Coverage Pointers - Volume XIII, No. 13

Dear Coverage Pointers Subscribers

Merry Christmas, Happy Chanukah, Joyous Kwanzaa, Happy New Year. 

It was such a great delight seeing so many friends and subscribers at the DRI Insurance Claims and Practice Symposium in New York last week.  My heartiest congratulations to those responsible for the program, including our own Audrey Seeley, who served as Program Vice-Chair and moderated a “View From The Bench” panel.

Counting Counts:

It’s our year end issue where we count stuff.  Hey, why not?  Here are the two numbers we’ve calculated:

652 and 4943

We’ll give you the meaning of the first number first since, after all, it’s first:

The Year in Review

With this issue, we present the final group of what totals up to be 652 New York State court appellate reviews, plus several delicious side dishes.

In the past 12½ years, your compulsive Coverage Pointers staff has summarized every New York appellate decision involving insurance coverage. How many is that?
We haven't counted back to the beginning, but in the past six calendar years, we have brought you over 3100 NY appellate reviews.
,
It’s time to take a quick look back on 2011, and I take this opportunity to thank my columnists, Margo Threshold Lagueras, Audrey The Undisputed Queen of No Fault Seeley, Steve Property Man Peiper, Kathie Federal Fijal, Earl The Pearl Cantwell,  Jennifer The Gem Ehman, Cassandra Capital Kazukenus and Mike Student-of-the-Law Perley for their regular and timely contributions:

• In 2011, we added Cassie’s Capital Connection column in April.  We reported on 652 appellate decisions and 98 lower court reviews for a total of 750 decision summaries.  Of the appellate reviews, 151 appeared in my column, 188 in Margo’s Musings, a record 183 in Audrey’s Angles, 87 in Steve Peiper Property and Potpourri column and 43 in Kathie’s Fijal’s Federal Focus case review.  In addition to those, Jen contributed the 98 lower court summaries, Earl penned 26 weekly Pearls and Mike Perley added several Liening Tower summaries.  Cassie Kazukenus gave us 22 reports from Albany.   Paul Suozzi contributed a guest column on municipal law.  How do we compare to previous years?  Pretty favorably.
• In 2010, we added Jen's Gems early in the year.  We reported on 641 appellate decisions and 71 lower court reviews, for a total of 712 summaries.  There were a paltry 137 in my column, 214 in Margo's, 159 of Audrey's Angles, Steve tackled 89 property and potpourri opinions, Kathie covered 42 federal court decisions and Jen added 76.  We also offered 28 Earl's Pearls articles, a couple from Scott Duquin's Lead Paint series, and a few from Mike Perley on the topic of Medicaid Secondary Payer.
• In 2009, we had a mere 557 appellate decisions to review, with 173 appearing in my column, 206 in Margo's, 93 in Audrey's, 81 in Steve's and four in Kathie Fijal's federal case review, which was added towards the end of the year. 
• In 2008, we summarized 679 appellate coverage decisions.  I had an easy year, with an even 200 summaries.  Margo and her predecessor reviewed 226 "serious injury" threshold cases.  Audrey was a mite busier with 176 appellate and arbitration awards covered in Audrey's Angles.  Steve about tripled his workload reviewing 77 in his offering. 
• In 2007, we reported on 651 New York appellate decisions involving insurance coverage.  I summarized 276 opinions in my column, some 226 "serious injury" threshold cases were reviewed, and Audrey Seeley gave us angles on 123 No Fault decisions.  Steve Peiper reviewed 26 first party and "potpourri" appeals.

 

Back by Request, Last Year’s Christmas Gift to Our Readers: 
Christmas Coverage
or
A Policy for Saint Nicholas

Dan D. Kohane
With apologies to Clement Moore (or less)

T'was the night before Christmas, and all through the land,
Few coverage advisors were still in demand.
The policies still showed on both desk and on screen.
My eyes only open with thanks to caffeine.

Most company's adjusters had left for the day;
And most coverage lawyers had little to say.
It was surely the moment to turn out the light,
Shut down the computer, put work out of sight.

Then the phone started chirping, it startled my poise,
not the typical ring-tone, but an odd sounding noise.
It jingled like sleigh bells, instead of a "ding,"
I knew I must answer, despite everything.

A Christmas Eve caller? What could be the need?
But the sound of the music, would just not recede.
I was really not looking for Christmas Eve banter,
Imagine my shock when the caller was Santa!

"I need some advice, sir" said a somber Saint Nick,
"My Christmas Eve Policy is three inches thick."
I don't mean to bother, but I'm wrought with confusion
"I don't understand this new 'Gifting Exclusion.'"

"It carves out the nasties, the mean and the haughty.
It favors the good ones and leaves out the naughty.
My coverage appears to have holes like Swiss Cheese,
I'm afraid if I'm sued, I will twist in the breeze."

"A products exclusion? A chimney one too?
Elf employment exception, I'm screwed through and through.
Just what is still covered? I sure am confounded,
With all of these issues, I'm fear that I'm grounded."

"With a sleigh full of sacks and reindeer at the ready,
I'm starting to feel just a tad too unsteady.
My belly has acid, my knees are a'quiver
With millions and millions of toys to deliver."

"I want you to help me, I fear a disclaimer.
This policy's scary; I need you to tame her.
We must surely save Christmas, for good girls and boys,
And Amazon won't refund "squat" on the toys.

The holiday challenged, I sure knew my mission
We needed to craft a new ISO edition
Santa needed an ally, a comrade, a fighter,
On the opposite side was a Grinch Underwriter.

I am sure you'd imagine how hard it would be
To secure for Saint Nick a late night policy,
Without coverage gaps, so that Santa could fly,
To save Christmas Day, we were destined to try.

The person in charge of the coverage for Nick,
Had left the shop early, was feeling quite sick.
Perhaps it was sadness, or guilt or just gumption,
He thought he'd killed Christmas, a well-placed assumption.

In order to soften his hardening heart.
We had to play coy, we had to be smart.
We needed to dazzle that Grinch with our guile,
To show him the risk was sure worth his while.

Worse yet, betwixt and between stood a broker,
A bloodsucker culled from the mind of Bram Stoker.
Through him we must go, around or about,
He'd bring pressure to bear, he's really got clout.

"It's Santa," we'd say, "who'd sue him for cash?"
"Another broker can get us a better deal in a flash.
We'll go to the market if a deal can't be made;"
The Grinch saw his bonus beginning to fade.

From the cream of the crop, a new team we'd assemble,
To get Santa bound and to weaken his tremble.
We'd send out the e-mail, we'd tweet and we'd twitter
We needed to find the best of the litter.

The other apt choice, as the time slipped on by,
Was to use those fine people, to make him comply.
By plane and by car, by boat and by train.
We beckoned this family to join in refrain.

And gather they did, first a few then a score,
Lawyers and brokers, claims folks and more
More than a choir, it was surely a throng,
Together they gave voice to a beautiful song.

And they reached that man's spirit, his heart and his soul,
And in no time at all, they'd accomplished their goal.
"Give me my pen", the Grinch yelled to his clerk.
I knew then and there that our ploy it had worked.

"Exclusions begone! Limitations not there!
We'll provide him his coverage, no need to beware."
And so it was written, and Santa could jet,
And Christmas was saved, the best Yuletide yet.

On cold winter night, when you're hearing his jingle,
When the children are sleeping and in comes Kris Kringle,
Remember that coverage protected his flight,
Happy Christmas to all, and to all a good night.

End-of-the-Year Message from Audrey Seeley, Queen of No Fault:

In our last edition of 2011, there is a noteworthy decision from the Appellate Division, First Department for review with regard to the ability to raise 5108 compliance issues and the scope of the insurer's defenses with an untimely denial.  This will be a case to watch to see if it proceeds to the Court of Appeals.

There are also an increased amount of reported arbitration decisions on lost wage claims.  We have one interesting arbitration reported that our own Margo Lagueras handled and prevailed on for the insurer.  Aside from the lost wage issue, Margo had to address the claim that an insurer should be responsible for the subsequent treatment resulting from addiction to prescription medication, allegedly taken as a result of injuries from the accident.  The assigned arbitrator was not prepared to accept the Applicant's argument in that case.

It is hard to believe that the year is coming to an end already.  2012 will be a great year and hopefully bring no-fault reform.  I hope that you and your family have a great holiday and I wish you the best in the New Year.

Audrey Seeley
[email protected]

 

4943 and Bad Faith:

It has been 4943 days since any New York State appellate court has affirmed a finding of bad faith against an insurer in either a first-party or third party case.  On June 11, 1998, the Court of Appeals, in Smith v. General Accident Insurance Company, affirmed a finding of bad faith in an action against a carrier for its failure to settle a case.  It has been 13 years, six months and 12 days since that decision.  That was 13 years, six months and 12 days ago – 4943 days.

Steve’s Year-End Piping

Happy Holidays.  We close out 2011 with a bang in this issue.  Take a moment to review the Second Department’s decision in Mallory v. Allstate which upholds the Court’s standing precedent that an alleged violation of the Unfair Claims Procedures Act does not result in the loss of coverage defenses for the carrier.  We, of course, couldn’t agree more with the decision.  Regulation 64 serves many purposes, but was not intended to serve as a de facto Insurance Law 3420(d) for first party losses. 

We would also be remiss if we didn’t point out a rarity from the First Department which upholds a sanction for frivolous motion practice.  As anyone who has ever put pen to paper (or fingertip to keyboard) knows, we are constantly called to evaluate the subtle distinction between zealous advocacy for our clients and frivolity.  It would appear to me that a third-party action which alleges the negligence of another party would not fall within the realm of frivolous, but my view is apparently not shared by at least 5 members of the Appellate Division, First Department.  We defer to their sound judgment, and merely remind our readers to keep this in mind with future third-party actions.

Finally, as we dash headlong into 2012, we can take some solace in the fact that the past 12 months have been, if nothing else, consistent.  One would be stretching to conclude that the industry absorbed any major changes to New York Insurance Law.  Indeed, we start 2012 pretty much where we ended 2010.  That, for an industry that thrives on predictability, is a good thing.  As noted earlier, we have made it yet another year fending off constant challenges to open the lid on bad faith and extra-contractual exposure.  Despite more attempts than ever, 2011 will go out without one decision affirming a finding of bad faith at the appellate level.  When it comes to bad faith litigation, no news is good news. 

One more thing, if you’re anywhere near Western New York we would strongly encourage you to give some thought to attending NBI’s “Insurance Claims: Investigation and Adjuster Negotiations”.  The program is set for January 19, 2012, and the faculty is chock full of gems and pearls.  Our own Earl Cantwell (he of pearls of wisdom) and Jennifer Ehman (and her gems) will be making appearances.  That’s it for this year, auld lang syne!

Steve Peiper
[email protected]

One Hundred Years Ago Today

On December 23, 1911, North Carolina became the ninth state to ratify what would have been – and to some fringe elements is --the Thirteenth Amendment to the United States Constitution, the Titles of Nobility Amendment, an amendment which would have revoked the citizenship of any American citizen who accept any title of nobility or honor without the consent of Congress.  There is speculation that the Congress proposed the amendment in response to the 1803 marriage of Napoleon Bonaparte's younger brother, Jerome, and Betsy Patterson of Baltimore, Maryland, who gave birth to a boy for whom she wanted aristocratic recognition from France.  The child, named Jérôme Napoleon Bonaparte, was not born in the United States, but in Great Britain on July 7, 1805—nevertheless, he would have held U.S. citizenship through his mother.  Another theory is that his mother actually desired a title of nobility for herself and, indeed, she is referred to as the "Duchess of Baltimore" in many texts written about the amendment.

If any citizen of the United States shall accept, claim, receive or retain, any title of nobility or honour, or shall, without the consent of Congress, accept and retain any present, pension, office or emolument of any kind whatever, from any emperor, king, prince or foreign power, such person shall cease to be a citizen of the United States, and shall be incapable of holding any office of trust or profit under them, or either of them.

There are still some who believe the Amendment was ratified, and argue that it has been ignored, suggesting that those who reap benefits from foreign governments are in fact receiving emoluments and should lose their citizenship.  As one site puts it:

With China and other nations buying voting blocks with illegal donations, i.e. "emoluments", "grafts" and "bribes", to the campaign funds and personal pockets of presidents, senators and congressmen, and others of our elected and appointed servants. With lobbying groups and multi-national corporations, which might properly be termed "foreign powers", doing the same.  With the duplicity evinced in the unprincipled, unethical and immoral conduct of a number of our elected representatives, who have subverted the Constitution at every step, who would destroy the Sovereignty of the United States of America.

You’ve heard of birthers, no doubt but there are still some Thirteenthers who believe that this Amendment was, in fact, ratified by the requisite number of states.  There was a misconception that Virginia had adopted the TONA when only one legislative chamber had done so, although is an “official” printing of the Revised Code of Virginia included that Amendment in the version of the Constitution printed therein.

The actual Thirteenth Amendment was adopted on December 6, 1865, and abolished slavery uniformly throughout the United States.

Happy Birthday Inspector Luger:

For Barney Miller fans, (for my money, one of the best sitcoms ever to be on TV), we note the 100th anniversary of the birth of James Gregory, born on December 23, 1911 (died in 2002), who played Deputy Inspector Frank Luger, the gravelly-voiced curmudgeon who dropped into the precinct house from time to time to bother Barney and the other officers.  He is also known for playing the role of McCarthy-like Senator John Iselin in The Manchurian Candidate. If you don’t remember Luger, here’s a great clip of him, with actor Steve Landesburg, who played the role of Detective Arthur Dietrich. 

Headlines, Headlines

In the attached issue, you’ll find cases involving the following subjects:

KOHANE’S COVERAGE CORNER
Dan D. Kohane
[email protected]

• Ban on Suing Employer Due to Receipt of Workers Compensation Benefits Does Not Preclude Claim Against Self-Insured Employer for Uninsured Motorists Benefits
• Putative Additional Insured Loses Coverage Because of Employee Exclusion in Named Insured’s Policy and Has No Right To Challenge Timeliness of Disclaimer
• A 33-Day Delay in Denying Coverage on Grounds Late Notice Renders Disclaimer Invalid
• Action for Breach of Policy Against Company Employees Dismissed, as Are Extra-Contractual Claims Against Company
•  “Contractor’s Condition” Endorsement Says What It Means and Means What It Says
• Another Late Notice Disclaimer Case; Another “Good Faith Belief in Non-Liability” Excuse Fails Because of Lack of Proof of Diligence
• A Disgorgement Payment to the SEC Does Not Constitute an Insurable Loss
• While an Injured Party Has a Statutory Right to Give Timely Notice to a Defendant’s Liability Carrier, It Must Show Diligence in Ascertaining the Identity of the Carrier and Giving Such Notice.  Here, the Insured Failed to Give Notice and the Injured Party Failed to Demonstrate Diligence
• While Claim for SUM Benefits May Begin to Accrue on Insolvency of Tortfeasor’s Carrier, Claim for UM Benefits Accrues Upon Disclaimer

 

MARGO’S MUSINGS ON SERIOUS INJURY UNDER NEW YORK NO FAULT
Margo M. Lagueras
[email protected]

• Surgical Report Two Months After Accident Noting Crush Injury Is Sufficiently Contemporaneous
• A Finding of a Nondisplaced Fracture Also Qualifies a “Presumed” Fracture
• Defendant’s Motion Denied Where Expert Did Not Relate Findings to the 90/180-Day Category Alleged in Bill of Particulars
• Plaintiff Provides Adequate Explanation for Cessation of Treatment
• Defendant’s Cross Motion Fails to Eliminate All Issues of Fact
• Defendant’s Motion Denied Where Supported by Examination Reporting Significant ROM Limitations
• Affirmative Defense Dismissed Where Accident Occurred in New Jersey
• On Appeal, Dismissal Is Affirmed

 

AUDREY’S ANGLES ON NO-FAULT
Audrey A. Seeley
[email protected]

ARBITRATION

• Memory Lapse and The IME Location Which Was Actually Near Home Not Reasonable Excuse For Failing To Appear For IMEs
• Lay Opinion On Failure To Properly Use Durable Medical Equipment Insufficient
• Applicant’s Failure To Submit Medical Records or Reports Insufficient To Rebut Lack of Medical Necessity
• Late Notice of Claim Denial Upheld – Facts Are A Must Read Though!
• Disability Ended With Return To Work And Arbitrator Not Prepared to Hold Insurer Responsible For Costs Associated With Addiction To Pain Medication
• Counsel Unilaterally Cancelling EUO Due To Testimony In Personal Injury Action Policy Violation

LITIGATION

• Preclusion Rule Has Narrow Exception And 5108 Violation Subject To Timely Denial
• Plaintiff’s Failure To Call Rebuttal Witness At Trial Fatal
• Insurer Establishes Policy Violation for Failure to Attend Scheduled IMEs
• Plaintiff’s Failure To Call Rebuttal Witness At Trial Fatal

 

PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper
[email protected]
Property

• Leave to Appeal Definition of Collapse Denied by High Court
• Snow, Rain or Sleet Damage NOT Covered Unless Driven by Wind; Bowing and Sagging Ceiling NOT Collapse Under the Policy
• Possible Violations of Fair Claims Act DOES NOT Result in the Waiver of Policy Defenses
• Violation of Insurance Department’s Fair Claims Practices Regulations Does not Preclude Insurer from Denying Coverage

 

Potpourri

• Delay of More than One Year is Fatal to Motion to Vacate Default
• Common Law Indemnity Claim Can Not Exist Where the Only Claim is Negligence Against Party Seeking Protection
• Indemnity Language “In, On or About Premises” Interpreted to Mean “Around or On the Outside Of”

 

CASSIE’S CAPITAL CONNECTION
Cassandra A. Kazukenus
[email protected]

• Circular Letter 14 (2011)

 

FIJAL’S FEDERAL FOCUS
Katherine A. Fijal
[email protected]

• Determining the Duty to Defend and the Duty to Indemnify an Additional Insured

 

JEN’S GEMS
Jennifer A. Ehman
[email protected]

• Non-Cooperation Denial Based on Three Unanswered Phone Calls and One Unanswered Letter Fails
• Coverage Triggered for Accident at Uninsured Property; Dangerous Condition Existed While Property Was Insured

 

EARL’S PEARLS
Earl K. Cantwell
[email protected]

Embezzlement Scheme a Single Inter-Related Claim or Occurrence

Well, that’s a wrap for 2011.  We wish you good health and good prosperity in 2012. Pardon a personal indulgence as I take a moment to remember my father, who passed away on this date in 1980.

 

Dan D. Kohane
Hurwitz & Fine, P.C.
1300 Liberty Building
Buffalo, NY 14202    
Phone:            716.849.8942
Fax:                  716.855.0874
E-Mail:             [email protected]  
H&F Website: www.hurwitzfine.com  
LinkedIn:         www.linkedin.com/in/kohane

Hurwitz & Fine, P.C. is a full-service law firm
providing legal services throughout the State of New York

NEWSLETTER EDITOR
Dan D. Kohane
[email protected]

ASSOCIATE EDITOR
Audrey A. Seeley
[email protected]

ASSISTANT EDITOR
Margo M. Lagueras
[email protected]

 

INSURANCE COVERAGE TEAM
Dan D. Kohane, Team Leader
[email protected]

Michael F. Perley
Katherine A. Fijal
Audrey A. Seeley
Steven E. Peiper
Margo M. Lagueras
Cassandra Kazukenus
Jennifer A. Ehman
Diane F. Bosse

FIRE, FIRST-PARTY AND SUBROGATION TEAM
Andrea Schillaci, Team Leader
[email protected]

Jody E. Briandi
Steven E. Peiper

NO-FAULT/UM/SUM TEAM
Audrey A. Seeley, Team Leader
[email protected]

Margo M. Lagueras
Cassandra Kazukenus
Jennifer A. Ehman

APPELLATE TEAM
Jody E. Briandi, Team Leader
[email protected]
 
Scott M. Duquin
Diane F. Bosse

Index to Special Columns

Kohane’s Coverage Corner
Margo’s Musings on “Serious Injury”
 Audrey’s Angles on No Fault
Peiper on Property and Potpourri
Cassie’s Capital Connection
Fijal’s Federal Focus
Earl’s Pearls
Across Borders

KOHANE’S COVERAGE CORNER
Dan D. Kohane
[email protected]

12/13/11         In the Matter of Elrac, Inc. v. Exum
New York State Court of Appeals
Ban on Suing Employer Due to Receipt of Workers Compensation Benefits Does Not Preclude Claim Against Self-Insured Employer for Uninsured Motorists Benefits
A self-insured employer whose employee is involved in an automobile accident may be liable to that employee for uninsured motorist benefits, notwithstanding the exclusivity provision of the Workers' Compensation Law.

When Exum, an employee of Elrac was involved in an auto accident with an uninsured motorist, he filed a notice of intention to arbitrate on Elrac, since Elrac (Enterprise Rentals) is self-insured for those benefits.

Uninsured Motorist Benefits are required in every policy of automobile insurance sold in New York.  A self-insurer had the same liability for uninsured motorist coverage that an insurance company would have. 

The high court finds that there is no policy reason why Exum's uninsured motorist protection should decrease because he happened to be driving the car of a self-insurer, even if that self-insurer was his employer.
Editor’s Note:  Another Elrac defeat.  The decision makes sense to us.

12/20/11         Utica Insurance Company v. RJR Maintenance Group, Inc.
Appellate Division, First Department
Putative Additional Insured Loses Coverage Because of Employee Exclusion in Named Insured’s Policy and Has No Right To Challenge Timeliness of Disclaimer
The employee exclusion in the subject insurance policy unambiguously states that the insurance did not apply to "bodily injury to any employee of any insured, to any contractor hired or retained by or for any insured, or to any employee of such contractor" sustained during the course of employment. Accordingly, plaintiff properly disclaimed coverage based upon the status of defendant Edwards (the underlying plaintiff) as an employee of the subcontractor of RJR (the insured) at the time of the alleged accident.

Moreover, defendant St. John's University lacked standing to challenge the timeliness of plaintiff's notice of disclaimer of coverage to RJR.

12/20/11         Tower Insurance Company of New York v. NHT Owners LLC
Appellate Division, First Department
A 33-Day Delay in Denying Coverage on Grounds Late Notice Renders Disclaimer Invalid
The insured waited 62 days after the accident before giving notice to its liability carrier. The court did not reach question of whether, under all the circumstances, the insureds' notice of claim, timely, where they conducted an inquiry into the underlying accident, and believed there was no liability because the court properly held that the notice of disclaimer, after a 33-day period, was untimely as a matter of law. The insurer's sole ground for the disclaimer was the insured's delay in notifying it of the occurrence, which was readily apparent at the time of the notice of claim.

12/13/11         O'Keefe v. Allstate Insurance Company
Appellate Division, Second Department
Action for Breach of Policy Against Company Employees Dismissed, as Are Extra-Contractual Claims Against Company
Insured was unhappy that his first party claim was not paid and brought an action against Allstate and certain named employees, seeking contractual damages, fraud, punitive damages and attorney’s fees.  The claims against the employees were dismissed as they had no personal liability to the plaintiff.  The cause of action sounding in fraud was no more than another breach of contract claim and was therefore dismissed.  The request for punitive damages was also dismissed. In New York, a claim for punitive damages was not warranted, as insureds failed to set forth any facts or allegations to support their contention that the defendant insurer'[s] conduct was egregious or fraudulent, or that it evidenced wanton dishonesty so as to imply a criminal indifference to civil obligations directed at the public generally.  This case is, in effect, simply a private breach of contract dispute between the insurer and its insured.

New York does not permit recovery of attorney’s fees in an action brought by a policyholder for contractual damages and that claim was also dismissed.
Editor’s Note:  While this decision did not follow a verdict (but was a motion on the pleadings), it reminds us to comment on claims for extra-contractual damages.

This being the last issue of Coverage Pointers for the calendar year, it’s worthy to note that, once again (at it is at least the fifth year in a row we are so reporting), there has not been a single case reported by any appellate court in New York State, upholding a bad faith or punitive damage verdict against a carrier in New York. 

12/13/11         Yangtze Realty, LLC v.Sirius America Insurance Company
Appellate Division, Second Department
“Contractor’s Condition” Endorsement Says What It Means and Means What It Says
There are a growing number of companies issuing CGL policies to general contractors which include, what some call, “Contractor’s Condition Endorsements”.  Generically speaking, they are endorsements to the policy that require their named insured general contractors, for example, to (a) secure additional insured status on their subcontractors’ policies or (b) to secure indemnity agreements from their subs, holding the general contractors harmless from any claim arising out of the subcontractor’s work.  If the required AI coverage or the indemnity agreements are not secured, the coverage provided by the general contractor’s insurers is eliminated or severely restricted.

Here, the policy contained an exclusion that barred coverage for property damage arising out of work performed on behalf of the insured by a subcontractor where no prior written agreement exists indemnifying and holding harmless the insured in the event of a loss.  The insurer submitted evidence showing that the property damage in the underlying action was caused by the work of a subcontractor hired by the named insured, and that the named insured’s written agreement with this subcontractor did not contain the required indemnity and hold harmless language.

The exclusion being clear it was enforceable and enforced.

12/13/11         Fine Line Builders, etc. v. Atlantic Casualty Ins. Co.
Appellate Division, Second Department
Another Late Notice Disclaimer Case; Another “Good Faith Belief in Non-Liability” Excuse Fails Because of Lack of Proof of Diligence
The insured failed to report an accident in a timely manner as required by its liability policy.  The plaintiff's claim that it had a reasonable, good faith belief in non-liability was belied by its failure to inquire into the circumstances of the accident at issue in the underlying action.
Editor’s Note:  As most NY coverage aficionados know, by reasons of legislative changes adopted in 2008, for policies issued or renewed after January 17, 2009, a carrier will have to demonstrate material prejudice to establish a right to rely on a late notice defense.  This is an “old” case (policy issued prior to the operative date).  We have not seen a single appellate case discussing the new prejudice standard, but undoubtedly (we keep suggesting) they will begin trickling out of the appellate courts in short order.

12/13/11         J.P. Morgan Securities Inc. v. Vigilant Insurance Company
Appellate Division, First Department
A Disgorgement Payment to the SEC Does Not Constitute an Insurable Loss
The Securities and Exchange Commission (“SEC”) sought sanctions against securities companies claiming that they facilitated a substantial amount of late trading and deceptive market timing for certain customers, predominantly large hedge funds, and affirmatively assisted them in evading detection, which enabled those customers to earn hundreds of millions of dollars in profits at the expense of mutual fund shareholders .

The insurance program at issue obligates the insurers to indemnify the insureds for all "Loss which the insured shall become legally obligated to pay as a result of any Claim . . . for any Wrongful Act" on its part.  The term "Loss" includes
"(1) compensatory damages, multiplied damages, punitive damages where insurable by law, judgments, settlements, costs, charges and expenses or other sums the Insured shall legally become obligated to pay as damages resulting from any claim", etc.  The program excludes claims made against the insured "based upon or arising out of any deliberate, dishonest, fraudulent or criminal act or omission," provided there has been an adverse final adjudication to that effect.  It also excludes claims "based upon or arising out of the Insured gaining in fact any personal profit or advantage to which the Insured was not legally entitled."
The court holds that under New York law, the risk of being directed to return improperly acquired funds is not insurable.  Thus, disgorgement of ill-gotten gains does not constitute an insurable loss

12/06/11         Spentrev Realty Corp. United National Spec. Ins. Co.
Appellate Division, Second Department
While an Injured Party Has a Statutory Right to Give Timely Notice to a Defendant’s Liability Carrier, It Must Show Diligence in Ascertaining the Identity of the Carrier and Giving Such Notice.  Here, the Insured Failed to Give Notice and the Injured Party Failed to Demonstrate Diligence
Where an insurance policy, requires an insured to provide notice of an accident or loss as soon as practicable, such notice must be provided within a reasonable time in view of all of the facts and circumstances.  Insurance Law § 3420(a)(3) gives the injured party an independent right to give notice of the accident and to satisfy the notice requirement of the policy.  However, the injured party has the burden of proving that he or she, or counsel, acted diligently in attempting to ascertain the identity of the insurer, and thereafter expeditiously notified the insurer.

Here, the insured failed to give notice and the injured party failed to demonstrate that it exercised any diligence in ascertaining the identity of the insurer and giving notice.  Coverage properly disclaimed.

12/06/11         In the Matter of Rogers v. Progressive Ins. Co.
Appellate Division, Second Department
While Claim for SUM Benefits May Begin to Accrue on Insolvency of Tortfeasor’s Carrier, Claim for UM Benefits Accrues Upon Disclaimer
Progressive issued a policy on a 1985 Buick to Rogers.  The policy contained both uninsured motorists coverage (UM coverage) and optional supplementary uninsured/underinsured motorist endorsement (hereinafter the SUM coverage).  In February 1998 the Buick, operated by Margaret Rogers, collided with a vehicle driven by Grieff and insured by Legion.

The Rogers sued Grieff alleging that he was at fault.  In July 2003 Legion was declared insolvent, and all claims against it were assumed by the New York Public Motor Vehicle Liability Security Fund (hereinafter the PMV Fund).  Grieff defaulted and a money judgment was entered against him.  In a letter dated December 30, 2009, the PMV Fund informed Grieff and the respondents of its denial of all claims against it for indemnification in connection with the subject accident.

The issue before the court was when the six year statute of limitations began to run for the action under the UM endorsement.  A claim under the UM endorsement of an automobile insurance policy "accrues either when the accident occurred or when the allegedly offending vehicle thereafter becomes uninsured".  Here, there were 12 years between the accident and the filing of the Rogers’ application for UM benefits and the burden shifted to the Rogers to establish an accrual date later than the date of the accident.

The Rogers demonstrated that the PMV Fund did not deny coverage within the meaning of Insurance Law until December 30, 2009.  Therefore, the respondents' claim against Progressive for UM benefits did not accrue until December 30, 2009, and, accordingly, the limitations period did not begin to run until that date.

If the Rogers were pursing SUM benefits, Progressive contended that the limitations period would have commenced to run when Legion became insolvent in July 2003.  However, the Rogers waived any claim for SUM benefits and were pursuing only UM benefits.

 

MARGO’S MUSINGS ON SERIOUS INJURY UNDER NEW YORK NO FAULT
Margo M. Lagueras
[email protected]

12/15/11         Torres v. Villanueva
Appellate Division, First Department
Surgical Report Two Months After Accident Noting Crush Injury Is Sufficiently Contemporaneous
The 29-year-old plaintiff was crossing the street when he was struck by defendants’ taxi.  He immediately complained of knee pain but was diagnosed with a thigh contusion.  A week later, he consulted with an orthopedist and was diagnosed with post-traumatic tenosynovitis.  An MRI revealed joint effusion and tears in the lateral collateral ligament and anterior cruciate ligament.  Two months later the orthopedist performed knee surgery and reported a “crush injury” of the medial femoral condyle, extensive synovitis and a torn and lax anterior cruciate ligament.

In support of their motion for summary judgment, defendants submitted the report of a radiologist showing only degenerative changes in the menisci and an otherwise normal knee, and the report of an orthopedist who performed objective tests which revealed normal range of motion and a resolved thigh contusion.  Defendants’ orthopedist concluded that plaintiff’s obesity and patellofemoral syndrome contributed to the knee condition.

In opposition, plaintiff submitted numerous contemporaneous reports from various physicians, the surgical report from two months after the accident, and other reports from a specialist in physical and rehabilitation medicine, with whom plaintiff began consulting immediately following the accident, and another orthopedist, who saw plaintiff two years after the accident and reported ongoing tenderness and range-of-motion limitations. 

The court affirmed the trial court’s denial of defendants’ motion finding that the surgeon’s report of a “crush injury” within two months of the accident was sufficiently contemporaneous to raise an issue of fact regarding causation and that the reports submitted by plaintiff sufficiently addressed defendants’ reports of degenerative and pre-existing conditions.
Note:  This is the first time we have seen the recent Court of Appeals decision in Perl v. Meher cited by one of the Appellate Departments.  We covered the Perl decision in our November 25, 2011 issue of Coverage Pointers.

12/15/11         Baez v. Boyd
Appellate Division, First Department
A Finding of a Nondisplaced Fracture Also Qualifies a “Presumed” Fracture
Defendants’ orthopedic expert reported full range-of-motion of plaintiff’s ankle and foot, properly compared those findings to the norm, and concluded that the injuries had resolved.  X-rays and MRIs confirmed that there were no fractures.

However, plaintiff’s treating orthopedist affirmed that his review of the MRIs revealed a nondisplaced fracture of the calcaneus and a “presumed” Salter-Harris I fracture of the distal fibula.  Because a nondisplaced fracture would qualify as a serious injury if determined to exist, it would serve to bring in the “presumed” fracture even though such an equivocal diagnosis, standing alone, might not satisfy the threshold requirement.  Once any injury meets threshold, all other causally related injuries can be considered by a jury, whether or not they individually would meet threshold.  Therefore, on appeal the trial court was reversed and summary judgment was denied to defendants.

12/13/11         Aujour v. Singh
Appellate Division, Second Department
Defendant’s Motion Denied Where Expert Did Not Relate Findings to the 90/180-Day Category Alleged in Bill of Particulars
On appeal, the court finds that defendant did not meet his burden and reverses the trial court.  Plaintiff alleged she sustained injury under the 90/180-day category in her bill of particulars.  In support of his motion, defendant submitted plaintiff’s deposition testimony in which she stated that she was confined to her home and did not work for 120 days following the accident.  In addition, defendant’s expert orthopedist did not examine plaintiff until 16 months after the accident and did not relate his findings to the period immediately after the accident.  Defendant did not, therefore, meet his prima facie burden and his motion should have been dismissed without the need to consider plaintiff’s opposing papers.

12/13/11         Mi Sook Jeong v. Callaghan
Appellate Division, Second Department
Plaintiff Provides Adequate Explanation for Cessation of Treatment
Plaintiff alleged her daughter sustained injuries under the permanent consequential and/or significant limitation of use categories to her cervical and lumbosacral spine.  The trial court granted defendants’ motion but on appeal was reversed.  In a decision without details, the court states that although defendants met their burden, plaintiff submitted competent medical evidence in rebuttal and also adequately explained the daughter’s cessation of medical treatment.

12/13/11         Poverud v. Kwartler
Appellate Division, Second Department
Defendant’s Cross Motion Fails to Eliminate All Issues of Fact
Defendant cross moved for summary judgment but the evidence submitted in support failed to eliminate all triable issues of fact regarding plaintiff’s alleged “fracture” to his right patella.  The trial court therefore properly denied the cross motion.

12/13/11         Scott v. Gresio
Appellate Division, Second Department
Defendant’s Motion Denied Where Supported by Examination Reporting Significant ROM Limitations
Plaintiff alleged serious injury to her lumbar spine.  In support of his motion, defendant relied on the affirmed report of his examining neurologist who found significant range-of-motion limitations of plaintiff’s spine.  On appeal, the court affirmed the trial court’s denial of defendant’s motion.

12/06/11         Palumbo v. Carey
Appellate Division, Second Department
Affirmative Defense Dismissed Where Accident Occurred in New Jersey
Defendants’ sixth affirmative defense alleged that the plaintiff did not sustain a serious injury within the meaning of § 5102(d).  However, all the evidence supported that the accident actually took place in New Jersey, making inapplicable the requirements of § 5102(d) because, by its terms, it only applies to accidents occurring within New York State.  As such, the plaintiff’s motion to dismiss the defendants’ sixth affirmative defense should have been granted.

12/06/11         Robinson v. Cameron
Appellate Division, Second Department
On Appeal, Dismissal Is Affirmed
In an opinion with no details, the appellate court affirms the dismissal of the plaintiff’s complaint alleging serious injuries to his cervical and lumbar spine and both shoulders.

 

AUDREY’S ANGLES ON NO-FAULT
Audrey A. Seeley
[email protected]

ARBITRATION

12/19/11         Applicant v. Allstate Prop. and Cas. Ins. Co.
Arbitrator Thomas J. McCorry, Erie County
Memory Lapse and IME Location, Which Was Actually Near Home, Not Reasonable Excuse for Failing to Appear for IMEs
The Applicant, eligible injured person, challenged the insurer’s denial of the entire claim based upon a policy violation for failure to attend scheduled independent medical examinations (“IMEs”).  The assigned arbitrator upheld the denial and determined that the Applicant’s excuses were not reasonable.  The excuses afforded were that the Applicant forgot about one IME, and the second IME was scheduled in Buffalo, too far from her home.  The assigned arbitrator determined that the later excuse lacked merit as the second IME was scheduled near her home in Falconer.

12/15/11         RS Medical v. Liberty Mut. Fire Ins. Co.
Arbitrator Kent L. Benziger, Erie County
Lay Opinion on Failure to Properly Use Durable Medical Equipment Insufficient
The Applicant sought reimbursement for the rental of a muscle stimulator prescribed to the eligible injured person a little over two months post-accident.  The insurer denied the claim on two grounds.  The first was upon the IME of Julius Horvath, DC.  The second that based upon the Smart Data Card report for the rental period the eligible injured person only used the device once.

The IME of Mr. Horvath revealed limited cervical spine range of motion and positive compression test for neck pain.  Also, the thoracic and lumbar spine range of motion was limited with some positive orthopedic tests.  The initial IME report recommended additional chiropractic care and a TENS unit was reasonable.  However, no further household help, special transportation or further diagnostic testing was warranted. 

The assigned arbitrator found the IME report insufficient to deny the muscle stimulator and even indicated that the denial was disingenuous.  The assigned arbitrator indicated that the IME report was misrepresented and there was a breach of the duty to deal with the eligible injured person in good faith. 

Turning to the Smart Card data, the insurer requested as part of verification the print outs from the Smart Card data.  This is a card contained within the unit to monitor the patient’s usage of the device.  The data revealed usage one time per months for four months and twice a month for four months.  There was also data indicating the unit was used more frequently for several months and then only 17 times in one month.

The assigned arbitrator declined to uphold the insurer’s denial on the basis that the unit was not used frequently enough.  The Applicant’s assignor testified that the unit had to be returned or replaced because of malfunction.  Also, it was difficult to set up and use the machine during her daily life.  The assigned arbitrator found the assignor’s explanation only partially satisfactory.  He stated that a layman could surmise that the use of the equipment was insufficient.  Also, the prescribing chiropractor should have monitored the usage and discussed it with his patient.  Despite this, the assigned arbitrator would not speculate and determined that the data should have been submitted to a peer reviewer for a medical determination.  The adjuster should not have denied reimbursement based upon his or her lay opinion.

12/15/11         RS Medical v. Allstate Ins. Co.
Arbitrator Thomas J. McCorry, Erie County
Applicant’s Failure to Submit Medical Records or Reports Insufficient to Rebut Lack of Medical Necessity
The Applicant sought reimbursement of a muscle stimulator prescribed approximately one year post accident.  The insurer denied the durable medical equipment upon the IME of Joseph Margolies, DC.  Mr. Margolies opined that the assignor had resolved thoracolumbar sprain/strain and left knee pain.  He further opined that no durable medical equipment was indicated.  The assigned arbitrator determined the insurer minimally met its burden.  The denial was upheld as the Applicant failed to submit a medical report or record other than the prescription which did not rebut the IME report’s conclusions.

12/15/11         Applicant v. 21st Century Nat’l Ins. Co.
Arbitrator Thomas J. McCorry, Erie County
Late Notice of Claim Denial Upheld – Facts Are a Must Read Though!
The issue in this arbitration was whether the insurer’s denial for late notice was appropriate.  The assigned arbitrator indicated that this case presented a strange set of facts.  The eligible injured person (“EIP”) claims that on March 20, 2010, he was involved in an accident.  However, the EIP admitted that he was so drunk he did not know what happened and the alleged driver of the car – the EIP’s brother – who never provided testimony at the hearing, reportedly denied any involvement.

The EIP claims that his brother had a gathering at his house with the party starting around 11PM and the Lewiston police arriving around 4:23AM for “possible domestic violence.”  The EIP only remembers lying in the roadway outside his brother’s trailer.  The party consisted of the EIP, his two brothers, his sister-in-law, and another female.

The EIP’s brother, who was not allegedly driving, testified that he had been drinking beer that night but did not consider himself drunk.  He did admit to multiple past DWI convictions.  Around 3AM everyone except the EIP and his brother who did not testify at the hearing left to get cigarettes.  The EIP’s brother received a call from the other brother indicating he thought he ran over something.

When the group returned to the trailer they found the EIP lying in the driveway.  The police were called and the investigating officer indicated he tried to speak with the EIP.  Unfortunately, the EIP was unable to provide any details due to his highly intoxicated state.  The police report did not provide any detail as to whether a vehicle was involved in this alleged incident.

No one asked the EIP’s brother who his insurer was for the vehicle and apparently the brother repeatedly denied being involved in an accident.

The assigned arbitrator upheld the denial as he found it hard to believe no one asked the owner of the vehicle whether the vehicle was insured.  The EIP was represented by counsel within 10 days after this incident.

12/13/11         Applicant v. Allstate Ins. Co.
Arbitrator Thomas J. McCorry, Erie County
Disability Ended With Return to Work and Arbitrator Not Prepared to Hold Insurer Responsible for Costs Associated With Addiction to Pain Medication
Our own Margo Lagueras handled this difficult wage loss case.  This is the second decision reported on that Margo handled and prevailed for the insurer on a large lost wage claim.

The Applicant sought reimbursement for lost wages after a December 20, 2008, accident, in the amount of $20,987.34 from July 3, 2009 through September 16, 2011.  It is noted that there were four hearings in this case.  The insurer denied the lost wage claim upon the IME conducted by Dr. John Ring.  The insurer also submitted an affidavit from the co-manager of Applicant’s place of employment at the time of the accident.  The affidavit attested to Applicant working post-accident until January 19, 2009, when she took time off from work.  The Applicant returned to work in late June 2009 until November 2009, when she again took time off of work.  The Applicant returned in August 2009 and continued to work her regular hours and perform her usual duties.  On March 17, 2011, the Applicant was arrested at work, at her mother’s request, due to a prescription medication addiction.  Since the Applicant did not return to work she was terminated on May 29, 2011.

The Applicant argued that she should be afforded lost wage benefits during her incarceration period as the drug addiction “is a well-known side effect of the pain medication….and the No-fault carrier should be paying for this psychological treatment, as psychological treatment is specifically covered by statute and regulation.”  Yet the Applicant failed to provide any authority for such a contention.

The assigned arbitrator determined that he could not tell from the evidence when the drug addiction began.  Rather, the evidence demonstrated that post-accident the Applicant returned to work after a denial of benefits.  She then gained access to drugs that led to her arrest.  The disability period ended with the Applicant returning to work and the Applicant failed to submit any documentation of further disability.  The assigned arbitrator specifically stated that he could not determine that a no-fault insurer is responsible for payments of benefits caused by medication addictions.

12/10/11         All Care Physical Therapy Services v. State Farm Mut. Auto. Ins. Co.
Arbitrator Thomas J. McCorry, Erie County
Counsel Unilaterally Cancelling EUO Due to Testimony in Personal Injury Action Is a Policy Violation
The insurer denied the no-fault claim on a policy violation of failure to appear for two scheduled EUOs.  The Applicant admitted to not attending based upon advice of counsel.  The Applicant’s personal injury attorney submitted a letter indicating that since his client submitted to a deposition in her action he was cancelling the EUO.  The assigned arbitrator determined that this was not a valid excuse for failing to appear for scheduled EUOs. 

LITIGATION

12/13/11         Mercury Cas. Co. v. Encare, Inc.
Appellate Division, First Department
Preclusion Rule Has Narrow Exception and 5108 Violation Subject to Timely Denial
The trial court properly dismissed the complaint on the ground that a no-fault insurer is precluded from challenging a claim if the denial was untimely.  The Court rejected the insurer’s attempt to fit the case within the narrow exception to preclusion set forth in Central General and its progeny.  The Court then indicates that the exception is lack of coverage premised on the fact or a founded belief that the injury does not arise out of an insured incident.  Further, the Court rejected the argument that an insurer should not be precluded from only paying the fee schedule as required under Insurance Law 5108.  The Court reasoned that virtually every application of the preclusion rule is based upon a statute, policy provision or common law rule that effectuates the purpose of the no-fault law. 

[The import of this decision is that the insurer will be precluded from virtually all defenses, including fee schedule, if a timely denial is not issued.  The decision was unanimous.  We will keep an eye on this to see if leave will be sought to the Court of Appeals.  The insurer here had very skilled counsel in this matter and it would not surprise us to see such a motion.]

12/08/11         All Island Medical Care, PC a/a/o Paulina Gonzalez v. State Farm Mut. Auto. Ins. Co.
Appellate Term, Second Department
Plaintiff’s Failure to Call Rebuttal Witness at Trial Is Fatal
The judgment dismissing the complaint was affirmed after a non-jury trial.  The insurer established lack of medical necessity through the testimony of the peer review physician.  The plaintiff failed to call any rebuttal witness.

12/06/11         Socrates Med. Health, PC a/a/o Juan Acevedo v. Praetorian Ins. Co.
Appellate Term, First Department
Insurer Establishes Policy Violation for Failure to Attend Scheduled IMEs
The insurer established entitlement to summary judgment based upon a policy violation for failure to appear for scheduled IMEs.  The insurer submitted sufficient evidence to demonstrate proper mailing of the IME notices and that the assignor failed to appear.  The plaintiff failed to raise any issue of fact regarding the reasonableness of the request or failure to attend the IMEs.

12/06/11         Five Boro Psychological Services, PC a/a/o Larisa Skowronski v. Liberty Mut. Fire Ins. Co.
Appellate Term, Second Department
Plaintiff’s Failure to Call Rebuttal Witness at Trial Is Fatal
The insurer established lack of medical necessity based upon a peer review through submission on summary judgment of an affidavit from the expert psychologist that performed the peer review and that the claim was timely denied accordingly to the insurer’s standard office practices and procedures.  The plaintiff failed to rebut the insurer’s prima facie case and summary judgment in the insurer’s favor was appropriate. 

 

PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper
[email protected]
Property

12/15/11         Viscosi v. Preferred Mutual Ins. Co.
Court of Appeals
Leave to Appeal Definition of Collapse Denied by High Court
We have been following this case for some time.  As our review of the Fourth Department’s decision in Viscosi pointed out, there appears to be a conflict regarding the definition of “collapse” within the Fourth Department. 

By denying Viscosi’s motion for leave to appeal, we must presume that the Court of Appeals has chosen to pass on weighing in on the apparent split.  Be guided accordingly. 

09/30/11 Viscosi v Preferred Mutual Ins. Co.
Appellate Division, Fourth Department
Snow, Rain or Sleet Damage NOT Covered Unless Driven by Wind; Bowing and Sagging Ceiling NOT Collapse Under the Policy
Plaintiff commenced this action for damages sustained to his premises when water seeped into “several rooms of the covered premises.” However, where, as here, the policy excluded water damage unless it entered the premises due to damage caused by wind or hail, no such coverage was found.
Further, the Court ruled that although the ceilings at issue were noticeably bowing due to water that accumulated, it did not fall within the “collapse” coverage provided by the policy. In relevant part, the Preferred policy at issue specifically provided that “cracking, bulging, sagging, bending, leaning, settling, shrinkage or expansion” did not constitute a state of “collapse.” Accordingly, plaintiff’s claims for coverage were appropriately denied by Preferred.
Peiper’s Point – This case is notable only because of the Court’s previous decision in Khuns v Bay State Ins. Co. (reported in our 11/26/10 Coverage Pointers). In Khuns, the Court held that a building fell within collapse coverage even though it was still standing. Here, note, the Court states that because the ceiling did not “abrupt[ly] fall down or cave in” collapse coverage was not triggered.

12/06/11         Mallory v Allstate Insurance Company
Appellate Division, Second Department
Possible Violations of Fair Claims Act DOES NOT Result in the Waiver of Policy Defenses
Plaintiff commenced this action to recover under a fire insurance policy issued by Allstate.  In its Answer, Allstate asserted several exclusions as affirmative defenses.  Plaintiff responded by moving to strike all policy defenses on the basis that Allstate’s failure to comply with 11 NYCRR 216.6(c) (“Unfair Claims Settlement” Act) operated as a waiver of all policy defenses.  For those unfamiliar with the section at issue, Section 216.6(c) requires a first party insurer to respond with 15 days of receipt of proof loss whether the coverage is accepted, denied or more investigation is needed. 

In affirming the trial court, the Second Department noted its previous precedent in De Marinis v. Tower, which unequivocally held that a violation of the time requirements imposed under the Unfair Claims Settlement Act did not constitute a waiver (akin to Insurance Law § 3420[d]) of policy exclusions. 

As we said then…

04/12/04         De MARINIS v TOWER INS. CO. OF NEW YORK
New York State Supreme Court, Appellate Division, Second Department
Violation of Insurance Department’s Fair Claims Practices Regulations Does not Preclude Insurer from Denying Coverage
Defendant issued a homeowners’ insurance policy, which covered damage to the plaintiffs’ residence, but contained an exclusion for “water damage.” Plaintiffs’ residence allegedly sustained damage due to rain, and plaintiffs filed a claim with Tower under the policy. Tower investigated the claim and disclaimed coverage due to the water damage exclusion more than 60 days after the claim was filed. Plaintiffs then commenced this action to recover damages for breach of contract. Plaintiffs asserted that Tower was precluded from disclaiming coverage because of its alleged violation of 11 NYCRR 216.6(c), which requires an insurer, “[w]ithin 15 business days after receipt by the insurer of a properly executed proof of loss and/or receipt of all items, statements and forms which the insurer requested from the claimant, to advise a claimant, or a claimant’s representative, in writing, (1) of its acceptance or rejection of a claim, or (2) that it needs more time to determine whether the claim should be accepted or rejected.”

Tower argued that its alleged failure to comply with 11 NYCRR 216.6(c) did not preclude it from disclaiming coverage based upon the policy exclusion. Rather, the common-law rule applied, providing for preclusion only if the delay in disclaiming coverage was unreasonable and resulted in prejudice to the insured. Court held that no private cause of action exists for a violation of part 216 of the Insurance Regulations. Moreover, cases have held that an insurer’s failure to comply with a different requirement of 11 NYCRR 216.6(c) was insufficient to estop the insurer from relying upon the plaintiff’s failure to commence an action within the limitations period provided in the policy. Applying those cases to the facts of this case, court held that Tower’s failure to comply with 11 NYCRR 216.6(c) did not preclude it from relying on a policy exclusion to disclaim coverage. The court further held, however, that Supreme Court properly denied Tower’s motion for summary judgment dismissing the complaint. “Water Damage” was defined as: “(1) Flood, surface water, waves, tidal water, overflow of a body of water, or spray from any of these, whether or not driven by wind; (2) Water which backs up through sewers or drains or which overflows from a sump; or (3) Water below the surface of the ground, including water which exerts pressure on or seeps or leaks through a building, sidewalk, driveway, foundation, swimming pool or other structure.” Based on plaintiffs’ description of how the damage occurred (i.e., high winds causing damage to the premises and rain damage to the interior), and the description in Tower’s disclaimer letter as to how the damage occurred (as “a result of water seeping through the rear wall of [the premises’ family room]” and “water entering from the side door and traveling under the granite tiles),” Tower failed to establish a prima facie case that the policy did not cover the loss claimed.
Peiper’s Point – Special acknowledge to our Editor who commented on De Marinis decision long before the birth of Peiper on Property. 

Potpourri

12/20/11         US National Bank Association as Trustee v Melton
Appellate Division, First Department
Delay of More Than One Year Is Fatal to Motion to Vacate Default
Defendant moved to vacate a default that was taken against him in May of 2009.  Initially, we provide the timeline of this case:

5/2006 -          Summons and Complaint served via CPLR 308(2) upon an adult co-tenant of defendant
5/08/06 -         Summons and Complaint served via US Postal Service at
defendant’s address
04/15/08 -      Default Judgment entered
05/05/09 -      Property sold a foreclosure auction
05/2010 -       Defendant moves to vacate the default

Defendant attempts to excuse his default by arguing that he does not remember receiving the mailed Summons and Complaint.  In addition, defendant’s counsel averred that the co-tenant that accepted the Summons and Complaint did not speak English, and as such a hearing was necessary to determine whether she properly provided a copy to defendant. 

The Court denied the motion on the basis that defendant’s confusion over whether he received the complaint could not rebut the prima facie proof offered by an affidavit of service.  In addition, the attorney’s affirmation regarding the competency of the co-tenant’s acceptance of service was made without personal knowledge, and, as such, was without probative value.  Moreover, the Court held that there was no evidence of a reasonable excuse for the default.  Finally, the Court noted that defendant’s delay of more than one year in moving to vacate the default was likewise fatal to his effort. 

12/20/11         Great Am. Ins. Cos. v. Bearcat Fin. Services, Inc. and Hayes
Appellate Division, First Department
Common Law Indemnity Claim Can Not Exist Where the Only Claim Is Negligence Against Party Seeking Protection
Great American commenced this action, in part, against Hayes as a result of Hayes’ own wrongdoing.  In response, Hayes commenced a third-party action seeking common law indemnification against another party, Dresdner.  Dresdner moved to dismiss the common law claim on the basis that the main-party action filed by Great American only sought to recover for actions committed solely by Hayes.  Accordingly, where the only basis for liability against Hayes was his own liability, it was impossible for a claim of common law indemnification to ripen. 

Interesting enough standing alone, but the fact that Hayes’ counsel was actually sanctioned as a result of bringing the third-party action makes this decision especially noteworthy.  In the opinion of the Trial Court, and affirmed by the First Department, Hayes’ third-party action seeking a remedy that was impossible to obtain was patently frivolous. 

12/13/11         Pritchard v. Suburban Carting Corp.
Appellate Division, Second Department
Indemnity Language “In, On or About Premises” Interpreted to Mean “Around or On the Outside Of”
Plaintiff commenced the instant action after she was struck by a garbage truck in the parking lot of a McDonald’s Restaurant.  Plaintiff’s action was brought against owner/operator of the truck, as well as the owner of the premises (Centro), tenant (McDonalds) and franchisee (Wong) for negligent ownership, maintenance, repair, inspection and design of the parking lot.  Upon being named in the lawsuit, Centro commenced a cross-claim for contractual indemnification against McDonalds pursuant to language in the Centro/McDonald’s lease.

The Trial Court denied Centro’s motion for summary judgment on the indemnification clause on a question of fact.  In reversing, the Second Department first noted that clause provided indemnity, in relevant part, “for any accident, injury…arising, directly or indirectly, out of the business conducted in the Premises, occurring in, on or about the Premises or any part thereof.”  The Court noted that the term “in or about” is a term of art that is synonymous with “around or on the outside of.”

Moreover, the Court noted that the indemnity clause was also triggered where the incident arose from McDonald’s business.  It is uncontroverted that plaintiff was in the process of leaving the restaurant when she was struck.  Given the expansive definition of the term “arising out of” the Court was convinced that the indemnity provision was triggered. 

Finally, the Court held that Centro had established that it was not negligent in the design or maintenance of the parking lot. Regardless of negligence, the Court went on to find that the design of the parking lot was not the proximate cause of plaintiff’s injury.

 

CASSIE’S CAPITAL CONNECTION
Cassandra A. Kazukenus
[email protected]

Circular Letter 14 (2011)

DFS issued a circular letter to all domestic insurers and Public Health Law Article 44 HMO stressing the importance of enterprise risk management (“ERM”) and its expectation that every insurer will adopt a formal ERM function.  Per the Department, ERM means “any activity, circumstance, event or series of events involving one or more affiliates of an insurer that, if not remedied promptly, is likely to have a material adverse effect upon the financial condition or liquidity of the insurer or its insurance holding company system as a whole.”

The Department recently established criteria to assess an insurer’s ERM practices which includes a process for evaluating an insurer’s ability to identify, measure, aggregate and manage risk exposures within predetermined guidelines across all activities.  It is expected that the evaluation of the insurer’s ERM practices will be done in conjunction with the statutory examination. 

When conducting an ERM evaluation, the Department will for adherence to the following ERM function objectives (not an exhaustive list):

• Objective ERM function, headed by an appropriately experienced individual that is adequately resourced to provide the insurer’s board of directors and management with an ongoing assessment of the insurer’s risk profile.
• A written risk policy that delineates the insurer’s risk/reward framework, risk tolerance levels and risk limits.
• A process of risk identification and quantification supported by documentation providing detailed descriptions and explanations for the risks identified, the measurement approaches used, key assumptions made and outcomes of any plausible adverse scenarios that were run.  Prospective solvency assessments should be a key component.
• An insurer should address as part of its ERM all reasonably foreseeable and relevant material risks including, insurance, underwriting, asset-liability matching, credit, market, operational, reputational, liquidity and any other significant risks.

 

FIJAL’S FEDERAL FOCUS
Katherine A. Fijal
[email protected]

12/12/11         Gilbane Building Company v. Admiral Insurance Company
Fifth Circuit Court of Appeals - Texas
Determining the Duty to Defend and the Duty to Indemnify an Additional Insured
This coverage dispute arises out of an underlying personal injury lawsuit brought by Michael Parr against Gilbane Building Company [“Gilbane”].  Gilbane, a general contractor, sought defense and indemnification from Admiral Insurance Company based on an insurance policy issued to Empire Steel Erectors [“Empire”], a subcontractor.

The district court determined that Admiral owed a duty to defend and indemnify.  The Fifth Circuit Court of Appeals [“Court”] reversed on the duty to defend and affirmed on the duty to indemnify.

Parr sustained injuries on a construction site while climbing down a ladder.  He sued Gilbane and Baker Concrete, the company responsible for installing and maintaining ladders at the site.  Parr did not sue his employer, Empire.  Parr alleged that recent rainstorms had caused the construction site to accumulate mud and that Gilbane had been negligent in failing to keep the workplace clean.

Gilbane tendered its defense and indemnification to Admiral as an additional insured under the CGL policy issued to Empire.  The Admiral policy provided coverage to additional insureds for their own or their agents’ acts or omissions, so long as Empire had previously assumed the liability of the potential additional insured in a written contract. Admiral denied Gilbane’s tender.  Parr and Gilbane eventually settled the lawsuit, and Gilbane filed an action for declaratory judgment and breach of contract against Empire and Admiral, seeking a declaration that Admiral had a duty to defend and indemnify it.  As noted above the district court found that Admiral owed Gilbane both a defense and indemnification.

On appeal, the Court addressed the issues applying Texas law.  In Texas the duties to defend and indemnify are distinct and they are to be decided separately.  Two documents determine the insurer’s duty to defend: the insurance policy and the plaintiff’s pleadings in the underlying litigation, which the court must review “without regard to the truth or falsity of those allegations” – the eight-corners rule.

The duty to indemnify, on the other hand, is a matter dependent on the facts and circumstances of the alleged injury-causing event, and the parties may introduce evidence during coverage litigation to establish or refute the duty to indemnify.

In addressing the duty to defend the Court noted that it was required to consider two issues:  (1) whether Gilbane qualifies as an additional insured under the policy, and (2) whether, under Texas’s strict eight-corners rule, the facts alleged in the underlying Parr lawsuit are sufficient to trigger Admiral’s duty to defend Gilbane.

On the first issue of additional insured status, Admiral argued that the Trade Contract Agreement [“TCA”] between Gilbane and Empire was not an “insured contract” because its indemnity provision was unenforceable under Texas law.  Admiral argued that the TCA did not comply with the express negligence doctrine, which requires that the intent to indemnify a party from the consequences of its own negligence “must be specifically stated in the four corners of the document.”

The Court assumed, without deciding, that the TCA’s indemnity provision was unenforceable under Texas law.  However, the Court went on to decide that the TCA could still be an “insured contract” under the policy even though that precise issue had never been addressed by the Texas Supreme Court.  Reviewing prior precedent in the Fifth Circuit the Court noted that the additional insured question did not turn on the enforceability of the TCA, but whether Empire agreed to “assume the tort liability of another party”.  In the TCA, Empire contracted not only to indemnify Gilbane, but also to secure insurance on its behalf; and, by doing so, it agreed to assume Gilbane’s tort liability.  The Court stated that that provision is not rendered void by the indemnity provision, even if it is unenforceable.  The Court concluded that Empire agreed to assume Gilbane’s tort liability and as a result Gilbane qualified as an additional insured.

Having determined that Gilbane qualified as an additional insured the Court analyzed whether the pleadings triggered the duty to defend.  Since Texas strictly follows the “eight-corners rule”, i.e., that the duty to defend may only be determined by the facts alleged in the petition and the coverage provided in the policy, the Court only considered facts alleged in the underlying pleading, and took those facts as true.  Additional facts outside the pleading were not considered.

First, the Court analyzed the policy which provided additional insured coverage “only with respect to “bodily injury” . . . caused, in whole or in part, by [Empire’s] acts or omissions; or . . . the acts or omissions of those acting on Empire’s behalf”.   Gilbane argued that interpretation of the policy should turn on the phrase “with respect to”, which has been interpreted as requiring less than proximate cause.  The Court disagreed because when the policy was examined as a whole, the policy explicitly required that the injuries be “caused in whole or in part” by Empire.  The Court further noted that the Texas Supreme Court had defined “caused by” as requiring proximate causation.  As such, Admiral would owe Gilbane a duty to defend only if the underlying pleadings alleged that Empire proximately caused Parr’s injuries.

Next, the Court analyzed the facts alleged in the pleadings.  The Court noted that the Petition alleged only one cause of his injuries, “Parr’s injures were brought to occur, directly and proximately by reason of the negligence of the Defendants herein” – the Gilbane defendants.

The district court determined that the pleadings did not conclusively rule out Parr’s negligence, opining that it was possible a jury could eventually find that Parr [acting on behalf of Empire] caused his own injuries.   The Court, however, held that such construction improperly shifts the burden of proof, requiring a party disputing coverage to establish that the pleadings do not potentially support a covered claim.  Applying the correct standard, the allegations in the pleadings do not implicate either Parr’s or Empire’s fault.  Accordingly, the Court found that Admiral has no duty to defend.

The Court was also asked to address a possible exception to the eight-corners rule and allow facts not alleged in the petition.  Since the issue had never been addressed by the Texas Supreme Court, the Court declined to look outside the petition.

The final issue addressed by the Court was whether Admiral had a duty to indemnify. Noting that the duty to indemnify is separate and distinct from the duty to defend, the duty to indemnify is controlled by the facts proven in the underlying suit.

The district court found that Parr was injured when he slipped while descending a ladder carrying an extension cord.  He told a co-worker immediately after he fell that his “feet got wrapped up in the extension cord”.  The district court concluded that “Parr’s own conduct was a contributing proximate cause of his damages claimed in the Underlying Lawsuit” and that a jury in the Underlying Lawsuit would have found Parr or his employer, Empire, 1% or more responsible for causing the occurrence and/or injuries at issue.  Therefore, under the terms of the policy Admiral had a duty to indemnify Gilbane.
The Court agreed with the district court finding that Admiral owes Gilbane a duty to indemnify for the costs of its settlement with Parr.

Although it is unusual to find a duty to indemnify where there is no duty to defend, similar results have been upheld by the Texas Supreme Court which held that it is possible to prove facts at trial that give rise to a duty to indemnify even when those same facts were not sufficiently pleaded to trigger the duty to defend. 

 

JEN’S GEMS
Jennifer A. Ehman
[email protected]

12/02/11         Matter of New South Ins. Co. v. Hyman
Supreme Court, Nassau County
Non-Cooperation Denial Based on Three Unanswered Phone Calls and One Unanswered Letter Fails
Juan Rivera was in a motor vehicle accident.  At the time of the accident, he was 15 years old and did not have a driver’s license.  This decision arises out of a framed issue hearing that addressed whether Juan was driving the vehicle with permission and whether the insured, Jose Rivera, cooperated with his insurance carrier, Nationwide.  Presumably, although not explicitly stated in the facts, the case is postured in this manner because Nationwide denied coverage and the injured party then moved for an Uninsured Motorist Arbitration. 

In considering the facts, the court determined that Nationwide failed to rebut the strong presumption of permissive use.  The only evidence Nationwide relied on was a note in its adjuster’s file detailing a conversation she had with another employee of Nationwide who allegedly had a conversation with Juan and his mother.  In this conversation, Juan allegedly stated that he did not have permission to drive the car, but was practicing for his learner’s permit. 

Likewise, the court also rejected Nationwide’s denial based on non-cooperation.  According to Nationwide’s records, the adjuster made three phone calls to Jose Rivera, which went answered.  There was no answering machine so no message was left.  The adjuster then sent a letter, but received no response.  It was unclear whether this letter was sent certified mail, and whether a return receipt card was received.  While the adjuster had asked that outside personnel visit the insured, this request was denied by her manager. 

Based on Jose Rivera’s failure to respond, Nationwide denied coverage.  To deny coverage based on lack of cooperation, the insurer is required to demonstrate that it acted diligently in seeking to bring about the insured’s cooperation.  Further, that the efforts employed were reasonably calculated to obtain the insured’s cooperation and that the attitude of the insured, after cooperation was sought, was one of willful and avowed obstruction. 

Here, the court determined that it could only speculate as to whether Jose Rivera received notice from his insurance company.  The record only established possible inaction by the insured, which did not rise to the level of noncooperation.  Three phone calls and one letter, under these factual circumstances, was insufficient to meet Nationwide’s burden. 

11/30/11         Jericho Atrium Assoc. v. Travelers Prop. Cas. Co. of Am.
Supreme Court, Nassau County
Coverage Triggered for Accident at Uninsured Property; Dangerous Condition Existed While Property Was Insured
Mary Bozzello slipped and fell at 500 North Broadway, Jericho, New York.  She commenced an action against Jericho Atrium Associates (“Jericho”).  By all accounts, no one disputed that Jericho had sold the premises ten days before Ms. Bozzello’s slip and fall.  Nonetheless, in her complaint, she alleged that Jericho was still liable under an exception to the general rule that liability for dangerous conditions on land does not extend to a prior owner.  The exception, relied on, applied where the dangerous condition existed at the time of the conveyance and the new owner did not have a reasonable time to discover the condition, if it was unknown, and to remedy the condition once it was known. 

Jericho tendered its defense in the action to defendant, Travelers.  Travelers denied the tender because when ownership was transferred, by request of Jericho, coverage was removed for the subject premises.  In fact, Travelers refunded the portion of the premium related to the property.  Thus, the policy was not triggered because 500 North Broadway did not appear on the schedule as a covered property on the date of loss.

In a creative argument, while not disputing that the property was sold, Jericho asserted that the conduct Ms. Bozzello seeks to recover for was engaged in during Jericho’s ownership of the property.  In reply Travelers’ argued, “[t]he simple fact of this dispute is that there was no coverage afforded under the Travelers Policy on the date of the loss, as the Subject Premises were removed from coverage at the request of the plaintiff...[t]his is an ‘occurrence’ based policy.  In other words, coverage is only triggered by bodily injury or property damage which occurs during the policy period.”  

Ultimately, in agreeing with Jericho, the court held that the Bozzello Complaint alleged that the condition which caused Ms. Bozzello’s injuries existed when Jericho was covered by the Travelers policy.  Thus, since the duty to defend is triggered whenever the allegations of the complaint suggest a reasonable possibility of coverage, Travelers has such a duty. 

Take Away:  Unless something crucial was omitted from these facts, Travelers was completely correct.  It issued an “occurrence” based policy.  An “occurrence” is essentially an accident.  Here, the accident occurred when Ms. Bozzello fell, which occurred after the property was removed from coverage.  The accident did not occur when the condition was created.   

EARL’S PEARLS
Earl K. Cantwell
[email protected]

EMBEZZELMENT SCHEME A SINGLE INTER-RELATED CLAIM OCCURRENCE

An Illinois appeals court recently limited an insurance company’s liability for several probate estates victimized by a law firm employee’s embezzlement scheme to the $100,000.00 policy limits for a single, related claim.  Despite involving a number of different estates, the scheme involved a common fact pattern.  Continental Casualty Co., v. Howard Hoffman & Associates, et al., 2011 WL 3612291 (Illinois Appellate Court, 1st Division, August 15, 2011). 

Despite involving the accounts of different estates, the scheme involved a common fact pattern.  The employee wrote checks to herself on the accounts of several estates and concealed her actions from the firm’s attorneys.  She eventually pleaded guilty to eleven (11) separate charges of theft, and the total amount of restitution entered was over $600,000.00.

Continental filed a declaratory judgment action to determine the total coverage it was obligated to provide the law firm under its policy which contained liability limits of $100,000.00 per claim and $300,000.00 in the aggregate.   The policy provided that claims are related if they arose from a single act or omission, or acts in the rendering of legal services that are connected “…by any common fact, circumstance, situation, transaction, event, advice or decision.” 

The trial court granted Continental summary judgment, ruling that the $100,000.00 single limit applied to all claims arising from the embezzlement scheme because they were all “related”.  The law firm and estates appealed, arguing that the claim should not be aggregated because the money was taken from accounts of several different estates at different times. 

The appellate court upheld the trial court and disagreed with the claimants because the loss involved a distinct pattern of operation whereby the employee would forge checks and conceal them by destroying bank statements and preparing false bookkeeping reports.  The appellate court also held that the law firm’s alleged negligent supervision of the employee was causally connected to the embezzlement because alleged poor oversight allowed the scheme to exist and continue.  Therefore, Continental was not required to pay more than $100,000.00 to cover the civil claims arising from the embezzlement scheme asserted against the law firm. 

This case is an interesting twist on the question of multiple occurrences and multiple acts or omissions under an errors and omissions or professional malpractice policy.  Even though the thefts were separate in the sense of being perpetrated at different times against different estates, the courts still reasoned that they were connected and subject to the single policy limit because the entire scheme was inter-related and connected through a common pattern of conduct and perpetration.

 

ACROSS BORDERS
Courtesy of the FDCC Website
www.thefederation.org

12/16/11         Alsidez v. American Family Mut. Ins.
Nebraska Supreme Court
Vehicle Owned by Named Insured and Covered Under the Policy is Not an Underinsured Vehicle
Anthony Alsidez was killed in a single-car accident on while he was driving a 1996 Jeep Grand Cherokee Laredo, which was owned by Melissa Alsidez his mother. The accident was caused by the conduct of a passenger in the car. The liability carrier for the passenger paid policy limits. Underinsured benefits were sought from the insurer of the Jeep. This coverage was denied based on policy language which provided that vehicles which were “[o]wned by or furnished or available for the regular use of you or a relative” were excluded from coverage as underinsured vehicles. The Court found that there was no coverage under this policy and that this exclusion did not violate public policy.
Submitted by: Kay Gaffney Crowe, Barnes, Alford, Stork & Johnson, Columbia SC

12/08/11         The Automobile Ins. Co. of Hartford v. Lipscomb
Mississippi Supreme Court
Exclusions in HO Policy Precludes Coverage Where Insured Using Part of His Property for Rentals and Policy Excluded Coverage for Businesses Engaged in by Insured or Arising Out of Insured Property Rentals
The Mississippi Supreme Court found that two exclusions in a homeowner’s policy’s personal liability coverage applied to preclude coverage where the insured was utilizing part of his property as rental property and the policy excluded coverage for businesses engaged in by an insured or arising out of the rental of any premises by the insured.

William Lipscomb owned his personal residence and rental property in Jackson, Mississippi. The property included a two-story building set apart from the main house that Lipscomb rented out as apartments. The first-floor apartment was rented by Whittington, the decedent. Whittington died after a fire broke out in the apartment. The American Insurance Company homeowner’s policy provided for personal liability coverage. After the fire, AIC denied coverage based upon the exclusion for injury “arising out of or in connection with a business engaged in by any insured” and based upon a second exclusion for injury “arising out of the rental . . . of any premises by any insured.” The Mississippi Supreme Court examined the two relevant exclusions and concluded that the conduct alleged in plaintiff’s complaint was outside the coverage of the policy. Lipscomb had built the apartment building for the purpose of renting it and it had been rented since its construction. He advertised the apartment for rent by placing an “apartment-for-rent” sign in the front yard of his personal residence. At the time of the fire, his only source of income was rental income. Lipscomb never received a copy of the policy until after the fire, and his agent told him before and after the fire that he was fully covered. The agent also knew that Lipscomb rented rooms in his home as well as the apartment building behind the house. The court noted that Lipscomb’s policy clearly precludes coverage when injury occurs that arises out of or in connection with a business engaged in by the insured or that arises out of rental of any premises by the insured. Since the conduct alleged in the complaint falls outside of coverage, AIC had no duty to defend Lipscomb.
Submitted by: Stacy Broman, Meagher & Geer

Reported Decisions

Palumbo v. Carey

Lerner, Arnold & Winston, LLP, New York, N.Y. (Charles M. Arnold and Constance Mollick of counsel), for appellant.
Leahey & Johnson, P.C., New York, N.Y. (Peter James Johnson, Jr., Joanne Filiberti, Gabriel M. Krausman, and James P. Tenney of counsel), for respondents.

DECISION & ORDER

In an action to recover damages for personal injuries, the plaintiff appeals from so much of an order of the Supreme Court, Kings County (Bayne, J.), dated May 6, 2011, as denied that branch of his motion which was, in effect, pursuant to CPLR 3211(b) to dismiss the sixth affirmative defense alleging the lack of 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 plaintiff's motion which was, in effect, pursuant to CPLR 3211(b) to dismiss the sixth affirmative defense alleging the lack of a serious injury within the meaning of Insurance Law § 5102(d) is granted.

The Supreme Court should have granted that branch of the plaintiff's motion which was, in effect, pursuant to CPLR 3211(b) to dismiss the sixth affirmative defense alleging the lack of a serious injury within the meaning of Insurance Law § 5102(d). The verified complaint, the police accident report, and the deposition testimony of the parties all indicated that the subject accident took place in New Jersey, and the defendants did not argue to the contrary in opposition to the plaintiff's motion, nor did they present any evidence suggesting that the accident may have occurred in New York. Since the serious injury threshold requirement set forth in Insurance Law § 5102(d) is expressly limited to only those motor vehicle accidents which occur "in this state" (Insurance Law § 5104[a]), that requirement is inapplicable to this matter (see Hunter v OOIDA Risk Retention Group, Inc., 79 AD3d 1, 7; Ofori v Green, 74 AD3d 474, 475; Federal Ins. Co. v Barsky, 267 AD2d 275, 276; Matter of McHenry v State Ins. Fund, 236 AD2d 89, 91; Morgan v Bisorni, 100 AD2d 956, 956-957). Accordingly, the plaintiff sustained his burden of demonstrating that the serious injury threshold defense is without merit as a matter of law (see Butler v Catinella, 58 AD3d 145, 147-148), thereby warranting the dismissal of that affirmative defense pursuant to CPLR 3211(b).

The defendants' remaining contentions are without merit.

Robinson v. Cameron

Herbert G. Lindenbaum, PLLC, New York, N.Y., for appellant.
Wilson Elser Moskowitz Edelman & Dicker LLP, White Plains, N.Y. (Stuart A. Miller and Brian J. Matthews of counsel), for respondents.
Picciano & Scahill, P.C., Westbury, N.Y. (Francis J. Scahill and Andrea E. Ferrucci of counsel), for defendant Brandon Cameron.

DECISION & ORDER
In an action to recover damages for personal injuries, the plaintiff appeals, as limited by his brief, from so much of an order of the Supreme Court, Kings County (R. Miller, J.), dated June 29, 2010, as granted that branch of the motion of the defendants Jacek Kochanowski and Page Taxi Corp. which was for summary judgment dismissing the complaint insofar as asserted against them on the ground that he did not sustain a serious injury within the meaning of Insurance Law § 5102(d).

ORDERED that the order is affirmed insofar as appealed from, with costs payable to the respondents.

The Supreme Court correctly determined that the evidence submitted in support of the motion of the defendants Jacek Kochanowski and Page Taxi Corp. (hereinafter together the defendants) was sufficient to meet their prima facie burden of showing that the plaintiff, who allegedly sustained injuries to the lumbar and cervical regions of his spine and both shoulders as a result of the accident, did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the 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.

Accordingly, the Supreme Court correctly granted that branch of the defendants' motion which was for summary judgment dismissing the complaint insofar as asserted against them.

In light of our determination, the defendants' remaining contention has been rendered academic.

In the Matter of Rogers v. Progressive Ins. Co.

Teresa Girolamo, Miller Place, N.Y., for appellant.
Ameduri Galante & Friscia, Staten Island, N.Y. (Marvin Ben-Aron of counsel), for respondents.

DECISION & ORDER

In two related proceedings pursuant to CPLR article 75, Progressive Northeastern Insurance Company appeals, as limited by its brief, from so much of (1) an order of the Supreme Court, Richmond County (Fusco, J.), dated October 12, 2010, as denied that branch of its petition in Proceeding No. 1 which was to permanently stay arbitration of the claim of Margaret Rogers and Eugene Rogers for uninsured motorist benefits, and (2) an order of the same court, also dated October 12, 2010, as granted the petition of Margaret Rogers and Eugene Rogers in Proceeding No. 2 to compel arbitration of their claim for uninsured motorist benefits, and denied that branch of its cross petition in Proceeding No. 2 which was to permanently stay arbitration of that claim.

ORDERED that the orders are affirmed insofar as appealed from, with one bill of costs.

The appellant, Progressive Northeastern Insurance Company (hereinafter Progressive), issued an automobile insurance policy (hereinafter the policy) covering a 1985 Buick automobile owned and operated by Eugene Rogers and Margaret Rogers (hereinafter together the respondents). The policy included a statutorily mandated uninsured motorist endorsement (hereinafter the UM endorsement) (see Insurance Law § 3420[f][1]) and an optional supplementary uninsured/underinsured motorist endorsement (hereinafter the SUM endorsement) (see Insurance Law § 3420[f][2]). In February 1998 the Buick, operated by Margaret Rogers, collided with a vehicle driven by Ross S. Grieff and insured by Legion Insurance Company (hereinafter Legion). Progressive informed the respondents that any and all claims arising from the accident must be presented to Legion.

In 2000 the respondents commenced a personal injury action against Grieff in the Supreme Court, Richmond County, alleging that he was at fault. In July 2003 Legion was declared insolvent, and all claims against it were assumed by the New York Public Motor Vehicle Liability Security Fund (hereinafter the PMV Fund) (see Insurance Law §§ 7601, et seq.). Grieff failed to appear in the personal injury action and, in August 2005, the Supreme Court issued an order directing entry of a money judgment in favor of the respondents and against Grieff. In a letter dated December 30, 2009, the PMV Fund informed Grieff and the respondents of its denial of all claims against it for indemnification in connection with the subject accident. In April 2010 the respondents served Progressive with a demand for arbitration, and filed and served a petition to compel arbitration of their claim pursuant to the UM endorsement of the Policy. Progressive cross-petitioned to permanently stay arbitration and also commenced a separate proceeding to stay arbitration, alleging that the respondents' claim was time-barred. In the two orders appealed from, the Supreme Court, respectively, granted the respondents' petition and denied Progressive's cross petition, and denied Progressive's separate petition, holding, inter alia, that the respondents' claim accrued when the PMV Fund denied coverage on December 30, 2009, and, thus, that the respondents' petition was timely.

On appeal, the parties do not dispute that the six-year statute of limitations for contract claims (see CPLR 213[2]) governs the respondents' proceeding against Progressive to compel arbitration of their claim under the policy (see Jenkins v State Farm Ins. Co., 21 AD3d 529). The sole issue before us is the date on which the limitations period started to run.

A claim under the UM endorsement of an automobile insurance policy "accrues either when the accident occurred or when the allegedly offending vehicle thereafter becomes uninsured" (id. at 530; see Matter of Allstate Ins. Co. v Giordano, 108 AD2d 910, affd 66 NY2d 810). Here, the 12-year period between the accident and the filing of the respondents' petition establishes, prima facie, that the proceeding to compel arbitration was untimely, and the burden shifted to the respondents to establish an accrual date later than the date of the accident (see Jenkins v State Farm Ins. Co., 21 AD3d at 530; Matter of State Farm Mut. Auto. Ins. Co. v Avena, 133 AD2d 159, 161).

The respondents met their burden with evidence that the PMV Fund did not deny coverage within the meaning of Insurance Law § 3420(f)(1) until December 30, 2009. Where the alleged tortfeasor's insurer becomes insolvent, the PMV Fund assumes the obligations of the defaulting insurer, and the injured party is precluded from proceeding against his or her own insurer pursuant to the UM endorsement of the relevant automobile insurance policy until the PMV Fund disclaims liability or denies coverage (see State-Wide Ins. Co. v Curry, 43 NY2d 298, 301-303; Matter of Eagle Ins. Co. v Hamilton, 16 AD3d 498, 503). Here, the letter dated December 30, 2009, unequivocally states that "any claim . . . pursuant to Article 76 of the New York Insurance Law for indemnification from the PMV Fund is denied" (cf. Matter of Eagle Ins. Co. v Hamilton, 16 AD3d at 503). Therefore, the respondents' claim against Progressive for UM benefits did not accrue until December 30, 2009, and, accordingly, the limitations period did not begin to run until that date.

Progressive contends, however, that the limitations period commenced to run when Legion became insolvent in July 2003 because the respondents, as purchasers of optional SUM coverage, were "entitled to seek such benefits upon the insolvency of the alleged tortfeasor's insure[r] and need not proceed against the PMV Fund" (Matter of Metropolitan Prop. & Cas. Ins. Co. v Carpentier, 7 AD3d 627, 628; see Matter of American Mfrs. Mut. Ins. Co. v Morgan, 296 AD2d 491, 493-494). Progressive's suggestion that the respondents are seeking SUM benefits is unsupported by the record. In both the respondents' demand for arbitration and their petition to compel arbitration, they expressly seek benefits only under the UM endorsement of the policy. The accrual date of the respondents' claim for UM benefits is not affected by their election not to pursue a claim for benefits under the SUM endorsement.

Spentrev Realty Corp. United National Spec. Ins. Co.

Decolator, Cohen & DiPrisco, LLP, Garden City, N.Y. (Joseph L. Decolator of counsel), for appellant.
Miranda Sambursky Slone Sklarin Verveniotis LLP, Mineola, N.Y. (Steven Verveniotis and Jonathan B. Isaacson of counsel), for defendant-respondent.

DECISION & ORDER

In an action for a judgment declaring the rights and obligations of the parties with respect to an insurance policy, the defendant Angel Martinez appeals from an order of the Supreme Court, Kings County (Schneier, J.), dated July 19, 2010, which granted the cross motion of the defendant United National Specialty Insurance Company for summary judgment declaring, inter alia, that it is not obligated to defend and indemnify the plaintiff, Spentrev Realty Corp., or Angel Martinez with respect to claims asserted in an underlying action entitled Martinez v Spentrev Realty Corp., pending in the Supreme Court, Kings County, under Index No. 12479/2007, and denied his motion for summary judgment declaring that the defendant United National Specialty Insurance Company is obligated to defend and indemnify its insured, the plaintiff, Spentrev Realty Corp., in the underlying action.

ORDERED that the order is affirmed, with costs, and the matter is remitted to the Supreme Court, Kings County, for the entry of a judgment declaring that the defendant United National Specialty Insurance Company is not obligated to defend and indemnify the plaintiff, Spentrev Realty Corp., or Angel Martinez with respect to claims asserted in the underlying action.

Where an insurance policy, such as the one in this case, requires an insured to provide notice of an accident or loss as soon as practicable, such notice must be provided within a reasonable time in view of all of the facts and circumstances (see Merchants Mut. Ins. Co. v Hoffman, 56 NY2d 799, 801-802; Travelers Indem. Co. v Worthy, 281 AD2d 411). "Providing an insurer with timely notice of a potential claim is a condition precedent, and thus [a]bsent a valid excuse, a failure to satisfy the notice requirement vitiates the policy'" (Sayed v Macari, 296 AD2d 396, 397, quoting Security Mut. Ins. Co. of N.Y. v Acker-Fitzsimons Corp., 31 NY2d 436, 440; see Argo Corp. v Greater N.Y. Mut. Ins. Co., 4 NY3d 332, 339).

Insurance Law § 3420(a)(3) gives the injured party an independent right to give notice of the accident and to satisfy the notice requirement of the policy. However, the injured party has the burden of proving that he or she, or counsel, acted diligently in attempting to ascertain the identity of the insurer, and thereafter expeditiously notified the insurer (see Steinberg v Hermitage Ins. Co., 26 AD3d 426, 428). "In determining the reasonableness of an injured party's notice, the notice required is measured less rigidly than that required of the insured[ ]" (Malik v Charter Oak Fire Ins. Co., 60 AD3d 1013, 1016 [internal quotation marks omitted]). "The injured person's rights must be judged by the prospects for giving notice that were afforded him, not by those available to the insured. What is reasonably possible for the insured may not be reasonably possible for the person he has injured. The passage of time does not of itself make delay unreasonable" (Lauritano v American Fid. Fire Ins. Co., 3 AD2d 564, 568, affd 4 NY2d 1028).

The Supreme Court properly determined that the defendant Angel Martinez, the plaintiff in the underlying personal injury action, failed to raise a triable issue of fact sufficient to rebut the prima facie showing made by the defendant, United National Specialty Insurance Company (hereinafter United), in support of its cross motion for summary judgment (see Alvarez v Prospect Hosp., 68 NY2d 320, 327; Zuckerman v City of New York, 49 NY2d 557, 562). Likewise, Martinez failed to meet his prima facie burden on his motion for summary judgment. Here, no triable issues of fact exist as to whether Martinez failed to diligently ascertain the identity of United or exercised his right to timely notify it of his claim (see Insurance Law § 3420[a][3], [4]; Steinberg v Hermitage Ins. Co., 26 AD3d 426; Trepel v Asian Pac. Express Corp., 16 AD3d 405, 406; Ringel v Blue Ridge Ins. Co., 293 AD2d 460, 461-462; American Home Assur. Co. v State Farm Mut. Auto. Ins. Co., 277 AD2d 409, 410; Lauritano v American Fid. Fire Ins. Co., 3 AD2d at 569).

The parties' remaining contentions either are without merit or need not be addressed in light of our determination.

Since this is a declaratory judgment action, the matter must be remitted to the Supreme Court, Kings County, for the entry of a judgment declaring that the defendant United National Specialty Insurance Company is not obligated to defend and indemnify the plaintiff, Spentrev Realty Corp., or Angel Martinez with respect to claims asserted in the underlying action (see Lanza v Wagner, 11 NY2d 317, appeal dismissed 371 US 74, cert denied 371 US 901).

In the Matter of Elrac, Inc. v. Exum

Michael F. Ingham, for appellant.
Robin Grumet, for respondent.

SMITH, J.:

We hold that a self-insured employer whose employee is involved in an automobile accident may be liable to that employee for uninsured motorist benefits, notwithstanding the exclusivity provision of the Workers' Compensation Law.

Birtis Exum was an employee of Elrac, Inc. (a subsidiary of Enterprise Rent-A-Car Company). While driving, in the course of his employment, a car owned by Elrac, Exum was in an accident with another car, driven by a person without liability insurance. Elrac was self-insured, as allowed by Vehicle and Traffic Law § 370 (3), and thus had not obtained an insurance policy to cover the car Exum was driving.

Exum served a notice of intention to arbitrate on Elrac, seeking uninsured motorist benefits. Elrac petitioned to stay the arbitration. Supreme Court granted the petition, but the Appellate Division reversed, permitting the arbitration to proceed (Matter of ELRAC, Inc. v Exum, 73 AD3d 431 [1st Dept 2010]). The Appellate Division granted leave to appeal to this Court, and we now affirm.

Insurance Law § 3420 (f) (1) requires every policy of motor vehicle liability insurance to contain a provision requiring payment to the insured of all sums, up to $25,000 in the case of injury and $50,000 in the case of death, that the insured is entitled to recover as damages from the owner or operator of an uninsured motor vehicle. In Matter of Allstate Ins. Co. v Shaw (52 NY2d 818 [1980]), we considered the application of this requirement to self-insurers, and held that a self-insurer had the same liability for uninsured motorist coverage that an insurance company would have. We said that, by authorizing self-insurance, the Legislature "in no way intended to decrease the insurance protection presently available" (id. at 820).

The rationale of Shaw applies here. There is no policy reason why Exum's uninsured motorist protection should decrease because he happened to be driving the car of a self-insurer.

But there is a difference between this case and Shaw: here the person claiming uninsured motorist coverage was an employee of the self-insurer. It is undisputed that Exum was entitled to workers' compensation benefits from Elrac, and Elrac claims that he is therefore barred from recovering uninsured motorist benefits. Exum points out that we permitted an employee of a self-insurer to recover in Matter of Country-Wide Ins. Co. (Manning) (62 NY2d 748 [1984]), which involved essentially indistinguishable facts. Because we did not discuss the workers' compensation issue in Manning, however, we assume that the issue is open.

Workers' Compensation Law § 11 says:

"The liability of an employer [for workers' compensation benefits] . . . shall be exclusive and in place of any other liability whatsoever, to such employee, his or her personal representatives, spouse, parents, dependents, distributees, or any person otherwise entitled to recover damages, contribution or indemnity, at common law or otherwise, on account of such injury or death or liability arising therefrom."

Although the words "any other liability whatsoever" seem all-inclusive, there are cases — of which this is one — in which they cannot be taken literally (see Billy v Consolidated Mach. Tool Corp., 51 NY2d 152 [1980]). Specifically, the statute cannot be read to bar all suits to enforce contractual liabilities. If an employer agrees, as part of a contract with an employee, to provide life insurance or medical insurance, and breaches that contract, an action to recover damages for the breach would not be barred, though the action might literally be "on account of . . . injury or death."

An action against a self-insurer to enforce the liability recognized in Shaw is, in our view, essentially contractual. The situation is as though the employer had written an insurance policy to itself, including the statutorily-required provision for uninsured motorist coverage. This action is therefore not barred by Workers' Compensation Law § 11.

Accordingly, the order of the Appellate Division should be affirmed with costs. The certified question is unnecessary and should not be answered.

J.P. Morgan Securities Inc. v. Vigilant Insurance Company, et al.,

Defendants appeal from the order of the Supreme Court, New York County (Charles E. Ramos, J.), entered September 14, 2010, which denied their motions to dismiss the complaint.

DLA Piper LLP (US), New York (Joseph G. Finnerty III, Megan Shea Harwick, Eric S. Connuck and Miles D. Norton of counsel), for Vigilant Insurance Company and Federal Insurance Company, appellants.
Drinker Biddle & Reath LLP, New York (Douglas M. Mangel, Marsha J. Indych, Ericka R. Lenz and David F. Abernathy of counsel), for Travelers Indemnity Company, appellant.
D'Amato & Lynch, LLP, New York (Luke D. Lynch, Jr., Richard F. Russell and Liza A. Chafiian of counsel), for National Union Fire Insurance Company of Pittsburgh, Pa., appellant.
Kaufman Borgeest & Ryan LLP, New York (Scott A. Schechter of counsel), for Liberty Mutual Insurance Company, appellant.
Clyde & Co. US LLP, New York (Edward J. Kirk and Allison M. Calkins of counsel), for Certain Underwriters at Lloyd's London, appellant.
Landman Corsi Ballaine & Ford P.C., New York (Michael L. Gioia of counsel), for American Alternative Insurance Corporation, appellant.
Proskauer Rose LLP, New York (John H. Gross, Francis D. Landrey, Steven E. Obus and Seth Schafler of counsel), for respondents.

ANDRIAS, J.

The disgorgement payment to the Securities and Exchange Commission (SEC) in settlement of charges that plaintiffs' predecessors wilfully facilitated illegal mutual fund trading practices does not constitute an insurable loss under the primary professional liability policy issued by defendant Vigilant Insurance Company (Vigilant) or the "follow the form" excess policies issued by the other insurer defendants. Accordingly, we reverse and grant defendants' motions to dismiss the complaint.

In 2006, the SEC notified Bear Stearns & Co., Inc., an introducing broker, and Bear Stearns Securities Corp., a clearing firm, (collectively Bear Stearns), that it intended to institute proceedings against them seeking broad injunctive relief and monetary sanctions of $720 million. The SEC alleged that between 1999 and September 2003, Bear Stearns, in violation of securities law, knowingly facilitated a substantial amount of late trading and deceptive market timing for certain customers, predominantly large hedge funds, and affirmatively assisted them in evading detection, which enabled those customers to earn hundreds of millions of dollars in profits at the expense of mutual fund shareholders [FN1] . Bear Stearns disputed these allegations in a "Wells Submission" in which it asserted that for the most part it was a clearing broker that processed transactions initiated by others, that it did not knowingly violate any law or regulation, that its management and supervisory personnel did not facilitate either market timing or late trading, and that it did not share in the profits or benefit in any way from the late trading, which generated only $16.9 million in revenue to Bear Stearns.

On or about November 17, 2005, Bear Stearns made a formal offer of settlement which the SEC accepted. On March 16, 2006, the SEC issued an "Order Instituting Public Administrative and Cease-and-Desist Proceedings Pursuant to Sections 15(b) and 21C of the Securities Exchange Act of 1934, Making Findings and Imposing Remedial Sanctions" (SEC Order) in which Bear Stearns, "without admitting or denying the findings [made pursuant to its offer of settlement]", agreed to pay "disgorgement in the total amount of $160,000,000" and "civil money penalties in the amount of $90,000,000."[FN2] The SEC also censured Bear Stearns for its willful violations, ordered it to "cease and desist" from future violations and mandated business restructuring to prevent future illegal trading. On March 10, 2006, the New York Stock Exchange (NYSE) issued Exchange Hearing Panel Decisions that included factual findings substantively identical to the SEC's. NYSE levied a sanction of "$160,000,000 as disgorgement" and "$90,000,000 as a penalty," which would be deemed satisfied by Bear Stearns's payment of the sanctions imposed by the SEC.

The insurance program at issue obligates the insurers to indemnify Bear Stearns for all "Loss which the insured shall become legally obligated to pay as a result of any Claim . . . for any Wrongful Act" on its part. The term "Loss" includes
"(1) compensatory damages, multiplied damages, punitive damages where insurable by law, judgments, settlements, costs, charges and expenses or other sums the Insured shall legally become obligated to pay as damages resulting from any claim"; and (2) "costs, charges and expenses or other damages incurred in connection with any investigation by any governmental body or self-regulatory organization (SRO), provided however, Loss shall not include: (i) fines or penalties imposed by law; or . . . (v) matters which are uninsurable under the law pursuant to which this policy shall be construed." The term "Wrongful Act" means "any actual or alleged act, error, omission, misstatement, misleading statement, neglect or breach of duty by the Insured(s) in providing services as a Security Broker/Dealer and/or Investment Advisor and/or Administrator."

The program excludes claims made against the insured "based upon or arising out of any deliberate, dishonest, fraudulent or criminal act or omission," provided there has been an adverse final adjudication to that effect. It also excludes claims "based upon or arising out of the Insured gaining in fact any personal profit or advantage to which the Insured was not legally entitled." The Lloyd's of London excess policy also includes a "Known Wrongful Acts Exclusion" which excluded claims for Wrongful Acts committed before March 21, 2000 "if any officer of the Assured, at such date, knew or could have reasonably foreseen that such Wrongful Act(s) could lead to a Claim."

Plaintiffs demanded that defendant insurers indemnify Bear Stearns for the disgorgement payment under the program. Defendant insurers refused on the ground that the payment was not an insurable loss, or was excluded from coverage. Plaintiffs then commenced this action for breach of contract and a declaration that defendants had a duty to indemnify them, asserting that the disgorgement payment, despite its label, constituted compensatory damages.

Disgorgement is an equitable remedy aimed at "forcing a defendant to give up the amount by which he was unjustly enriched" through violations of the federal securities laws (SEC v Tome, 833 F2d 1086, 1096 [2d Cir 1987]; see also SEC v Fischbach Corp., 133 F3d 170, 175 [2d Cir 1997] ["The primary purpose of disgorgement orders is to deter violations of the securities laws by depriving violators of their ill-gotten gains"]). Securities Act Section 8A(e), Exchange Act Section 21B(e), and Exchange Act Section 21C(e) authorize the SEC to seek disgorgement in a cease-and-desist proceeding and a proceeding in which a civil money penalty may be imposed (15 USC §§ 77h-1[a], 78u-2[e], 78u-3[e]).

Under New York law, "[t]he risk of being directed to return improperly acquired funds is not insurable" (Vigilant Ins. Co. v Credit Suisse First Boston Corp., 10 AD3d 528, 528 [2004]). Thus, disgorgement of ill-gotten gains or restitutionary damages does not constitute an insurable loss (see Millennium Partners, L.P. v Select Ins. Co., 68 AD3d 420 [2009], appeal dismissed 14 NY3d 856 [2010]; Reliance Group Holdings v National Union Fire Ins. Co. of Pittsburgh, Pa, 188 AD2d 47, 55 [1993], lv dismissed in part and denied in part 82 NY2d 704 [1993]). The public policy rationale for this rule is that the deterrent effect of a disgorgement action would be greatly undermined if wrongdoers were permitted to shift the cost of disgorgement to an insurer, thereby allowing the wrongdoer to retain the proceeds of his or her illegal acts (see Vigilant Ins. Co. v Credit Suisse First Boston, 6 Misc 3d 1020A [2003], affd in part, modified in part, 10 AD3d 528 [2004], supra).

In Millenium Partners, the insured disgorged $148 million in connection with a market timing investigation by the SEC. Although the settlement agreements did not specifically state that the disgorgement was for improperly obtained funds, we affirmed the grant of summary judgment to the insurers on the ground that the findings recited in the orders with the SEC and the Attorney General of the State of New York "conclusively link[ed] the disgorgement to improperly acquired funds," notwithstanding that the plaintiff consented and agreed to these orders "without admitting or denying the findings [t]herein" (68 AD3d at 420; see also Reliance Group v Natl. Union, 188 AD2d at 55 [the settlement of the action was essentially equivalent to a determination, reached through agreement of the parties, that plaintiff had been unjustly enriched through its actions]). Here too, read as a whole, the offer of settlement, the SEC Order, the NYSE order and related documents are not reasonably susceptible to any interpretation other than that Bear Stearns knowingly and intentionally facilitated illegal late trading for preferred customers, and that the relief provisions of the SEC Order required disgorgement of funds gained through that illegal activity.

The SEC Order illustrates how the Bear Stearns timing desk actively collaborated with Bear Stearns's clients to execute illegal mutual fund trading. Specifically, Bear Stearns processed these late trades as if they had been submitted hours earlier and then "falsified internal order tickets" to misrepresent that it had received late trading orders prior to the 4 p.m. deadline.

The SEC Order details how Bear Stearns operated its late trading and market timing scheme in direct disregard of demands by mutual funds that Bear Stearns stop allowing timing in their funds. In response, rather than prevent the timing activity, Bear Stearns assigned "multiple account numbers to customers so that the mutual funds could not identify them as customers whose trades they had previously blocked, or by assigning multiple [registered representative] numbers to registered representatives at [Bear Stearns] to try to conceal the identity of the traders." The SEC Order also specifies that in multiple taped telephone conversations, a Bear Sterns supervisor and a timing desk employee specifically advised a new customer (broker) that late trades would be "populated" at either "4:00 or 3:59." Further, the "PCS Administrative Head," and the "MFOD Administrative Head," when recruiting a new broker, discussed the "cut off" time to do trades (5:45 p.m.), and certain department heads discussed the cut off time with a new customer, a large Texas hedge fund, and a Florida correspondent broker. Based on these findings, the SEC concluded that Bear Stearns:
(1)"willfuly violated, willfuly aided and abetted, and caused violations of" Section 17(a) of the Securities Act, and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, which prohibit fraudulent conduct in the offer or sale of securities;
(2)"willfuly violated, willfuly aided and abetted, and caused violations of Section 15(c) of the Exchange Act and Rule 15c-1-2 thereunder, which prohibit a broker or a dealer from effecting transactions in, or inducing or attempting to induce, the purchase or sale of securities (other than on a national securities exchange of which it was a member) by means of a manipulative, deceptive, or other fraudulent device or contrivance;" (3)"willfuly violated" and "willfuly aided and abetted, and caused violations of Rule 22c-1(a)," as adopted under Section 22(c) of the Investment Company Act, which requires mutual fund shares to be sold and redeemed at a price based on the net asset value computed after receipt of an order to buy or redeem; and(4)"willfuly violated, willfuly aided and abetted, and caused violations of Section 17(a) of the Exchange Act and Rule 17a-3(a)(6) thereunder[,] . . . by preparing inaccurate records and by, among other things, falsifying [mutual fund] order tickets."

Given these findings, it cannot be seriously argued that Bear Stearns was merely found guilty of inadequate supervision and a failure to place adequate controls on its electronic entry system.[FN3]

The fact that the SEC did not itemize how it reached the agreed upon disgorgement figure does not raise an issue as to whether the disgorgement payment was in fact compensatory [FN4] . Although the disgorged amount must be "causally connected to the violation" (see SEC v First Jersey Sec., Inc., 101 F3d 1450, 1475 [2d Cir 1996]), the SEC "is not required to trace every dollar of proceed[s]" or "to identify misappropriated monies which have been commingled" (SEC v Anticevic, 2010 US Dist LEXIS 83538 at *14, 2010 WL 3239421, at *5 [SD NY 2010] [internal quotation omitted]). Accordingly, a disgorgement calculation requires only a "reasonable approximation of profits causally connected to the violation" (SEC v First Pac. Bancorp, 142 F3d 1186, 1192 n6 [9th Cir 1998] [internal citation omitted]), and the amount of disgorgement should include "all gains flowing from the illegal activities" (SEC v JT Wallenbrock & Assocs, 440 F3d 1109, 1114 [9th Cir 2006]). Further, joint and several liability for combined profits may be imposed on collaborating or closely related parties (see SEC v AbsoluteFuture.com, 393 F3d 94, 97 [2d Cir. 2004]; see also SEC v Anticevic, 2010 US Dist LEXIS 83538 at *14, 2010 WL 3239421, at *5 [SD NY 2010] supra, [in insider trading cases, the tipper may be held jointly and severally liable for the profits obtained by his tippees]). Here, in addition to admittedly generating at least $16.9 million in revenues for itself, Bear Stearns knowingly and affirmatively facilitated an illegal scheme which generated hundreds of millions of dollars for collaborating parties and agreed to disgorge $160,000,000 in its offer of settlement.

Nor is the nature of the disgorgement payment altered by the fact that the $250 million sanction was to be placed in a Fair Fund pursuant to Section 308(a) of the Sarbanes-Oxley Act of 2002 to be distributed to compensate investors harmed in the mutual funds. "[M]ost SEC cases involving a substantial economic settlement include a provision providing for distributions to aggrieved investors. This is because once the primary purpose of disgorgement has been served by depriving the wrongdoer of illegal profits, the equitable result is to return the money to the victims of the violation'" (SEC v Bear, Stearns & Co., 626 F Supp 2d 402, 407 [SD NY 2009]; see also SEC v Fischbach, 133 F3d at 175 ["Although disgorged funds may often go to compensate securities fraud victims for their losses, such compensation is a distinctly secondary goal"]).

Accordingly, the order of the Supreme Court, New York County (Charles E. Ramos, J.), entered September 14, 2010, which denied defendants' motions to dismiss the complaint, should be reversed, on the law, without costs, and the motions granted. The Clerk is directed to enter judgment dismissing the complaint.
All concur.

Order, Supreme Court, New York County (Charles E. Ramos, J.), entered September 14, 2010, reversed, on the law, without costs, and the motions granted. The Clerk is directed to enter judgment dismissing the complaint.
Footnotes

Footnote 1: Mutual funds generally are required to calculate their net asset values daily by 4:00 p.m. Eastern Standard Time, when the closing bell rings on the major U.S. stock exchanges (17 C.F.R. 270.22c-1(b)(1). Late trading is the illegal practice of permitting a purchase or redemption order received after the 4:00 p.m. pricing time to receive the share price calculated as of 4:00 p.m. that day before the release of any after-market information (see e.g. SEC v Pentagon Capital Mgmt. PLC, 612 F Supp 2d 241, 248 [SDNY 2009]). "Market timing is a mutual fund share trading strategy that exploits brief discrepancies between the stock prices used to calculate the shares' value once a day, and the prices at which those stocks are actually trading" (SEC v Ficken, 546 F3d 45, 48 [1st Cir 2008] [internal quotations and citation omitted]).

Footnote 2: The SEC's practice of allowing settlements in which the wrongdoer does not admit or deny the finding of facts has been subject to criticism (see SEC v Vitesse Semiconductor Corp., 771 F Supp 2d 304, 309-310 [SDNY 2011]).

Footnote 3: In this regard, we note that in an SEC press release, the Director of the Northeast Regional Office of the SEC explained: "Bear Stearns was the Northeast hub that connected the many spokes of market timing and late trading - hedge funds, brokers and the mutual funds. Tape-recorded phone calls of its employees make plain the two roles played by Stearns that were fundamental to mutual fund trading abuses. Bear Stearns made it possible for hedge funds and brokers to submit orders long after the 4:00 pm cut off. Bear Stearns made it easier for the hedge funds and the brokers to engage in market timing, and harder for the mutual funds to detect and stop it." Similarly, the Chief Executive Officer, NYSE Regulation, Inc., stated in his press release: "It is disturbing how so many people in so many different units [at Bear Stearns] worked to circumvent the blocks and restrictions set up by the mutual funds. . . . This type of behavior is completely outrageous and unacceptable."

Footnote 4: While the SEC order does not set forth the amount of Bear Stearn's ill gotten gains, SEC's Enforcement Director stated in a press release: "For years Bear Stearns helped favored hedge fund customers evade the systems and rules designed to protect long term mutual fund investors from the harm of market timing and late trading. As a result, market timers profited while long term investors lost. This settlement will not only deprive Bear Stearns of the gains it reaped by its conduct, but also require Bear Stearns to put in place procedures to prevent similar misconduct from recurring" (emphasis added).

Fine Line Builders, etc. v. Atlantic Casualty Ins. Co.

Barr Post & Associates, PLLC, Spring Valley, N.Y. (Craig A. Post of counsel), for appellant.
Milber, Makris, Plousadis & Seiden, LLP, Woodbury, N.Y. (Lorin A. Donnelly of counsel), for respondent.

DECISION & ORDER

In an action for a judgment declaring that the defendant is obligated to defend and indemnify the plaintiff in an underlying action entitled Shortell v Swanson Consulting, Inc., commenced in the Supreme Court, Rockland County, under Index No. 5964/07, the plaintiff appeals from an order and judgment (one paper) of the Supreme Court, Rockland County (Walsh II, J.), dated August 20, 2010, which denied its motion for summary judgment on the complaint, granted the defendant's cross motion for summary judgment, and declared that the defendant is not obligated to defend and indemnify it in the underlying action.

ORDERED that the order and judgment is affirmed, with costs.

The defendant, Atlantic Casualty Insurance Company (hereinafter Atlantic), established, prima facie, its entitlement to judgment as a matter of law by showing that it properly disclaimed coverage on the ground of late notice of the underlying accident (see Ciampa 21, LLC v QBE Ins. Corp., 81 AD3d 586; Lobosco v Best Buy, Inc., 80 AD3d 728; Bigman Bros., Inc. v QBE Ins. Corp., 73 AD3d 1110, 1112; Sputnik Rest. Corp. v United Nat. Ins. Co., 62 AD3d 689; St. James Mech., Inc. v Royal & Sunalliance, 44 AD3d 1030, 1032; Felix v Pinewood Bldrs., Inc., 30 AD3d 459; Jordan Constr. Prods. Corp. v Travelers Indem. Co. of Am., 14 AD3d 655). In opposition, the plaintiff failed to raise a triable issue of fact (see Bigman Bros., Inc. v QBE Ins. Corp., 73 AD3d at 1112; Sputnik Rest. Corp. v United Natl. Ins. Co., 62 AD3d 689). The plaintiff's claim that it had a reasonable, good faith belief in nonliability was belied by its failure to inquire into the circumstances of the accident at issue in the underlying action (see Great Canal Realty Corp. v Seneca Ins. Co., Inc., 5 NY3d 742, 743; Security Mut. Ins. Co. of N.Y. v Acker-Fitzsimons Corp., 31 NY2d 436, 441; Hanson v Turner Constr. Co., 70 AD3d 641; York Specialty Food, Inc. v Towers Ins. Co. of N.Y., 47 AD3d 589, 590; St. Nicholas Cathedral of Russian Orthodox Church in N. Am. v Travelers Prop. Cas. Ins. Co., 45 AD3d 411; Felix v Pinewood Bldrs., Inc., 30 AD3d at 461). Accordingly, the Supreme Court properly granted Atlantic's cross motion for summary judgment and, for the same reason, properly denied the plaintiff's motion for summary judgment (see Zimmerman v Peerless Ins. Co., 85 AD3d 1021; Magistro v Buttered Bagel, Inc., 79 AD3d 822; Hanson v Turner Constr. Co., 70 AD3d 641)..

O'Keefe v. Allstate Insurance Company

Lawrence V. Carra, Mineola, N.Y., for appellants.
Feldman, Rudy, Kirby & Farquharson, P.C., Jericho, N.Y. (Brian R. Rudy of counsel), for respondents.

DECISION & ORDER

In an action, inter alia, to recover damages for breach of an insurance contract, the plaintiffs appeal from an order of the Supreme Court, Nassau County (Woodard, J.), entered September 16, 2010, which granted the defendants' motion pursuant to CPLR 3211(a)(7) to dismiss the complaint insofar as asserted against the defendants Mark Malenczak, David Mateer, and Freida Hicks and to dismiss the third cause of action and so much of the complaint as sought to recover punitive damages and an attorney's fee insofar as asserted against the defendant Allstate Insurance Company, and denied their cross motion pursuant to CPLR 3124 to compel discovery.

ORDERED that the order is affirmed, with costs.

The Supreme Court properly granted that branch of the defendants' motion which was pursuant to CPLR 3211(a)(7) to dismiss the complaint insofar as asserted against the individual defendants, Mark Malenczak, David Mateer, and Freida Hicks (hereinafter collectively the individual defendants), all employees of the defendant Allstate Insurance Company (hereinafter the insurer), as they cannot, under the circumstances of this case, be held personally liable to the plaintiffs (see Bardi v Farmers Fire Ins. Co., 260 AD2d 783, 787; Schunk v New York Cent. Mut. Fire Ins. Co., 237 AD2d 913, 915; Benatovich v Propis Agency, 224 AD2d 998, 998-999).

With respect to the complaint insofar as asserted against the insurer, the third cause of action sounds in fraud but relates directly to the breach of contract claims, in that it alleges that the insurer's actions were undertaken to avoid paying the plaintiffs the amounts specified in their insurance policy. Accordingly, the third cause of action cannot be sustained (see Pepper v Hezghia, 307 AD2d 959, 960; Schunk v New York Cent. Mut. Fire Ins. Co., 237 AD2d at 913-915; F. Nathanson & Co. v Marinello, 192 AD2d 575; Manshul Constr. Corp. v City of New York, 143 AD2d 333, 336).

Moreover, the Supreme Court properly granted that branch of the motion which was to dismiss so much of the complaint as sought an award of an attorney's fee against the insurer. An "insured may not recover the expenses incurred in bringing an affirmative action against an insurer to settle its rights under the policy" (New York Univ. v Continental Ins. Co., 87 NY2d 308, 324; see Mighty Midgets v Centennial Ins. Co., 47 NY2d 12, 21). Further, punitive damages are not warranted, as "[t]he insureds failed to set forth any facts or allegations to support their contention that the defendant insurer'[s] conduct was egregious or fraudulent, or that it evidenced wanton dishonesty so as to imply a criminal indifference to civil obligations directed at the public generally. This case is, in effect, simply a private breach of contract dispute between the insurer
and [its] insureds with no greater implications" (Flores-King v Encompass Ins. Co., 29 AD3d 627, 627; see Rocanova v Equitable Life Assur. Socy. of U.S., 83 NY2d 603, 615).

The plaintiffs' remaining contentions are either without merit or improperly raised for the first time on appeal.

Yangtze Realty, LLC v.Sirius America Insurance Company

Fogarty & Duffy, P.C., Mineola, N.Y. (Garrett Duffy of counsel), for appellants.
White, Quinlan & Staley, LLP, Garden City, N.Y. (Arthur T. McQuillan of counsel), for respondent.

DECISION & ORDER

In an action for a judgment declaring that the defendant insurer is obligated to defend and indemnify the plaintiffs in an underlying property damage action entitled Estate of Ramkissoon v Yangtze Realty, LLC, commenced in the Supreme Court, Kings County, under Index No. 12136/05, the plaintiffs appeal from an order of the Supreme Court, Queens County (Satterfield, J.), dated August 17, 2010, which granted the defendant's motion for summary judgment, in effect, declaring that it is not obligated to defend and indemnify the plaintiffs in the underlying action, and denied the plaintiffs' cross motion for summary judgment declaring that the defendant is obligated to defend and indemnify them in the underlying action.

ORDERED that the order is affirmed, with costs, and the matter is remitted to the Supreme Court, Queens County, for the entry of a judgment declaring that the defendant is not obligated to defend and indemnify the plaintiffs in the underlying action.

An insurer's duty to defend " arises whenever the allegations in a complaint state a cause of action that gives rise to the reasonable possibility of recovery under the policy'" (Fieldston Prop. Owners Assn., Inc. v Hermitage Ins. Co., Inc., 16 NY3d 257, 264, quoting Fitzpatrick v American Honda Motor Co., 78 NY2d 61, 65; see BP A.C. Corp. v One Beacon Ins. Group, 8 NY3d 708, 714). The duty to defend is not triggered, however, "when the only interpretation of the allegations against the insured is that the factual predicate for the claim falls wholly within a policy exclusion" (Global Constr. Co., LLC v Essex Ins. Co., 52 AD3d 655, 656; see Richner Dev., LLC v Burlington Ins. Co., 81 AD3d 705, 706; Bruckner Realty, LLC v County Oil Co., Inc., 40 AD3d 898, 900; see also Automobile Ins. Co. of Hartford v Cook, 7 NY3d 131, 137; Howard & Norman Baker, Ltd. v American Safety Cas. Ins. Co., 75 AD3d 533, 534). An exclusion from coverage "must be specific and clear in order to be enforced" (Seaboard Sur. Co. v Gillette Co., 64 NY2d 304, 311), "and an ambiguity in an exclusionary clause must be construed most strongly against the insurer" (Guachichulca v Laszlo N. Tauber & Assoc., LLC, 37 AD3d 760, 761). Nevertheless, "the plain meaning of a policy's language may not be disregarded to find an ambiguity where none exists" (Howard & Norman Baker, Ltd. v American Safety Cas. Ins. Co., 75 AD3d at 534; see Guachichulca v Laszlo N. Tauber & Assoc., LLC, 37 AD3d at 761).

Here, the defendant established its prima facie entitlement to judgment as a matter of law. The plain meaning of the exclusionary clause invoked by the defendant bars coverage for, inter alia, property damage arising out of work performed on behalf of the insured by a subcontractor where no prior written agreement exists indemnifying and holding harmless the insured in the event of a loss (see Wilson v Sirius Am. Ins. Co., 44 AD3d 754). The defendant submitted evidence showing that the property damage in the underlying action was caused by the work of a subcontractor hired by the insured plaintiffs, and that the insured plaintiffs' written agreement with this subcontractor did not contain the required indemnity and hold harmless language. Accordingly, the defendant established, prima facie, that it was not obligated to defend and indemnify the plaintiffs in the underlying action (see Global Constr. Co., LLC v Essex Ins. Co., 52 AD3d at 656). In opposition to the defendant's prima facie showing, the plaintiffs failed to raise a triable issue of fact.

Accordingly, the Supreme Court properly granted the defendant's motion for summary judgment and, for the same reason, properly denied the plaintiffs' cross motion for summary judgment.

Since this is an action for a declaratory judgment, the matter must be remitted to the Supreme Court, Queens County, for the entry of a judgment declaring that the defendant is not obligated to defend and indemnify the plaintiffs in the underlying action (see Lanza v Wagner, 11 NY2d 317, 334, appeal dismissed 371 US 74, cert denied 371 US 901).

Torres v. Villanueva

Baker, McEvoy, Morrissey & Moskovitz, P.C., New York (Stacy R. Seldin of counsel), for appellants.
Ephrem J. Wertenteil, New York, for respondent.

Order, Supreme Court, Bronx County (Mary Ann Brigantti-Hughes, J.), entered May 12, 2011, which, in an action for personal injuries sustained in a motor vehicle accident, denied defendants' motion for summary judgment dismissing the complaint, unanimously affirmed, without costs.

On October 23, 2008, as then 29-year-old plaintiff Richard Torres was crossing the street, a livery cab owned by defendant Sheridan, Inc. and operated by defendant Jose Villanueva struck him in the knees and knocked him to the ground. Despite complaints of knee pain, plaintiff was diagnosed with left distal thigh contusion during his initial medical evaluations at the emergency room of a hospital the morning after the accident, and during his initial October 28, 2008 visit with Dr. Orsuville Cabatu, a specialist in physical and rehabilitation medicine. Pursuant to evaluations by other physicians, he had knee surgery on December 2008.

Defendants met their initial burden of demonstrating absence of significant limitation of use of plaintiff's left knee by submitting a report from radiologist Peter Ross, M.D. showing only degenerative changes in the menisci in an otherwise normal knee, and a December 2009 report from orthopedist Gregory Montalbano, M.D. showing that objective tests revealed full range of motion, that plaintiff sustained a left thigh contusion that had resolved, and that plaintiff's obesity and patellofemoral syndrome contributed to plaintiff's knee condition (see Cabrera v Gilpi, 72 AD3d 552 [2010]).

In response, plaintiff submitted the report of orthopedist Stanley Liebowitz, M.D. showing that plaintiff saw him on October 29, 2008 complaining that daily activities (standing, walking, stair climbing, and his job duties as a bus driver) increased the level of knee discomfort, and a diagnosis of post-traumatic tenosynovitis based on the doctor's observations of mild effusion and tenderness. Pursuant to a radiologist's MRI findings of joint effusion and tears in the lateral collateral ligament and anterior cruciate ligament, Dr. Liebowitz performed knee surgery in December 2008, during which he discovered a "crush injury" of the medial femoral condyle, "extensive synovitis," and a torn and lax anterior cruciate ligament with positive anterior drawer sign and Lachman testing. A February 2009 report of Dr. Cabatu noted that plaintiff still complained of pain, especially when bending or squatting, and tenderness on palpation. Plaintiff testified at his November 2009 deposition that he still saw Dr. Cabatu for physical therapy, and that he could not pick up his children, climb stairs, bend, run, exercise, or stand for long periods without feeling knee pain. The report of orthopedist Paul Post, M.D., who examined plaintiff in October 2010, noted a 20-degree limitation in flexion of the knee, and tenderness and thickness of the synovium. The evidence of limitations, and injuries set forth in the MRI and operative reports, raise a factual issue as to existence of a significant limitation of use of the knee (see Toure v Avis Rent A Car Sys., 98 NY2d 345, 353 [2002]).

The evidence of plaintiff's treatment, which began days after the accident, including Dr. Liebowitz' sufficiently contemporaneous findings during surgery of a crush injury and positive anterior drawer sign and Lachman testing, raises an issue of fact as to causation (see Salman v Rosario, 87 AD3d 482 [2011]). Plaintiff adequately addressed defendants' evidence of degenerative and pre-existing conditions (see Perl v Meher, __ NY3d __, NY Slip Op 8452 [2011]; Pommells v Perez, 4 NY3d 566, 580 [2005].

Baez v. Boyd

Trolman, Glaser & Lichtman, P.C., New York (Michael T. Altman of counsel), for appellants.
Crisci, Weiser & Huenke, New York (Joy R. Simon of counsel), for respondents.

Order, Supreme Court, Bronx County (Lucindo Suarez, J.), entered September 28, 2010, which, to the extent appealed from, granted defendants' motion for summary judgment dismissing the complaint based on the failure to establish a "serious injury" within the meaning of Insurance Law § 5102(d), unanimously reversed, on the law, without costs, and the motion denied.

Defendants made a prima facie showing of entitlement to judgment as a matter of law by submitting the affirmed reports of their medical experts. Their orthopedic expert reported ranges of motion for the subject ankle and foot, compared them to the norm, found that plaintiff had no range-of-motion limitations, and concluded that his injuries had resolved (see Glover v Capres Contr. Corp., 61 AD3d 549, 549 [2009]). Their other physician reviewed the X rays and MRIs of the subject areas and found that the infant plaintiff had sustained no fracture.

Plaintiffs, however, raised a triable issue of fact by submitting the affirmed report of the infant plaintiff's treating orthopedist, who affirmed that his review of the infant plaintiff's MRI films revealed a nondisplaced fracture of the calcaneus (heel bone) and a presumed Salter-Harris I fracture of the distal fibula. A fracture, by definition, constitutes a "serious injury" under the statute (Insurance Law § 5102[d]; Elias v Mahlah, 58 AD3d 434, 434-435 [2009]). Although the equivocal finding of a "presumed" Salter-Harris I fracture, standing alone, may not satisfy the serious injury threshold (see Glover, 61 AD3d at 550), if the trier of fact determines that a serious injury has been sustained, it may award damages for all injuries causally related to the accident, even those that do not meet the threshold (see Linton v Nawaz, 14 NY3d 821 [2010]; Rubin v SMS Taxi Corp., 71 AD3d 548, 549 [2010]).

Aujour v. Singh

Rony Princivil, P.C., Lake Success, N.Y., for appellant.
Baker, McEvoy, Morrissey & Moskovits, P.C., New York, N.Y. (Stacy R. Seldin 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 (McDonald, J.), entered June 25, 2010, which granted the defendant's 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 reversed, on the law, with costs, and the defendant's motion for summary judgment dismissing the complaint is denied.

The defendant failed to meet his prima facie burden of showing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident (see Toure v Avis Rent A Car Sys., 98 NY2d 345; Gaddy v Eyler, 79 NY2d 955, 956-657). In her bill of particulars, the plaintiff alleged that she had 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 activities for not less than 90 days during the 180 days immediately following the subject accident. However, the defendant failed to show, prima facie, that the plaintiff did not sustain such an injury. In support of his motion, the defendant submitted the plaintiff's deposition testimony, which indicated that, for 120 days following the subject accident, she was confined to her home and did not go to work (see Takaroff v A.M. USA, Inc., 63 AD3d 1142, 1143; Shaw v Jalloh, 57 AD3d 647, 648; Ali v Rivera, 52 AD3d 445, 446; DeVille v Barry, 41 AD3d 763). Moreover, the defendant's orthopedist, who examined the plaintiff more than 16 months after the accident, did not relate any of his findings to the period of time immediately following the accident (see Cabey v Leon, 84 AD3d 1295, 1296; Mugno v Juran, 81 AD3d 908, 909; Lewis v John, 81 AD3d 904, 905; Takaroff v A.M. USA, Inc., 63 AD3d at 1143; Shaw v Jalloh, 57 AD3d at 648; DeVille v Barry, 41 AD3d at 763-764). Since the defendant did not sustain his prima facie burden on his motion, it is unnecessary to determine whether the papers submitted by the plaintiff in opposition were sufficient to raise a triable issue of fact (see Mugno v Juran, 81 AD2d at 909; Galofaro v Wylie, 78 AD3d 652, 653).

Accordingly, the Supreme Court should have denied the defendant's motion for summary judgment dismissing the compliant.

Mi Sook Jeong v. Callaghan,

DECISION & ORDER

In an action to recover damages for personal injuries, the plaintiff appeals from an order of the Supreme Court, Queens County (Weiss, J.), entered December 14, 2010, which granted the defendants' motion for summary judgment dismissing the complaint on the ground that Yoon Hee Kim 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 defendants' motion for summary judgment dismissing the complaint is denied.

The plaintiff alleged, inter alia, that as a result of the subject accident, her daughter, Yoon Hee Kim, sustained injuries to the cervical and lumbosacral regions of her spine. The defendants met their burden of establishing their prima facie entitlement to judgment as a matter of law by submitting competent medical evidence establishing that the alleged injuries to those regions did not constitute serious injuries within the meaning of Insurance Law § 5102(d) (see Gaddy v Eyler, 79 NY2d 955; Rodriguez v Huerfano, 46 AD3d 794, 795; see also Karpinos v Cora,AD3d, 2011 NY Slip Op 08566 [2d Dept 2011]).

However, in opposition, the plaintiff submitted competent medical evidence raising a triable issue of fact as to whether the alleged injuries to the cervical and lumbosacral regions of her daughter's spine constituted serious injuries under the permanent consequential limitation of use and/or significant limitation of use categories of Insurance Law § 5102(d) (see Dixon v Fuller, 79 AD3d 1094, 1094-1095). Furthermore, contrary to the Supreme Court's determination, the plaintiff provided a reasonable explanation for any alleged cessation of her daughter's medical treatment (see Abdelaziz v Fazel, 78 AD3d 1086).

Accordingly, the Supreme Court should have denied the defendants' motion for summary judgment dismissing the complaint.

Poverud v. Kwartler

Craig P. Curcio, Middletown, N.Y. (Bryan R. Kaplan of counsel), for appellant.
Dupée & Monroe, P.C., Goshen, N.Y. (James E. Monroe of counsel), for respondents.

DECISION & ORDER

In an action to recover damages for personal injuries, etc., the defendant appeals from so much of an order of the Supreme Court, Orange County (Cohen, J.), dated September 22, 2010, as denied her cross motion for summary judgment dismissing the complaint on the ground that the plaintiff Jeremy K. Poverud did not sustain a serious injury within the meaning of Insurance Law § 5102(d).

ORDERED that the order is affirmed insofar as appealed from, with costs.

The evidence submitted by the defendant in support of her cross motion failed to eliminate all triable issues of fact as to whether the plaintiff Jeremy K. Poverud sustained a "fracture" to his right patella as a result of the subject motor vehicle accident (see Alvarez v Prospect Hosp., 68 NY2d 320, 324; Olic v Pappas, 47 AD3d 780, 780; see generally Insurance Law § 5102[d]). Since the defendant failed to meet her prima facie burden, it is unnecessary to determine whether the plaintiffs, in opposition to the defendant's cross motion, raised a triable issue of fact (see Coscia v 938 Trading Corp., 283 AD2d 538). Accordingly, the Supreme Court properly denied the defendant's cross motion for summary judgment dismissing the complaint.

In light of our determination, we need not reach the parties' remaining contentions.
Scott v. Gresio

David J. Sobel, P.C., Smithtown, N.Y., for appellant.
Brown & Gropper, LLP, New York, N.Y. (Joshua Gropper of counsel), for respondent.

DECISION & ORDER
In an action to recover damages for personal injuries, the defendant appeals from an order of the Supreme Court, Suffolk County (Gazzillo, J.), dated March 30, 2011, which denied his 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 defendant failed to meet his prima facie burden of showing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident (see Toure v Avis Rent A Car Sys., 98 NY2d 345; Gaddy v Eyler, 79 NY2d 955, 956-957). The plaintiff alleged, inter alia, that the lumbar region of her spine sustained certain injuries as a result of the subject accident. Although the defendant asserted that those alleged injuries did not constitute a serious injury within the meaning of Insurance Law § 5102(d) (see Toure v Avis Rent A Car Sys., 98 NY2d at 352; Gaddy v Eyler, 79 NY2d at 955-956), his examining neurologist recounted, in an affirmed report submitted in support of the motion for summary judgment dismissing the complaint, that range-of-motion testing performed during the examination revealed the existence of a significant limitation of motion in the region (see Walter v Walch, 88 AD3d 872, 872; Cues v Tavarone, 85 AD3d 846, 846-847).

Since the defendant failed to meet his prima facie burden, the Supreme Court properly denied his motion for summary judgment dismissing the complaint, without considering whether the plaintiff's opposition papers were sufficient to raise a triable issue of fact (see Cues v Tavarone, 85 AD3d at 846-847).

Tower Insurance Company of New York v. NHT Owners LLC

Law Offices of Max W. Gershweir, New York (Joseph S. Wiener of counsel), for appellant.
Rothkrug, Rothkrug & Spector, LLP, Great Neck (Simon H. Rothkrug of counsel), for respondents.

Order, Supreme Court, New York County (Marcy S. Friedman, J.), entered June 24, 2010, which, in this action for a declaratory judgment, denied plaintiff insurer's motion for summary judgment and declared that it was obligated to defend and indemnify defendants-respondents NHT Owners LLC and Mallory Management Corp. in the underlying action against them, and granted said defendants-respondents' cross motion for summary judgment dismissing the complaint, unanimously affirmed, with costs.

A liability policy that requires an insured to provide notice of an occurrence to its insurer "as soon as practicable" obligates the insured to give notice of the occurrence within a reasonable period of time (Great Canal Realty Corp. v Seneca Ins. Co., 5 NY3d 742, 743 [2005]). However, we need not reach the question of whether, under all the circumstances, the insureds' notice of claim, 62 days after the occurrence, was timely, where they conducted an inquiry into the underlying accident, and believed there was no liability (see Security Mut. Ins. Co. of N.Y. v Acker-Fitzsimons Corp., 31 NY2d 436, 441 [1972]) because the court properly held that the notice of disclaimer, after a 33-day period, was untimely as a matter of law (see Ins Law § 3420[d]; First Fin. Ins. Co. v Jetco Contr. Corp., 1 NY3d 64, 68-69 [2003]; see e.g. West 16th St. Tenants Corp. v Public Serv. Mut. Ins. Co., 290 AD2d 278 [2002], lv denied 98 NY2d 605 [2002]). The insurer's sole ground for the disclaimer of coverage was the insured's delay in notifying it of the occurrence, which was readily apparent at the time of the notice of claim (see First Fin. Ins. Co., 1 NY3d at 69).

We have considered the insurer's remaining contentions and find them without merit.

Utica Insurance Company v. RJR Maintenance Group, Inc.

Harrington, Ocko & Monk, LLP, White Plains (I. Paul Howansky of counsel), for appellant.
Farber Brocks & Zane L.L.P., Mineola (Audra S. Zane of counsel), for respondent.

Order and judgment (one paper), Supreme Court, New York County (Judith J. Gische, J.), entered September 24, 2010, which, insofar as appealed from as limited by the briefs, granted plaintiff's motion for summary judgment declaring that it is not obligated to defend or indemnify defendant RJR Maintenance Group, Inc. (RJR) in an underlying personal injury action, unanimously affirmed, with costs.

The employee exclusion in the subject insurance policy unambiguously states that the insurance did not apply to "bodily injury to any employee of any insured, to any contractor hired or retained by or for any insured, or to any employee of such contractor" sustained during the course of employment. Accordingly, plaintiff properly disclaimed coverage based upon the status of defendant Edwards (the underlying plaintiff) as an employee of the subcontractor of RJR (the insured) at the time of the alleged accident (see 385 Third Ave. Assoc., L.P. v Metropolitan Metals Corp., 81 AD3d 475, 476 [2011], lv denied 17 NY3d 702 [2011]).

Moreover, defendant St. John's University lacked standing to challenge the timeliness of plaintiff's notice of disclaimer of coverage to RJR. "The contemporary rule is that a party has standing to enforce a statutory right if its abuse will cause him injury and it may fall within the zone of interest' protected by the legislation" (Matter of Schwartz v Morgenthau, 7 NY3d 427, 432 [2006] [internal quotation marks and citation omitted]). Here, however, there is no basis to find that St. John's was in the "zone of interest" protected by Insurance Law § 3420(d). St. John's failed to establish that it was an intended beneficiary of the insurance policy (see Stainless, Inc. v Employers Fire Ins. Co., 69 AD2d 27, 33 [1979], affd 49 NY2d 924 [1980]), or that it could otherwise assert RJR's rights under the policy (cf. Public Serv. Mut. Ins. Co. v AYFAS Realty Corp., 234 AD2d 226, 228 [1996], lv dismissed 90 NY2d 844 [1997]).

We have reviewed St. John's remaining contentions and find them unavailing.

Pritchard v Suburban Carting Corp.

Quirk and Bakalor, P.C., New York, N.Y. (Richard Bakalor and Dominic S. Curcio of counsel), for appellant.
Faust Goetz Schenker & Blee LLP, New York, N.Y. (Peter Kreymer of counsel), for respondents.

DECISION & ORDER

In an action to recover damages for personal injuries, the defendant Centro GA Cortlandt, LLC, appeals from so much of an order of the Supreme Court, Westchester County (Liebowitz, J.), entered September 28, 2010, as denied that branch of its motion which was for summary judgment on its cross claim against the defendant McDonald's Corporation for contractual indemnification.

ORDERED that the order is reversed insofar as appealed from, on the law, with costs, and that branch of the motion of the defendant Centro GA Cortlandt, LLC, which was for summary judgment on its cross claim against the defendant McDonald's Corporation for contractual indemnification is granted.

The plaintiff allegedly was injured when she was struck by a garbage truck in the parking lot of a McDonald's restaurant after leaving the restaurant. At her deposition, she testified that she stood on the curb, in a landscaped area of the parking lot, and looked to her right and left before attempting to cross the lot to reach her car. Two-way traffic was permitted in this area of the parking lot. There were no crosswalks or other markings at this location. When the plaintiff looked to her left, she saw a garbage truck about two car lengths away. She testified at her deposition that the truck was not moving at the time. She stepped off the curb and took three or four steps before she was struck by the garbage truck. The garbage truck driver, the defendant Paul G. Troy, testified at his deposition that he stopped the truck when he heard a scream. He did not know where the plaintiff came from, and his view was obstructed by a rail on the outside of the truck.

The plaintiff subsequently commenced this action against, among others, the landlord Centro GA Cortlandt, LLC (hereinafter Centro), the tenant McDonald's Corporation (hereinafter McDonald's), and the restaurant franchisee Seventh Wong Corp. (hereinafter Wong), alleging, inter alia, that they were negligent in the ownership, maintenance, repair, inspection, design, and construction of the parking lot. Centro asserted a cross claim against McDonald's for contractual indemnification.

Centro moved, among other things, for summary judgment on its cross claim against McDonald's for contractual indemnification. In the order appealed from, the Supreme Court, inter alia, denied that branch of Centro's motion, finding that there were triable issues of fact as to whether Centro was negligent in the happening of the accident which precluded an award of summary judgment to Centro on its cross claim against McDonald's for contractual indemnification. We reverse the order insofar as appealed from by Centro.

As Centro correctly contends, the Supreme Court erred in denying that branch of its motion which was for summary judgment on its cross claim against McDonald's for contractual indemnification. The indemnification provision in the lease between McDonald's and Centro provides that McDonald's will indemnify Centro for "any accident, injury or damage whatsoever caused to any person or property arising, directly or indirectly, out of the business conducted in the Premises or occurring in, on or about the Premises or any part thereof," except when such was a result of Centro's own negligence. The record establishes that the accident took place "in, on or about the Premises" (see generally Hogeland v Sibley, Lindsay & Curr Co., 42 NY2d 153). A phrase such as "in, on or about the Premises" is not to be read as limited in its spatial description to "in the demised premises," for then the words "or about" would have no meaning (id. at 159 [internal quotation marks omitted]). This is a phrase of art, frequently used synonymously to mean "around" or "on the outside of" (id. [internal quotation marks omitted]).

Here, there was evidence that the accident took place on the demised premises. At her deposition, the plaintiff marked on a photograph the spot where she stood prior to the accident, which showed that she was standing on the curb in a landscaped area just in front of the McDonald's building. She testified that she stepped off the curb and took three or four steps at a right angle to the curb, at which time the accident occurred.

In an affidavit submitted by Centro in support of its motion, Centro's expert Kim Vauss concluded that, based on (1) the depiction of a single light pole in the site photographs and a 1984 site plan, (2) the plaintiff's marking of her location on a photograph some distance to the right of that pole, (3) the scale of the site plan, and (4) the boundary of the demised premises as depicted on the site plan, the plaintiff was still on McDonald's premises when the accident occurred, regardless of the direction in which she stepped off the curb.  In any event, even if the accident did not take place in, on, or about the demised premises, it did arise out of the business conducted in the premises. The plaintiff was a customer of McDonald's and had just eaten in the restaurant. She was struck by a truck picking up McDonald's garbage. Consequently, Centro made a prima facie showing that the indemnification provision was applicable. In opposition, McDonald's and Wong failed to raise a triable issue of fact on this issue.

Centro also made a prima facie showing that it was not negligent in the design or maintenance of the parking lot, and that, in any event, the parking lot merely furnished the condition or occasion for the accident, and was not a proximate cause thereof (see Castillo v Amjack Leasing Corp., 84 AD3d 1298, 1298-1299; Comolli v 81 & 13 Cortland Assoc., 285 AD2d 863, 864-865; Vayser v Waldbaum, Inc., 225 AD2d 760, 761). In opposition, McDonald's and Wong failed to raise a triable issue of fact as to whether Centro was negligent.

Accordingly, the Supreme Court should have granted that branch of Centro's motion which was for summary judgment on its cross claim against McDonald's for contractual indemnification.

In light of our determination, we need not reach Centro's remaining contention.

Great American Insurance Companies v. Bearcat Financial Services, Inc.

Law Offices of Peter A. Hurwitz, PLLC, New City (Peter A. Hurwitz of counsel), for appellant.
Orrick, Herrington & Sutcliffe LLP, New York (Ayanna Lewis-Gruss of counsel), for respondent.

Order, Supreme Court, New York County (Ira Gammerman, J.H.O.), entered May 3, 2010, which, to the extent appealed from as limited by the briefs, granted the motion of third-party defendant Dresdner to dismiss the third-party complaint, award Dresdner its costs, and impose sanctions on defendant/third-party plaintiff Hayes and his counsel, unanimously affirmed, with costs.

Because the first-party complaint alleges that Hayes is liable based only on his own wrongdoing, his third-party claim that he is entitled to common-law indemnification from Dresdner does not state a cause of action (Mathis v Central Park Conservancy, 251 AD2d 171, 172 [1998]). Accordingly, the third-party complaint was properly dismissed.

Because the third-party claim was plainly defective, the motion court providently exercised its discretion in determining that it was frivolous and imposing sanctions and costs (see 22 NYCRR 130-1.1; Pickens v Castro, 55 AD3d 443 [2008]).

We have considered Hayes's remaining contentions and find them unavailing.

Mallory v Allstate Insurance Company

Shayne, Dachs, Corker, Sauer & Dachs, LLP, Mineola, N.Y. (Norman H. Dachs of counsel), for appellant.
Feldman, Rudy, Kirby & Farquharson, P.C., Jericho, N.Y. (Brian R. Rudy of counsel), for respondent.

DECISION & ORDER

In an action, inter alia, to recover the proceeds of a fire insurance policy, the plaintiff appeals from an order of the Supreme Court, Suffolk County (Jones, Jr., J.), dated December 13, 2010, which denied her motion pursuant to CPLR 3211(b) to dismiss the defendant's first, second, and third affirmative defenses.

ORDERED that the order is affirmed, with costs.

The plaintiff commenced this action, inter alia, to recover the proceeds of a fire insurance policy. The defendant asserted several affirmative defenses based on policy exclusions. The plaintiff moved to dismiss the defendant's first, second, and third affirmative defenses on the ground that the defendant was precluded from raising those defenses as a result of the defendant's failure to comply with 11 NYCRR 216.6(c) in processing the plaintiff's claim. The Supreme Court properly denied the motion. In De Marinis v Tower Ins. Co. of N.Y. (6 AD3d 484, 486-487), this Court held that a failure to comply with 11 NYCRR 216.6(c) does not preclude an insurance company from relying on a policy exclusion to disclaim coverage. We decline the plaintiff's invitation to overrule De Marinis. Accordingly, the plaintiff did not demonstrate that the defenses were without merit as a matter of law (see CPLR 3211[b]; Galasso, Langione & Botter, LLP v Liotti, 81 AD3d 880, 882).

US National Bank Association as Trustee v Melton

Walter T. Ramsey, Brooklyn, N.Y., for appellant.
Rosicki, Rosicki & Associates, P.C., Plainview, N.Y. (Owen M. Robinson of counsel), for respondent.

DECISION & ORDER

In an action to foreclose a mortgage, the defendant appeals from an order of the Supreme Court, Nassau County (Adams, J.), entered August 9, 2010, which denied his motion, inter alia, pursuant to CPLR 5015(a)(4) to vacate a judgment of foreclosure and sale of the same court entered April 15, 2008, upon his default in answering the complaint or otherwise appearing in the action.

ORDERED that the order is affirmed, with costs.

This action was commenced in early May 2006. According to the affidavit of service, the defendant was served with copies of the summons and complaint at his home on May 8, 2006, by delivery of a copy of the summons and complaint to Angelica Guevara, referred to as a cotenant, and by the mailing of a second copy of the summons and complaint to his home, all pursuant to CPLR 308(2). The defendant neither answered the complaint nor otherwise appeared in the action. On April 15, 2008, a judgment of foreclosure and sale (hereinafter the judgment) was entered against him. On November 17, 2008, a copy of the judgment was served upon the defendant with notice of entry. On May 5, 2009, a foreclosure auction was held, and the mortgaged property was sold. In May 2010 the defendant moved, inter alia, pursuant to CPLR 5015(a)(4) to vacate the judgment entered upon his default. In support, he submitted an affidavit stating, in conclusory fashion, that he was never personally served with a copy of the summons and complaint, and that he did not have "a precise recollection" as to whether he received a copy of the summons and complaint in time to defend against the action. The defendant's attorney, in an affirmation made without any personal knowledge of the facts, asserted that Guevara did not speak or understand English, and that a hearing was necessary on the issue of whether she gave a copy of the summons and complaint to the defendant with enough time to answer. The Supreme Court denied the defendant's motion concluding, inter alia, that his affidavit was conclusory and failed to rebut the process server's affidavit. We affirm.

The Supreme Court properly denied that branch of the defendant's motion which was pursuant to CPLR 5015(a)(4) to vacate the judgment. The affidavit of the process server constituted prima facie evidence of proper service pursuant to CPLR 308(2) (see Deutsche Bank Natl. Trust Co. v Hussain, 78 AD3d 989), and the defendant's unsubstantiated denial of receipt was insufficient to rebut the presumption of proper service (id.). A hearing is not required where, as here, the defendant fails to swear to specific facts rebutting the statements in the process server's affidavit (see U.S. Bank, N.A. v Arias, 85 AD3d 1014, 1015; Scarano v Scarano, 63 AD3d 716). Furthermore, the affirmation of an attorney which is not based upon personal knowledge of the facts is of no probative or evidentiary significance (see JMD Holding Corp. v Congress Fin. Corp., 4 NY3d 373, 384-385; Warrington v Ryder Truck Rental, Inc., 35 AD3d 455, 456).

To the extent that the defendant moved pursuant to CPLR 5015(a)(1) to vacate the judgment, the motion was untimely since it was not made within one year after a copy of the judgment was served upon him with notice of entry (see CPLR 5015[a][1]). Moreover, the defendant was not entitled to relief pursuant to CPLR 5015(a)(1), as he failed to set forth any reasonable excuse for his default (see Tribeca Lending Corp. v Crawford, 79 AD3d 1018, 1020). Finally, even if the defendant's motion were treated as one made pursuant to CPLR 317, he both failed to demonstrate that he did not receive notice of the action in time to defend and made his motion in May 2010, more than one year after a copy of the judgment was served upon him with notice of entry (see Matter of Rockland Bakery, Inc. v B.M. Baking Co., Inc., 83 AD3d 1080, 1082).

The defendant's remaining contentions either are without merit or have been rendered academic by our determination.

Viscosi v Preferred Mutual Insurance Company

O'Shea McDonald & Stevens, LLP, Rome (Timothy Brian O'Shea of counsel), for defendant-appellant.
Gustave J. DeTraglia, Jr., Utica, for plaintiffs-respondents.

Appeal from an order of the Supreme Court, Oneida County (Anthony F. Shaheen, J.), entered September 2, 2010. The order, insofar as appealed from, denied the motion of defendant for summary judgment dismissing the complaint.

It is hereby ordered that the order insofar as appealed from is unanimously reversed on the law without costs, defendant's motion is granted and the complaint is dismissed.

Memorandum: Plaintiffs commenced this action seeking damages for an alleged breach of an insurance policy issued by defendant. We note at the outset that, although defendant purports to appeal from "each and every part" of the order, it is not aggrieved by that part of the order denying plaintiffs' cross motion for summary judgment on the complaint and thus may not appeal therefrom (see CPLR 5511). We agree with defendant that Supreme Court erred in denying its motion for summary judgment dismissing the complaint (see generally Government Empls. Ins. Co. v Kligler, 42 NY2d 863, 864 [1977]), and we therefore reverse the order insofar as appealed from.

The policy excluded coverage for loss "to the inside of a building or the property contained in a building caused by rain, snow, [or] sleet . . . unless the direct force of wind or hail damages the building causing an opening in a roof or wall and the rain, snow, [or] sleet . . . enters through [that] opening." In support of its motion, defendant submitted the deposition testimony of plaintiff John Viscosi in which he testified that the damage at issue was caused by water "that had seeped" into the ceiling of several rooms in the covered premises, and he specifically denied that either wind or hail created an opening in the building. We also agree with defendant that the ceiling did not collapse within the meaning of the policy, which specifically states that "any part of a building that is standing is not considered to be in a state of collapse even if it shows evidence of cracking, bulging, sagging, bending, leaning, settling, shrinkage or expansion." Here, the record establishes that the ceiling did not "abrubt[ly] fall[ ] down or cav[e] in" but, rather, the ceiling was noticeably bowed for several months before plaintiffs had it demolished. In light of our determination, defendant's remaining contentions are academic. Present—Centra, J.P., Peradotto, Carni, Green and Gorski, JJ.