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Insurance Coverage Team

Dan D. Kohane, Team Leader
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Michael F. Perley
Audrey A. Seeley
Vivian Perry Roché

Steven E. Peiper

Fire, First-Party and Subrogation Team
Andrea Schillaci, Team Leader
as@hurwitzfine.com
Jody E. Briandi
Steven E. Peiper

NO-FAULT/UM/SUM TEAM
Audrey A. Seeley, Team Leader
aas@hurwitzfine.com
Vivian Perry Roché
Mark Starosielec

APPELLATE TEAM
Dan D. Kohane
Scott M. Duquin

Index to Special Columns

Starosielec’s Serious Side of “Serious Injury”

 Audrey’s Angles on No Fault

Peiper on Property

Across Borders

LEGISLATIVE NEWS

S6306 Passes Both Houses of Legislature and Will be Sent to Governor for Likely Signature

You all received our alert on this bill (and the scores of other alerts that arrived thereafter).

The bill, which has now passed both houses of the New York State Legislature, makes two changes to existing law.

The first overrules the Court of Appeals decision in Lang v. Hanover (decided in 2004).  The Lang court resolved a conflict between intermediate appellate court departments and determined that an injured party did not have standing to commence a declaratory judgment action to review a disclaimer letter.  The high court held that Section 3420 provided a different remedy for injured parties, a direct action against the carrier but that under the provisions of that section of the Insurance Law, the direct action could only be commenced AFTER the injured party had a judgment against the insured.  Until then, the injured party did not have enough of an interest in the policy to have standing to challenge the disclaimer.

The first part of this statute (once signed into law, and it hasn't been signed yet) would allow the injured party to commenced that Declaratory Judgment Action against a carrier even without a judgment against the carrier's insured.  It provides that a “party that has interposed a claim” has standing.  Whether that means the party must have actually commenced a lawsuit against the insured is not yet clear.  However, this will undoubtedly lead to a greater number of DJ actions being commenced earlier in the process.  Under present law, based on Lang, only the insured, additional insureds or the insurer could commence a DJ action.  This will allow an injured person (the underlying claimant or plaintiff) to challenge disclaimers at a much earlier point in time.

The second part of the proposed statute imposes a prejudice requirement on denial of coverage for late notice of claim.  It does not change the existing law with respect to late notice of accident, only late notice of claim.  Basically, it provides, that an insurer cannot deny late notice of claim (or suit) unless it has suffered material prejudice as a result of the late notice (and indicates that earlier and timely notice of accident, from whatever source, will make it especially difficult to deny coverage for late notice of claim).  Again, it does not change existing law with respect to late notice of accident.  Presumably, if someone fails to provide timely notice of an accident, an insurer can still deny coverage if there is no legally cognizable excuse for that late notice, even if the insurer had not been prejudiced (the unusual rule which has been in NY forever).

6/27/07            B.P. Air Conditioning Corp. v. One Beacon Insurance Company

New York State Court of Appeals

Obligation to Defend Purported Additional Insured Depends on Allegations in Complaint, Not Ultimate Determination of Liability.  Priority of Coverage Between and Among Policies Requires Review of Policy.  Pecker Iron Works Says Nothing Differently

For regular readers of Coverage Pointers, you’ll recall the B.P. Air Conditioning case we reported on back in our Bastille Day, 2006 edition of this publication.

There are two separate issues that the case addresses: (a) the duty to defend someone alleged to have the status of an additional insured and (b) the priority of coverage between and among policies:

Duty to Defend

This part of the decision was affirmed by the Court of Appeals.  We reported on the case as follows:

Is an additional insured under CGL policy entitled to a defense when it is uncertain whether any eventual judgment might fall within coverage? Court holds that additional insured, has same rights as named insured and if allegations fall within potential coverage, additional insured entitled to defense. Henegan was the general contractor and retained BP, an HVAC subcontractor for project. BP hired ALFA as sub-sub contractor for steam fitting work. The purchase order between BP and ALFA required ALFA to purchase CGL coverage naming BP as additional insured.

ALFA secured the policy which contained a Blanket Additional Insured endorsement, providing that any insured for “whom you are performing operations …. When you and such person or organization have agreed in writing to be added as an additional insured …[shall become an additional insured] …only with respect to liability arising out of your ongoing operations performed for that insured. “One Beacon was the carrier on the risk...

Consentino worked for Karo Sheet Metal, another subcontractor of BP, and slipped and fell on a patch of oil at the jobsite. He sued Henegan and Henegan sued BP and ALFA (and then Consentino sued BP and ALFA and others later. BP tendered the defense of the matter to One Beacon who denied coverage and BP commenced a declaratory judgment against one Beacon seeking defense.

Discovery did not resolve, conclusively, the source of the oil and Beacon opposed a motion for summary judgment in the DJ action, arguing that it should not bear the responsibility for defending until it is determined that the source of the oil was its insured’s and in any event, there are other carriers whose coverage may be triggered because their insureds were on the job as well and may have left the oil patch.

The Appellate Division held that since the allegations led to a “reasonable possibility” that the Consentino action could lead to a judgment against BP within the scope of the coverage under ALFA’s policy, One Beacon had an obligation to defend... It makes no difference that there may be a contrary result, and that One Beacon may not be required to indemnify, “once the litigation has run its course.”

One Beacon’s argued unsuccessfully both at the Appellate Division and at the Court of Appeals that rules requiring a broad defense based on allegations in the complaint should not apply to additional insureds, but only to named insureds but the majority rejected that argument. The Appellate Division and now the Court of Appeals rejected that argument declaring that the rights of the additional insured to a defense are not to be determined by the eventual outcome, but by the allegations in the complaint – they are to be treated just as a named insured would be treated.

Priority of Coverage

The court below interpreted Pecker Iron Works, the famous Court of Appeals decision on the obligations of a carrier providing additional insured status, to hold that the additional insured status provided was primary, even with respect to BP’s coverage under its own CGL policy).  As we have said in the column many times, Pecker Iron Works does not so hold.  The Court of Appeals agreed that Pecker does not control and held that priority of coverage requires a comparison of all the policies in issue with one another.  Without those policies before the Court, any determination of priority of coverage is premature. 

6/27/07            In the Matter of Eighth Judicial District Asbestos Litigation.

New York State Court of Appeals

Whenever a Plaintiff and a Defendant Enter into a High-low Agreement in a Multi-defendant Action which Requires the Agreeing Defendant to Remain a Party to the Litigation, the Parties Must Disclose the Existence of that Agreement and its Terms to the Court and the Non-agreeing Defendant

Not a coverage case, but a very interesting and important decision, the New York State Court of Appeals vacated a judgment (which happened to be in an asbestos case) where there was an undisclosed high-low agreement in place between the plaintiff and one of the defendants.  When the verdict came in and a remaining defendant learned that such an agreement limited the plaintiff’s recovery against another party, an application was made to set aside the verdict.  The trial court refused, the Appellate Division affirmed but the Court of Appeals reversed.  High-low agreements must be disclosed to the remaining parties.

The Court held that the remaining defendant was deprived of its right to a fair trial by Supreme Court's failure to disclose the existence of the high-low agreement so that it knew its true posture in the case.  A plaintiff might have a financial incentive to maximize the liability of a non-settling party, or it might impact on jury selection and the right to share jury challenges, impact on impeachment of witnesses, etc.

In summary, whenever a plaintiff and a defendant enter into a high-low agreement in a multi-defendant action which requires the agreeing defendant to remain a party to the litigation, the parties must disclose the existence of that agreement and its terms to the court and the non-agreeing defendant

6/27/07            Benesowitz v. Metropolitan Life Insurance Company

New York State Court of Appeals

For Group Disability Policies, Pre-existing Condition Statute Permits Benefit Toll of Up to 12 Months, Not Permanent Coverage Bar

Section 3234(a) of the Insurance Law authorizes a group disability insurer to preclude coverage for benefits, for the first 12 months of coverage, if the disability suffered by the policyholder pre-existed the issuance of the policy.  The question certified by the United States Court of Appeals for the Second Circuit was whether or not the insurer could deny benefits for that pre-existing disability thereafter.

The Court sided with the policyholder and determined that the 12 month period was a tolling statute and the only benefits that could be denied for pre-existing disability would be for that 12 months period only and after that, the policy benefits are payable.

6/28/07            In re Progressive Classic Insurance Company v. Kitchen
Appellate Division, First Department
Dot the “I’s” and Cross the “T’s” to Prove Policy Cancellation, or Lick Your Wounds
How many times have we seen perfectly good cases go down the tubes because of a failure to present properly documented evidence.  This case cam up in the context of an application to stay an UM arbitration.  Progressive Classic moved to stay the arbitration, arguing that the offending vehicle was in fact insured.  Central Mutual insisted that it had cancelled the policy and thus, the claimant was entitled to uninsured motorists benefits.  Central Mutual demonstrated that it sent out the notices of cancellation to the insured but failed to demonstrate, with sufficient admissible proof, that it had sent the proper notifications to the Department of Motor Vehicles.  It had some proof from DMV records that it had, indeed filed the notices, but the documents were not satisfied and the insurer did not establish office mailing procedures to establish the presumption that it had mailed the notices within 30 days.  Form over substance?  Perhaps.  But a common lesson learned, again.

6/28/07            Schlott v. Transcontinental Insurance Company, Inc.
Appellate Division, First Department
By the Hair of its Chinny – Chin - Chin, Insurer Wins Late Notice Case (that it Should have Lost)

Well, we understand (and appreciate) the result, but, technically, as an insurance purist, note that the carrier got away with one.

Muriel fell on steps constructed by the carrier’s insured.  Muriel sued the insured and took a default.  She tried to squeeze money out of the insured, without success and Muriel forwarded the judgment to the carrier for the insured. 

That was the first notice the insurer received.  It was three years after the judgment was entered against the insured and seven years after the accident.

The insurer immediately disclaimed on the ground of late notice in a disclaimer letter copied to both the insured and plaintiff’s counsel.  Muriel then sued the carrier to enforce the judgment against the policy.  The Appellate Division found that the disclaimer was effective and held in the insurer’s favor.

How could that be the wrong decision, you may ask? 

You will note that the first notice to the carrier was given by the claimant and not by the insured.  When the carrier denied coverage, it denied coverage based on the insured’s late notice, not the claimant’s late notice.  The claimant has a right to give notice and when it gives notice late, the case law is legion that the insurer must indicate in its disclaimer letter that it is denying coverage based on the claimant’s late notice.  A failure to do so results in a waiver of that defense.  It is a reason that courts have said, time and time again, is different from the insured’s late notice.

The court, surely in a result oriented holding, simply said, without citations, that the “fact that defendant omitted from that notice any specific reference to the injured party's own failure to afford the insurer timely notice did not prejudice plaintiffs.”

Prejudice?  Since when is that the standard?

6/21/07            McHale v. Anthony

Appellate Division, First Department
Subrogation Claim Relates Back to Original Claim

Court allows amendment of pleadings in personal injury action, after statute of limitations has expired, to add a subrogation claim on behalf of auto carrier.  Court finds claims arise out of the same occurrence, so late amendment is allowable.

6/19/07            Schirmer v. First Insurance Company

Appellate Division, Second Department
No Evidence of Material Misrepresentation Leading to CGL Policy Being Issued
Schirmer sues Penkert.  Penkert was insured under a Utica First CGL policy, placed by Penkert’s insurance Broker, Marcus.  Schirmer fell from a defective ladder while combing from his boat in dock space rented from Penkert.  The Utica First CGL policy was in force at the time. Utica disclaimed, relying on watercraft exclusion and next on an Artisan Contractor's Survey in which Penkert represented that his primary work was cabinet making and that there was no watercraft exposure on this coverage.

In an earlier motion, Utica abandoned the watercraft exclusion.  The only issue remaining was whether the insured made a material misrepresentation in his application for insurance. Utica now seeks to rescind the policy based on material misrepresentations made. Penkert sought an entitlement to coverage

T establish its right to rescind an insurance policy, an insurer must demonstrate that the insured made a material misrepresentation. A misrepresentation is material if the insurer would not have issued the policy had it known the facts misrepresented. To establish materiality as a matter of law, the insurer must present documentation concerning its underwriting practices, such as underwriting manuals, bulletins, or rules pertaining to similar risks that show that it would not have issued the same policy if the correct information had been disclosed in the application.  Conclusory statements by insurance company employees, unsupported by documentary evidence, are insufficient to establish materiality as a matter of law.

Penkert established entitlement to judgment as a matter of law on his defense and indemnification claim against Utica -- the only misrepresentation alleged was in the Artisan Contractor’s Survey which was completed after the policy was issued.

6/19/07            Sorbara Construction Corporation v. AIU Insurance Company
Appellate Division, First Department

An Insured Who Claims a “Good Faith Belief in Non-Liability” as Excuse for Late Notice, Must Establish that It Made an Attempt to Assess Responsibility; No Prejudice Rule Reaffirmed

Appellate Division reaffirms “no prejudice” rule in late notice case.  Insured became aware of its employees accident and lawsuit when it occurred, but did not notify excess carrier for over five years, after the third party action was commenced against it.  The court reminds us that where a reasonable person could envision liability, it has an obligation to make enquiry.  Here, the court found that there was never any proof that the plaintiff took any action to ascertain the possibility of its own liability.  While a good faith believe in non-liability can excuse the failure to give timely notice, there is no proof that the plaintiff ever took any action to ascertain the possibility of its own liability for the accident prior to the commencement of the third party action.  The duty to provide notice to the excess carrier is not excused simply because the insurer had actual knowledge acquired from another source.

In a concurring opinion, a single judge indicated recognition of the “no prejudice” rule is still the law of the land, but that judge simply doesn’t like it.

STarosieleC’S serious (Injury) Side of New York No-FaulT
Mark Starosielec
mas@hurwitzfine.com

6/28/07            Parks v. Miclette

Appellate Division, Third Department

Beware of Medical Records: Defendant’s Use of Plaintiff’s Meds Leads to Summary Judgment

In a very lengthy opinion, the Appellate Division affirmed a lower court order granting defendants’ motion for summary judgment dismissing the complaint. As a result of a motor vehicle accident, plaintiff had asserted that he suffered: a permanent consequential limitation of use of a body organ or member, a significant limitation of use of a body function or system, and that he was unable to perform substantially all of his usual and customary daily activities for 90 of the first 180 days following the accident. In essence, since the evidence relied upon by plaintiff is insufficient to create a triable issue of fact with respect to any of the statutory categories of serious injury, the complaint was properly dismissed.

To meet their initial burden of demonstrating that plaintiff did not sustain a serious injury, defendants submitted records and reports of plaintiff’s treating physicians, as well as an affidavit from the president of plaintiff's former employer. Such “documents [are evidence] upon which [a] defendant may properly rely to make [a] prima facie showing of entitlement to judgment as a matter of law.”(Tuna v Babendererde, 32 AD3d 574, 575 [2006]; see Franchini v Palmieri, 1 NY3d 536, 537 [2006]. Plaintiff’s medical records from the period immediately following the accident indicate that he had struck his head during the collision but was initially discharged from the emergency room after tests there came back normal. Records indicate a "[c]ervical strain/sprain," "mild" vertebrae tenderness, some "slight" muscle tenderness and a limited range of motion that was "near normal."

Later, plaintiff commenced treatment with David Hart, who noted plaintiff's complaints of vertigo, found plaintiff's cervical range of motion to be limited in all directions. A month later, Hart found plaintiff’s cervical range of motion to be only “mildly limited,” that there was only “minimal” neck tenderness and that the muscle spasms were no longer present. Defendants also provided an affidavit from plaintiff’s former employer indicating that plaintiff’s duties were primarily sedentary and, in any event, he was in the process of being terminated from his job at the time of the accident.

In opposition to the motion, plaintiff relies upon his medical records, an affirmation from Hart and his own affidavit. None of the records other than those from plaintiff’s treatment with Hart contains qualitative or quantitative descriptions of any limitation in plaintiff’s range of motion or daily activities, and the diagnostic test results show no evidence of abnormality. Indeed, while Hart’s affirmation does provide explanations of the objective basis for the initial diagnosis of vertigo and for the gap in plaintiff’s treatment (see Pommells v Perez, 4 NY3d 566, 577 [2005], supra), it does not explain why the physical limitation and the vertigo previously described as “mild” and “rare,” respectively were suddenly significant. Finally, the description in Hart’s affirmation and plaintiff's affidavit of plaintiff’s inability to perform his customary daily activities for the first 90 days after the accident is not supported by medical evidence that is independent of plaintiff's subjective complaints of pain.

6/26/07            Vargas v Ahmed

Appellate Division, First Department

Do You Have The Time? Failure to Timely Move to Vacate Default Dooms Plaintiffs

Lower court order which granted plaintiffs’ motion to vacate a default was reversed by Appellate Division which held the responding plaintiffs have offered no reasonable excuse for waiting two years to move to vacate their default. They do not attempt to argue that they have either a reasonable excuse for failing to respond to defendants’ original motion for summary judgment, or that they have a meritorious cause of action (see Kalisch v Maple Trade Fin. Corp., 35 AD3d 291 [2006]). Their only excuse was that “there were numerous plaintiffs in this action and we had great difficulty getting signed affirmation [sic] from radiologists.” However, they submitted no such affirmations. Plaintiffs have thus failed to demonstrate a meritorious cause of action (see Ortega v Maldonado, 38 AD3d 388 [2007]; Atkinson v Oliver, 36 AD3d 552 [2007]). On appeal, plaintiffs rely solely on the assertion that defendants’ summary judgment motion was untimely. Defendants offered a good cause for the delay in that the number of plaintiffs made it difficult for them to obtain authorizations. The only difference between plaintiffs’ excuse and defendants’ good cause is defendants obtained the authorizations, which they submitted on the motion, while plaintiffs did not submit any affirmations, which allegedly formed the purported reason for their delay.

6/19/07            Bartley v. Trans Car & Limo, Inc.

Appellate Division, Second Department

Degenerative Nature of Plaintiff’s Injuries Leads to Summary Judgment

The Appellate Division affirmed a lower court order which had granted the defendants’ 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). Here, the defendants made a prima facie showing by demonstrating that the plaintiff’s injuries were not permanent and were of a degenerative nature, predating the accident. Further, the defendants demonstrated that the plaintiff was able to perform all of her daily activities for more than 90 days of the first 180 days subsequent to the accident.

6/19/07            Bestman v. Seymour

Appellate Division, Second Department

Conflicting Reports of Plaintiff’s Range of Motion Leads to Complaint Dismissal

Defendants appeal an order denying motion for summary judgment. On appeal, the Appellate Division reversed the lower court order. The Court held the defendants made a prima facie 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. In opposition, the plaintiff failed to raise a triable issue of fact. The plaintiff’s examining neurologist noted in his report that the plaintiff had “full range of motion” in her cervical spine. In this same report, he concluded that the plaintiff had a 30% reduction in range of motion of the lumbar spine on flexion, and had other significant range of motion limitations. Despite finding these limitations in lumbar range of motion, neither the plaintiff’s examining neurologist, in his report, nor the plaintiff, set forth any competent medical evidence showing range of motion limitations in the lumbar spine contemporaneous with the accident.

6/19/07            Cossentino v. Kelly

Appellate Division, Second Department

Degenerative Nature of Plaintiff’s Injuries Leads to Summary Judgment

In a brief opinion, the Appellate Division affirmed a lower court order granting defendants’ summary judgment motion. The defendants satisfied their prima facie burden by showing that the plaintiff did not sustain a serious injury. In opposition, the plaintiff failed to raise a triable issue of fact. Plaintiff’s treating physician relied on the unsworn reports of others in reaching his conclusions. Plaintiff’s MRI report of her cervical spine did not raise a triable issue of fact either. The mere existence of a herniated or bulging disc is not evidence of a serious injury in the absence of objective evidence.

6/19/07            Francovig v. Senekis Cab Corp.

Appellate Division, Second Department

Plaintiff Survives Summary Judgment by Adequately Explaining Gap in Treatment

Failure to treat because no-fault insurance was cut off is a good enough reason according to the Appellate Division which reversed a lower court order which had granted the defendants’ motion for summary judgment. The Court held the lower court properly determined that the defendant established its prima facie burden since it established that she did not sustain a serious injury. In opposition, plaintiff raised a triable issue of fact. She explained her four-year gap in treatment because no-fault insurance was cut off and she could not afford any further treatments out of her own pocket. Additionally, her treating chiropractor raised a triable issue of fact as to whether she sustained a serious injury within the meaning of the no-fault statute under either the permanent consequential or significant limitation of use categories of Insurance Law § 5102(d). The chiropractor opined, based on her contemporaneous and most recent examinations and review of plaintiff’s MRI reports which showed herniated discs in her cervical and lumbar spine, that her injuries were permanent and causally related to the subject accident.

 

6/19/07            Joyce v. Lacerra

Appellate Division, First Department

Plaintiff’s Fracture Knee is a Serious Injury

Plaintiff, a pedestrian struck by a taxi at LaGuardia Airport, survives summary judgment on appeal. Lower court had previously granted defendants’ motion dismissing the complaint for failing to meet the serious injury threshold of Insurance Law § 5102(d). Defendants’ expert had alleged that plaintiff merely suffered bone contusions or bruising. In response, plaintiff’s orthopedic surgeon, who repaired plaintiff’s ACL with surgery, opined that an MRI taken less than two weeks after the accident showed he had suffered “an acute traumatic [ACL] tear and a nondisplaced fibular head fracture.”  A fracture of his knee as a result of the accident is, by itself, sufficient to establish a serious injury. Plaintiff’s medical evidence set forth a prima facie case, thus raising issues of material fact as to whether he had sustained a serious injury.

6/19/07            Staubitz v. Yaser

Appellate Division, Second Department

Courts to Docs: Examine ALL of the Body Parts that Plaintiff Alleges were Injured

Plaintiff appealed a lower court order which granted defendant’s motion for summary judgment. On appeal, the order is reversed. The Appellate Division held the defendant failed to establish, prima facie, that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) While the defendant’s neurologist opined that the plaintiff had full range of motion in her lumbar and cervical spine, the neurologist never examined the plaintiff’s right shoulder, which was also alleged to have been seriously injured. In this regard, the lower court could not have determined that no triable issues of fact remained as to any serious injuries with respect to her right shoulder since the neurologist never evaluated the right shoulder.

While the defendant’s radiologist reviewed the MRI films of the plaintiff’s cervical and lumbar spine, the plaintiff’s claimed injuries went beyond merely her cervical and lumbar spine and included her right shoulder. The affirmed medical report of the defendant's radiologist did not rule out the fact that the plaintiff may have sustained medically-determined injuries to the other areas of her body alleged to have been injured, including her right shoulder and lumbar spine. In this vein, despite reviewing the MRI file of the plaintiff's lumbar spine, the defendant’s neurologist was unable to determine the cause of annular tears at the L3-4 and L4-5 levels of the plaintiff's spine.

Audrey’s Angle on No-Fault

Audrey Seeley

aas@hurwitzfine.com

The reporting of No-Fault arbitration awards is not at the same level of reported case law, meaning there is no one source to turn to for comprehensive research of arbitration awards.  We encourage you to submit to us, in a PDF format, at aas@hurwitzfine.com, any recent no-fault arbitration awards, especially Master Arbitration awards, that address interesting no-fault issues. 

Arbitration

6/21/07            In the Matter of the Arbitration of the Applicant and the Respondent

                        Arbitrator Thomas J. McCorry, Erie County

Second Time’s a Charm – Re-Evaluation Nearly Two Years After First Arbitration Regarding Chiropractic Care Persuasive on Aggravation of Pre-Existing Condition Issue

The Angle:  The insurer was successful in upholding its denials for chiropractic care the second time around in arbitration.  However, not before the Applicant underwent five years of chiropractic care and two arbitrations.  It is noted that in this particular case that the Applicant had a pre-existing condition that was aggravated by the motor vehicle accident. 

The Analysis:  The Applicant, eligible injured person (“EIP”), was involved in a May 16, 2001, motor vehicle accident whereafter she began chiropractic care.  The insurer denied chiropractic care after five years.  In 2004 arbitration before Arbitrator James Buckley, he declined to uphold the insurer’s denials on the basis that the Applicant’s “infrequent” chiropractic care permitted her to cope with her condition.

The insurer re-evaluated the Applicant on April 26, 2006, with Dr. Mevlin Brothman, an orthopedist, who opined that Applicant had pre-existing degenerative cervical and lumbar disc disease that was aggravated by the motor vehicle accident.  Dr. Brothman further opined that the aggravation appeared to have ceased returning the Applicant back to her pre-accident status.  Accordingly, Dr. Brothman did not recommend further chiropractic care.

Arbitrator McCorry found Dr. Brothman’s opinion persuasive and upheld the insurer’s denials.

6/19/07            In the Matter of the Arbitration of the Applicant and the Respondent

Arbitrator Veronica K. O’Connor, Erie County

Second Time is Not a Charm Here – Insurer Entitled to Participate in Workers’ Compensation Board Hearing

The Angle:      Here is another case that was arbitrated twice but had a different result than the prior reported decision.  The insurer denied the Applicant’s claim for no-fault benefits on the basis that the Applicant, as an employee of a taxi or car service, was entitled to Workers’ Compensation.  The insurer requested notice of the Workers’ Compensation hearings and was not provided with the ability to participate.  Accordingly, both arbitration demands Applicant filed were denied without prejudice.

The Analysis:  On March 21, 2003, the Applicant, eligible injured person, was involved in a motor vehicle accident which he owned and was insured and registered as a livery vehicle.  The insurer denied Applicant’s claim for no-fault benefits on the basis that the Applicant was eligible for Workers’ Compensation since he was an employee of a taxi corporation/car service/radio base.  The insurer specifically requested in the denial that it be notified of any Workers’ Compensation hearing.

The Applicant arbitrated this denial on June 14, 2005, before Arbitrator McCorry who denied Applicant’s claim without prejudice.  Arbitrator McCorry aptly concluded that the matter must be submitted to the Workers’ Compensation Board first.

On September 16, 2005, the Workers’ Compensation Board determined that the Applicant was an independent contractor.  Further, the record did not contain any medical evidence providing causal relationship.  If medical evidence were submitted the Workers’ Compensation Board would consider it but no further action was planned.

The Applicant resubmitted the claim for arbitration and the insurer argued that it was not provided with notice of the Workers’ Compensation hearing.  Accordingly, it was not able to participate in the hearing.

Arbitrator O’Connor denied Applicant’s claim without prejudice pending further review by the Workers’ Compensation Board.  Under 11 NYCRR §65-3.19(c)(2) the Workers’ Compensation Board will give the insurer notice of the Applicant’s hearing so that the insurer can be present.  While the insurer is not a party to the hearing, it can submit evidence to the referee and may request specific questions be asked of the Applicant.  Arbitrator O’Connor relying upon Arvatz v. Empire Mut. Ins. Co., 171 AD2d 262 (1^st Dept. 1991) held that since the insurer was not placed on notice of the Workers’ Compensation Board hearing the claim must be dismissed to afford the insurer the opportunity to be heard.

6/15/07            In the Matter of the Arbitration of the Applicant and the Respondent

Arbitrator Thomas J. McCorry, Erie County

Chiropractic Manipulation to Cervical Spine Post Multi Level Fusion not Medically Necessary

The Angle:      The Applicant was involved in two motor vehicle accidents nearly two years apart involving injury to the cervical spine.  The Applicant underwent a plethora of chiropractic treatment from the time of the first motor vehicle accident until after undergoing multi level fusion surgery to the cervical spine.  The Arbitrator determined that chiropractic care as a result of the second accident was no longer medically necessary from the orthopedic surgical IME re-evaluation until the last date of treatment post surgery.  The Arbitrator specifically mentioned that even as a lay person chiropractic manipulation to the cervical spine after multi level fusion was highly questionable.

The Analysis:  The Applicant, eligible injured person, was involved in a November 9, 2001, motor vehicle accident (“November accident”) and a February 28, 2003, motor vehicle accident (“February accident”).  The subject of this arbitration was the February accident.  The Applicant was already undergoing chiropractic care from the November accident.  As a result of the February accident she complained of neck, right shoulder, right wrist, right knee, and right instep injuries.  She continued chiropractic care for her neck which was the subject of the dispute in this arbitration.

The treating chiropractor opined that the Applicant was disabled due to neck injuries from November 9, 2001 through February 28, 2003, due to the November accident.  He further found the Applicant totally disabled from the February 2003 accident due to further injury to her neck.  The chiropractor continued to treat the Applicant up until her multi level cervical spine fusion in November 11, 2005.

The insurer denied chiropractic care based upon the August 28, 2003, IME report of John Weisberg, D.C.  Mr. Weisberg opined that the Applicant’s current condition was chronic cervical chondromalacia and chronic right subacromial bursitis related to the February 2003 accident.  However, the Applicant had pre-existing chronic cervical segmental dysfunction and spondylosis.  Further, Mr. Weisberg noted that Applicant’s treating physicians and chiropractor made very little adjustment to their diagnosis and treatment plan from the November accident to the February accident.  Mr. Weisberg further opined that the Applicant’s stationary lifestyle which included smoking and long term use of addictive narcotic medication factored into her inhibited and delayed healing process resulting in a guarded prognosis.  Ultimately, the Applicant had an addictive type personality with dependency on chiropractic and massage therapy as well as prescription medication.  Mr. Weisberg concluded that any mild strain and segmental dysfunction which may have occurred from the February accident had adequate healing time and time to stabilize.

The Applicant produced two IME reports from an orthopedic surgeon who opined that chiropractic care was necessary until April 1, 2004.

The Applicant underwent 65 chiropractic treatments from September 18, 2003 until April 2, 2004, which the Arbitrator held were necessary pursuant to the IME report of the orthopedic surgeon.

Thereafter, the chiropractic care was found to be not medically necessary.  Arbitrator McCorry noted that “even to a lay person, treatment to the cervical area by chiropractic manipulation, after surgery to the neck, is highly questionable.”  Moreover, he found Mr. Weisberg’s comments on dependency of chiropractic care to be the best explanation for the multitude of chiropractic treatments.

Litigation

6/12/07            Fair Price Med. Supply Corp. a/a/o Cesar Nivelo v. Travelers Indemnity Co., 2007 NYSlipOp 05220 (2d Dept.)

Insurer Must Timely Deny Claim for Medical Supplies Even if Defense is Based Upon Fraudulent Claim Through Failure to Provide Supply

On May 8, 2001, the eligible injured person (“EIP”) was allegedly injured in a motor vehicle accident.  The Plaintiff, medical supplier, purportedly issued to the EIP a TENs unit, infrared heat lamp, massager, heating pad, cervical pillow, and lumbosacral support.  The Plaintiff submitted a claim for no-fault benefits, as the assignor of the EIP, on September 18, 2001 and October 13, 2001 for the total amount of $1,638.98.  The insurer requested a letter of medical necessity which the Plaintiff provided on November 6, 2001.

The insurer never denied the claims until nearly two years later – August 15, 2003.  The basis for the denial was that based upon the EIP’s October 4, 2001, statement he denied ever receiving the medical supplies the Plaintiff sought payment for.

The issue before the Appellate Division was whether the insurer was precluded from arguing the defense that the claim fraudulently seeks reimbursement for medical supplies that were never delivered to the EIP.  The Court held that this defense was precluded as the insurer failed to pay or deny the claim within 30 days from receipt of proof of claim.

The Court proceeded to provide an analysis of the Zappone, Presbyterian Hosp., and Chubb cases (citations omitted) which the Court reasoned ultimately permitted an insurer, who fails to timely deny a claim, to preserve the ability to argue fraud with respect to staged accidents.  Simply put, the insurer is not precluded from arguing that the claim was not “accident” never falling within what the insurance policy provided coverage.  This is opposed to the insurer relying upon a policy exclusion or breach of policy condition.  In that case, the insurer is essentially indicating that the claim initially fell within the scope of coverage provided by the policy but some fact or situation, i.e., intoxication or late notice took it outside of coverage.

Here, the Court concluded that the insurer was not arguing that this claim did not fall within the grant of insurance coverage.  The claim was really that the medical supply, which is covered under the insurance policy, was not provided not that medical supplies were never within the scope of insurance coverage under the policy. 

Yet, you may ask what about the fraud defense?  The Court addresses that argument by reasoning that in the defense of fraud by a staged accident it is a situation where there was never insurance coverage under the policy in the first instance.  The key inquiry is whether the defense is based upon whether the claim was within the grant of insurance coverage in the first instance.  In the situation of medical supplies, the insurance policy provides coverage for medical supplies, but the purported fraud arose later taking it out of insurance coverage.

What is the insurer to do then when it suspects that the medical supply was never provided to the EIP?  Request timely verification of the claim and timely issue the denial if the medical supply was never provided.

PEIPER on PROPERTY

Steven E. Peiper

sep@hurwitzfine.com

6/28/07            Ernest J. Maier, Jr v. Allstate Insurance Company

Appellate Division, Third Department

Unrefuted Testimony that a Fire’s Origin was Caused by Accelerants Proves Clear and Convincing to the Third Department.  In Addition, Financial Motive Also Points to Insured’s Arson
Insured commenced the above-action in an attempt to recover additional monies he claimed were owed as a result of a fire that destroyed his house in Renssselaer County.  Allstate’s refusal was based, in part, on the fact that two separate fire investigators determined that the fire started in an upstairs bedroom as a result of flammable liquid being ignited.  As the insured presented no evidence to refute the testimony of both investigators, the Third Department affirmed the Trial Court’s determination that Allstate provided “clear and convincing evidence” that the fire did not start as a result of an accident or natural cause.

In addition, the Third Department also affirmed the Trial Court’s ruling that Allstate proved that its insured had a financial motive to destroy the house rather than having it sold on the open market.  Important factors considered by the Trial Court included: (1)  the fact that the insured would receive substantially more revenue through insurance than a sale on the open real estate market; (2)  the insured’s net income was less than  $10,000 per year; (3)  the insured had left the home for good, and was in the process of permanently relocating to Florida. 

6/26/07            Edelman v. Chubb Indemnity Insurance Company

Appellate Division, First Department

Consignment Policy Covered Property in Care, Custody and Control of Insured; All-Risk Policy Might also Cover Loss of Painting

Two first party policies might provide coverage for loss of painting on consignment including one specifically bought for property in care, custody and control of insured.  Other, all-risk policy, may also provide protection to insured for painting, once cause of loss is determined.

6/19/07            Pearl Schlesinger v Harleysville Worcester Insurance Company

Appellate Division, Second Department

Excavation = Construction; Coverage Denied

Here, the Second Department is focused upon the procedural aspects of the insured’s motion to renew a previously unsuccessful motion for summary judgment.  However, for coverage purposes, it is worth pointing out the arguments in carrier’s concurrent summary judgment that was filed in the Supreme Court of Kings County.

In this matter, the property owner/insured was covered under a policy issued by Harleysville Worcester Insurance Company (“Harleysville”).  The insured sought coverage under its policy with Harleysville for damage it sustained to the foundation of a building she owned.  The damage was allegedly caused by the excavation of a construction site adjacent to the insured premises. 

Harleysville disclaimed coverage to its insured on the basis of an exclusion which removed coverage for damages arising from “negligent construction on or off the premises.”  The trial court held, and was implicitly affirmed by the Second Department, that the application of the negligent construction exclusion was applicable to the current matter.  In so holding, the trial court ruled that the term “construction” as used in the Harleysville policy encompassed the act of excavation.  In turn, Harleysville’s denial was upheld as a result.

6/19/07            WestCom Corporation v Greater N.Y. Mut. Ins. Co.

Appellate Division, First Department

Case of “Who Done It” Falls Under Exclusion for Mysterious Disappearance of Property

WestCom Corporation (“WestCom”) rented a storage facility from Manhattan Mini Storage, LLC (“MMS”).  The storage facility was owned by MMS, but WestCom obtained the sole access rights and possessed the only key to unlock the unit.

On February 4, 2003, a WestCom employee was not able to gain access to the unit because the padlock securing the entrance was jammed with a key that was broken off inside the lock.  The lock was subsequently cut off of the unit, and a new lock was provided with WestCom personnel.  Two days later, on February 6, 2003, a WestCom employee discovered certain property that had been stored inside the unit with other items was missing.

WestCom’s carrier disclaimed coverage pursuant to an exclusion under the policy.  The exclusion in question removed coverage for “property that is missing, but there is no physical evidence to show what happened to it, such as shortage disclosed upon taking inventory.”

The First Department held that because the language of the exclusion was unambiguous, and because there was “no physical evidence” of what happened to WestCom’s stock, the exclusion applied to bar coverage.  In so holding, the First Department also stated that the last clause of the exclusion (“such as a shortage discovered upon taking inventory”) was not a limitation on the exclusion.

Across Borders

Visit the Hot Cases section of the Federation of Defense & Corporate Counsel website, www.thefederation.org. Dan Kohane serves as the FDCC’s President and Website Editor Emeritus.

6/18/2007        Clarendon American Insurance Co. v. 69 W. Washington Mgmt. LLC, et al
Illinois Court of Appeal, First District

Court Refuses to Insert Language Defining Parties as Additional Insureds When Four Corners of the Agreement Were Silent and Parties Could Have Easily Inserted Such Language Themselves
Plaintiff insurer, Clarendon American Insurance Company (“Clarendon”), brought a declaratory action seeking a determination that it did not owe a duty to defend or indemnify defendants 69 West Washington Management, LLC (“69 West”) and County of Cook (“Cook”) as additional insureds under a CGL policy. A third party, Aargus Security Systems, Inc. (“Aargus”), entered into a contract with 69 West (acting as manager of Cook) to provide security services, and agreed to secure insurance naming 69 West and Cook as additional insureds. Clarendon then issued a CGL policy to defendant B.G.K Security Services, Inc. (“BGK”). Later, Aargus and BGK entered into a contract which, with respect to insurance, provided only that “all insurance that may from time to time be required shall be obtained in such a manner as the parties hereto agree.” A fire then occurred on the insured property and 69 West, Cook, Aargus and BGK were all named as defendants in various lawsuits. All four parties tendered the defense to Clarendon. Clarendon then brought a declaratory action arguing that the CGL policy issued to BGK did not include 69 West or Cook as additional insureds. The Appellate Court reversed the trial court’s determination and held that Clarendon did not owe 69 West and Cook a duty to defend and indemnify under the CGL policy issued to BGK. 69 West and Cook argued that the contract between Aargus and BGK included them as additional insureds, although not specifically stated but rather by reference to the contract between Aargus and 69 West, wherein it was specifically articulated that insurance would be secured for 69 West and Cook as additional insureds. BGK was not a party to the 69 West/Aargus contract, and the court held that there was nothing within the four corners of the contract that obliged BGK to provide insurance for 69 West or Cook as additional insureds. The court further noted that the two agreements were not entered into by the same parties or as part of the same transaction, and the contract failed to incorporate the agreement between Aargus and 69 West, which did provide insurance for 69 West and Cook. The court found that the plain language of the Aargus/BGK agreement showed intent not to define insurance relationships, and the court refused to insert language providing for such insurance. Accordingly, Clarendon did not have a duty to defend 69 West or Cook.

Submitted by: Bruce D. Celebrezze and Erin A. Cornell (Sedgwick, Detert, Moran & Arnold LLP)

Reported Decisions

Schirmer v. First Insurance Company

DECISION & ORDER

In three related actions, inter alia, to recover damages for personal injuries, etc., for indemnification, and for a judgment declaring that Utica First Insurance Company, the defendant in Action Nos. 2 and 3, is obligated to defend and indemnify Robert A. Penkert in Action No. 1, Robert A. Penkert appeals, as limited by his notice of appeal and brief, from so much of an order of the Supreme Court, Nassau County (O'Connell, J.), dated June 4, 2004, as (a) denied that branch of his motion which was for summary judgment dismissing the third-party complaint in Action No. 2 and declaring that Utica First Insurance Company is obligated to defend and indemnify him in Action No. 1, (b) denied that branch of his motion which was for summary judgment on the third-party complaint in Action No. 1 and granted that branch of the cross motion of M & R Marcus Company East Meadow, Ltd., the third-party defendant in Action No.1, which was for summary judgment dismissing the third-party complaint in that action, and (c) granted the cross motion of Utica First Insurance Company for summary judgment in its favor in Action Nos. 2 and 3.

ORDERED that the appeal from so much of the order as denied that branch of the appellant's motion which was for summary judgment on the third-party complaint in Action No. 1 and granted that branch of the cross motion of the third-party defendant in Action No. 1 which was for summary judgment dismissing the third-party complaint in that action is dismissed as academic, without costs or disbursements; and it is further,

ORDERED that the order is modified, on the law, (1) by deleting the provision thereof granting the cross motion of Utica First Insurance Company for summary judgment in its favor in Action Nos. 2 and 3, and substituting therefor a provision denying that cross motion, and (2) by deleting the provision thereof denying that branch of the motion of Robert A. Penkert which was for summary judgment dismissing the third-party complaint against him in Action No. 2 and declaring that Utica First Insurance Company is obligated to defend and indemnify him in Action No. 1, and substituting therefor a provision granting that branch of the motion; as so modified, the order is affirmed insofar as reviewed, without costs or disbursements, and the matter is remitted to the Supreme Court, Nassau County, for the entry of a judgment declaring that Utica First Insurance Company is obligated to defend and indemnify Robert A. Penkert in Action No. 1.

Robert A. Penkert, the defendant in an action to recover damages for personal injuries, etc., brought by the plaintiffs Robert Schirmer and Diana Schirmer (hereinafter Action No. 1), was insured under a commercial liability insurance policy issued by Utica First Insurance Company (hereinafter Utica) and placed by Penkert's insurance broker, M & R Marcus Company East Meadow, Ltd. (hereinafter M & R). The policy was in effect when Robert Schirmer, the injured plaintiff in Action No. 1, fell from an allegedly defective ladder while climbing from his boat in dock space he rented from Penkert at the insured premises. When the summons and complaint in Action No. 1 were served on Penkert, he forwarded them to Utica, which promptly disclaimed. Utica first relied on a watercraft exclusion and next on an Artisan Contractor's Survey in which Penkert represented that his primary work was cabinet making and that there was no watercraft exposure on this coverage.

This disclaimer was the subject of an earlier motion by Penkert for summary judgment against Utica. In denying that motion, the Supreme Court, Nassau County (Warshawsky, J.), observed that Utica abandoned the first branch of the disclaimer the watercraft exclusion and held that the second branch sufficed to put Penkert on notice that he was being charged with a material misrepresentation. This, the court held, was an adequate disclaimer letter. Not decided in that motion was whether the grounds for disclaimer as asserted in the disclaimer letter were legally adequate. The court held that the question of whether "Penkert materially misrepresented the dock use on his property in Question 6 under the General Information portion of his insurance application for renewal, or Page 1 of the Artisan Contractor Survey, the question on which this action turns, is not answerable until further discovery is conducted." Penkert appealed from this order denying his motion for summary judgment. His appeal, however, was dismissed by decision and order on motion of this court dated July 12, 2002, for failure to prosecute.

A note of issue was filed and Penkert moved again for summary judgment against, among others, Utica and M & R. Utica moved for summary judgment against, among others, Penkert. Meanwhile, M & R cross-moved for summary judgment against Penkert.

The Supreme Court found that M & R did not commit broker malpractice as alleged in Penkert's third-party complaint in Action No. 1, and it therefore granted M & R's cross motion for summary judgment against Penkert. The Supreme Court also denied that branch of Penkert's motion which sought summary judgment against Utica and granted Utica's cross motion for summary judgment in its favor in Actions Nos. 2 and 3.

We agree with Penkert's contention that the Supreme Court erred in granting Utica's cross motion (see Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853). Utica cross-moved based on its claim that it established the sole remaining basis for disclaiming coverage for the tort claims alleged in Action No. 1 against Penkert - a material misrepresentation by Penkert. "[T]o establish its right to rescind an insurance policy, an insurer must demonstrate that the insured made a material misrepresentation. A misrepresentation is material if the insurer would not have issued the policy had it known the facts misrepresented" (Zilkha v Mutual Life Ins. Co. of N.Y., 287 AD2d 713, 714; see Insurance Law § 3105[b]). The issue of materiality is generally a question of fact for the jury (see Process Plants Corp. v Beneficial Nat. Life Ins. Co., 53 AD2d 214, 216, affd 42 NY2d 928).

To establish materiality as a matter of law, the insurer must present documentation concerning its underwriting practices, such as underwriting manuals, bulletins, or rules pertaining to similar risks, that show that it would not have issued the same policy if the correct information had been disclosed in the application (see Insurance Law § 3105[c]; Curanovic v New York Cent. Mut. Fire Ins. Co., 307 AD2d 435, 437; Tuminelli v First Unum Life Ins. Co., 232 AD2d 547; cf. Shapiro v Allstate Life Ins. Co. of N.Y., 202 AD2d 659, 660). Conclusory statements by insurance company employees, unsupported by documentary evidence, are insufficient to establish materiality as a matter of law (see Curanovic v New York Cent. Mut. Fire Ins. Co., supra; Tuminelli v First Unum Life Ins. Co., supra). Assuming that Penkert made the misrepresentations complained of, the conclusory statement by, among others, Utica's underwriter was insufficient to establish materiality as a matter of law (see Parmar v Hermitage Ins. Co., 21 AD3d 538, 540-541; Iacovangelo v Allstate Life Ins. Co. of NY, 300 AD2d 1132, 1133). Thus, Utica's motion for summary judgment in its favor in Actions Nos. 2 and 3 should have been denied based upon Utica's failure to establish prima facie its entitlement to judgment as a matter of law (see Winegrad v New York Univ. Med. Ctr., supra).

By contrast, Penkert did establish his entitlement to judgment as a matter of law on his defense and indemnification claim against Utica (see Banuchis v Government Empls. Ins. Co., 14 AD3d 581, 582). Penkert established as a matter of law that Utica cannot prevail on its second, remaining, branch of disclaimer (the first branch having been abandoned), namely a material misrepresentation in the Artisan Contractor's Survey. This Survey was taken on November 14, 1995, subsequent to the issuance of the policy on November 9, 1995. The fact that Penkert may not, under Bray v Cox (38 NY2d 350), raise any claim that Utica's disclaimer was invalid for failing expressly to claim that Penkert misrepresented the watercraft exposure in no way undermines his current argument that this misrepresentation was not made before Utica actually issued the liability insurance policy (see Insurance Law § 3105[a]). Since Utica's disclaimer asserted no misrepresentation other than the one in the Artisan Contractor's Survey, there remains no other basis on which to apply its disclaimer of its obligation to defend and indemnify Penkert in Action No. 1.

The foregoing, among other reasons, sufficed to establish Penkert's entitlement to summary judgment and a declaration that Utica is obligated to defend and indemnify Penkert as a defendant in Action No. 1. Thus, we remit the matter to the Supreme Court, Nassau County, for the entry of a judgment declaring that Utica is obligated to defend and indemnify Penkert in the main action.

In light of our disposition of the appeal from so much of the order as concerns Penkert's claim against Utica, the appeal from so much of the order as denied that branch of Penkert's motion which was for summary judgment on the third-party complaint in Action No. 1 and granted summary judgment to M & R dismissing Penkert's third-party complaint in Action No. 1 has been rendered academic.

Sorbara Construction Corporation v. AIU Insurance Company

Herzfeld & Rubin, P.C., New York (David B. Hamm of
counsel), for appellant.
Hodgson Russ LLP, Buffalo (Kevin D. Szczepanski of counsel),
for respondent.

Order, Supreme Court, New York County (Marcy Friedman, J.), entered January 18, 2007, which denied plaintiff's motion for summary judgment and granted defendant insurer's cross motion for summary judgment to the extent of absolving it of any obligation to defend or indemnify plaintiff in the underlying personal injury action, affirmed, with costs.

Where a liability insurance policy requires notice of an occurrence to the carrier as soon as practicable, such notice must be given within a reasonable period of time, and the insured's noncompliance in this respect constitutes failure of a condition precedent (Great Canal Realty Corp. v Seneca Ins. Co., Inc., 5 NY3d 742 [2005]), thus vitiating the contract as a matter of law, without a showing of prejudice (Argo Corp. v Greater N.Y. Mut. Ins. Co., 4 NY3d 332, 339 [2005]).

Plaintiff became aware of its employee's accident and his ensuing lawsuit almost immediately, but did not notify defendant excess insurer for some 5½; years, until after the defendants in the underlying matter had instituted a third-party action against it. "[W]here a reasonable person could envision liability, that person has a duty to make some inquiry" (White v City of New York, 81 NY2d 955, 958 [1993]). Although a good-faith belief in non-liability may excuse the failure to give timely notice (see Great Canal Realty Corp. v Seneca Ins. Co. (5 NY3d 742 [2005]), there is no indication plaintiff ever took any action to ascertain the possibility of its own liability for the accident prior to the commencement of the third-party action. Accordingly, there is no basis for a good-faith belief in its non-liability. Moreover, plaintiff's own duty to provide notice to the excess insurer is not negated by the insurer's actual knowledge acquired from another source (Ocean Partners, LLC v North Riv. Ins. Co., 25 AD3d 514, 515 [2006]; Travelers Ins. Co. v Volmar Constr. Co., 300 AD2d 40 [2002]). Notice under a workers' compensation policy does not constitute notice under a liability insurance policy (see Nationwide Ins. Co. v Empire Ins. Group, 294 AD2d 546, 548 [2002]). Plaintiff's protracted delay in giving defendant insurer the requisite contractual notice relieved the insurer of its obligation to defend or indemnify plaintiff.

All concur except Catterson, J. who concurs in a separate memorandum as follows:

CATTERSON, J. (concurring)

I concur in the result but write separately because while I believe that Great Canal Realty Corp. v Seneca Ins. Co. Inc. (5 NY3d 742, 800 N.Y.S.2d 521, 833 N.E.2d 1196 (2005)), the decision by which we are constrained today, was wrongly decided, I nonetheless agree with the majority that in this case, it would not have made a difference even had the Court affirmed our decision in Great Canal. In that case, the time lapse between occurrence and plaintiff's notification to insurer was just four months whereas here plaintiff did not notify defendant insurer for 5½; years, thus prejudice can be assumed as a matter of law.

Parks v. Miclette

Calendar Date: April 24, 2007
Before: Mercure, J.P., Crew III, Rose and Lahtinen, JJ.


The LaFave Law Firm, P.L.L.C., Delmar (Chad A. Jerome of counsel), for appellant.
FitzGerald, Morris, Baker Firth, P.C., Glens Falls (Nikki J. Moreschi of counsel), for respondents.

MEMORANDUM AND ORDER


Mercure, J.P.

Appeal from an order of the Supreme Court (Reilly Jr., J.), entered May 8, 2006 in Schenectady County, which, inter alia, granted defendants' motion for summary judgment dismissing the complaint.

In March 2002, plaintiff and defendant Robert R. Miclette Jr. were involved in a multi-car accident on Interstate 90 in Onondaga County. Miclette was driving defendant Peggy L. Senecal's vehicle when a tractor trailer allegedly entered his lane of travel, causing Miclette to strike the center guard rail and rebound back into traffic. The disabled vehicle was then struck by plaintiff's vehicle. Plaintiff thereafter commenced this action against Miclette and Senecal, alleging that he suffered concussive and back injuries that constituted serious injuries within the meaning of Insurance Law § 5102 (d). Specifically, plaintiff asserted that he suffered a permanent consequential limitation of use of a body organ or member, a significant limitation of use of a body function or system, and that he was unable to perform substantially all of his usual and customary daily activities for 90 of the first 180 days following the accident. Supreme Court granted defendants' subsequent motion for summary judgment dismissing the complaint and plaintiff now appeals.

We affirm. To meet their initial burden of demonstrating that plaintiff did not sustain a serious injury under any of the statutory categories set forth in Insurance Law § 5102 (d) (see Pommells v Perez, 4 NY3d 566, 574 [2005]; Toure v Avis Rent A Car Sys., 98 NY2d 345, 352 [2002]), defendants submitted records and reports of plaintiff's treating physicians, as well as an affidavit from the president of plaintiff's former employer. Contrary to plaintiff's argument, such "documents [are evidence] upon which [a] defendant may properly rely to make [a] prima facie showing of entitlement to judgment as a matter of law" (Tuna v Babendererde, 32 AD3d 574, 575 [2006]; see Franchini v Palmieri, 1 NY3d 536, 537 [2006]; Drexler v Melanson, 301 AD2d 916, 916 [2003]). Plaintiff's medical records from the period immediately following the accident indicate that he had struck his head during the collision but was initially to be discharged from the emergency room after tests there came back normal. A subsequent battery of tests, including X rays and CT scans, was performed after plaintiff fainted causing him to fall and hit his head on a table and floor and then began complaining of neck pain. The results of the second round of tests were negative and plaintiff's discharge instructions indicated that he was in "satisfactory condition" but fitted with an Aspen collar for his neck pain. Records from plaintiff's next three doctors' visits, in late March and April 2002, noted a post-concussive state that was expected to improve, a "[c]ervical strain/sprain," "mild" vertebrae tenderness, some "slight" muscle tenderness and a limited range of motion that was "near normal." Plaintiff was cleared to return to light activity at work in March 2002 and authorized to remove his cervical collar in April 2002.

In May 2002, plaintiff commenced treatment with David Hart, who noted plaintiff's complaints of vertigo, found plaintiff's cervical range of motion to be limited in all directions, and observed the presence of "a moderate degree" of muscle spasm. One month later, however, Hart found plaintiff's cervical range of motion to be only "mildly limited," that there was only "minimal" neck tenderness and that the muscle spasms were no longer present. Hart also recorded plaintiff's statements that he was feeling "better and better," that his vertigo bothered him only when lying down, that he was able to resume running and jogging and that his headaches did not warrant the bother of going to the store to buy painkillers. Hart concluded that plaintiff was doing "considerably better" and that he could return to sedentary work. Defendants also provided an affidavit from plaintiff's former employer indicating that plaintiff's duties were primarily sedentary and, in any event, he was in the process of being terminated from his job at the time of the accident.

Inasmuch as minor, mild or slight limitations in range of motion or mere subjective complaints of pain will not satisfy the serious injury threshold (see e.g. Pianka v Pereira, 24 AD3d 1084, 1086 [2005]; Gonzalez v Green, 24 AD3d 939, 940-941 [2005]), the burden shifted to plaintiff to raise a triable issue of fact on the three claimed categories of serious injury through the use of objective, medical proof (see Toure v Avis Rent A Car Sys., supra at 350, 353; Tuna v Babendererde, supra at 576-577). In that regard, we note that to establish a claim under the permanent, consequential limitation or significant limitation of use categories, "'the medical [proof] submitted by plaintiff must contain objective, quantitative evidence with respect to diminished range of motion or a qualitative assessment comparing plaintiff's present limitations to the normal function, purpose and use of the affected body organ, member, function or system'" (Pugh v DeSantis, 37 AD3d 1026, 1029 [2007], quoting John v Engel, 2 AD3d 1027, 1029 [2003]). In addition, the 90/180-day category requires the presentation of "objective evidence of 'a medically determined injury or impairment of a non-permanent nature'" (Toure v Avis Rent A Car Sys., supra at 357, quoting Insurance Law § 5102 [d]).

In opposition, plaintiff relies primarily upon his medical records, an affirmation from Hart and his own affidavit. Notably, none of the records other than those from plaintiff's treatment with Hart contains qualitative or quantitative descriptions of any limitation in plaintiff's range of motion or daily activities, and the diagnostic test results contained therein show no evidence of abnormality. Hart's record from May 2002 does indicate the presence of muscle spasms and positive "sway" on "Romberg testing," as well as specific, quantitative limitations in plaintiff's range of motion and notes restrictions in plaintiff's ability to work and exercise. Neither the record nor Hart's subsequent affirmation, however, sets forth the objective tests used to determine the spasms or supports the findings regarding plaintiff's physical limitations and restrictions in his daily activities (see Toure v Avis Rent A Car Sys., supra at 357-358; Tuna v Babendererde, supra at 577; Pianka v Pereira, supra at 1086). Moreover, Hart's record from June 2002 indicates that plaintiff experienced no muscle spasms, that the vertigo troubled him only when lying down, and that any limitations or tenderness were mild and minor at that point. The affirmation and a subsequent record indicate that Hart next treated plaintiff 3½; years later and concluded that he suffered from neck and headache pain, "abnormal" range of motion in his neck and, rarely, from vertigo, all of which were permanent. These documents do not, however, set forth any quantitative or qualitative assessment of these allegedly persisting conditions or demonstrate that they are presently more than "'minor, mild or slight'" (Toure v Avis Rent A Car, Sys., supra at 353, quoting Licari v Elliott, 57 NY2d 230, 236 [1982]; see Pugh v DeSantis, supra at 1029).

Indeed, while Hart's affirmation does provide explanations of the objective basis for the initial diagnosis of vertigo and for the gap in plaintiff's treatment (see Pommells v Perez, 4 NY3d 566, 577 [2005], supra), it does not explain why the physical limitation and the vertigo which the June 2002 medical records described as "mild" and "rare," respectively were suddenly significant or, as Supreme Court noted, resolve the contradictions between Hart's June 2002 opinion that plaintiff was "considerably better" and expected to improve, and his present opinion that plaintiff is permanently disabled despite reported increases in his physical capabilities. Finally, the description in Hart's affirmation and plaintiff's affidavit of plaintiff's inability to perform his customary daily activities for the first 90 days after the accident is not supported by medical evidence that is independent of plaintiff's subjective complaints of pain. In any event, the claims regarding the restrictions on plaintiff's daily activities are largely belied both by plaintiff's reported description of his physical capabilities in Hart's June 2002 medical records and the affidavit from his employer describing the circumstances under which plaintiff lost his job, which plaintiff does not dispute.

In short, because the evidence relied upon by plaintiff is insufficient to create a triable issue of fact with respect to any of the statutory categories of serious injury, Supreme Court properly dismissed the complaint (see Tuna v Babendererde, 32 AD3d 574, 577 [2006], supra; John v Engel, supra at 1028-1030; Adams v Pagano, 1 AD3d 779, 780-781 [2003]; Drexler v Melanson, 301 AD2d 916, 918-919 [2003], supra).

Crew III, Rose and Lahtinen, JJ., concur.

Vargas v. Ahmed

Marjorie E. Bornes, New York, for appellants.
Mitchell Dranow, Mineola, for respondents.

Order, Supreme Court, Bronx County (Sallie Manzanet, J.), entered July 31, 2006, which, to the extent appealed from, granted the motion by plaintiffs other than Rodolfo Vargas to vacate a default entered against them on May 10, 2004, unanimously reversed, on the law, without costs, and the motion denied.

The military stay ordered by the court in 2004 applied only to plaintiff Rodolfo Vargas, not the responding plaintiffs, whose causes of action had already been dismissed. There is no evidence that Rodolfo Vargas was necessary for the motion of his
co-plaintiffs to vacate their defaults (see Pinkowski v All-States Sawing & Trenching, 290 AD2d 873 [2002]). Therefore, the responding plaintiffs have offered no reasonable excuse for waiting two years to move to vacate their default.

Even if the motion to vacate the default were timely, the responding plaintiffs do not attempt to argue that they have either a reasonable excuse for failing to respond to defendants' original motion for summary judgment, or that they have a meritorious cause of action (see Kalisch v Maple Trade Fin. Corp., 35 AD3d 291 [2006]). Their only excuse to the motion court was that "there were numerous plaintiffs in this action and we had great difficulty getting signed affirmation [sic] from radiologists." However, they submitted no radiologists' affirmations. Moreover, the only evidence they offered as to their alleged "serious injuries" (Insurance Law § 5102[d]) consisted of MRI and other medical reports, which were not affirmed, and the affirmation of Dr. Hausknecht, who did not conduct an examination contemporaneous to the accident, or any objective tests, but relied solely on plaintiffs' subjective complaints and the unsworn medical and MRI reports, with no indication that he reviewed the MRI films. Plaintiffs have thus failed to demonstrate a meritorious cause of action (see Ortega v Maldonado, 38 AD3d 388 [2007]; Atkinson v Oliver, 36 AD3d 552 [2007]; Graham v Shuttle Bay, 281 AD2d 372 [2001]; Sherlock v Smith, 273 AD2d 95 [2000]).

On appeal, plaintiffs rely solely on the assertion that defendants' summary judgment motion was untimely (see Miceli v State Farm Mut. Auto. Ins. Co., 3 NY3d 725 [2004]; Brill v City of New York, 2 NY3d 648 [2004]). However, defendants offered good cause for the delay in that — as plaintiffs must concede, given their own proffered excuse for their delay — the number of plaintiffs made it difficult to obtain authorizations and to gather necessary information. The only difference between plaintiffs' excuse and defendants' good cause is that defendants obtained the authorizations and the necessary information, which they submitted on the motion for summary judgment, while plaintiffs did not submit any radiologists' affirmations, which allegedly formed the purported reason for their delay.

THIS CONSTITUTES THE DECISION AND ORDER OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.

Bartley v. Trans Car & Limo, Inc.

Elliot Ifraimoff & Associates, P.C., Forest Hills, N.Y. (David E. Waterbury of counsel),             for appellant.
Baker, McEvoy, Morrissey & Moskovits, P.C., New York, N.Y.
(Holly E. Peck of counsel), for respondents.

 

DECISION & ORDER

In an action to recover damages for personal injuries, the plaintiff appeals from an order of the Supreme Court, Queens County (Agate, J.), dated January 11, 2006, which granted the defendants' 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).

ORDERED that the order is affirmed, with costs.

The defendants made a prima facie showing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) (see Toure v Avis Rent A Car Sys., 98 NY2d 345; Gaddy v Eyler, 79 NY2d 955). The defendants' affirmed medical reports demonstrated that the plaintiff's injuries were not permanent and were of a degenerative nature, predating the accident. Further, the defendants demonstrated that the plaintiff was able to perform all of her daily activities for more than 90 days of the first 180 days subsequent to the accident (see Sainte-Aime v Ho, 274 AD2d 569).

In opposition to the defendants' showing, the plaintiff failed to raise a triable issue of fact.
RIVERA, J.P., SPOLZINO, FISHER, LIFSON and DICKERSON, JJ., concur.

Bestman v. Seymour

Nicolini, Paradise, Ferretti & Sabella (Rivkin Radler LLP, Uniondale, N.Y. [Evan H. Krinick, Cheryl F. Korman, and Melissa M. Murphy] of counsel), for appellants.
Bosco Bisignano & Mascolo, LLP, Staten Island, N.Y. (James A. Maleady of counsel), for
respondent.

 

DECISION & ORDER

In an action to recover damages for personal injuries, the defendants appeal (1) from an order of the Supreme Court, Kings County (Schack, J.), dated October 13, 2006, which denied their motion for summary judgment dismissing the complaint, and (2), as limited by the brief and the stipulation of the parties dated March 1, 2007, from so much of an order of the same court dated December 8, 2006, as, upon determining, upon reargument, that their motion for summary judgment was timely, denied their 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).

ORDERED that the appeal from the order dated October 13, 2006, is dismissed, as that order was superseded by the order dated December 8, 2006, made upon reargument; and it is further,

ORDERED that the order dated December 8, 2006, is reversed insofar as appealed from, on the law, with costs, and the defendants' motion for summary judgment dismissing the complaint is granted.

On their motion for summary judgment, the defendants made a prima facie 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 opposition, the plaintiff failed to raise a triable issue of fact. The affirmed medical report of the plaintiff's examining neurologist did not establish a triable issue of fact. The plaintiff's examining neurologist evaluated the plaintiff on a single occasion on May 12, 2006, and noted in his report that the plaintiff had "full range of motion" in her cervical spine. In this same report, he concluded that the plaintiff had a 30% reduction in range of motion of the lumbar spine on flexion, and had other significant range of motion limitations on straight-leg raising test results when compared to the normal range of motion. Despite finding these limitations in lumbar range of motion, neither the plaintiff's examining neurologist, in his report, nor the plaintiff, in opposition to the motion, set forth any competent medical evidence showing range of motion limitations in the lumbar spine that were contemporaneous with the subject accident (see Borgella v D & L Taxi Corp., 38 AD3d 701; Iusmen v Konopka, 38 AD3d 608; Earl v Chapple, 37 AD3d 520; Zinger v Zylberberg, 35 AD3d 851; Felix v New York City Tr. Auth., 32 AD3d 527). No other medical findings concerning range of motion were submitted by the plaintiff in opposition to the defendants' motion.

The only other submission in opposition to the motion was the plaintiff's affidavit, which, by itself, was insufficient to raise a triable issue of fact as to whether the plaintiff sustained a serious injury within the meaning of Insurance Law § 5102(d) (see Felix v New York City Tr. Auth., supra; Fisher v Williams, 289 AD2d 288). Moreover, neither the plaintiff nor her examining neurologist adequately explained the gap in her treatment between when she stopped treating in 2003 and her most recent examination on May 12, 2006 (see Pommells v Perez, 4 NY3d 566, 574-575; Berktas v McMillian,AD3d [2d Dept, May 1, 2007]; Waring v Guirguis, 39 AD3d 741; Phillips v Zilinsky, 39 AD3d 728; Albano v Onolfo, 36 AD3d 728). Furthermore, the plaintiff failed to submit any competent medical evidence that she was unable to perform substantially all of her daily activities for not less than 90 of the first 180 days subsequent to the subject accident (see Sainte-Aime v Ho, 274 AD2d 569).
RIVERA, J.P., SPOLZINO, FISHER, LIFSON and DICKERSON, JJ., concur.

Cossentino v. Kelly

Dupee & Monroe, P.C. (William J. Garvin of counsel), for appellant.
Marc D. Orloff, P.C., Goshen, N.Y. (Steven A. Kimmel of counsel), for respondents.

 

DECISION & ORDER

In an action to recover damages for personal injuries, the plaintiff appeals from an order of the Supreme Court, Orange County (Slobod, J.), entered May 3, 2006, which granted the defendants' motion for summary judgment dismissing the complaint on the ground that she did not sustain a serious injury within the meaning of Insurance Law § 5102(d).

ORDERED that the order is affirmed, with costs.

The defendants satisfied their prima facie burden by 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 opposition, the plaintiff failed to raise a triable issue of fact. The plaintiff's treating physician relied on the unsworn reports of others in reaching the conclusions in his affirmation (see Iusmen v Konopka, 38 AD3d 608; Elder v Stokes, 35 AD3d 799; Friedman v U-Haul Truck Rental, 216 AD2d 266). The submission of the plaintiff's magnetic resonance imaging report of her cervical spine did not raise a triable issue of fact. The mere existence of a herniated or bulging disc is not evidence of a serious injury in the absence of objective evidence of the extent of the alleged physical limitations resulting from the disc injury and its duration (see Yakubov v CG Trans Corp., 30 AD3d 509; Cerisier v Thibiu, 29 AD3d 507; Bravo v Rehman, 28 AD3d 694; Kearse v New York City Tr. Auth., 16 AD3d 45; Diaz v Turner, 306 AD2d 241).
RIVERA, J.P., SPOLZINO, FISHER, LIFSON and DICKERSON, JJ., concur.

Francovig v. Senekis Cab Corp.

Mallilo & Grossman, Flushing, N.Y. (Christopher L. Bauer of counsel), for appellant.
Russo, Keane & Toner, LLP, New York, N.Y. (Christopher G. Keane of counsel), for respondent.

DECISION & ORDER

In an action to recover damages for personal injuries, the plaintiff Angelica Francovig appeals, as limited by her brief, from so much of an order of the Supreme Court, Queens County (Price, J.), entered June 8, 2006, as granted that branch of the motion of the defendant Senekis Cab Corp. which was for summary judgment dismissing the complaint insofar as asserted against it by her on the ground that she 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 that branch of the motion of the defendant Senekis Cab Corp. which was for summary judgment dismissing the complaint insofar as asserted against it by the plaintiff Angelica Francovig is denied.

The Supreme Court properly determined that the defendant Senekis Cab Corp. established its prima facie burden on that branch of its motion which was for summary judgment dismissing the complaint insofar as asserted against it by the plaintiff Angelica Francovig (hereinafter Angelica) since it established that Angelica 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). However, in opposition, Angelica raised a triable issue of fact. The Supreme Court erred in finding that Angelica failed to adequately explain the lengthy gap in her treatment between October 2002 and her most recent examination by her treating chiropractor in 2006. Angelica stated in her affidavit, as well as in her deposition testimony, that she stopped treatment in October 2002 because no-fault insurance was cut off and she could not afford any further treatments out of her own pocket (see Williams v New York City Tr. Auth., 12 AD3d 365; Black v Robinson, 305 AD2d 438).

In addition, the affidavit of Angelica's treating chiropractor raised a triable issue of fact as to whether Angelica sustained a serious injury within the meaning of the no-fault statute under either the permanent consequential or significant limitation of use categories of Insurance Law § 5102(d) (see Lim v Tiburzi, 36 AD3d 671; Shpakovskaya v Etienne, 23 AD3d 368; Clervoix v Edwards, 10 AD3d 626; Acosta v Rubin, 2 AD3d 657; Rosado v Martinez, 289 AD2d 386; Vitale v Lev Express Cab Corp., 273 AD2d 225). Here, Angelica's treating chiropractor opined, based on her contemporaneous and most recent examinations of Angelica and her review of Angelica's magnetic resonance imaging reports which showed, inter alia, herniated discs in Angelica's cervical and lumbar spine, that Angelica's injuries were permanent and causally related to the subject accident. She further opined that as a result of the injuries and decreased limitations in movement noted during her examinations of Angelica that Angelica sustained a significant limitation of use of her cervical and lumbar spine as a result of the subject accident.
SCHMIDT, J.P., KRAUSMAN, GOLDSTEIN, COVELLO and ANGIOLILLO, JJ., concur.

Joyce v. Lacerra

Law Offices of Gary S. Alweiss, Garden City (Theodore A. Naima of counsel), for appellant.
Baker, McEvoy, Morrissey & Moskovits, P.C., New York
(Holly E. Peck of counsel), for respondents.

Order, Supreme Court, Bronx County (Betty Owen Stinson, J.), entered April 11, 2006, which granted defendants' motion for summary judgment dismissing the complaint, unanimously reversed, on the law, with costs, the motion denied and the complaint reinstated.

On January 16, 2004, plaintiff, a pedestrian, was crossing a road at LaGuardia Airport when he was struck by a taxi driven and owned by defendants. Plaintiff was thrown into the air by the impact and then hit the taxi's windshield, breaking it, before being propelled to the ground.

Complaining of pain to his right knee, plaintiff was examined by EMS and Port Authority Police, and he thereafter boarded his flight to Michigan. Upon arrival, he went to a hospital emergency room where his knee was x-rayed and he was discharged with crutches and an immobilizer brace. When plaintiff returned from Michigan, he was treated by his local physician before commencing this action.

Defendants' motion for summary judgment, which asserted that plaintiff did not meet the serious injury threshold of Insurance Law § 5102(d), should have been denied. In response to defendants' expert's allegations that plaintiff merely suffered bone contusions or bruising and that there was no evidence of a permanent abnormality, Dr. George McGinnis, plaintiff's orthopedic surgeon, who repaired his ACL with surgery in March 2004, opined that an MRI taken less than two weeks after the accident showed plaintiff had suffered "an acute traumatic [ACL] tear and a nondisplaced fibular head fracture" due to the accident. In response to the motion, plaintiff consulted with Dr. Robert Diamond, a radiologist who reviewed the original MRI taken in March 2004 who found that the MRI revealed an almost complete ACL tear as well as a fracture of the fibula head. Also, Dr. Dov Berkowitz, an orthopedic surgeon who offered an expert affidavit for plaintiff in response to the motion, agreed that plaintiff sustained "a non-displaced fracture of the head of the right fibula and a full thickness anterior cruciate ligament tear of the right knee," based upon his review of plaintiff's medical records and his examination of plaintiff performed on October 17, 2005.

A fracture of plaintiff's knee as a result of the accident is, by itself, sufficient to establish a serious injury under the Insurance Law (see Lanpont v Savvas Cab Corp., 244 AD2d 208, 211-212 [1997]). Plaintiff's medical evidence, submitted in response to the motion, set forth a prima facie case that he had suffered a tibia head fracture and ACL tear, thus raising issues of material fact as to whether he had sustained a serious injury (Toure v Avis Rent A Car Sys., 98 NY2d 345, 351-352 [2002]).

Staubitz v. Yaser

Baker, McEvoy, Morrissey & Moskovits, P.C., New York, N.Y.
(Holly E. Peck of counsel), for respondent.

 

DECISION & ORDER

In an action to recover damages for personal injuries, the plaintiff appeals from an order of the Supreme Court, Queens County (Price, J.), entered June 30, 2006, which granted 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).

ORDERED that the order is reversed, on the law, with costs, and the defendant's motion for summary judgment dismissing the complaint is denied.

Contrary to the Supreme Court's determination, the defendant failed to establish, prima facie, 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). While the defendant's neurologist, in her affirmed report, opined that the plaintiff had full range of motion in her lumbar and cervical spine upon examination, the neurologist never examined the plaintiff's right shoulder, which was also alleged to have been seriously injured as a result of the subject accident (see Hughes v Cai, 31 AD3d 385; Loadholt v New York City Tr. Auth., 12 AD3d 352). In this regard, the Supreme Court could not have determined that no triable issues of fact remained as to any serious injuries with respect to her right shoulder since the neurologist, the only doctor for the defendant who physically examined her, never evaluated the right shoulder. Moreover, the report of the defendant's neurologist was based on her examination of the plaintiff on October 26, 2005, which was 10 months after the subject accident. The plaintiff stated both in her deposition testimony and her bill of particulars that as a result of the subject accident she missed over 3 months of work immediately following the subject accident. The plaintiff clearly alleged in her bill of particulars that she sustained a medically-determined injury or impairment of a nonpermanent nature which prevented her from performing substantially all of the material acts which constituted her usual and customary daily activities for not less than 90 days during the 180 days immediately following the subject accident. The defendant's neurologist failed to relate any of her findings to this category of serious injury for the period of time immediately following the accident (see Torres v Performance Auto Group, Inc., 36 AD3d 894; Talabi v Diallo, 32 AD3d 1014; Sayers v Hot, 23 AD3d 453).

While the defendant's radiologist reviewed the magnetic resonance imaging (hereinafter MRI) films taken of the plaintiff's cervical and lumbar spine in December 2004, the plaintiff's claimed injuries went beyond merely her cervical and lumbar spine and included her right shoulder. The affirmed medical report of the defendant's radiologist did not rule out the fact that the plaintiff may have sustained medically-determined injuries to the other areas of her body alleged to have been injured as a result of the subject accident, including her right shoulder and lumbar spine. In this vein, despite reviewing the MRI file of the plaintiff's lumbar spine, the defendant's neurologist was unable to determine the cause of annular tears at the L3-4 and L4-5 levels of the plaintiff's spine.

Since the defendant failed to meet his prima facie burden, it is unnecessary to consider whether the plaintiff's opposition papers were sufficient to raise a triable issue of fact (see Coscia v 938 Trading Corp., 283 AD2d 538).
MASTRO, J.P., RITTER, SKELOS, CARNI and McCARTHY, JJ., concur.

McHale v. Anthony

Smith Mazure Director Wilkins Young & Yagerman, P.C.,
New York (Louis H. Klein of counsel), for appellants.
Ryan & Gulino, P.C., New York (Joseph M. Hiraoka, Jr. of
counsel), for respondents.

Order, Supreme Court, New York County (Milton A. Tingling, J.), entered on or about October 26, 2005, which granted plaintiffs' motion for leave to amend the summons and complaint to add a subrogation cause of action on behalf of Liberty Mutual Insurance Company, affirmed, without costs.

It is undisputed that plaintiff Robert McHale was seriously injured on July 12, 1999 when the vehicle he was driving, which was owned by United Refrigeration, collided with a truck driven by defendant-appellant Anthony, rented by defendant-appellant Empire Beef and owned by defendant Ryder Truck Rental, Inc. This personal injury action was timely commenced two years later; however, because Ryder declared bankruptcy, and its insurer, Frontier Insurance Group, as well as the insurer for defendants-appellants Anthony and Empire Beef, Reliance Insurance Company, went into receivership, the action was stayed from 2001 until October 2004. As a result, plaintiffs, without notice to defendants, filed a claim with United Refrigeration's uninsured motorist carrier, Liberty Mutual, that resulted, on May 10, 2004, in a settlement agreement that contained a right of subrogation.

As is relevant to this appeal, on or about June 6, 2005, plaintiffs moved pursuant to CPLR 3025(b) to amend the complaint to add a subrogation cause of action on behalf of Liberty Mutual. Defendants-appellants Anthony and Empire Beef opposed on the ground that Liberty Mutual's subrogation claim was barred by the statute of limitations inasmuch as it accrued on the date of the accident, not the date of payment or of the subrogation agreement. Defendant Ryder also opposed on statute of limitations grounds, arguing that the subrogation claim did not relate back to the original complaint pursuant to CPLR 203(f) because the original complaint did not give any notice of the possibility of an arbitration between plaintiffs and Liberty Mutual that could result in a large settlement without Ryder's participation. Ryder also argued that plaintiffs' motion must be denied because counsel for Liberty Mutual, who failed to enter an appearance on behalf of plaintiffs as directed by the court, did not have standing to move on behalf of plaintiffs. Subsequent replies and a letter by plaintiffs and a surreply by Anthony and Empire Beef, while addressing the relation-back issue and raising a new argument that Liberty Mutual, although referred to in the proposed amended complaint as a "subrogee," was in essence an "assignee," made no reference to Ryder's lack of standing claim. Nor did the court, which found that defendants' arguments were unavailing and granted plaintiffs' motion.

Accordingly, limiting our review to the issues raised in appellants' briefs, it is evident that Liberty's claim for part of whatever plaintiffs might recover "arises out of the same occurrence that gave rise to plaintiffs' claim . . . and is similar enough to plaintiffs' claim that defendant was thereby placed on notice of [the insurer]'s claim" (Omiatek v Marine Midland Bank, N.A., 9 AD3d 831, 831-832 [2004], appeal dismissed 3 NY3d 738 [2004]; see also Kaczmarski v Suddaby, 9 AD3d 847, 848 [2004], appeal dismissed 3 NY3d 738 [2004]). Hence, the relation-back provision of CPLR 203[f] applies, and Liberty Mutual's subrogation cause of action is not time-barred.

The concerns expressed by the dissent have no relevance to the issues presented by the parties to this appeal. Defendants Anthony and Empire Beef, as limited by their briefs, have appealed only on the grounds that the relation-back provision of CPLR 203(f) does not apply and the proposed new cause of action is one for subrogation and not assignment. Ryder, the only party who raised the standing issue before the motion court, has not appealed and therefore must be deemed to have abandoned such issue. Nevertheless, the dissent would reverse and deny plaintiffs' motion solely on the ground of counsel's lack of standing, an issue not raised by the appealing parties and not addressed in their brief.

It is well settled that an appellate court's scope of review is generally limited to those issues that have been appealed and that aggrieve the appealing party (Hecht v City of New York, 60 NY2d 57, 61 [1983]), and that arguments raised below but not pursued on appeal are generally deemed abandoned (see Batas v Prudential Ins. Co. of America, 37 AD3d 320, 321, n 1 [2007]). Thus, any arguments pertaining to standing are not properly before us and should not be considered (see Matter of Kent v Kent, 29 AD3d 123, 130 [2006]). To do so would be so unfair to the parties, who have presented what they think are the determinative issues for this Court to decide only to be blindsided by a decision based on issues not even raised or addressed in their briefs, as to implicate due process concerns.

All concur except Sweeny and McGuire, JJ. who dissent in a memorandum by McGuire, J. as follows:

McGUIRE, J. (dissenting)

I respectfully dissent as I would deny plaintiffs' motion for leave to amend the summons and complaint to add a subrogation cause of action on behalf of Liberty Mutual Insurance Company (Liberty) without prejudice to a new application on proper papers.

Although plaintiffs moved for leave to amend the complaint to add a subrogation cause of action on behalf of the ostensible plaintiff Liberty, plaintiffs conclusory motion papers do not state that Liberty supported or even had notice of the motion. Notably, no notice of appearance was filed by an attorney representing Liberty (see Szuldiner v City of New York, 18 AD2d 897 [1963]; see also Elite 29 Realty v Pitt, 39 AD3d 264 [2007]). Nor did plaintiffs assert, let alone provide a basis for concluding, that they had standing or authority to assert another party's cause of action (see Rattner v York, 174 AD2d 718, 720 [1991] [affirming dismissal of complaint brought by plaintiff Rattner to the extent it was ostensibly brought by plaintiff Tillie because "[t]here is no evidence that Tillie consented to being joined as a plaintiff in this action . . . [or] authorized Rattner to act on her behalf"]). Moreover, plaintiffs' counsel identified itself only in a perfunctory manner in the motion papers as counsel for plaintiffs and Liberty. Counsel's affirmation and reply papers state that counsel represents plaintiffs, no mention of Liberty is made. At no point do the motion papers indicate that counsel had spoken with anyone at Liberty and had been authorized to act as its attorneys and assert the subrogation cause of action. The plaintiffs' brief in this Court, moreover, provides additional reason for doubt as to whether Liberty had authorized plaintiffs' counsel to represent Liberty and bring the cause of action. Nowhere in the brief does plaintiffs' counsel indicate that it represents Liberty.^[FN1]

Whether deemed a motion to add a party pursuant to CPLR 1003 or as one for leave to intervene pursuant to CPLR 1013, the motion should have been denied. In my view, plaintiffs' failure to demonstrate that they had standing or authority to assert a claim on behalf of Liberty is fatal to their motion. It is not necessary to decide whether lack of standing is a nonwaivable defect touching on the subject matter jurisdiction of the court or a defect that may be waived if not timely raised (compare Security Pac. Natl. Bank v Evans, 31 AD3d 278 [2006], appeal dismissed 8 NY3d 837 [2007], with Murray v State Liq. Auth., 139 AD2d 461 [1988], lv denied 72 NY2d 810 [1988]). If it is a jurisdictional defect, then reversal on this ground would unquestionably be warranted. Even assuming it is a waivable defect, I am not aware of any authority — and the majority does not cite any — that requires us to disregard the issue of the standing of plaintiffs to assert a cause of action on behalf of Liberty. Thus, although defendants-appellants Anthony and Empire Beef Company have not raised this issue, we should not ignore a legal infirmity that is obvious on the face of the record and may prejudice the rights of a nonparty on whose behalf plaintiffs are purporting to act. Moreover, when a defendant fails to object to the lack of standing or capacity of the plaintiff, that failure affects only the rights of the defendant. Here, by contrast, that failure additionally affects the rights of a stranger to the action.

The majority's contention that by raising the standing issue I am "blindsid[ing]" the parties to this appeal and "implicat[ing]" due process concerns is misplaced. Certain defects, particularly those touching on the subject matter jurisdiction of a court, may be raised at any point in an action and may be done by the court sua sponte (see Matter of Grand Jury Subpoenas, 72 NY2d 307, 311 [1988], cert denied 488 US 966 [1988]; Matter of Prospect v Cohalan, 65 NY2d 867, 870 n* [1985]; Matter of Reis v Zimmer, 263 AD2d 136, 144 [1999]). Nor is the majority persuasive in arguing that a reversal on the basis of an issue the parties have not addressed "implicates due process concerns." Of course, even assuming that a reversal on this ground would "implicate[]" due process concerns, those concerns can be implicated without being violated. Moreover, if, as appears to be the case, the McHale plaintiffs have no authority to assert Liberty's claim, they have no ground on which to object to our resolution of this appeal. If, on the other hand, Liberty did authorize the motion, plaintiffs would hardly be irretrievably prejudiced if we were to reverse and deny the motion without prejudice to a new application on proper papers. Obviously, defendants-appellants would not be aggrieved by such a resolution of this appeal.

Curiously, the majority claims that I would deny plaintiffs' motion "solely on the ground of counsel's lack of standing." Of course, however, the issue is plaintiffs' lack of standing. By referring to "counsel's lack of standing," whatever that means, the majority avoids taking an express position on whether plaintiffs' lack of standing presents a jurisdictional defect. Albeit implicitly, however, the majority does take a position on that issue. After all, the majority could not affirm the order granting plaintiffs' motion to add a claim on behalf of Liberty if it concluded that plaintiffs' lack of standing to assert that claim presented a jurisdictional defect. In any event, however the standing issue is characterized, as discussed above there are numerous reasons for believing that plaintiffs were not authorized to represent or otherwise act on behalf of Liberty, and there is virtually no reason to believe plaintiffs were so authorized. The majority has nothing at all to say in response to any of the factual matters discussed above bearing on plaintiffs' lack of standing.

For these reasons, I would deny plaintiffs' motion without prejudice, and would not reach the question of whether the relation-back provision of CPLR 203(f) renders the proposed claim timely.

THIS CONSTITUTES THE DECISION AND ORDER
OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.

ENTERED: JUNE 21, 2007

CLERK

Footnotes

Footnote 1:In addition, the caption of this appeal is inexplicably identical to the prior caption of this action, even though in granting the motion the court deemed to be served the amended complaint, the caption of which includes Liberty as the subrogee of plaintiffs.

Edelman v. Chubb Indemnity Insurance Company

Kupferman & Kupferman, LLP, New York (Stephanie E.
Kupferman of counsel), for Asher B. Edelman, appellant.
Sedgwick, Detert, Moran & Arnold, LLP, New York (Jeffrey
M. Winn of counsel), for Chubb Indemnity Insurance Company,
appellant.
White Fleischner & Fino, LLP, New York (Frederic R.
Mindlin of counsel), for respondent.

Order, Supreme Court, New York County (Barbara R. Kapnick, J.), entered March 31, 2006, which granted third-party defendant's motion for summary judgment dismissing the complaint and the third-party complaint, denied defendant/third-party plaintiff's motion for summary judgment, and denied plaintiff's cross motion for partial summary judgment against defendant/ third-party plaintiff, unanimously affirmed, without costs.

This action involves insurance under a consignment agreement. The court construed the plain and ordinary meaning of the unambiguous terms and conditions of the agreement (see United States Fid. & Guar. Co. v Annunziata, 67 NY2d 229, 232 [1986]), and properly determined that third-party defendant's insurance policy from Underwriters at Lloyd's, covering property of customers while in the company's care, custody or control, provided the necessary coverage called for in the agreement.

It should be noted that plaintiff's cause of action against Phillips de Pury & Luxembourg did not include any claim of negligence, merely breach of contract.

Summary judgment was properly denied to both plaintiff and defendant Chubb Indemnity Insurance Company, plaintiff's all-risk insurer, in connection with plaintiff's claim under the policy because of questions of fact as to the cause of the damage to the subject painting (Zuckerman v City of New York, 49 NY2d 557, 562 [1980]).

We have considered the parties' remaining arguments for affirmative relief and find them without merit.

Senate Bill 6306

Section 1. Section 3001 of the civil practice law and rules is amended to read as follows:

§ 3001. Declaratory judgment. The supreme court may render a  declaratory judgment having the effect of a final judgment as to the rights and other legal relations 

of the parties to a justiciable controversy whether  or  not further relief is or could be claimed. If the court declines to render such a judgment it shall state its grounds. 

A party  who  has interposed  a  claim against another party may bring a declaratory judgment action for a determination of the existence or extent  of  

coverage owed  by  an insurer subject to the provisions of article thirty-four of the insurance law to the party against whom the original claim is interposed.

§ 2. The insurance law is amended by adding a new section 3451 to read as follows:

§ 3451. Notice of a claim for insurance coverage.  (a) Notwithstanding any inconsistent provision of this chapter  or  of  any  other  general, special  or  local 

 law  to  the  contrary,  and  except  as provided in subsection (d) of this section, the provisions of this section shall  be applicable  to  all  insurance  coverage

 in the state issued pursuant to this article and to every insurance contract executed, issued,  reissued or  renewed on or after the effective date of this 

section by an authorized insurer subject to the provisions of this  article.  Any  provision contained  in an insurance contract that is subject to the provisions 

of this section that is contrary in purpose with, or in conflict with,  the provisions of this section shall be null and void if the effectuation of such  provision  

would  result  in  the  derogation of the benefit to an insured intended by the enactment of this section.

(b) An insurer subject to the provisions of  this  article  shall  not deny  coverage  for  a  claim based on the failure of an insured to give timely notice of a 

claim unless the authorized insurer or other  insurer subject to the provisions of this article is able to demonstrate that it has  suffered  material  prejudice

as  a  result of the delayed notice.

Evidence that such insurer had knowledge of the accident,  loss,  injury or  death  that is the subject of the claim, including any communication from the

claimant  or  the  claimant's  representative  or  health  care provider, or from any other injured person or injured person's representative  or  health  care

provider,  or from such insurer to the insured regarding the accident, loss, injury or death, shall create a rebuttable presumption that such insurer has

not been prejudiced by delayed notice.

Notice given to any licensed agent of such insurer in  this  state  with particulars sufficient to identify the insured shall be deemed notice to

such insurer.

(c)  The  provisions  of  this section shall be liberally construed in order to effectuate the purpose hereof which is to mitigate against  the potential 

for  procedural  denial  of  insurance  coverage resulting in unreasonable loss of insurance protection for claimants.

(d) Nothing contained in  this  section  shall  supersede  any  notice requirements  established  for claims arising under article fifty-one of  this chapter.

§ 3. Severability clause. If any clause, sentence, paragraph, subdivision, section or part of this act shall be  adjudged  by  any  court  of competent  

jurisdiction  to  be invalid, such judgment shall not affect, impair, or invalidate the remainder thereof, but shall  be  confined  in its  operation  to the clause, 

sentence, paragraph, subdivision, section or part thereof directly involved in the controversy in which such judgment shall have been rendered. It is hereby 

declared to be the intent of the legislature that this act would  have  been  enacted  even  if  such invalid provisions had not been included herein.

§ 4. This act shall take effect immediately, provided that with regard to  insurance contracts, the provisions of section 3451 of the insurance law, as added by 

section two of this act, shall apply to  all  insurance contracts executed, issued, reissued or renewed on or after such date.

BP Air Conditioning Corp. v. One Beacon Insurance Group

Jonathan Schapp, for appellant.
Mitchell S. Cohen, for respondent.

CIPARICK, J.:

We are asked to decide within the context of a Comprehensive General Liability insurance policy whether liability must be determined before an additional named insured is entitled to a defense in an underlying personal injury action. We conclude that additional insured coverage is not contingent upon a liability finding and that the obligation of an insurer to provide a defense to an additional named insured under the policy exists to the same extent as it does to a named insured. We are unable to answer a second question regarding priority of coverage since the relevant parties and policies at issue are not before us.

In 2000, Henegan Construction Company, Inc., a general contractor on a multi-floor renovation project at the World Trade Center, subcontracted the HVAC work to BP Air Conditioning Corp. BP subsequently subcontracted the HVAC-related steamfitting work to Alfa Piping Corp. The purchase order memorializing the subcontract between BP and Alfa contained the following indemnification/hold-harmless clause:

"To the fullest extent permitted by law, Subcontractor shall indemnify and hold harmless the Owner, General Contractor and BP Air Conditioning and their agent and employees from and against all claims, damages, losses, and expenses, including, but not limited to attorneys fees, arising out of or resulting from the performance of the Work, provided that any such claims, damages, losses or expenses are (1) attributable to bodily injury[,] sickness, disease or death or to injury or to destruction of tangible property including the loss of use resulting therefrom and (2) caused in whole or in part by any negligent act or omission of the Subcontractor, any sub-subcontractor, anyone directly or indirectly employed by any of them or anyone for whose acts any of them be liable, regardless of whether or not it is caused in part by a party indemnified hereunder."

 

Furthermore, the purchase order required Alfa to obtain "Comprehensive General Liability [I]nsurance . . . naming [BP] . . . additional insured." The CGL policy issued by defendant, One Beacon Insurance Group,^[FN1] to Alfa included an additional insured endorsement, which provided in relevant part that:
"Who is An Insured (Section II) is amended to include as an 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 be added as an additional insured on your policy. Such person or organization is an additional insured only with respect to liability arising out of your ongoing operations performed for that insured. A person's or organization's status as an insured under this endorsement ends when your operations for that insured are completed."

In December 2000, Joseph Cosentino, an employee of Karo Sheet Metal, Inc., another subcontractor hired by BP, was allegedly injured when he slipped and fell on an oil slick that had originated from a machine used to cut and thread pipe at the work site. Cosentino commenced an action against Henegan,^[FN2] who then brought a third-party action against BP and Alfa, who were subsequently added as direct defendants in the Cosentino action.

BP, as an additional named insured on Alfa's policy, tendered its defense in the Cosentino action to One Beacon, which declined to defend BP, although it defended Alfa, its insured in the underlying action. BP then commenced a fourth-party action against One Beacon, seeking a declaration of its rights as an additional insured under Alfa's policy, and against Karo, asserting various contractual and common-law claims. One Beacon subsequently moved to sever BP's fourth-party declaratory judgment action against it from the Cosentino action. The motion court granted One Beacon's motion, which left Karo as the sole fourth-party defendant in the underlying action and BP and One Beacon as the remaining parties to this declaratory judgment action.

Thereafter, BP moved for partial summary judgment, seeking an order requiring One Beacon to defend it in the underlying action and for reimbursement of its past defense costs. One Beacon opposed summary judgment contending that it was not obligated to defend BP until it was determined that Cosentino's alleged injury arose out of Alfa's activities, and that One Beacon's responsibility, if any, for the costs of BP's defense could not be determined without considering other relevant policies at issue.

Supreme Court granted BP's motion for partial summary judgment, to the extent that One Beacon is obligated to defend BP in the Cosentino action. However, the court declined to declare that One Beacon was primarily responsible for BP's defense costs. The court opined that since no copies of other relevant insurance policies were submitted, it was "unable to ascertain whether . . . some other carrier [] should be treated as a co-insurer or an excess carrier to [One Beacon, and that its] ultimate contribution for defense and indemnification[,] if any, cannot be determined from the present submissions." The Appellate Division, with two Justices dissenting, modified Supreme Court's order, holding that One Beacon must provide BP a defense in the Cosentino action and that this coverage is primary and BP's coverage under its own policy is excess (33 AD3d 116 [2006]). Relying on the Appellate Division's holding in AIU Ins. Co. v American Motorists Ins. Co. (292 AD2d 277 [1st Dept 2002]), the dissenting Justices stated [*4]that because "the [additional insured] endorsement creates a condition precedent to the triggering of additional insured coverage . . . it must be shown that the [cause of] Cosentino['s] . . . slip and fall emanated . . . from Alfa's work" (33 AD3d at 133). The dissent further stated that because liability in the underlying Cosentino action must be determined before One Beacon is obligated to defend BP, the court need not reach the issue of the priority of coverage. The Appellate Division granted leave to appeal to this Court and certified the following question: "Was the order of this Court, which modified the order of the Supreme Court, properly made?" We answer the certified question in the negative, modify the order of the Appellate Division and reinstate the order of Supreme Court.

Addressing first whether BP is entitled to be defended by One Beacon, it is well settled that an insurer's "duty to defend [its insured] is 'exceedingly broad' and an insurer will be called upon to provide a defense whenever the allegations of the complaint 'suggest . . . a reasonable possibility of coverage'" (Automobile Ins. Co. of Hartford v Cook, 7 NY3d 131, 137 [2006] [citation omitted]). "The duty to defend [an] insured[] . . . is derived from the allegations of the complaint and the terms of the policy. If [a] complaint contains any facts or allegations which bring the claim even potentially within the protection purchased, the insurer is obligated to defend" (Technicon Elecs. Corp. v American Home Assur. Co., 74 NY2d 66, 73 [1989]).

A duty to defend is triggered by the allegations contained in the underlying complaint. The inquiry is whether the allegations fall within the risk of loss undertaken by the insured "[and, it is immaterial] that the complaint against the insured asserts additional claims which fall outside the policy's general coverage or within its exclusory provisions" (Town of Massena v Healthcare Underwriters Mut. Ins. Co., 98 NY2d 435, 444 [2002] [internal quotation marks and citations omitted]). "The merits of the complaint are irrelevant and, an insured's right to be accorded legal representation is a contractual right and consideration upon which [a person's] premium is in part predicated, and this right exists even if debatable theories are alleged in the pleading against the insured" (id. [internal quotation marks and citation omitted]). An "insured's right to representation and the insurer's correlative duty to defend suits, however groundless, false or fraudulent, are in a sense 'litigation insurance' expressly provided by the insurance contract" (Servidone Constr. Corp. v Security Ins. Co. of Hartford, 64 NY2d 419, 423-424 [1985]). Furthermore, "an insurer may be required to defend under the contract even though it may not be required to pay once the litigation has run its course" (Automobile Ins. Co., 7 NY3d at 137).

It is undisputed that Alfa agreed in the purchase order to name BP as an "additional insured" in Alfa's CGL policy and that Alfa also agreed to indemnify and pay BP's attorneys fees for any personal injury tort claim arising from Alfa's work. One Beacon urges us to adopt a different standard that requires a determination of liability before an additional named insured is entitled to a defense. Quite to the contrary, we have held that an "[a]dditional insured is a recognized term in insurance contracts, . . . [and that] the well-understood meaning of the term is an entity enjoying the same protection as the named insured" (Pecker Iron Works of N.Y. v Traveler's Ins. Co., 99 NY2d 391, 393 [2003] [internal quotation marks and citations omitted]). As such, the dissenting Justices' and One Beacon's reliance on the Appellate Division's decision in AIU Ins. Co., which held that liability must be determined before an additional insured is entitled to a defense, is misplaced. Thus, the standard for determining whether an additional named insured is entitled to a defense is the same standard that is used to determine if a named insured is entitled to a defense.

One Beacon argues that the portion of the additional insured endorsement that states that BP "is an additional insured only with respect to liability arising out of [Alfa's] ongoing operations performed for that insured," requires a determination of liability for Cosentino's injuries before BP is entitled to a defense. However, when considering this policy language in light of an insurer's broad obligation to defend an insured, it does not affect the standard under which a duty to defend is determined. When the duty to defend is at issue, a liability alleged to arise out of Alfa's ongoing operations is one "arising out of" such operations within the meaning of the policy.

Here, Cosentino, in his amended complaint, alleged, among other things, that Alfa, BP's subcontractor, was engaged in construction work at the work site where he was injured, that Alfa breached its duty to keep the work site safe and that Alfa's breach caused his injuries. These allegations form a "factual [and] legal basis on which [One Beacon] might eventually be held to be obligated to indemnify [BP] under any provision of the insurance policy" and certainly brings this claim within the ambit of the protection purchased (Servidone Constr. Corp. at 424). Since there is a possibility that Cosentino's injuries "ar[ose] out of [Alfa's] ongoing operations performed for [BP]," One Beacon's obligation to provide BP with a defense is triggered.

Moreover, nothing in the policy or the purchase order requires the application of a different standard for determining under what circumstances BP is entitled to a defense. To the contrary, the purchase order's indemnification/hold-harmless clause indicates that BP sought broad protection against any liability that may be attributable to Alfa's activities as insured by One Beacon. The language of the purchase order and the policy evinces BP's reasonable expectation to the defense that it now seeks.

We have previously held that "the reasonable expectation and purpose of the ordinary business[person] when making an ordinary business contract" will be considered in construing a contract (Album Realty Corp. v American Home Assur. Co., 80 NY2d 1008, 1010 [1992]). BP's reasonable expectation, when it forwarded the purchase order to Alfa that required [*6]Alfa to name BP as an additional insured, was that it wanted protection from lawsuits arising out of Alfa's work — litigation insurance. Denying BP a defense in the underlying matter would rewrite the policy without regard to BP's reasonable expectations as expressed in the purchase order, and provide a windfall for One Beacon. Therefore, the lower courts correctly determined that One Beacon is obligated to provide BP a defense in the underlying Cosentino action, regardless of the merits of the claim.

Turning to the issue of the priority of coverage, we conclude that the Appellate Division erred in finding that One Beacon's coverage is primary and BP's coverage under its own policy is excess. In order to determine the priority of coverage among different policies, a court must review and consider all of the relevant policies at issue (see State Farm Fire & Cas. Co. v LiMauro, 65 NY2d 369 [1985]). Here, Supreme Court correctly concluded that because none of the other insurance carriers are parties to this declaratory judgment action and no other relevant policies have been submitted, the priority of coverage cannot be determined.

Accordingly, the order of the Appellate Division should be modified, without costs, by reinstating the order of Supreme Court and, as so modified, the order should be affirmed, and the certified question answered in the negative.
* * * * * * * * * * * * * * * * *
Order modified, without costs, by reinstating the order of Supreme Court, New York County, and, as so modified, affirmed. Certified question answered in the negative. Opinion by Judge Ciparick. Chief Judge Kaye and Judges Graffeo, Read, Smith, Pigott and Jones concur.
Decided June 27, 2007

Footnotes

Footnote 1: One Beacon is the successor-in-interest to General Accident Insurance, the insurance company that issued Alfa's policy.

Footnote 2: The underlying action is captioned Cosentino v Henegan Construction Company, Inc., et al., New York County Clerk's Index No. 110853/01.

In the Matter of Eighth Judicial District Asbestos Litigation.

Nancy A. Reynolds, & c., Respondent, Amchem Products Inc., et al., Defendants, Garlock Sealing Technologies LLC, Appellant.


Michael J. Hutter, for appellant.
John Ned Lipsitz, for respondent.




PIGOTT, J.:

In this multi-defendant action, Supreme Court erred in failing to disclose to all of the parties the existence of a high-low agreement between the plaintiffs and one of the defendants. Because this error prejudiced the determination of the rights and liabilities of the non-agreeing defendant at trial, a new trial on liability and damages is warranted.

I.

Plaintiff Donald H. Reynolds ^[FN1] worked at the Ashland Oil Refinery in Tonawanda, New York from 1942 through 1987, and purportedly contracted mesothelioma from his exposure to asbestos while employed at that facility. Reynolds and his wife commenced this products liability/negligence action against various manufacturers and distributors of alleged asbestos-containing products used at the refinery. At the time of trial, only two defendants remained in the action: Garlock Sealing Technologies LLC, a manufacturer of gaskets and packaging, and Niagara Insulations, Inc., a distributor and installer of pipe covering insulation. It is alleged that Reynolds's exposure to asbestos in these defendants' products caused his disease.

Unbeknownst to Garlock, plaintiffs and Niagara entered into a high-low agreement two weeks before trial whereby it was agreed that Niagara's total liability would fall into a predetermined range. Specifically, if the jury's damage award against Niagara was $155,000 or less, Niagara would pay plaintiffs a minimum of $155,000, even if Niagara was found to be without fault; if the damage award against Niagara was more than $185,000, Niagara's liability would be capped at $185,000; if the damage award fell within the $155,000 - $185,000 range, Niagara would pay plaintiffs the designated amount within that range. Thus, the high-low agreement differed in its effect from a settlement agreement in that Niagara had only $30,000 at stake and its continued participation at trial might have tactical importance for plaintiffs' claims against Garlock.^[FN2]

Although Supreme Court was cognizant that plaintiffs and Niagara had entered into a high-low agreement, it was unaware of its terms or the amounts involved. Neither Supreme Court nor the agreeing parties advised Garlock of the agreement, and the matter proceeded to trial with Garlock and the jury unaware of its existence. The jury apportioned liability against Garlock and Niagara at 60% and 40%, respectively, and awarded plaintiffs [*3]damages in the amount of $3,750,000.

Having learned of the high-low agreement just days after the jury's verdict, Garlock moved to set aside the verdict and requested a new trial on various grounds. Relevant to this appeal, Garlock asserted that Niagara's continued participation in the trial after entering into the high-low agreement with plaintiffs was inherently unfair and prejudicial, and that Supreme Court's failure to disclose the existence of the agreement prejudiced Garlock and constituted reversible error. Supreme Court disagreed and entered judgment accordingly.

The Appellate Division, with one dissent, affirmed the judgment, holding that Supreme Court's failure to disclose the high-low agreement did not warrant reversal absent evidence of collusion between plaintiffs and Niagara to the detriment of Garlock, noting that Niagara never lost its incentive to magnify Garlock's liability or minimize its own (32 AD3d 1268, 1270 [4th Dept. 2006]). We granted leave and now reverse.

II.

At the outset, it should be noted that Supreme Court did an admirable job of brokering pre-trial settlements of many claims in this complex litigation involving numerous defendants. That only two defendants remained in the litigation at the time of trial is a testament to Supreme Court's effectiveness in that regard. Nonetheless, we are constrained to agree with Garlock that the court's failure to disclose the existence of the high-low agreement rendered impossible a fair determination of Garlock's rights and liabilities.

A high-low agreement is a tool commonly used in litigation that guarantees the plaintiff a minimal recovery while concomitantly capping a defendant's potential exposure (see Faley, High-Low Agreements: Misunderstood Litigation Technique, NYLJ, March 27, 1998, at 1, col 1). Because the amount of damages a plaintiff is entitled to recover under a high-low agreement is usually fixed by the liability and damage determinations made by the factfinder, cases involving such agreements routinely go to trial. Unlike a typical settlement situation where the settling defendant is dismissed from the action, having "bought its peace," the defendant entering into a high-low agreement routinely remains in the action until its ultimate liability has been ascertained.

When entered into between a plaintiff and a defendant in a single-defendant trial, the high-low agreement affords the parties a means of tempering the significant risks associated with proceeding to trial. In a multi-defendant litigation, however, a high-low agreement between a plaintiff and fewer than all defendants has the potential of prejudicing the rights of the non-agreeing defendant if all parties are not apprised of the agreement's existence. Indeed, courts and commentators alike have acknowledged that secretive agreements may result in prejudice to the non-agreeing defendant at trial, distort the true adversarial nature of the litigation process, and cast a cloud over the judicial system (see generally Slusher v Ospital, 777 P2d 437, 440-441, 444 [*4][Utah 1989]; Ratterree v Bartlett, 707 P2d 1063, 1076 [Kan 1985]; General Motors Corp. v Lahocki, 286 A2d 1039, 1044-1048 [Md 1980]; Ward v Ochoa, 284 So2d 385, 387-388, [Fla 1973]; Hoenig, Products Liability, Experts, Privileged Info.; Secret 'High-Low' Agreements, NYLJ, Oct. 11, 2006, at 3, col 1; Kaufman, Outside Counsel, Risk Reduction Strategies in Personal Injury Litigation, NYLJ, Jan. 21, 2000, at 1, col 1; Benedict, It's a Mistake to Tolerate the Mary Carter Agreement, 87 Colum L Rev 368 [1987]). The resulting prejudice warrants a new trial (see Ratterree, 707 P2d at 1075-1076; General Motors Corp., 410 A2d at 1046).

Here, Garlock was deprived of its right to a fair trial by Supreme Court's failure to disclose the existence of the high-low agreement. The agreement furnished plaintiffs with an incentive to maximize Garlock's liability while minimizing Niagara's, because the potential amount of damages plaintiffs could recover from Niagara was capped at $185,000. While it is not uncommon for a plaintiff to have a financial incentive to maximize the liability of one particular defendant in a multi-defendant action, Garlock was entitled to disclosure of the existence of the high-low agreement so it knew the true posture of the case. Had the agreement been disclosed, Garlock could have adjusted its trial strategy accordingly and evaluated the risks of going to trial with the knowledge that plaintiffs had an added incentive of making Garlock the target defendant.

Non-disclosure also deprived Garlock of the opportunity to, among other things, seek appropriate procedural and evidentiary rulings from the trial court and argue the significance of the high-low agreement to the jury. For instance, Garlock may have conducted its jury selection in a different manner, argued that it should not have been required to share peremptory challenges with Niagara, or brought in limine motions concerning the admissibility of the agreement and to what extent, if any, Garlock would be permitted to cross-examine witnesses concerning the contents of the agreement. Instead, Garlock was compelled to proceed blindly to trial without any meaningful opportunity to defend itself from the deleterious effects that the secret agreement may have had on Garlock's defense.

To ensure that all parties to a litigation are treated fairly, we hold that whenever a plaintiff and a defendant enter into a high-low agreement in a multi-defendant action which requires the agreeing defendant to remain a party to the litigation, the parties must disclose the existence of that agreement and its terms to the court and the non-agreeing defendant(s). This result strikes a proper balance between this State's public policy of encouraging the expeditious settlement of claims, and the need to ensure that all parties to a litigation are apprised of the true posture of the litigation so they may tailor their strategy accordingly. Disclosure provides a non-agreeing defendant a meaningful opportunity to place on the record how it intends to use the agreement at trial, if at all, and affords the trial court an opportunity to weigh the interests of all the parties in considering the extent to which an agreement may be utilized in that forum. Of [*5]course, the determinations as to what effect, if any, the existence of the agreement will have at trial, including whether such an agreement should be disclosed to the jury, are matters that lie within the sound discretion of the trial court.

Because Garlock is entitled to a new trial, we do not address Garlock's remaining arguments.

Accordingly, the order of the Appellate Division should be reversed, with costs, and a new trial ordered.
* * * * * * * * * * * * * * * * *
Order reversed, with costs, and a new trial ordered. Opinion by Judge Pigott. Chief Judge Kaye and Judges Ciparick, Graffeo, Read, Smith and Jones concur.
Decided June 27, 2007

Footnotes

Footnote 1: Reynolds died after the entry of judgment. His wife, Nancy H. Reynolds, responds to this appeal both individually and as the executrix of his estate.

Footnote 2: We note that the $30,000 range here, although not negligible, was certainly quite narrow. Indeed, the narrower the range, the more likely it seems that the parties' true motive for entering into a high-low agreement is to gain a tactical advantage at the expense of the non-agreeing defendant.

Benesowitz v. Metropolitan Life Insurance Company

Eve-Lynn Gisonni, for appellant.
Amy K. Posner, for respondents.
Barbara D. Underwood, for amicus Eric R. Dinallo,
Superintendent of Insurance of the State of New York.
American Council of Life Insurers et al.; The Life
Insurance Council of New York, Inc., amici curiae.




GRAFFEO, J.:

The United States Court of Appeals for the Second Circuit has asked us to decide how Insurance Law § 3234 (a) (2) affects an employee's eligibility to receive benefits under the employer's group disability plan when the disability is caused by a preexisting medical condition. We conclude that the statute allows insurers to toll benefits during the first 12 months of coverage, but does not permit them to impose an absolute bar to coverage for disabilities stemming from preexisting conditions and arising during that 12-month period.

Plaintiff Mitchell Benesowitz began a new job with Honeywell International, Inc. on April 1, 2002. He was immediately covered under Honeywell's short- and long-term group disability insurance plans, now administered by defendant Metropolitan Life Insurance Company (MetLife). In the three months preceding his Honeywell employment, plaintiff had been treated for kidney disease. By October 2002, plaintiff could no longer work because of his illness and he applied for short-term disability benefits, which MetLife paid. Plaintiff later sought long-term disability benefits. MetLife denied the application based on the following exclusion in the plan:
"Benefits will not be paid for any period of Disability caused or contributed to by, or resulting from, a Pre-Existing Condition. A 'Pre-Existing Condition' means any Injury or Sickness for which you incurred expenses, received medical treatment, care or services including diagnostic measures, took prescribed drugs or medicines, or for which a reasonable person would have consulted a Physician within three months before the most recent effective date of your coverage.

"The Pre-Existing Condition limitation will apply to any added benefits or increases in benefits. This limitation will not apply to a period of Disability that begins after you are covered for at least 12 months after the most recent effective date of your coverage, or the effective date of any added or increased benefits."

In July 2003, plaintiff filed an administrative appeal with MetLife, claiming that the plan's preexisting condition exclusion conflicted with Insurance Law § 3234 (a) (2), which provides that "[n]o pre-existing condition provision shall exclude coverage for a period in excess of twelve months following the effective date of coverage for the covered person."^[FN1] MetLife denied the appeal. Plaintiff then commenced this action in federal court to contest MetLife's denial of long-term disability benefits. Both parties moved for summary judgment.

The United States District Court for the Eastern District of New York granted MetLife summary judgment and dismissed the complaint. Relying on Pulvers v First UNUM Life Ins. Co. (210 F3d 89 [2d Cir 2000]), the court rejected plaintiff's contention that the plan's preexisting condition exclusion violated Insurance Law § 3234 (a) (2).

On appeal, the Second Circuit clarified that Pulvers did not resolve the statutory interpretation question and therefore certified the following question to this Court:
"Whether New York Insurance Law § 3234 (a) (2) means that (1) a policy may impose a twelve-month waiting period during which no benefits will be paid for disability stemming from a pre-existing condition and arising in the first twelve months of coverage or (2) a policy may lawfully include a permanent absolute bar to coverage of disabilities resulting from pre-existing conditions that trigger disability within the first twelve months of the employee's coverage" (471 F3d 348, 353 [2006]).

Plaintiff argues that section 3234 (a) (2) is a tolling provision that permits insurers only to delay the payment of benefits for disabilities arising from preexisting conditions during the first 12 months of coverage. In plaintiff's view, insurers must provide plan benefits if the disability continues beyond the 12-month period. In accordance with this interpretation, plaintiff contends that MetLife was obligated to pay him long-term disability benefits beginning in April 2003 — 12 months after his coverage began. The Superintendent of Insurance of the State of New York, appearing as amicus curiae, endorses plaintiff's construction of the statute. MetLife counters that section 3234 (a) (2) was intended to allow insurers to exclude coverage permanently for any disability resulting from a preexisting condition that arises within the first 12 months of coverage. Under this analysis, only disabilities commencing after the 12-month window are covered by the plan. MetLife's position is supported by amici curiae Life Insurance Council of New York, Inc. and other national insurance organizations.

Although the statute is not a model of clarity, we are persuaded that plaintiff's construction is the correct one. Enacted in 1993, Insurance Law § 3234 provides:
"(a) Every group or blanket policy issued or issued for delivery in this state which provides benefits by reason of the disability of the insured and which includes a pre-existing condition provision shall contain in substance the following provision or provisions which in the opinion of the superintendent are more favorable to the members of the group:

"(1) In determining whether a pre-existing condition provision applies to an eligible person, the group or blanket disability policy shall credit the time the person was previously covered under a previous group or blanket disability insurance plan or policy or employer-provided disability benefit arrangement, if the previous coverage was continuous to a date not more than sixty days prior to the effective date of the new coverage. The credit shall apply to the extent that the previous coverage or level of benefits was substantially similar to the new coverage or level of benefits; and
"(2) No pre-existing condition provision shall exclude coverage for a period in excess of twelve months following the effective date of coverage for the covered person.
"(b) Nothing herein shall be construed to prohibit or restrict an insurer from utilizing other forms of underwriting for the members of the group in lieu of, or in addition to, the pre-existing condition provision described in subsection (a) of this section."

In matters of statutory interpretation, "our primary consideration is to ascertain and give effect to the intention of the Legislature" (Matter of DaimlerChrysler Corp. v Spitzer, 7 NY3d 653, 660 [2006] [internal quotation marks and citation omitted]). In discerning the legislative intent underlying section 3234 (a) (2), it is instructive to examine section 3232, a health insurance statute. Indeed, section 3234 tracks the language of section 3232, which was added a year earlier and places similar limitations on preexisting condition provisions in health insurance policies. Both statutes contain a portability provision requiring insurers to credit the time a person previously was covered under a comparable plan for purposes of determining the applicability of a preexisting condition provision (see Insurance Law § 3232 [a]; § 3234 [a] [1]). This portability feature was designed to enable individuals to change jobs or insurance plans without fear of having to wait for coverage to take effect. Most relevant to the issue here, both statutes also prescribe a 12-month maximum time frame for preexisting condition provisions (see Insurance Law § 3232 [b]; § 3234 [a] [2]).

Section 3232 (b), the health insurance provision, employs language nearly identical to section 3234 (a) (2)^[FN2]. The parties agree that under section 3232 (b), although insurers may limit or preclude coverage for medical claims stemming from preexisting conditions during the first 12 months (assuming there is no portability of coverage), the insurers must cover such claims thereafter. Section 3232 (b) therefore functions as a tolling or waiting period because it mandates full health coverage — even for preexisting medical conditions — once the 12-month period expires. Insurers are not permitted to bar health coverage completely under section 3232 (b).

In choosing to use the same "for a period in excess of twelve months" language in section 3234 (a) (2) to define the time frame, the Legislature sought to create a similar tolling provision for preexisting conditions in group disability policies. We have observed in this regard that "whenever a word is used in a statute in one sense and with one meaning, and subsequently the same word is used in a statute on the same subject matter, it is understood as having been used in the same sense" (Riley v County of Broome, 95 NY2d 455, 466 [2000] [internal quotation marks and citation omitted]). If insurers may exclude health coverage for up to 12 months under section 3232 but must pay benefits for medical claims related to preexisting conditions after that time period, the statute should operate the same way for group disability plans under section 3234 (a) (2).

The legislative history buttresses our conclusion that section 3234 should be interpreted in a manner consistent with section 3232 (see id. at 463 [noting that "the legislative history of an enactment may also be relevant and is not to be ignored, even if words be clear"] [internal quotation marks and citation omitted]). The Senate memorandum in support of the bill explains that it "adds a new section 3234 to the Insurance Law to establish similar standards for pre-existing conditions for disability insurance policies" (Senate Introducer Mem In Support, Bill Jacket, L 1993, ch 650). Similarly, the Assembly sponsor described the bill as extending the standards applicable to preexisting conditions in health insurance policies to group disability insurance policies (see Assembly Mem in Support, Bill Jacket, L 1993, ch 650).

In contrast, when the Legislature intended to allow insurance policies to include a permanent bar to coverage for disabilities arising from a preexisting condition during a prescribed time period, it used different language to accomplish this result. Insurance Law § 3216 (d) (1) (B) (ii), applicable to individual disability policies, states:
"No claim or loss incurred or disability (as defined in the policy) commencing after two years from the date of issue of this policy shall be reduced or denied on the ground that a disease or physical condition not excluded from coverage by name or specific description effective on the date of loss had existed prior to the effective date of coverage of this policy" (emphasis added).
By using the phrase "commencing after," the Legislature made clear that section 3216 (d) (1) (B) (ii) authorizes insurers to bar benefit coverage completely for claims arising during the first two years of coverage. And statutes in other states that permit insurers to preclude coverage totally for certain disability claims use analogous language (see e.g. Colo Rev Stat Ann § 10-16-214 [3] [a] [V] [C] ["In no event shall a group disability income insurance policy deny, exclude, or limit benefits for a covered individual because of a preexisting condition for a disability commencing more than twelve months following the effective date of such individual's coverage"] [emphasis added]; Ga Code Ann § 33-24-26.1 [c] ["No policy or certificate of group disability income insurance shall be issued or delivered in this state which limits or excludes payment of benefits for a disability resulting from a preexisting condition if that disability occurs more than 24 months following the effective date of an insured's coverage under such policy"] [emphasis added]). No comparable language appears in Insurance Law § 3234 (a) (2).

Finally, interpreting section 3234 (a) (2) as allowing insurers to impose a tolling period rather than an absolute bar to benefits does not prevent insurers from excluding or limiting disability coverage based on an individual's prior medical history. Section 3234 (b) recognizes that insurance companies may use individual underwriting procedures in determining a person's eligibility for coverage under a group disability policy. The Superintendent indicates in his brief that such individual underwriting practices for group disability policies may involve the review of an applicant's medical history or the results of a medical examination. After assessing the individual's risk, the insurer may charge the applicant a higher premium, exclude coverage for a specified condition or decline to provide coverage.

Accordingly, the certified question should be answered as follows: New York Insurance Law § 3234 (a) (2) means that a policy may impose a 12-month waiting period during which no benefits will be paid for a disability stemming from a pre-existing condition and arising in the first 12 months of coverage.
* * * * * * * * * * * * * * * * *
Following certification of a question by the United States Court of Appeals for the Second Circuit and acceptance of the question by this Court pursuant to section 500.27 of the Rules of Practice of the New York State Court of Appeals, and after hearing argument by counsel for the parties and consideration of the briefs and the record submitted, certified question answered as follows:

New York Insurance Law § 3234(a)(2) means that a policy may impose a 12-month waiting period during which no benefits will be paid for disability stemming from a pre-existing condition and arising in the first 12 months of coverage. Opinion by Judge Graffeo. Chief Judge Kaye and Judges Ciparick,
Read, Smith, Pigott and Jones concur.
Decided June 27, 2007

Footnotes

Footnote 1: The Insurance Law contains three distinct statutes denominated as section 3234. The provision at issue here was enacted by chapter 650 of the Laws of 1993.

Footnote 2: Insurance Law § 3232 (b) provides, in relevant part: "No pre-existing condition provision shall exclude coverage for a period in excess of twelve months following the enrollment date of coverage for the covered person."

ERNEST J. MAIER JR. v  ALLSTATE INSURANCE COMPANY

Appeal from a judgment of the Supreme Court (Monserrate, J.H.O.), entered May 27, 2005 in Rensselaer County, upon a decision of the court in favor of defendant.

Plaintiff owned a home in the Town of Sand Lake, Rensselaer County that was insured by a homeowners insurance policy issued by defendant. On August 8, 2000, the property was completely destroyed by fire. Plaintiff submitted a proof of loss statement to defendant seeking to recover $240,000 in insurance proceeds ^[FN1]. Defendant paid the balance of the mortgage on the property (approximately $92,000), but otherwise denied plaintiff's claim. When plaintiff then commenced this action to compel defendant to cover his loss, defendant asserted the affirmative defense of arson. A nonjury trial was thereafter held after which Supreme Court dismissed the complaint and awarded costs and disbursements to defendant. On plaintiff's appeal, we now affirm.

Evidence at trial established the following. Previously, plaintiff lived at the Sand Lake residence for half the year and rented in Florida for the other half of the year, but in 2000 he decided to move to Florida to live full time. In the week preceding the fire, plaintiff appeared personally at his insurance agent's office and for the first time in memory of his agent paid his monthly homeowners insurance premium on time. He also held a moving sale, packed up some of his furniture and personal property in a moving truck, and placed his home for sale with a local realtor at a list price of $120,000. He planned to leave Sand Lake permanently on August 8, 2000 and, after giving keys to his residence to the realtor and posting "For Sale" signs, he locked up and left the property at approximately 4:30 P.M. He then went to the home of friends, where he planned to have dinner prior to departing for Florida. At 5:45 that evening, area fire departments responded to a fire call at plaintiff's residence.

After the fire was extinguished and the cause of the fire was not readily apparent, a Rensselaer County fire investigator was called to inspect the property. The investigator, along with his canine companion trained in the detection of combustibles, arrived at the scene and determined that combustible flammable vapor residue was present in an upstairs hallway as it leads into a bedroom, where a burned-out mattress was located on the floor. A few days later, a private arson investigator hired by defendant conducted another inspection of the property and concluded that the fire had started in the upstairs bedroom and attached hallway and, in his opinion, was the result of a flammable liquid being poured on the floor of the hall and bedroom and then ignited. At the time of the fire, plaintiff was supporting himself and his two minor children on a yearly net income of less than $10,000. His bank accounts showed no significant savings and he owed $2,103 in 2000 property taxes.

To establish the affirmative defense of arson, it was defendant's burden to demonstrate by clear and convincing evidence that plaintiff intentionally set the fire (see Chenango Mut. Ins. Co. v Charles, 235 AD2d 667, 668 [1997]; Ashline v Genesee Patrons Coop. Ins. Co., 224 AD2d 847, 848 [1996]). "[D]irect proof of arson is seldom available and, therefore, can be established in civil cases by circumstantial evidence" (Weed v American Home Assur. Co., 91 AD2d 750, 751 [1982]; see Phillips v State Farm Fire & Cas. Co., 225 AD2d 457, 457 [1996]).

Here, the record amply supports Supreme Court's conclusion that clear and convincing evidence existed that the fire was deliberately started. Testimony from the County fire investigator and the arson investigator supports their conclusion that the fire began when an accelerant was poured on the floor of an upstairs hall and bedroom and then ignited. Their unrefuted testimony provided ample support for the court's finding that the fire was not the result of an accident or a natural cause, but due to human intervention (see Ashline v Genesee Patrons Coop. Ins. Co., supra at 848; 3910 Super K v Pennsylvania Lumbermens Mut. Ins. Co., 219 AD2d 589, 589-590 [1995]; Torian v Reliance Ins. Co., 171 AD2d 971, 972 [1991]). Contrary to plaintiff's contention, the testimony describing the behavior of the canine in detecting the presence of a combustible vapor residue on the property was not equivocal or inconsistent in any way. Further, the fact that laboratory results performed on the burned-out mattress material came back negative for the presence of an accelerant is not inconsistent with the findings of the fire investigators inasmuch as the private arson investigator testified that negative results were expected because either the accelerant was completely consumed by the fire or washed away in the effort to extinguish the fire (see Ashline v Genesee Patrons Coop. Ins. Co., supra at 848).

Further, Supreme Court appropriately considered circumstantial evidence of strong motivation, opportunity and means to establish that plaintiff, despite his denial, committed the arson (see Chenango Mut. Ins. Co. v Charles, supra at 669). Plaintiff testified that he left the property vacant and locked up less than 90 minutes before the fire was reported, and that only he, [*3]his oldest son and his realtor had keys to the property. Financial motive was established by the fact that plaintiff would almost certainly have gained more if his home had been lost in a fire than if he had sold it; although the home was listed at plaintiff's urging at $119,900, the realtor originally valued the home at less than $100,000. This, combined with the evidence of plaintiff's precarious financial conditions, the steps that plaintiff had taken in preparation for permanently leaving the area and the evidence of opportunity, constitute sufficient evidence that it was plaintiff who set the fire in order to collect the insurance proceeds (see Ashline v Genesee Patrons Coop. Ins. Co., supra at 848; Torian v Reliance Ins. Co., supra at 971-972; Weed v American Home Assur. Co., supra at 751; cf. Chenango Mut. Ins. Co. v Charles, supra at 669-670).

Finally, we are unpersuaded by plaintiff's contention that Supreme Court impermissibly shifted the burden of proof to plaintiff. Only after finding that defendant had established the arson defense did the court assess plaintiff's credibility and conclude that "[p]laintiff produced no competing evidence which would serve as a basis for any other rational conclusion." We have considered plaintiff's remaining contentions and find them unpersuasive.

Cardona, P.J., Peters, Carpinello and Rose, JJ., concur.

ORDERED that the judgment is affirmed, with costs.

Footnotes

Footnote 1: The policy had a face value of $140,000 for the dwelling, and provided $98,000 for personal property protection and $7,000 for debris removal.

PEARL SCHLESINGER v HARLESYVILLE WORCHESTER INS. CO.

Weg and Myers, P.C., New York, N.Y. (Joshua L. Mallin and
Daniel Hirschel of counsel), for appellants.
Friedman, Hirschen & Miller, LLP, Albany, N.Y. (John L.
Orfan of counsel), for respondent.

 

DECISION & ORDER

In an action to recover damages for breach of an insurance contract, the plaintiffs appeal from an order of the Supreme Court, Kings County (Johnson, J.), dated April 4, 2006, which denied their motion for leave to renew their opposition to the defendant's prior motion for summary judgment dismissing the complaint, which had been granted in an order of the same court dated May 11, 2005, and for leave to renew their cross motion for summary judgment on the issue of liability, which had been denied in the order dated May 11, 2005.

ORDERED that the order dated April 4, 2006, is affirmed, with costs.

In September 2003 a building owned by the plaintiffs sustained damage, including cracking and settlement, due to a loss of foundational soil support. The loss of soil support resulted from excavation performed on the adjoining property in preparation for the construction of a new building. The defendant insurance company denied coverage and, in March 2004 the plaintiffs commenced this action to recover damages for breach of an insurance contract.

By notice of motion dated November 30, 2004, the defendant moved for summary judgment dismissing the complaint on the ground that the insurance policy contains an exclusion for loss caused by negligent construction on or off the premises. It presented evidence that the adjoining landowners had received notices of construction violations from the New York City Department of Buildings as well as the affidavit of an engineer who had inspected the premises in November 2003. Based on his inspection, the engineer concluded that the excavation on the adjoining property compromised the structural support of the plaintiffs' building.

The plaintiffs cross-moved for summary judgment on the issue of liability, arguing that the policy's exclusion for loss caused by negligent "construction" did not include loss caused by negligent "excavation." In an order dated May 11, 2005, the Supreme Court found that "construction" encompassed "excavation," granted the defendant's motion for summary judgment dismissing the complaint, and denied the plaintiffs' cross motion.

In November 2005 the plaintiffs moved for leave to renew their opposition to the defendant's motion and their cross motion. They contended that since the time of the prior motions, engineers who had inspected the property determined that the excavation had caused significant impairment of the structural integrity of the building and ordered that the building be vacated until repaired. The plaintiffs contended that these assertedly new facts, presented in part in inadmissable form, trigger a separate provision in the policy specifically covering loss caused by defective construction involving "collapse."

The Supreme Court properly denied the motion for leave to renew. The plaintiffs presented no evidence as to whether the alleged new facts could have been ascertained at the time of the original motions. Thus, they failed to present a reasonable justification for their failure to present such facts on the prior motion and cross motion (see CPLR 2221[e][3]; Allstate Ins. Co. v Davis, 23 AD3d 418, 419; Renna v Gullo, 19 AD3d 472, 473; Natale v Samel & Assoc., 264 AD2d 384, 385).
CRANE, J.P., GOLDSTEIN, COVELLO and DICKERSON, JJ., concur.

              WESTCOM CORPORATION v GREATER N.Y. MUT. INS. CO.

Thomas Hughes, New York (Richard C. Rubinstein of counsel),
for Greater New York Mutual Insurance Company,
appellant/respondent.
Fiedelman & McGaw, Jericho (James K. O'Sullivan of
counsel), for Manhattan Mini Storage, LLC, appellant.
Robinson Brog Leinwand Greene Genovese & Gluck P.C.,
New York (John D. D'Ercole of counsel), for WestCom
Corporation, respondent.

Order, Supreme Court, New York County (Harold B. Beeler, J.), entered January 30, 2006, which, insofar as appealed from, denied the motion by defendant Greater New York Mutual Insurance Company (GNY) for summary judgment dismissing the amended verified complaint as against it, and also denied the cross motion by third-party defendant Manhattan Mini Storage LLC (MMS) for summary judgment dismissing the amended verified third party complaint and the amended verified complaint as against it, unanimously modified, on the law, to grant the motion and cross motion to the extent of dismissing the amended verified complaint as against GNY, dismissing the fourth, fifth and sixth causes of action of the amended verified complaint as against MMS, dismissing the amended verified third-party complaint in its entirety as academic, and directing that plaintiff WestCom Corporation's potential recovery against MMS under the third cause of action of the amended verified complaint be limited to $7,500, and otherwise affirmed, without costs. The Clerk is directed to enter judgment in favor of GNY dismissing the amended verified complaint as against it, and in favor of MMS dismissing the amended verified third-party complaint.

In 2002, plaintiff WestCom Corporation, a telecommunications company, purchased a number of digital line interface cards (DLICs). WestCom stored the DLICs at a storage unit it leased in a storage facility operated by third-party defendant MMS. WestCom's storage unit was secured by a padlock that was opened with a key. WestCom owned the padlock and key, and, while the lease remained in effect, only WestCom's personnel were entitled to access to the storage unit's contents.

On February 4, 2003, a WestCom employee visited the storage unit and discovered that a key was broken off in the keyhole of the padlock securing the unit. At WestCom's request, MMS cut off the padlock. WestCom then purchased a new padlock from MMS and placed it on the unit.

On or about February 6, 2003, another WestCom employee went to the storage facility and, upon unlocking the unit, discovered that the DLICs were not there. The last time any WestCom employee remembered having noticed the DLICs in the storage unit was in December 2002.

After discovering that the DLICs were missing from the storage unit, WestCom filed a claim for the loss with its insurer, defendant GNY, under WestCom's coverage for "direct physical loss of . . . Covered Property." GNY denied the claim on the ground that it fell under the policy's exclusion for "[p]roperty that is missing, but there is no physical evidence to show what happened to it, such as shortage disclosed on taking inventory."

After the denial of its insurance claim for the lost DLICs, WestCom commenced this action against GNY ^[FN1]. GNY commenced a third-party action against MMS to recover, as subrogee, any amount it might be required to pay WestCom. WestCom subsequently amended its complaint to assert various causes of action directly against MMS, although the caption of the action has not been changed to reflect the addition of MMS as a direct defendant. In the order appealed from, Supreme Court denied GNY's motion for summary judgment dismissing the amended complaint as against it and MMS's cross motion for summary judgment dismissing the amended complaint and the amended third-party complaint. We now modify to render summary judgment dismissing the amended complaint in its entirety as against GNY, the amended complaint in part as against MMS, and GNY's third-party complaint against MMS in its entirety.

Although "an insurer generally has the burden of proving that a loss is within the scope of a policy exclusion" (Maurice Goldman & Sons v Hanover Ins. Co., 80 NY2d 986, 987 [1992]), the uncontroverted evidence in the record establishes, as a matter of law, that the claim here at issue falls within the policy exclusion invoked by the insurer, as was the case in Maurice Goldman & Sons (claim for unexplained loss of bag of jewelry during business trip held to fall within a similar but differently worded policy exclusion). Again, the relevant policy exclusion exempts from coverage any claim for "[p]roperty that is missing, but there is no physical evidence to show what happened to it, such as shortage disclosed on taking inventory." Aside from the fact that the subject loss was not discovered on a taking of inventory, the language of the exclusion precisely describes WestCom's claim ^[FN2]. The only evidence of the loss is a WestCom employee's testimony that he observed, upon opening the storage unit on or about February 6, 2003, that the DLICs previously placed in that unit were "missing" from it. There is no evidence at all, much less any "physical" evidence, to show "what happened to" the DLICs.

The discovery on February 4 that the unit's padlock was jammed with a broken-off key does nothing to "show what happened to" the missing property. This is because the unit remained secured by the jammed padlock, which was cut off and replaced at WestCom's direction. Thus, even if it is assumed that the jammed padlock constituted "physical" evidence of an attempt by an unauthorized person to get into the unit, it did not constitute evidence that any such attempt succeeded.

WestCom's reliance on this Court's decision in Moneta Dev. Corp. v Generali Ins. Co. of Trieste & Venice (212 AD2d 428 [1995]) is unavailing. In Moneta, the claim was based on a statement by an officer of the insured "that, on March 3, 1988, he observed the subject property, which consisted of forklifts and other heavy equipment and which occupied approximately 6,000 square feet and weighed approximately 22 tons, and that, on March 9, 1988, he observed that most of the equipment was gone" (id. at 429). Although the policy in Moneta contained the same exclusion at issue here, we denied summary judgment to the insurer on the ground that "the fact that a very large amount of heavy equipment disappeared in a short period of time creates a sufficient inference of theft to withstand summary judgment on the issue of whether the evidence show[s] what happened to [the property]'"
(id. at 430 [emphasis added]). Indeed, citing Maurice Goldman & Sons v Hanover Ins. Co. (supra), we specifically distinguished the situation presented in Moneta "from one in which pieces of jewelry or other small items, easily subject to being misplaced or accidentally lost, disappear without explanation" (212 AD2d at 430 [emphasis added]). Since the DLICs at issue here were small, easily transported items of personal property, this case is controlled by the Court of Appeals' decision in Maurice Goldman & Sons, not by Moneta.

We note that a federal Court of Appeals, in a case concerning coverage for lost laptop computers, distinguished Moneta on precisely the same ground we do here, holding that an identically worded policy exclusion precluded recovery where there was no evidence to explain what became of the missing laptops (see C.T.S.C. Boston, Inc. v Continental Ins. Co., 25 Fed Appx 320, 326 n 4 [6th Cir 2001]). As the Sixth Circuit further opined in C.T.S.C. Boston, if testimony that property once in the insured's possession could no longer be found sufficed in every case to satisfy the requirement of "physical evidence to show what happened to the [property]," then "all missing property would be covered by the policy when there is no physical evidence of what happened to it, based on the missing property' exclusion itself" (id. at 326). This would render the exclusion self-cancelling and, hence, meaningless surplusage. Accordingly, we construe Moneta's holding to be limited to cases involving the unexplained loss of heavy equipment or other massive items of personal property.

In view of the foregoing, the complaint must be dismissed as against GNY without regard to any of the other issues raised by the parties. Since GNY is being dismissed from the case, its third-party complaint against MMS must be dismissed as academic.

As previously noted, WestCom's amended complaint asserts a number of causes of action directly against MMS, and MMS has appealed from Supreme Court's denial of its cross motion for summary judgment dismissing the amended complaint as against it ^[FN3]. Turning to that aspect of the appeal, we modify to dismiss the complaint's fourth cause of action (for breach of contract), fifth cause of action (for breach of implied warranties) and sixth cause of action (for bailment liability) against MMS. Each of these causes of action is precluded by the express language of the Self-Service Storage Occupancy Agreement between WestCom and MMS, dated February 14, 2002 (the Storage Agreement), which expressly provides that "Owner [MMS] is not supplying any security . . . or any other services," and that "[t]he relationship of Owner and Occupant [WestCom] created by this agreement is that of Owner and Occupant of a self-storage facility in accordance with Section 182 of the New York State Lien Law . . . and not that of bailee and bailor." As to WestCom's third cause of action (for negligence and gross negligence) against MMS, however, we find that MMS's submissions in support of its cross motion did not establish, as a matter of law, that MMS could not be held liable to WestCom under a negligence theory.

Although we are not dismissing WestCom's third cause of action against MMS, the terms of the Storage Agreement require us to further modify to direct that WestCom's potential recovery under that claim be limited to $7,500. Under the Storage Agreement, WestCom agreed that it would not store more than $7,500 worth of property in its unit, and that MMS's "liability for damages relating to any loss or damage to [WestCom's] personal property caused by [MMS] . . . is limited to $7500."
WestCom has not made any argument that MMS is not entitled to enforcement of these contractual provisions.

THIS CONSTITUTES THE DECISION AND ORDER
OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.

ENTERED: JUNE 19, 2007

CLERK

Footnotes

Footnote 1:The action has been discontinued by stipulation as against the other named direct defendant, Masters Coverage Corporation.

Footnote 2:We see no merit in WestCom's contention that the language "such as shortage discovered upon taking inventory" should be read as a limitation of the policy exclusion's scope. The use of the introductory phrase "such as" indicates unambiguously that the reference was intended as an example of a situation in which "there is no physical evidence to show what happened to [the property]," not to limit the scope of the exclusion to shortages discovered during the taking of inventory. After all, it would make no sense to exclude from coverage an unexplained loss discovered upon a formal taking of inventory while allowing coverage for an unexplained loss discovered in the course of other activities. We further note that WestCom's general counsel admits in his affidavit that WestCom never even entered the DLICs at issue on its inventory system. It is absurd for WestCom to suggest that, by failing to list these DLICS on its inventory records, it ensured that any loss of such equipment would be covered by the GNY policy.

Footnote 3:We construe the request in MMS's notice of cross motion for dismissal of "any cross-claims [sic] and counterclaims [sic] of plaintiff" to refer to the causes of action plaintiff asserts against MMS in the verified amended complaint.

 

In re Progressive Classic Insurance Company v. Kitchen

John C. Buratti & Associates, Yonkers (Michael A. Zarkower
of counsel), for appellant.
Mitchell S. Lustig, Plainview, for New York Central Mutual
Fire Insurance Company, respondent.

Order, Supreme Court, Bronx County (John A. Barone, J.), entered on or about September 20, 2006, which, after a framed-issue hearing, denied petitioner insurer's application to stay an uninsured motorist arbitration upon a finding that additional respondent insurer (Central Mutual) had effectively cancelled its policy on the offending vehicle, unanimously reversed, on the law, without costs, and the petition to stay arbitration granted. While Central Mutual established that it mailed the two underwriting information request letters required by the New York State Assigned Risk Plan as a condition to cancellation pursuant to Vehicle and Traffic Law § 313 (Manual of the New York Automobile Insurance Plan, § 18.2[9][b] [April 1, 2004 Distribution]), it failed to establish that, as required by Vehicle and Traffic Law § 313(2)(a), it filed a copy of the notice of cancellation with the Department of Motor Vehicles within 30 days of the effective date of the cancellation. In the latter regard, Central Mutual relied on a copy of an "insurance activity expansion" it had downloaded from the Department of Motor Vehicles' Web site. The copy was not certified pursuant 4518(c), and Central Mutual did not attempt to prove at the hearing its office procedures, if any, for transmitting notices of cancellation to the Department of Motor Vehicles. Thus, there is no proof of an office practice and procedure followed by Central Mutual in the regular course of its business such as might raise a presumption that its notice of cancellation relating to the offending vehicle was received by the Department of Motor Vehicles within 30 days of the cancellation (cf. Matter of Liberty Mut. Ins. Co. v Morrissey, 203 AD2d 93 [1994]). Nor does the face of the expansion plainly indicate when the notice of cancellation was received by the Department of Motor Vehicles. Accordingly, the expansion should not have been received as evidence of a section 313 cancellation unless so patently trustworthy in that respect as to be self-authenticating, which it is not (cf. Elkaim v Elkaim, 176 AD2d 116 [1991], appeal dismissed 78 NY2d 1072 [1991]). Central Mutual's failure to show that it had timely filed the notice of cancellation renders the cancellation ineffective as against persons other than the named insured and members of the latter's household (Vehicle and Traffic Law § 313[3]; see Matter of Progressive Northeastern Ins. Co. v Barnes, 30 AD3d 523 [2006]). We note that Central Mutual could have simply offered into evidence its receipt for the filing from the Department of Motor Vehicles, which would have constituted "conclusive evidence of such filing" (Vehicle and Traffic Law § 313[3]).

Schlott v. Transcontinental Insurance Company, Inc.

Shayne, Dachs, Stanisci, Corker & Sauer, Mineola (Norman H.
Dachs of counsel), for appellants.
Colliau Elenius Murphy Carluccio Keener & Morrow, New
York (Howard R. Rabin of counsel), for respondent.

Order, Supreme Court, New York County (Walter B. Tolub, J.), entered May 17, 2006, which denied plaintiffs' motion for summary judgment and granted defendant's cross motion for summary judgment dismissing the complaint, unanimously affirmed, without costs.

Muriel Schlott fell on steps constructed by defendant's insured, against whom plaintiffs took a default judgment. Unable to collect payment, they forwarded a copy of the judgment to defendant. Within two weeks, defendant rejected coverage on the ground of late notice, in a disclaimer letter sent to both the policyholder and plaintiffs' counsel. Plaintiffs then brought this action, demanding that the insurer satisfy the outstanding judgment against its insured.

Defendant maintains that the first notice it received about this accident was more than three years after entry of the judgment, and nearly seven years after the occurrence. Plaintiffs offered the court no explanation why notice was not attempted until years later, or what diligent efforts they undertook to notify the insured's carrier expeditiously. Nonetheless, they argue that defendant's notice of disclaimer was ineffective as against them. When an insurer disclaims liability for accidental death or bodily injury, it is required to "give written notice as soon as is reasonably possible of such disclaimer of liability or denial of coverage to the insured and the injured person or any other claimant" (Insurance Law § 3420[d]). Plaintiffs suggest that defendant's disclaimer notice, albeit timely, was effective only against the insured. We disagree. Defendant complied with the mandate of § 3420(d) when it gave notice of disclaimer to the insured and sent a copy to the injured party. The fact that defendant omitted from that notice any specific reference to the injured party's own failure to afford the insurer timely notice did not prejudice plaintiffs.