurance, the policy explicitly provides that, throughout the policy, "[t]he words 'we,' 'us' and 'our' refer to the Company providing this insurance." As is plainly set forth in the declarations pages under the heading "[i]nsuring [c]ompany," Charter Oak is the only party providing the insurance. Given that the policy clearly and unambiguously provides that Charter Oak is the only party providing the insurance,[FN1] the complaint should have been dismissed against all of the other Travelers defendants.
While plaintiffs also claim that the Travelers defendants may be held liable for the conduct of their wholly owned subsidiary, Charter Oak, it is well settled that "such liability can never be predicated solely upon the fact of a parent corporation's ownership of a controlling interest in the shares of its subsidiary" (Billy v Consolidated Mach. Tool Corp., 51 NY2d 152, 163 ; see Daniels v Zelco, Inc., 159 AD2d 538, 540 ). Rather, "there must be direct intervention by the parent in the management of the subsidiary to such an extent that the subsidiary's paraphernalia of incorporation, directors and officers are completely ignored" (Billy v Consolidated Mach. Tool Corp., 51 NY2d at 163 [internal quotation marks and citation omitted]; see Horowitz v Aetna Life Ins., 148 AD2d 584, 586 ). Since plaintiffs have neither alleged nor submitted any facts indicating that the other Travelers defendants exercised such a level of dominion and control over Charter Oak, there is no basis upon which to predicate liability against them (see Mitchell v TAM Equities, Inc., 27 AD3d 703, 708 ; Lipton v Unumprovident Corp., 10 AD3d 703, 705 ; Baratta v Kozlowski, 94 AD2d 454, 456 ).
We also agree with the Travelers defendants that any claims under the policy by New Prospect, the landlord and owner of the premises, must be dismissed because New Prospect is not named to any extent under SUS's businessowners' property coverage (see Insurance Corp. of N.Y. v Cohoes Realty Assoc., L.P., 50 AD3d 1228, 1229-1230 ; Gap, Inc. v Fireman's Fund Ins. Co., 11 AD3d 108, 111 ). Although New Prospect is named as an "additional insured" under SUS's CGL coverage, the standard CGL policy like the one at issue here does not cover damage to property owned by the insured, but rather provides coverage for liability to third parties pursuant to a judgment or settlement (see Gap, Inc. v Fireman's Fund Ins. Co., 11 AD3d at 111; see also Great N. Ins. Co. v Mount Vernon Fire Ins. Co., 92 NY2d 682, 688 ). No such third-party liability claims are being asserted here [FN2]. Since New Prospect is not named under SUS's businessowners' property coverage and its status as an additional insured under the CGL policy does not entitle it to any coverage in this first-party liability claim, any claims asserted by New Prospect must be dismissed.
Finally, we agree with the Travelers defendants that the policy provides no coverage for damage to the building itself and, therefore, SUS's claims for any such damage must be dismissed. The policy's "Businessowners Property Coverage Special Form" provides coverage for "Covered Property" which includes "[b]usiness [p]ersonal [p]roperty," and "[b]uilding, meaning the building or structure described in the Declarations" "if a Limit of Insurance is shown in the Declarations for that type of property" (emphasis added). While the "Businessowners Declarations" sets forth a limit of insurance for "Business Personal Property" and other coverage extensions, such as accounts receivable and fine arts, no limit of insurance is shown for the building. As such, we find that the subject building is not covered under the clear language of the businessowners' property coverage part of the policy. Furthermore, for the reasons previously discussed, the CGL portion of the declarations which provides a limit of insurance of $300,000 for "Damage to Premises Rented to You" is not applicable to SUS's first-party liability claim for damage to the building. In that regard, the CGL coverage expressly limits the insurer's liability to SUS to those sums that SUS becomes legally obligated to pay as property damage arising from a covered event, and there is no allegation that SUS had been found legally obligated to pay any of the damages alleged (see 87-10 51st Ave. Owners Corp. v Steadfast Ins. Co., 39 AD3d 700, 701 ). For these reasons, Supreme Court should have dismissed all claims by SUS seeking recovery for damage to the building.
Rose, Lahtinen, McCarthy and Egan Jr., JJ., concur.
ORDERED that the order is modified, on the law, without costs, by reversing so much thereof as denied the motion of defendants St. Paul Travelers Group, Travelers Indemnity Company, Travelers Indemnity Company of America, St. Paul Travelers Companies, Inc., St. Paul Fire and Marine Insurance Company and Charter Oak Fire Insurance Company to (1) dismiss the complaint against all said defendants except Charter Oak Fire Insurance Company, (2) dismiss all claims for damage to the building itself, and (3) dismiss all claims asserted by plaintiff New Prospect, LLC; motion granted to said extent; and, as so modified, affirmed.
Footnote 1: That the word "Travelers" and its logo appear at the top of the declarations pages and certain portions of the policy are copyrighted by one of the Travelers defendants does not serve to create an ambiguity where no other exists.
Footnote 2:Indeed, the endorsement to the CGL coverage specifically provides that, as an additional insured, New Prospect was covered "only with respect to liability arising out of [SUS's] ongoing operations performed for [New Prospect] at the location designated above; or [a]cts or omissions of [New Prospect] in connection with [its] general supervision of such operations."
Decided and Entered: July 1, 2010
ROSE INN OF ITHACA
GREAT AMERICAN INSURANCE COMPANY.
Calendar Date: May 24, 2010
Before: Cardona, P.J., Mercure, Malone Jr., Kavanagh and Egan Jr., JJ.
Anderson, Kill & Olick, P.C., New York City (Dennis
J. Artese of counsel), for appellants-respondents.
Hiscock & Barclay, L.L.P., Albany (Mark T. Whitford
Jr. of counsel), for respondent-appellant.
MEMORANDUM AND ORDER
Cross appeals from an order of the Supreme Court (Garry, J.), entered March 11, 2009 in Tompkins County, which, among other things, partially granted defendant's cross motion for summary judgment dismissing the complaint.
Plaintiffs Charles Rosemann and Sheryl Rosemann are the sole shareholders and owners of plaintiff Rose Inn of Ithaca, Inc., which operated a country inn. After a substantial portion of the inn was destroyed in a 2004 fire, plaintiffs made a claim under their insurance policy, which was issued by defendant. Because plaintiffs decided not to rebuild the inn, the policy entitled them to the actual cash value of the loss.
The claim negotiations were conducted on plaintiffs' behalf by Charles Rosemann (hereinafter Rosemann), who had decades of experience in the hospitality industry and had negotiated a prior insurance claim involving a fire at the inn. In that role, Rosemann dealt regularly with the independent adjuster to assess the degree of damage to the inn and, after receiving the preliminary estimate of the damage, contended that over 200 items in it required revision. Rosemann raised a number of issues with regard to the revised estimate as well, and his efforts resulted in a final estimate of property damage that was almost $250,000 higher than the preliminary one. He also negotiated with defendant, rejecting multiple settlement offers and arguing that the extant portion of the inn was a total loss [FN1]. After several months of these extensive discussions, the claim was settled for the actual cash value of those parts of the inn that had been destroyed, leaving unresolved only the issue of whether plaintiffs were entitled to replacement costs for the surviving portion of the inn.
Plaintiffs thereafter commenced this action asserting two breach of contract claims, the first alleging that defendant omitted items from its calculation of actual cash value, and the second contending that defendant should have determined that the surviving portion of the inn was a total loss and awarded plaintiffs its actual cash value as well. Defendant answered and raised the affirmative defense of accord and satisfaction. Plaintiffs subsequently moved for partial summary judgment on the first claim insofar as it related to architectural and engineering fees omitted from the calculation of actual cash value, and defendant cross-moved for summary judgment dismissing the complaint. Supreme Court granted plaintiffs' motion as to the issue of liability on the first claim, and granted defendant's cross motion to the extent of dismissing the second claim. Defendant appeals.[FN2]
We agree with defendant that the first claim should have been dismissed in its entirety, and modify Supreme Court's order accordingly. As defendant asserts, an accord and satisfaction is effected when "the parties . . . enter into a new contract wherein they agree that a stipulated performance will be accepted in the future, in lieu of an existing claim" (Altamuro v Capoccetta, 212 AD2d 904, 904 , lv denied 85 NY2d 808 ; see Environmental Prods. & Servs. v Consolidated Rail Corp., 285 AD2d 700, 702 ). That is, an accord and satisfaction requires a "dispute as to the amount due and knowing acceptance by the creditor of a lesser amount" (Consolidated Edison Co. of N.Y. v Jet Asphalt Corp., 132 AD2d 296, 303 ; see Marine Midland Bank v Scallen, 161 AD2d 103, 105 ). Inasmuch as an accord and satisfaction constitutes a contract, it must be shown that the parties set forth the essential elements thereof and had a meeting of the minds to resolve the disputed claim (see Sorrye v Kennedy, 267 AD2d 587, 589 ; Altamuro v Capoccetta, 212 AD2d at 905).
Here, the relevant facts are not in dispute. The adjuster who handled plaintiffs' claim for defendant stated in deposition testimony that the architectural and engineering fees incurred in the rebuilding of a structure are a component of replacement cost. She also acknowledged that replacement cost is reduced by depreciation to arrive at the actual cash value of a stucture. Nevertheless, the adjuster omitted the architectural and engineering fees from the final settlement amount because plaintiffs decided not to rebuild the inn. Rosemann asserted that he was unaware that defendant did not intend to pay the fees. Long before accepting the settlement amount, however, Rosemann had questioned whether the fees should be included in the estimate that became the basis for the final calculation of replacement cost. Although the dispute over the fees evidently was not expressly resolved, plaintiffs nonetheless accepted the settlement. As such, there was no "mistake as to matters that were not within the contemplation of the parties" that would permit plaintiffs to avoid the creation of an accord and satisfaction (13-70 Corbin on Contracts 70.14 ). Inasmuch as plaintiffs elected to accept the settlement without asserting their current claim that they were entitled to an additional amount representing the architectural and engineering fees, the settlement gave rise to an accord and satisfaction (see Gimper, Inc. v Giacchetta, 221 AD2d 682, 684 ; Hemingway v State Farm Fire & Cas. Co., 187 AD2d 814, 815-816 ; Restatement [Second] of Contracts 154; cf. Sabbagh v Pantano, 170 AD2d 411, 412 ; Ginsburg v Equitable Life Assur. Socy. of U.S., 254 App Div 445, 447 , lv denied 279 NY 810 ).
Plaintiffs' remaining claims for damages, arising from items allegedly omitted or undervalued in the final calculation of actual cash value, are similarly barred by accord and satisfaction. As with the above fees, while Rosemann stated that he did not know that sales tax was omitted from the calculation of replacement cost, the record reveals that he inquired about the inclusion of the tax prior to settling the claim. Plaintiffs further complain that the valuation of unit costs in the settlement was too low, but Rosemann had affirmatively challenged those costs prior to settling the claim. Finally, plaintiffs concede that damages for additional tear-out and removal costs are unavailable given the dismissal of the second claim.
Cardona, P.J., Malone Jr., Kavanagh and Egan Jr., JJ., concur.
ORDERED that the order is modified, on the law, without costs, by reversing so much thereof as partially denied defendant's cross motion for summary judgment; cross motion granted in its entirety, summary judgment awarded to defendant and complaint dismissed; and, as so modified, affirmed.
Footnote 1:Defendant's claims adjuster stated that Rosemann rejected the first settlement offer of $3,964,035 and demanded $4,150,720. Defendant agreed to pay that amount two weeks later, but Rosemann again declined to settle, citing ongoing concerns with the damage estimate. After those issues were resolved, the final settlement value was over $4.3 million.
Footnote 2:Plaintiffs appealed from Supreme Court's order as well, but seek only its affirmance in their brief. Accordingly, we deem their appeal to have been abandoned (see Matter of Northern Metro. Residential Health Care Facility, Inc. v Novello, 24 AD3d 1069, 1071 n 1 ).
Decided and Entered: July 1, 2010
as Subrogee of RAINER'S GOURMET, INC.
MICHAEL BESHARA, INC.
Calendar Date: May 26, 2010
Before: Peters, J.P., Rose, Lahtinen, McCarthy and Egan Jr., JJ.
Goldberg Segalla, L.L.P., Albany (Jonathan M.
Bernstein of counsel), for appellants-respondents.
Taylor & Associates, Albany (Sean A. Tomko of
counsel), for respondent-appellant.
MEMORANDUM AND ORDER
Cross appeals from an order of the Supreme Court (Williams, J.), entered April 6, 2009 in Saratoga County, which, among other things, granted defendants' motion for summary judgment dismissing the complaint.
In September 1998, Rainer Mehalick, the owner of Rainer's Gourmet, Inc., leased property from defendant Michael Beshara consisting of a large restaurant and storage building in the Village of South Glens Falls, Saratoga County. The lease provided that Beshara certified that the heating and air circulating systems "are working and in good repair" and that "[a]ll future maintenance and repair are [l]essee's responsibility." Rainer's Gourmet occupied the property until February 2004, when water pipes froze and burst, causing water to flood the premises. Following the flood, plaintiff paid an insurance claim to Rainer's Gourmet in the amount of $151,583.84.
Plaintiff, as subrogee of Rainer's Gourmet, thereafter commenced this action seeking to recover from defendants the sum it paid under the insurance policy. In particular, the complaint alleges that defendants failed to provide a heating system that was in good repair and that the frozen pipes were caused by a heating malfunction. Defendants interposed counterclaims against plaintiff for property damage, alleging that Mehalick was responsible for the heating system's maintenance and agreed to indemnify defendants for any loss resulting from the bursting of pipes. Following joinder of issue, defendants moved and plaintiff cross-moved for summary judgment. Supreme Court granted defendants' motion dismissing the complaint and, finding that the allegations underlying defendants' counterclaims only provide the basis for an affirmative defense of comparative negligence, dismissed the counterclaims as well. The parties cross-appeal.
Plaintiff contends that summary judgment dismissing the complaint was inappropriate because a question of fact exists as to whether Beshara provided a heating system that was "working and in good repair" at the commencement of the lease. Initially, we find that defendants made a prima facie showing of entitlement to judgment as a matter of law. In support of the motion, defendants proffered deposition testimony establishing that Beshara sent a vendor to the property at the time the lease commenced to start up the heating units and ensure that they were operational, and relied on the term of the lease agreement providing that Mehalick was responsible for all future maintenance and repair of the heating and air circulating systems. Further, Beshara testified that he never had problems with the heating system when he used the property as a restaurant and was not aware that there was a problem with the system until 2003.
In opposition, plaintiff raised a triable issue of fact. Mehalick testified that he experienced problems with the heating system "from day one" of the lease and throughout the entirety of the tenancy. Although he confirmed that Beshara had a vendor "fire the unit[s] up" and warranted that they worked properly at the time the lease commenced, Mehalick also testified that the units only came on intermittently, as was the case during the entire time he leased the property. Plaintiff also provided the testimony of Paul White, a heating service technician who had worked on the heating system at the property for the past 25 to 30 years. White testified that he inspected the system within three months of the commencement of the lease and found it to be old, in poor condition and unsafe. He explained that one half of one of the units was not functioning at all and that, even at the beginning of the lease, the units were not in good working order and were simply too old to be repaired or restored. Viewing this evidence in a light most favorable to plaintiff and according it the benefit of every reasonable inference that can be drawn therefrom (see Ballou v Ravena-Coeymans-Selkirk School Dist., 72 AD3d 1323, 1326 ; Gadani v Dormitory Auth. of State of N.Y., 43 AD3d 1218, 1219 ), we find that plaintiff raised a genuine issue of fact as to whether Beshara fulfilled his duty of providing a heating system that was "working and in good repair" in the first instance (cf. Padovano v Vivian, 217 AD2d 868, 869-870 ).
Turning to defendants' cross appeal, we likewise find that outright dismissal of the counterclaims was improper. It is well settled that "[a] subrogee acquires all rights, defenses and remedies of the subrogor and is subject to any claims or defenses which may be raised against the subrogor" (Servidori v Mahoney, 129 AD2d 944, 945 ; see United States Fid. & Guar. Co. v Smith Co., 46 NY2d 498, 504 ; Solomon v Consolidated Resistance Co. of Am., 97 AD2d 791, 792 ). Having commenced the instant action, plaintiff stepped into the shoes of Rainer's Gourmet, "succeeding to the benefits which it might bring, but chargeable to the extent of it with the liabilities of [Rainer's Gourmet]" (Seibert v Dunn, 216 NY 237, 245-246  [emphasis added]). Despite plaintiff's contention and Supreme Court's conclusion to the contrary, defendants' claims may properly be interposed as counterclaims (see Siegel, NY Prac 226 [4th ed]; Siegel, Practice Commentaries, McKinney's Cons Laws of NY, Book 7B, CPLR C3019:5, at 210-211; see also Allstate Ins. Co. v Babylon Chrysler Plymouth, 45 AD2d 969 ; cf. James Talcott, Inc. v Winco Sales Corp., 14 NY2d 227, 231-233 ). However, they cannot effect an affirmative recovery against plaintiff, but rather may be maintained against plaintiff in the present action only to the extent of setting off plaintiff's claim (see Allstate Ins. Co. v Babylon Chrysler Plymouth, 45 AD2d at 969; see also Siegel, Practice Commentaries, McKinney's Cons Laws of NY, Book 7B, CPLR C3019:5, at 210; Travelers Indem. Co. v Zeff Design, 23 Misc 3d 1121[A], *2 ; Allstate Ins. Co. v Trans Hudson Express, Inc., 4 Misc 3d 1029[A], *2-3 ). In order to seek affirmative relief, defendants must commence an independent action against Rainer's Gourmet or implead Rainer's Gourmet on the counterclaims (see CPLR 3019 [d]; see also Siegel, Practice Commentaries, McKinney's Cons Laws of NY, Book 7B, CPLR C3019:5, at 211).
The parties' remaining contentions have been reviewed and are either without merit or have been rendered academic by our decision.
Rose, Lahtinen, McCarthy and Egan Jr., JJ., concur.
ORDERED that the order is modified, on the law, without costs, by reversing so much thereof as granted defendants' motion for summary judgment and granted plaintiff's cross motion for summary judgment dismissing defendants' counterclaims to the extent that they seek to set off plaintiff's claim; motion and cross motion denied to said extent; and, as so modified, affirmed.