Coverage Pointers - Volume XIII, No. 15

Dear Coverage Pointers Subscribers:

It’s snowing in Buffalo, but this issue comes to you from the desert in Scottsdale.  Given the choice, I rather be here.

In the New York insurance blogosphere, the talk of the town is the First Department’s decision in George Campbell Painting v. National Fire Insurance Company reviewed in this week’s issue.  The First Department overruled one of its earlier decisions, holding that a liability carrier must timely disclaim on grounds it knows forms the basis for a disclaimer even while it is investigating other grounds for denial of coverage.  The court found that within a couple of months of being notified, the excess insurer knew it could deny coverage based on late reporting, yet it failed to do so (as it was investigation other possible grounds for denial of coverage).  The insurer’s reservation of rights on late notice was not a substitute for a disclaimer and the fact that the carrier was undertaking an investigation into other grounds, did not excuse its failure to timely deny coverage on the ground it knew.

For an ongoing discussion about this case, visit our interactive discussion group, New York Insurance, on the LinkedIn New York Insurance Law group.

Frankly, from this writer’s perspective, the decision is not extraordinary or ground-breaking.  Courts are regularly reminding carriers that they must deny coverage promptly when they know of a policy breach or an applicable exclusion in cases involving bodily injury or wrongful death.

There’s also a guest column from Mike Perley (we placed in his usual Liening Tower of Perley location), on a New York State Court of Appeals case on the running of interest.  It’s a very good read and a very important decision.

The Federation of Defense and Corporate Counsel Presents:

2012 Litigation Management College and Graduate Program

The eighteenth annual Litigation Management College and the ninth annual Graduate Program of the Litigation Management College are scheduled for June 10-14, 2011 at Emory University Conference Center in Atlanta, Georgia.  Our annual goal for enrollment is 75-100 students for the College and 25 students for the Graduate Program. 

The FDCC looks forward to continuing to provide claims professionals a sophisticated level of training offered by experts in negotiation, evaluation and litigation.  The Litigation Management College has earned an international reputation as the premier advanced litigation training course for claims professionals.  Utilizing a new fact pattern, the College offers an intensive four-day experience of workshops, based on a case study and participatory interactive educational experiences.  The curriculum is fast-paced and cutting-edge with a practical approach to litigation management.  The program provides a unique opportunity for claims professionals to explore, study and discuss issues of current interest.

The College is sponsored by the FDCC as a service to claims professionals, third-party administrators and self-insured corporate litigation managers working in the insurance industry or in corporate law and claim departments handling litigation matters.  The College is designed for claim and litigation management professionals with five to fifteen years claims or litigation management experience. 

The Graduate Program consists of an intensive 32-hour classroom and workshop curriculum intended to expand the litigation management, evaluation and negotiation skills learned in the College.  It builds upon the solid foundation provided by the College to further refine the students’ understanding of advanced insurance coverage issues, strategic litigation tactics and alternatives for resolution of disputes on favorable terms.  It allows students to gain additional experience and participation in application of their skills in a cost effective manner with any type of litigation challenge that may arise in their workloads. 

Students have included representatives from Acadia Insurance, Zurich North America, Harleysville Insurance, EMC Insurance, Axis Insurance, Meadowbrook Insurance Group, Dollar General Stores, Liberty Mutual Insurance, Hanover Insurance, Hartford Insurance, Mountain States Insurance, Dean Foods Company, Infinity Insurance, AIG, RSUI, General Star, Akzo Nobel, NGM Insurance, Guilford Specialty, IMT Insurance and Mitsui Sumitomo Insurance.

Every year, both the LMC and Graduate Programs receive rave reviews from students.  “Excellent, intensive, hands on/real practice exercises with high potential for mental retention.”  “The faculty is so knowledgeable and very willing to take the time to answer questions and assist in any way they can.”  “Great group of speakers.”  “This was the best seminar I have attended in 15 years.” 

The faculty of the College and the Graduate Program consists of numerous prominent attorneys and insurance industry executives, all of whom are members of the FDCC, and many of whom have devoted years of service in educating class after class of students.  The College also provides training from outside experts as a part of the experience.  These include:

• Audrey Nelson, Ph.D. of Nelson Communications in Boulder, Colorado, an internationally recognized trainer, keynote speaker, and consultant specializing in gender communication, conflict management and dealing with difficult people and communication skills;
• John Patrick Dolan, Esquire, a well-known attorney who is also a professional speaker on the classic principles of effective negotiation; and
• The jury consulting firm of Tsongas Litigation Consulting uses its experience, methodology, audiovisual technology, and expert knowledge of communication to assist with witness preparation (including the claims professional) and provides insight into the use of mock juries.

 

We believe the students attending the 2012 Litigation Management College and Graduate Program will have an excellent experience and take home skills which they can utilize in their everyday job performance.  A full description of the College and Graduate Program, as well as applications which can be downloaded, may be found on the FDCC website, www.thefederation.org.

Greg Witke
Dean, Litigation Management College

Scott Kreamer
Dean of Curriculum, Litigation Management College

Susan Harwood
Dean, Graduate Program

One Hundred Years Ago Today:

New York Times
January 20, 1912
Page 1

YOUNG DEPEW DENIES IT
Declares His Wife Lost No Clothes in Hotel Plaza Accident

Chauncey Mitchell Depew, 2nd, indignantly denied to a Times reporter last night that his wife had lost $5,000 worth of clothes in an elevator accident at the Hotel Plaza.  It was reported in an afternoon paper that an elevator, presumably a freight lift, had dropped nine stories and cut in half a trunk containing the clothes.  When Mr. Depew was seen he said that there had been no such accident.  He denied that his wife had gone to bed ill with grief at her loss.

An air of mystery pervaded the Plaza during the afternoon after the report became current in the newspapers and inquiry provoked only vehement denials by the hotel people.  One of the house porters, however, was telling the Times reporter all about somebody’s trunk getting damaged when he was stopped peremptorily by one of the managers.  The enigma is still unsolved, because it seems clear that one’s trunk was mussed up and nobody wishes to claim the trunk.
Editor’s Note:  A follow up story in the February 18, 1912 issue of the Oakland Tribune confirmed the “tragedy”:

MRS. DEPEW ILL FROM
LOSS OF COSTLY GOWNS

NEW YORK - Mrs. Chauncey M. Depew, second, whose husband is a nephew of ex-Senator Depew, is mourning the loss of nearly $5900 worth of gowns she recently brought from Paris. 

Editor’s note:  To keep the cost of these gowns in perspective, on the same day as the “tragic loss,” The New Brunswick (NJ) Times carried an ad from the Central Garage and Sales Company touting the cost of a new Ford at $600, a new Rambler at $1000 and the “Buick 25” at $1050.

Mr. and Mrs. Depew live at the Hotel Plaza. The gowns were the most expensive of a lot that Mrs. Depew purchased abroad and were kept in a large drawer trunk. This, it is reported, was cut in two when an elevator upon which it was being loaded slipped its clutch arid dropped nine floors. The trunk was half on the elevator and half off when the accident happened. Luckily no one was on the elevator.

Strewn on landings on the way down, hardly a square of the material remained intact.

The Depews were moving from an apartment on the eleventh floor to one on the tenth, and their servants were transferring their trunks.

When the news was told Mrs. Depew she wept. When the remnants of the costly gowns were collected and brought into her room she broke down completely.  It was necessary to call a physician.

Chauncey’s uncle, Senator Chauncey Mitchell Depew (April 23, 1834 – April 5, 1928) was an attorney for Cornelius Vanderbilt’s railroad interests, president of the New York Central Railroad System, and a United States Senator from New York from 1899 to 1911.  Depew received 99 votes, to Benjamin Harrison’s 80, in the first ballot of the Republican Presidential Nominating Convention in 1888. Harrison won that nomination on the eighth ballot, going on to defeat Grover Cleveland in his first bid for reelection.  Depew established a New York Central railroad factory and development company in western New York and the Village of Depew, New York is named in his honor.

Audrey’s Angle:

There has been little recent reported activity in no-fault litigation but there are some noteworthy arbitration decisions.  One decision from Arbitrator O’Connor is particularly noteworthy in that it involved a denial for failure to appear for scheduled IMEs and EUOs.  The assignor/eligible injured person was deemed to have violated a condition precedent to coverage under the policy.  Yet, the noteworthy part of her decision is at the end where she determines that she is persuaded by the cases which hold an insurer can deny claims made prior to the breach.

On the training front, DRI’s Insurance Law Committee is holding the Insurance Coverage and Claims Institute in Chicago from March 28-30th.  There will be in-house speakers from ACE Limited, American Modern Insurance Group, State Farm Insurance Company, Travelers Insurance Company, Liberty Mutual Group, CNA, and Swiss Re American Holding Corporation.  There will be panel counsel meetings and opportunities to network with senior claims executives.  Also, this year the Wednesday afternoon track will focus solely on bad faith issues.  The Thursday plenary session has a number of timely topics from drilling down the duty to defend to perspectives from senior management and claims professionals to the role and E&O liability of agents and brokers.  Finally, the Friday session will consist of two separate tracks with one focused on construction defect and the second focused on first party personal and property lines issues.  If you need a brochure please send me an email at [email protected]

Audrey

One Hundred Years Ago:

Syracuse Herald
January 20, 1912
Page 1

ESCAPE FROM SING SING MAY
CAUSE SCANDAL
Chester Yates, Who Made Mysterious
Get-Away Can Not Be Located.
HAD HELP FROM INSIDE
Not Possible for Him to Get Away Unless He Had Assistance—
Successful Escapes From Sing Sing Are Unheard of — Yates Was Serving a Twenty-one Year Term.

Ossining, Jan 20.—Chester Yates, who escaped from Sing Sing Wednesday morning, has not yet been captured, and the affair has caused a sensation in prison circles. Successful escapes from Sing Sing are so rare that the get-away of Yates has given rise to all sorts of rumors, and a prison scandal is predicted before the matter is finally sifted down.

That Yates received help from the outside or inside is almost certain, and if it is finally learned that it came from the inside — which is the most logical reasoning — there will be a far-reaching investigation, and there will undoubtedly be some interesting developments.
Editor’s Note:  Yates was not returned to Sing Sing until 1919 when he was finally captured  He had been arrested several times between1912 and 1919 but had escaped each time.  He died in Auburn prison in 1925.

Highlights of This Week’s Issue

In this week’s blockbuster edition, attached, we offer the following:

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

• The Phrase “Caused by the Named Insured’s Operations” in an Additional Insured Endorsement Was as Broad as the Phrase “Arising Out of the Named Insured’s Operations”
• First Department Overrules Its Own Precedent; Carrier Has Obligation to Disclaim Promptly as Soon as It Knows of Any Grounds for Disclaimer, Even if It Is Investigating Other Grounds
• Duty to Indemnify Cannot Be Determined on Allegations in Complaint But Must Await Ultimate Findings of Fact; Questions of Fact Existed on the Reasonableness of the Insured’s Delay of 15 Months in Giving Notice
• Twenty-Day Period to Demand Stay of Arbitration Did Not Apply if Accident Occurred Outside Jurisdiction of the Policy, In this Case, for Accident in Mexico

 

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

• The Rule:  Provided One Injury Meets Threshold, Damages for All Causally Related Injuries, Even Those Not Meeting Threshold, May Be Awarded
• A Scar That Is Not Readily Visible Is Not a Significant Disfigurement
• Relying on Same MRI Report, But Attributing Injuries to Different Cause, Raises Triable Issue of Fact
• Where Finding of Serious Injury Necessitates Reliance on Subjective Complaints, Assessment of Plaintiff’s Credibility by Trier of Fact Is Necessary First
• Submission Not in Admissible Form Fail to Raise an Issue of Fact
• Treating Physician’s Affidavit Based on Recent Examination Raises Triable Issue of Fact
• A Fracture Is a Serious Injury, But Unsworn Report Will Not Support Summary Judgment

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

• Failure to Rebut IME Report Conclusions Fatal to Claim for Reimbursement for Durable Medical Equipment
• Applicant Should Have Been Re-Examined After First Decision Did Not Uphold Denial Based Upon IME
• Arbitrator Agrees Claims Can Be Denied for Services Rendered Before Breach of Policy Condition

 

LIENING TOWER OF PERLEY
Michael F. Perley
[email protected]

• New York Reinstates Interest for Future Damages for Wrongful Death Actions

 

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

• Motion to Dismiss Property Damage Claim Based on “Faulty Workmanship” Exclusion, Denied
• Time Lapse of Two Hours After Last Snow Fall Creates a Question of Fact on Storm in Progress; Snow Plow Contractors Indemnity Obligations are Defined by the Plain Terms of the Contract
• Six Year Statute of Limitations Governing the Recovery of a Judgment Under Debtor & Creditor Law Did Not Accrue Until the Judgment was Actually Entered
• Re-insuer’s Decision to Refuse Payment Results in a Question of Fact as to Whether the Underlying Carrier Acted in Good Faith

 

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

• All quiet in the Capitol District.

 

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

• “Total Disability” Under Group Life Insurance Policy

 

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

• Where Law Firm Is Duped into Depositing a Fraudulent Check into Its Escrow Account, This Action Qualifies as a “Wrongful Act” Under Its Professional Liability Policy and Coverage Is Triggered
• Court Rules That Demand for Arbitration Must Be Specific and Unambiguous
• No Coverage Under Homeowners’ Policy for Property the Insured Rented Out
• Premium Finance Company Only Entitled to Refund of the Portion of the Premium It Actually Paid
• Assault and Battery Exclusion Removed Coverage Even Where Underlying Complaint Alleged Various Negligent Acts

 

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

INSURANCE APPORTIONMENT – TIME ON THE RISK

That’s all folks.  We’ll see you back in snow country for our next issue.

Dan
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
Liening Tower of Perley
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]

01/19/12         W & W Glass Systems, Inc. v. Admiral Insurance Company
Appellate Division, First Department
The Phrase “Caused by the Named Insured’s Operations” in an Additional Insured Endorsement Was as Broad as the Phrase “Arising Out of the Named Insured’s Operations”
W&W, a general contractor, sought a declaration that it was entitled to a defense and indemnity from Admiral in connection with an underlying personal injury action in which an employee of defendant Metal Sales, a subcontractor hired by W&W, was injured. Metal Sales had a commercial general policy with Admiral pursuant to which plaintiff was named as an additional insured. The policy provided that plaintiff was covered "only with respect to liability caused by [the subcontractor's] ongoing operations performed for that insured.  The policy further provided that it did not apply to “liability caused by the sole negligence of the person or organization [named as an additional insured]."

Admiral argued that the terms Contrary to defendants' argument that the term caused by is narrower than the arising out of language in the Regal case.  In Regal, the Court of Appeals held that an injury to additional insured status would be extended to an owner or general contractor who was promised AI status in a trade contract, if the indemnity agreement provided for coverage arising out of the named insured’s work and the injury was to a named insured’s employee in the course of the work.

The court held that the phrase “only with respect to liability caused by … ongoing operations” did not require a negligence trigger.

01/17/12         Ocean Gardens Nursing Facility, Inc. v. Travelers Cos. Inc.,
Appellate Division, Second Department
Duty to Indemnify Cannot Be Determined on Allegations in Complaint But Must Await Ultimate Findings of Fact; Questions of Fact Existed on the Reasonableness of the Insured’s Delay of 15 Months in Giving Notice
Ocean Gardens d/b/a Horizon sought a declaration that was obligated to indemnify it in an underlying personal injury action alleging that Horizon's employee caused damages in an automobile accident

This was not a suit seeking defense costs.

 

The duty to pay is determined by the actual basis for the insured's liability to a third person, not the allegations in the complaint. Since Horizon's liability to the plaintiff in the underlying action has yet to be determined, it was premature for the Supreme Court to pass on the question of whether such loss would be covered by the policy.

Travelers' contended that Horizon failed to give notice of the accident "as soon as reasonably possible," as required by the policy. This was a pre-prejudice case.  Here, in opposition to Travelers' prima facie showing that notice, given approximately 15 months after the accident, was not "as soon as reasonably possible," Horizon raised an issue of fact as to whether its good faith belief in nonliability constitutes a reasonable excuse for the delay). The evidence submitted by Horizon supports its reasonable belief that it bore no liability for the accident involving its employee and the plaintiff in the underlying action.

According to deposition testimony, at the time of the accident, Horizon's employee was driving in his own personal vehicle and was not engaged in any matters which were related to his employment with Horizon. Moreover, Horizon was not named as a defendant in the underlying action and was not contacted regarding the case until more than a year after the accident occurred, when it was subpoenaed to produce records for inspection by the underlying plaintiff.
Notice was given shortly thereafter.  Accordingly, there is a question of fact on the reasonableness of the delay.

01/17/12         George Campbell Painting v. National Union Fire Ins. Co.
Appellate Division, First Department
First Department Overrules Its Own Precedent; Carrier Has Obligation to Disclaim Promptly as Soon as It Knows of Any Grounds for Disclaimer, Even if It Is Investigating Other Grounds
An Excess insurer, the court found, had obtained sufficient grounds to deny coverage based on later reporting of claim in January.  It waited until May before disclaiming on that ground, because it was investigating other grounds of possible disclaimer. 

The insurer reserved its rights on late notice within 30 days of the accident, but a reservation of rights is not a substitute for a disclaimer.  It wanted additional information on the timeliness of the notice and the insured status of the party seeking coverage.  The letter it sent out at the 30 day mark, said, in party:
The policy conditions require timely notice. We note that your tender request is our first notice of this loss. It further appears [that] this matter has been in suit for approximately 2 years. However, first notice to NUFIC was not [received] until November 23, 2005. This notice may have breached the foregoing policy conditions.

It then asked for more information to determine whether or not the party qualified as an additional insured under the policy.  It received a letter dated January 19 which included: a “copy of our previous status reports to [Gulf] which reflect our evaluations of liability and damages."

When the carrier finally disclaimed in May, it quoted the evaluations of liability and damages that were received back in January.  Accordingly, the court found that the information that had in January was sufficient to place them of notice of the excess policy being implicated.

The information it didn’t have in January – information about whether or not the party would be an additional insured, the court found, was inconsequential.  If the carrier had determined that the party was NOT an insured, it would not have needed to disclaim timely anyway.  If the carrier had determined it was an insured, it would have had the obligation to disclaim promptly.

In DiGuglielmo v Travelers Prop. Cas. (6 AD3d 344 [2004], lv denied 3 NY3d 608 [2004]), the same court that held that, notwithstanding this statutory language, "[a]n insurer is not required to disclaim on timeliness grounds before conducting a prompt, reasonable investigation into other possible grounds for disclaimer".  In this case, the court declines to follow, and expressly overrule, DiGuglielmo, because it find sit to be inconsistent with the text of § 3420(d) and with the decisions of the Court of Appeals interpreting that statute.
Editor’s Note:  Remember that in New York, a reservation of rights letter on late notice is NOT a substitute for a disclaimer.  In any other civilized jurisdiction, the letter sent out a month after the accident advising of the ROR on late notice would protect the carrier’s right to later disclaim but NOT in New York.

01/17/12         In re Allstate Insurance Company v. LeGrand
Appellate Division, First Department
Twenty-Day Period to Demand Stay of Arbitration Did Not Apply if Accident Occurred Outside Jurisdiction of the Policy, In this Case, for Accident in Mexico
Generally, an application to stay an uninsured or underinsured motorist arbitration must be made within 20 days of the time arbitration has been demanded. However, a motion to stay arbitration may be entertained outside the 20-day period when "its basis is that the parties never agreed to arbitrate, as distinct from situations in which there is an arbitration agreement which is nevertheless claimed to be invalid or unenforceable because its conditions have not been complied with.”

Here, the accident occurred while a rental car was being driven in Mexico.  The policy provided coverage only for accidents that occurred within New York State, the United States, its territories, possessions or Canada.  Since the policy did not provide for coverage in the geographic area where the accident occurred, it cannot be said that the parties ever agreed to arbitrate this claim.

 

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

01/19/12         Singer v. Gae Limo Corp.
Appellate Division, First Department
The Rule:  Provided One Injury Meets Threshold, Damages for All Causally Related Injuries, Even Those Not Meeting Threshold, May Be Awarded
Plaintiff was injured when the taxi in which she was a passenger collided with another cab.  She complained of constant pain from her left buttock area radiating down her left leg and was diagnosed with left piriformis syndrome and left sacroiliac joint syndrome.  She claimed injury under the permanent consequential and/or significant limitation of use categories.  She also claimed she was confined to bed and home for about four months following the accident.

On appeal, the court disagreed with the trial court and found that defendant met his prima burden with respect to plaintiff’s claims of serious injury to her cervical, thoracic and lumbar spines, left hand/wrist, left knee and left foot/ankle.  In opposition, plaintiff failed to raise an issue of fact with respect to those claimed injuries.

However, defendant failed to submit any medical evidence addressing plaintiff’s claims based on piriformis syndrome and left sacroiliac joint syndrome, or plaintiff’s claim under the 90/180-day category.  Defendant’s experts did not examine plaintiff until three years after the accident and did not address those injuries.  Because defendant did not meet his burden with respect to those claims, the burden did not shift to plaintiff and it was not necessary to consider the sufficiency of plaintiff’s rebuttal evidence.  As such, if the trier of fact determines that any one injury qualifies as a serious injury, damages may be awarded for any other causally related injuries, even if they themselves do not meet threshold.

01/19/12         Mahar v. Bartnick
Appellate Division, Third Department
A Scar That Is Not Readily Visible Is Not a Significant Disfigurement
As the result of a two-car accident, Pplaintiff sustained a laceration on the back of her head and received sutures.  A CT scan did not, however, reveal evidence of an acute injury.  The trial court found the scar did not constitute a significant disfigurement as it could be covered by plaintiff’s hair, and was not ”unattractive, objectionable or the subject of pity or scorn” as is required to qualify as a serious injury.  On appeal, the court agreed and noted that the record did not include a photograph or specific description of the scar and, as also pointed out by the trial court, plaintiff did not allege that the scar constituted a significant disfigurement in her bill of particulars.

Plaintiff also claimed injuries under the permanent consequential and/or significant limitation of use categories, as well as under the 90/180-day category.  She treated for headaches, neck pain and bruises to her knees and was initially told to remain out of work for two weeks and attend physical therapy for her neck pain.  The therapist initially diagnosed cervicothoracic strain but after about four months reported that plaintiff’s cervical range-of-motion was within normal limits. 

In support of her motion, defendant submitted plaintiff’s medical records, an MRI report, the physical therapy records, plaintiff’s deposition testimony, and two reports by an orthopedist who examined plaintiff at the request of plaintiff’s insurance carrier.  The orthopedist, during the second examination, found only slight decrease in rotation to the right and no restriction or pain in rotation to the left.  He concluded that plaintiff did not need any further orthopedic treatment.  Furthermore, plaintiff returned to work three weeks after the accident and an MRI taken three months after the accident revealed only minimal cervical disc bulges. 

Contrary to plaintiff’s assertions, the court noted that a bulging disc may qualify as a serious injury if it results in a quantifiable loss in range-of-motion.  The court further determined that her treating physician’s affidavit regarding her restrictions was based on the assessment performed by the physical therapist and not on any examination performed by the physician.  In addition, the restrictions were those noted initially but when therapy ended four months later, the therapist found plaintiff’s cervical range-of-motion to be within functional limits. 

With regard to her claim under the 90/180-day category, the court noted that plaintiff returned to work in three weeks and that she did not specifically identify what, if any, activities she was unable to perform, but rather simply stated that her activities were restricted.  The court agreed with the trial court that such evidence is insufficient to support a claim of serious injury.

01/17/12         Grant v. United Pavers Co., Inc.
Appellate Division, First Department
Relying on Same MRI Report, But Attributing Injuries to Different Cause, Raises Triable Issue of Fact
While attempting to make a left turn, plaintiff’s vehicle was struck in the rear by defendants’ dump truck.  Plaintiff claimed injuries to his left knee and cervical and lumbar spine under the permanent consequential and/or significant limitation of use as well as under the 90/180-day categories of serious injury.

Defendants moved to dismiss asserting that the degenerative nature of the injuries prevented plaintiff from establishing that they were causally related to the accident, and that any injuries sustained had resolved and therefore were not permanent or significant.  In support, defendants submitted medical evidence that plaintiff had full range of motion.  In addition, they submitted the report of their radiologist who, upon reviewing plaintiff’s MRI films, concluded that plaintiff suffered from preexisting degenerative conditions and that the accident was not the proximate cause of the injuries.

Plaintiff proffered the affirmation of his treating physicians who both concluded, based on contemporaneous and recent examinations, review of the same MRI films, and arthroscopic surgery to plaintiff’s left knee performed 18 months after the accident,  that the injuries were causally related to the accident. 

On appeal, the court noted that, although plaintiff’s physicians did not specifically address the conclusion of defendants’ expert that the injuries were degenerative, “by relying on the same MRI report as defendants’ expert, and attributing plaintiff’s injuries to a different, yet equally plausible cause, plaintiffs raised a triable issue of fact.”  Quoting the recent Court of Appeals decision in Perl v Meher, the court stated that “although ‘a factfinder could of course reject this opinion,’ we cannot say on this record, as a matter of law, that plaintiff’s injuries had no causal connection to the accident.”

The appellate court modified the lower court’s order and denied defendants’ motion with respect to the permanent consequential and/or significant limitation of use categories.  However, with regard to plaintiff’s claim under the 90/180-day category, the court affirmed the dismissal finding that plaintiff’s deposition testimony, that he missed two months of work and that his activities were significantly impaired, was insufficient to support the claim.

01/12/12         Connis v. Menichetti
Appellate Division, Third Department
Where Finding of Serious Injury Necessitates Reliance on Subjective Complaints, Assessment of Plaintiff’s Credibility by Trier of Fact Is Necessary First
On appeal, the court affirms the trial court’s grant of plaintiff’s motion on the issue of negligence as well as its denial of plaintiff’s motion on the issue of serious injury.  Plaintiff claimed injuries under the permanent consequential and/or significant limitation of use categories.  He submitted his own testimony his describing debilitating pain, restriction and attempts to manage his pain.  He also submitted a CT scan report from after the accident and a subsequent MRI showing degenerative disc disease and bulges at C3-4 and C4-5.  He was diagnosed with a cervical strain that aggravated his preexisting degenerative disc disease.

In opposition, defendant raised an issue of fact by submitting evidence undermining plaintiff’s credibility.  Defendant’s submissions included evidence that plaintiff misrepresented why he stopped working, a video suggesting plaintiff’s limitations were not what he claimed, and comments from doctors to the effect that plaintiff’s complaints did not correlate with their observations.  In addition, plaintiff never disclosed a prior accident, after which he treated for neck injury, during his deposition or to any of his doctors.  This rendered the doctors’ opinions as to causation speculative.  Because the medical testimony submitted relied in large part on tests relying on plaintiff’s subjective complaints, an assessment of plaintiff’s credibility is necessary before a finding of serious injury can be made.  Plaintiff’s motion for summary judgment on the issue of serious injury was therefore properly denied.

01/10/12         Diaz v. Chaudhry
Appellate Division, Second Department
Submission Not in Admissible Form Fail to Raise an Issue of Fact
Defendants met their prima facie burden of showing that plaintiff did not sustain a serious injury to his right knee under the permanent consequential and/or significant limitation of use categories.  Upon renewal, plaintiff submitted medical records that were either not in admissible form or factually insufficient.  He also failed to explain the cessation of treatment after 2003.  As such, he failed to raise a triable issue of fact on renewal and the trial court properly adhered to its prior determination.

01/10/12         Johnson v. Cristino
Appellate Division, Second Department
Treating Physician’s Affidavit Based on Recent Examination Raises Triable Issue of Fact
In yet another decision citing to the recent Court of Appeals decision in Perl v. Meher, on appeal the trial court’s order is modified to deny defendant’s motion with respect to Hee Goo Kim’s claim of injury to her cervical and lumbar spine and right shoulder under the permanent consequential and/or significant limitation of use categories.  Kim’s treating physician concluded in his affidavit, based on his most recent examination, that she sustained such injuries.  He also addressed the issue of pre-existing and degenerative injuries as well as the lengthy gap in treatment.  This was sufficient to raise an issue of fact.

However, with respect to plaintiff, Chun C. Johnson, the physician’s affidavit was no sufficient to raise an issue of fact with regard to her right shoulder or right knee because the range-of-motion limitations were insignificant within the meaning of the no-fault statute.

12/30/11         Sauter v. Calabretta
Appellate Division, Fourth Department
A Fracture Is a Serious Injury, But Unsworn Report Will Not Support Summary Judgment
Plaintiff’s mother brought the motion on behalf of her daughter who was struck as she walked along the side of the road.  She submitted the report from a radiologist who diagnosed the daughter with a linear skullbase fracture.  The fracture clearly qualifies as a serious injury but summary judgment was denied because the report was unsworn and not properly certified as a business record.  As such, it was not in admissible form and could not support the motion.

 

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

ARBITRATION
01/12/12         RS Medical v. Allstate Prop. and Cas. Ins. Co.
Arbitrator Veronica K. O’Connor, Erie County
Failure to Rebut IME Report Conclusions Fatal to Claim for Reimbursement for Durable Medical Equipment
The Applicant sought reimbursement for an interferential unit dispensed to the eligible injured person in March 2011, allegedly as a result of a September 1, 2010, accident.  The insurer denied the durable medical equipment upon an independent orthopedic examination conducted by Dr. Raghava Polavarapu.  Dr. Polavarapu’s report opined that the eligible injured person had resolved cervical spine strain, bilateral shoulder sprain, bilateral elbow sprain, right wrist sprain, and bilateral hand sprain.  Accordingly, she opined that special supplies were not medically necessary. 

The assigned arbitrator determined that the Applicant’s evidence submission did not adequately refute the conclusions in Dr. Polavarapu’s report.  Therefore, the denial was upheld and the claim denied.

01/11/12         Applicant v. Allstate Ins. Co.
Arbitrator Mary Anne Theiss, Onondaga County
Applicant Should Have Been Re-Examined After First Decision Did Not Uphold Denial Based Upon IME
The insurer relied upon the independent medical examination performed by Dr. Chiarmonte to deny the Applicant lost wages.  The assigned arbitrator noted that the Applicant commenced a prior lost wage arbitration which was heard before the assigned arbitrator.  The Applicant challenged the insurer’s reliance upon Dr. Chiarmonte’s independent medical examination to deny lost wages.  The assigned arbitrator in that prior arbitration determined that the Applicant was unable to work as a massage therapist but was making other income through teaching.

The assigned arbitrator noted that the insurer did not have the Applicant re-examined after the prior award and should have done so.  Since the Applicant presented continuing disability slips from her physician the denial was not upheld.

01/10/12         RS Medical v. GEICO Ins. Co.
Arbitrator Veronica K. O’Connor, Erie County
Arbitrator Agrees Claims Can Be Denied for Services Rendered Before Breach of Policy Condition
The insurer denied durable medical equipment based upon the eligible injured person’s failure to attend schedule independent medical examinations and examinations under oath.  The insurer submitted two scheduling letters for medical examinations for chiropractic, orthopedic, and acupuncture which the eligible injured person failed to attend.  The insurer established that it issued a timely denial based upon these policy condition violations.

The assigned arbitrator determined that the eligible injured person violated a condition precedent to coverage and no reasonable justification was presented.  The Applicant took an assignment from the eligible injured person and stands in the eligible injured person’s shoes.  Thus, the Applicant has no greater rights than the eligible injured person. 

The assigned arbitrator upheld the denial but also commented on the dichotomy of court decisions regarding the insurer’s ability to denial claims for services rendered prior to the eligible injured person’s breach of the policy condition.  The assigned arbitrator indicated that upon her review of the case law she is persuaded that the policy violation bars recovery of the claim irrespective of whether the services were rendered before or after the denial of the claim based upon the policy violation.

LIENING TOWER OF PERLEY
Michael F. Perley
[email protected]
01/10/12         Toledo v. Iglesia Ni Cristo
New York State Court of Appeals
New York Reinstates Interest for Future Damages for Wrongful Death Actions
On January 10 the New York State Court of Appeals reinstated interest on post-verdict pecuniary loss in wrongful death cases; leading some to conclude that the Court was over-ruling its decision in Milbrandt v. Green Refractories (79 NY2d 26).  Although the Toledo decision may have caught some by surprise, when analyzed carefully, there is a way to reconcile this decision with Milbrandt.  To understand the Court’s reasoning in Toledo a short history lesson is in order.  In 1991 when it decided the Milbrandt case, the award for future pecuniary loss in a New York wrongful death action was discounted to the date of the verdict.  Under those circumstances the Court Milbrandt held that interest would not be calculated on the future pecuniary loss.  The Court, applying EPTL §5-4.3 (a), reasoned that such an award would constitute a double recovery since the plaintiffs would have the opportunity to invest the money and receive a return in that investment, making an award of interest at trial a windfall.

After Milbrandt was decided, the Court again addressed the issue of discounting post-verdict damages in Rohring v. City of Niagara Falls (84 NY2d 60), a case involving the manner in which attorney’s fees would be calculated under CPLR Article 50-B.  In that case, the Court required the attorney’s fees to be calculated on the discounted amount.  The Rohring Court also decided that “future damages should be discounted to the date of liability, which by statute [in a death case] is the date of death, before interest is calculated on them”. (84 NY2d 69).  That led the Court this year in Toledo to determine that all damages [both pre and post-verdict] should be discounted to the date of death and that interest be applied on all damages.  The majority in Toledo considered that this calculation would be a “wash”, failing to recognize, as pointed out in the dissent, that the discount rate to be applied would be at approximately 4% and the interest rate to be applied would be approximately 9%. 

As a result, all damages in wrongful death cases are now discounted to present value as of the date of death and interest is applied to both past and future damages.

Defendants and carriers in New York now need to pay close attention to the manner in which interest will be calculated in order to properly evaluate their exposure.

 

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

01/17/12         Makris v. Masjid
Appellate Division, Second Department
Motion to Dismiss Property Damage Claim Based on “Faulty Workmanship” Exclusion, Denied
Makris sued Tower Insurance claiming that Tower had wrongfully it claim to recover for property damage caused to its property caused by negligent demolition.  Tower based its denial on the policy's "faulty workmanship" exclusion. This was not an ultimate determination on the merits, but only on the pleadings.

On a motion to dismiss the complaint, Tower failed to carry its burden of demonstrating that the faulty workmanship exclusion applies in this particular case, and that the exclusion is subject to no other reasonable interpretation than the one offered by it.

01/12/12         Imperati v. Kohl’s Department Stores
Appellate Division, Third Department
Time Lapse of Two Hours After Last Snow Fall Creates a Question of Fact on Storm in Progress; Snow Plow Contractors Indemnity Obligations are Defined by the Plain Terms of the Contract
Plaintiff sustained injury when she fell on ice that had formed in the parking lot of a Kohl’s Department store.  Upon being named as a defendant, Kohl’s immediately commenced a third-party action against Tower Cleaning Systems, Inc. who served as the snow plow contractor for the site.  Kohl’s asserted claims of common law and contractual indemnification against Tower. 

Kohl’s eventually moved for summary judgment against plaintiff on the basis that the action was precluded by operation of the “storm in progress” doctrine.  However, where all sides agreed that no snow had fallen in the two hours immediately preceding plaintiff’s incident, a question of fact existed as to whether Kohl’s had sufficient time to remedy the allegedly defective condition.  Likewise, plaintiff’s cross-motion for summary judgment was denied where questions remained as to how, when and whether Kohl’s knew that ice had formed on the parking lot.

At the same time, Kohl’s also moved for an award of contractual/common law indemnification against Tower.  Tower opposed Kohl’s motion on the basis that its duties under the contract in question had not been triggered at the time plaintiff fell.  In interpreting the contract, the Third Department noted that Tower was obligated to salt and plow “whenever weather conditions in the area warranted.”  Where it is undisputed that the parking lot was ice covered at the time plaintiff fell, it followed that the broad indemnity language in question protected Kohl’s should liability to plaintiff ultimately attach.

01/10/12         In re. State Insurance Fund v PSG Construction Co., Inc.
Appellate Division, Second Department
Six Year Statute of Limitations Governing the Recovery of a Judgment Under Debtor & Creditor Law Did Not Accrue Until the Judgment was Actually Entered
In 2001, the State Insurance Fund commenced a proceeding against Bridgeworks to recover more than $1,000,000 in unpaid premiums.  Judgment against Bridgeworks was finally obtained in April of 2009.  However, it was later determined that Bridgeworks dissolved in 2005, and that prior to dissolving it had made several loans to defendant PSG. 

Armed with this knowledge, the State Insurance Fund commenced a special proceeding against PSG in 2010 which alleged that Bridgeworks’ loans to PSG were fraudulent under Debtor and Creditor Law § 273.  Importantly, PSG appears to have opposed the State Insurance Fund’s petition on the basis it was time barred by the applicable six year statute of limitations.  However, in finding the action timely, the Court noted that the statute of limitations did not begin to accrue until the State Insurance Fund actually obtained judgment in 2009.  As such, the commencement of the instant proceeding, a mere one year later, was timely.

12/27/11         American Home Assurance Co. v Everest Reinsurance Company
Appellate Division, First Department
Re-insuer’s Decision to Refuse Payment Results in a Question of Fact as to Whether the Underlying Carrier Acted in Good Faith
This case, principally, arises out of a 1993 mass toxic tort settlement entered into by National Union and its underlying insured.  At that time, National Union agreed to assist in the funding of a clean-up effort.  In addition, a protocol was established for the settlement of future bodily injury and property damage claims.  Fast forward 11 years to 2004, and the underlying insured resolved a massive tort claim involving its plant in Alabama.  As part of the $600 million dollar settlement, the insured submitted a $150 million claim to National Union.  National Union paid the claim, and then sought reimbursement through its reinsurer Everest Re. 

Everest Re declined to reimburse National Union, it appears, on the basis that the claim presented by the insured was not covered.  The Court initially began its discussion by noting that a reinsurer will be bound by the terms of a settlement so long as the resolution is “reasonably within the terms of the original policy, even if not technically covered.”  Simply stated, a reinsurer must accept a loss absent the existence of fraud, collusion or bad faith. 

Everest Re’s position appears to have been based upon the fact that a 1994 decision determined that the insured’s claims were barred by the total pollution exclusion.  As such, Everest Re appears to have argued that National Union should not have settled the claim.  In light of the 1994 decision, the First Department found the existence of question of fact as to whether National Union’s acceptance of the 2004 settlement was done in good faith.

 

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

All quiet in the State’s Capitol this week.

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

01/11/12         Scibelli, et.al. v. Prudential Insurance Company of America
First Circuit Court of Appeals – Massachusetts
“Total Disability” Under Group Life Insurance Policy
Plaintiffs are the executor and beneficiaries of a Prudential Group Life Insurance policy in which Walter Jajuga was an insured.  Whether the estate gets those benefits turns on whether Jajuga was “totally disabled” on May 6, 1997, when he stopped working for Mercedes Benz USA [“MBUSA”].

The last day that Jajuga worked for MBUSA was May 5, 1997, at that time he was 52 years old.  From May 6, 1997, until his death on December 31, 2008, Jajuga never returned to work at MBUSA, or anywhere else.

On May 13, 1997, Jajuga had an MRI scan which identified numerous problems causing serious back pain.  On May 24, 1997, Jajuga was admitted to psychiatric hospitalization for alcohol detoxification and depression.  Jajuga was discharged from psychiatric care on June 11. 1997.  Jajuga did not return to work and he continued to see medical specialists and sought long-term disability benefits in 1997 and then a waiver of premiums at issue in 1998. 

Importantly, a neurologist, Dr. Patricia Klein, completed an attending physician statement form in support of Jajuga’s application for long term disability benefits from MBUSA.  As to Jajuga’s physical impairment, Dr. Klein checked the box for Class 5 – Severe limitation of functional capacity; incapable of minimum (sedentary) activity (75-100%.  In response to the question, “Is the patient now totally disabled?”  Dr. Klein checked “yes” boxes for “patient’s occupation” and for “any other work”.  Dr. Klein also stated on the form that Jajuga was incapable of performing all duties, that he would never recover, and that he was not a candidate for rehabilitation.  Later, MBUSA found this evidence of disability adequate, and allowed Jajuga’s claims, and long term disability benefits from at least October 1, 1997, until his death. In addition, Prudential found that Jajuga met the conditions for waiver of premiums under his Individual Policy.

In a subsequent report dated March 30, 1998, Dr. Klein completed a separate “attending physician’s statement” form, in support of Jajuga’s claim for a waiver of premiums under the Group Policy at issue.  In her statement, Dr. Klein stated that Jajuga had stopped working due to “numbness in both legs and severe pain in how low back and legs” and “acute lumbar derangement.”  She wrote that the usual duration of the condition was indefinite.  In response to the question of what work duties Jajuga could perform, she wrote “none”; and, in response to the question of what duties can Jajuga not perform, she wrote “all”.

            The policy at issue was a Group Life Insurance policy.  The policy was insured and administered by Prudential and regulated by ERISA. 

            The district court entered summary judgment for Prudential.  On de novo review the First Circuit Court of Appeals [“Court”], concluded that the plaintiffs were entitled to benefits.  The Court held that the plaintiffs carried their burden of showing that when Jajuga stopped working on May 6, 1997, he was “totally disabled” under the terms of the Group Policy.  That is, plaintiffs sufficiently demonstrated that when Jajuga stopped working on May 6, 1997, he was “not able to perform for wage or profit, the material and substantial duties of any job for which he was reasonably fitted by his education, training or experience.  In rendering its decision the Court relied heavily on Dr. Klein’s physicians’ statements.

Prudential argued that Jajuga’s hospitalization for detoxification on May 24, 1997, shows that he stopped working not because of disabling back pain but “to undergo treatment for alcoholism”.  In response, the Court noted that this was a brand new defense conjured up in litigation because at no point during the administrative appeals process did Prudential assert that Jajuga stopped working because of alcoholism rather than back pain.  Further, there was no evidence in the record which supports the assertion made by Prudential that Jajuga stopped working due to alcoholism rather than back pain.

Prudential also relied on a report written by a psychiatrist when he was discharged from the hospital on June 11, 1997.  Prudential argued that the discharge plan constituted a medical evaluation of Jajuga’s ability to return to work.  The Court once again disagreed stating that since this was a psychiatric discharge summary, the report was concerned with Jajuga’s psychiatric health, not his physical health and even if Jajuga was psychiatrically able to return to work, the report stated no opinion on whether he was the physically able to perform the duties of his or any other job.

For its conclusion that Jajuga was totally disable under the terms of the Group Policy, the Court also relied on a related decision by Prudential itself which granted Jajuga’s claim for waiver of premiums under his Individual Policy for being “totally disabled”.  The Court held that the definition of “total disability” in the Group Policy is substantively indistinguishable from the definition of “totally disabled” in the Individual Policy.

Prudential then argued, and the district court agreed, that the definition of “any job” is broader than the Individual Policy’s definition for “any gainful work”.  The Court disagreed stating  that if one is unable to do “any gainful work”, one is also unable to “perform for wage or profit, the material and substantial duties of any job”.

Prudential then argued that the paucity of relevant evidence from the period around Jajuga’s last day of work is reason to hold that plaintiffs had not carried out their burden.  The Court pointed out, however, that that paucity was attributable to Prudential’s failure to give Jajuga timely notice of its decision to deny his claim for a waiver of premiums under the Group Policy, as required by the ERISA regulations.  MBUSA sent Jajuga’s waiver of premiums claim to Prudential on September 10, 1998.  However, Prudential evidently did not send any notification that it denied the claim until November 29, 1999, over a year later- a violation of regulations.  Moreover, that notification was sent to MBUSA, not to Jajuga, the claimant, as was required by the regulations. There was no evidence the Jajuga received notice of the denial of his Group Policy premium-waiver claim until September, 2005.  The Court held that plaintiffs had been prejudiced by Prudential’s seven-year delay in giving Jajuga notice that his claim had been denied.

Accordingly, the Court held that, based on the relevant evidence in the administrative record, the Group Policy language, and the unexplained inconsistency in Prudential’s award of benefits under the Individual Policy but denial of benefits under the Group Policy, Jajuga was “totally disabled” under the terms of the Group Policy when he stopped working on May 6, 1997.  The order of the district court was reversed.

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

01/11/12         Yudin & Yudin, PLLC v. Liberty International Underwriters, Inc. 
Supreme Court, New York County
Where Law Firm Is Duped into Depositing a Fraudulent Check into Its Escrow Account, This Action Qualifies as a “Wrongful Act” Under Its Professional Liability Policy and Coverage Is Triggered
This matter arises out of a claim made under a professional liability policy.  Plaintiff, a law firm, was contacted by a new client who sought representation.  In the course of the firm’s representation, the firm was told that one of the client’s debtors had agreed to repay an outstanding debt.   Accordingly, the firm was sent a check from JP Morgan Chase in the amount of the debt.  The firm then deposited the check in its escrow account maintained with Capital One and, upon the client’s request, wired the money to an account at the Korea Exchange Bank.  After the money was wired, J.P. Morgan Chase notified the firm that the check was fraudulent, which resulted in an overdraft in the firm’s escrow account. 

The issue of this case is whether Liberty International, Plaintiff’s professional liability carrier, is required to defend the firm in the suit brought by Capital One.  Pursuant to the grant of coverage, Plaintiff was insured for damages resulting from a claim that is caused by a “wrongful act.”  A “wrongful act” is defined as “any actual or alleged, error, omission or personal injury which arises out of the rendering or failure to render professional legal services.”  The court held that as required by ethical rules, attorneys ordinarily maintain accounts with client funds and transfer these funds at the client’s request.  Thus, here, when dealing with Capital One, Plaintiff was performing legal services as defined by the policy. 

01/11/12         Matter of Country-Wide Ins. Co. v. Ramirez
Supreme Court, Nassau County
Court Rules That Demand for Arbitration Must Be Specific and Unambiguous
Respondent, Jose Ramirez, was injured while operating a motorcycle.  At the time of the accident, the motorcycle was insured by GMAC.  In addition to this policy, Mr. Ramirez also had a policy in place with Petitioner, Country-Wide, for a vehicle he owned. 

Following the accident, on June 14, 2011, Mr. Ramirez advised Country-Wide of his intention to proceed with a claim pursuant to the SUM provision of the Country-Wide policy.  The letter provided, in relevant part:

Claimant intends to demand arbitration you will be precluded from raising the objection, inter alia, that a valid agreement had not been made or complied with unless you have applied to stay arbitration within 20 days after receipt of this notice.  You may consider this letter a formal claim to you of our intention to pursue Uninsured/Underinsured benefits of said policy…”

Thereafter, by letter dated August 15, 2011, Country-Wide denied coverage based on an exclusion in its policy for bodily injury sustained by the insured while occupying or when struck by any motor vehicle owned by that insured which is not insured for this coverage under this policy. 

Three days after receiving the denial, on August 18, 2011, Country-Wide received an American Arbitration Association demand for SUM arbitration.  By petition filed on September 2, 2011, Country-Wide sought a permanent stay of the arbitration. 

Now, in a technical argument, likely to avoid the policy exclusion, Mr. Ramirez argued that Country’s petition was too late.  Pursuant to § 7503, an application to stay arbitration must be made by the party served within twenty days after service upon him of the notice or demand or he shall be so precluded.  Mr. Ramirez argued that his June 14, 2011 letter was a demand for arbitration.  Thus, as County-Wide’s petition was not filed until over two months later, it should be precluded from relying on the subject policy exclusion.

The court disagreed.  It held that § 7503 provides a mechanism whereby a party demanding arbitration may limit the opposing party’s right to object to arbitration.  But, to do so, the statute mandates that the opposing party’s notice or demand contain specific information.  Here, the court held, the June 14, 2011 letter did not comply with § 7503.  Specifically, the letter was ambiguous in that it contained words like “intends”, which gave the impression that a demand for arbitration would be sent in the future.  Also, when the letter was viewed in conjunction with the August 18, 2011 AAA demand, it was clear that the latter was the actual demand.  Thus, County-Wide’s petition was timely.  Further, the court held that the exclusion applied and granted County-Wide a permanent stay of arbitration.  

01/10/12         Zises v. New York Cent. Mut. Fire Ins. Co.
Supreme Court, Dutchess County
No Coverage Under Homeowners’ Policy for Property the Insured Rented Out
In this decision, the court analyzed the term “reside” as used in a homeowners’ policy.  The policy issued to Plaintiff specifically defined the covered dwelling as “[t]he dwelling on the ‘residence premises’ shown in the Declarations, including structures attached to the dwelling.’”  The policy further provided that the term “residence premises” means, in relevant part, the one family dwelling where the insured resides.

Following a fire at Plaintiff’s property, Defendant disclaimed coverage based on evidence that, although Plaintiff had lived at the property at one time, during the 8 years prior to the fire, the property was rented out. 

In upholding Defendant’s denial, the court held that the policy’s reference to the phrase “reside” was not ambiguous and, accordingly, must be accorded its plain and ordinary meaning.  Under these circumstances, according to the court, it was reasonable to conclude that the policy was intended and written so as to provide liability coverage to the insured at his residence, which was either the premises described in the policy or any other place where he actually lived.

01/9/12           All Is. Credit Corp. v. County-Wide Ins. Co.
Supreme Court, New York County
Premium Finance Company Only Entitled to Refund of the Portion of the Premium It Actually Paid
This is an action commenced by Plaintiff, a premium finance company.  Plaintiff entered into a premium finance agreement with Defendant-insured Gotham Logistics.  Pursuant to the agreement, Gotham intended to purchase a motor vehicle insurance policy from County-Wide with a cash price of $90,522.00 (premium).  Gotham agreed to pay a cash down payment of $22,631.00 and Plaintiff agreed to lend the remainder of the money ($67,891.00).     

According to Plaintiff, it paid its portion of the premium, but Gotham did not.  As a result of Gotham’s failure to pay its share, Plaintiff issued a Notice of Cancellation.  Upon receipt of Plaintiff’s Notice of Cancellation, County-Wide cancelled the policy.  Now, the issue in this case is how much money is Country-Wide obligated to return to Plaintiff. 

Per County-Wide’s calculations, it took the cash price of the premium and multiplied it by the percentage of the year that the policy was in place.  This resulted in a total cost of $22,493.91.  It then subtracted this number from the amount paid by Plaintiff and returned those funds. 

Plaintiff disagreed with the calculation and brought this action.  It argued that County-Wide should have subtracted the $22,493.91 from the total cash price ($90,522.00); thus, entitling it to a return of $77,546.00.  In considering this argument, the court was unpersuaded.  It held that the applicable statute, Insurance Law § 3428(d), requires an insurer to only refund amounts that were actually paid to it or its agents.  Here, County-Wide never received Gotham’s portion of the premium.  To remit to Plaintiff more than it actually paid, would confer a windfall upon premium financing companies.  According to the court, this was not contemplated by the statute.  Rather, the return of unearned premiums was done for the benefit of the insured as it was required to be applied to reduce the insured’s account. 

01/5/12           Dmitriyev v. Tower Ins. Co. of N.Y.
Supreme Court, Kings County
Assault and Battery Exclusion Removed Coverage Even Where Underlying Complaint Alleged Various Negligent Acts
While at Tower’s insured’s restaurant, Plaintiff was injured after being stabbed twice in the chest by an unknown intoxicated patron.  As a result of these injuries, Plaintiff brought an action alleging two causes of action against Tower’s insured:  negligent supervision and inadequate security. 

Tower denied coverage based on untimely notice and the intentional tort exclusion.  The exclusion removed coverage for “bodily injury” arising from, due to, or caused by:

1. Assault and/or Battery committed by an insured, any employee of any insured, any patron or customer of the insured, or any other person; or
2. The failure to suppress or prevent any Assault and/or Battery or any act or omission in connection with any Assault and/or Battery; or
3. The negligent hiring, supervision or training of any employee or agent of the insured with respect to the events described in a. and b. above.

 

After Tower’s insured’s default, this action was brought against Tower.  Here, in considering Tower’s motion for summary judgment, the Court held that the assault and/or battery exclusion was clearly unambiguous.  It rejected Plaintiff’s argument that the stabbing was not intentional.  It likewise rejected the argument that the injuries did not arise from the stabbing, but, rather, from the negligent supervision at the premises.  The court reasoned that Plaintiff’s injuries would not have occurred “but for” the intentional batter committed upon him.  All Plaintiff’s other claims are rooted in assault and battery.  Accordingly, merely because the insured might be found liable under some negligence theory does not overcome the policy’s exclusion for injury arising from assault.  Thus, Tower established the applicability of the exclusion.

 

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

INSURANCE APPORTIONMENT – TIME ON THE RISK

A California Appellate Court recently apportioned responsibility for a $750,000.00 settlement between two (2) insurers for a roofing subcontractor.  Steadfast Insurance Co v. Gemini Insurance Co., 2011 WL 4793141 (Cal. Ct. App. October 11, 2011).  The court ruled that Gemini Insurance had to cover 75% of a settlement even though its policy did not cover the period when the work was actually undertaken and completed by the roofing subcontractor, Avanti. 

The dispute arose from defective roofing and waterproofing work the subcontractor allegedly provided on a home in California.  Steadfast insured the roofing subcontractor during 2002, when the work was performed, and Gemini Insurance insured the roofing subcontractor for the succeeding three (3) years, 2003-2005.  The sub-contractor, Avanti, was hired to do the roofing work and performed it in 2002.

Eventually, the homeowners sued the general contractor for breach of contract and negligence.  The general contractor filed a cross complaint against Steadfast and Gemini seeking indemnity and declaratory relief.  After initially demanding $1 Million from the subcontractor to drop the suit, the general contractor lowered its demand to $750,000.00.  Gemini refused to participate in settlement discussions because it believed the general contractor had a weak case.  Steadfast paid the entire $750,000.00 settlement to the general contractor and then sought contribution from Gemini.  Gemini had originally offered to contribute $100,000.00 to the settlement if Steadfast waived claims against it.

The trial court applied the “time on the risk” method of allocation and awarded Steadfast a $562,500.00 judgment, plus pre-judgment interest of more than $130,000.00 against Gemini.  The time on the risk method requires a court to apportion contribution among insurers based on the relative duration of each policy compared to the overall time period during which the loss occurred. 

Gemini appealed, and argued that the judgment was inequitable because it was based on the premise that Steadfast was only a 25% stakeholder, but allowed that insurer to control the settlement negotiations and amount. 

The three (3) judge appellate court said that the trial court properly applied the “time on the risk” method of apportioning responsibility for the settlement because Gemini improperly refused to participate in the settlement negotiations. 

The appellate court further concluded that a non-participating co-insurer such as Gemini waives its right to challenge the reasonableness of a settlement amount when it refuses to participate in the settlement.  The court reasoned that Gemini “unreasonably refused” to participate in the settlement because the evidence submitted by the homeowner’s expert gave rise at least to an inference that some of the defects occurred due to the subcontractor’s work.  As a result, Gemini could not challenge the settlement amount on appeal.  Essentially, the court ruled that, since the homeowner’s expert presented a prima facie claim of defective work against the sub-contractor, Gemini could not challenge the settlement amount on appeal.

The appeal court also said the trial court correctly applied the “time on the risk” method of apportioning the $750,000.00 settlement because the damage (arguably) got progressively worse during Gemini’s three (3) subsequent policy periods.  Consequently, the appellate court ruled that the trial court correctly found that Gemini had to contribute 75% of the settlement amount. 

The Steadfast Insurance Co. case outlines the risks an insurance company faces if it does not participate in a settlement and decisions are then made by parties and other insurance companies it cannot control or influence.  Here, Steadfast was steadfast, settled the underlying case and then pursued contribution from Gemini.  Steadfast undertook the risk of payment of the settlement, but then successfully sought recoupment against Gemini. 

The Steadfast Insurance Co. case also represents application of the “time on risk” method of allocating responsibility and payment among co-insurers.  Again, Gemini was forced to contribute 75% of a settlement which it had little or no hand in negotiating, plus $130,000.00 in pre-judgment interest, not to mention the subsequent litigation and court costs. 

A question to be asked of this decision is whether and what kind of insurance was involved that would insure essentially for a contractor’s “completed operations” and for “breach of warranty” on a subcontractor’s work, as it would seem there would be initial coverage questions not addressed in the opinion. 

 

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

Nothing on the coverage front on the FDCC site.

Reported Decisions

Sauter v. Calabretta

Appeal and cross appeal from an order of the Supreme Court, Onondaga County (James P. Murphy, J.), entered March 22, 2011 in a personal injury action. The order denied plaintiff's motion for partial summary judgment and denied defendant's cross motion for summary judgment.

Stanly Law Offices, LLP, Syracuse (Armen J. Nazarian Of Counsel), For Plaintiff-Appellant-Respondent.
Mackenzie Hughes LLP, Syracuse (Jonathan H. Bard Of Counsel), For Defendant-Respondent-Appellant.

It is hereby ORDERED that the order so appealed from is unanimously affirmed without costs.
Memorandum: Plaintiff commenced this action on behalf of her daughter seeking damages for injuries her daughter sustained when she was struck by a vehicle operated by defendant while walking on the shoulder of the road. Plaintiff appeals and defendant cross-appeals from an order denying plaintiff's motion for partial summary judgment on liability, i.e., the issues of negligence and serious injury (see generally Ruzycki v Baker, 301 AD2d 48, 51-52), and denying defendant's cross motion for summary judgment dismissing the complaint. We affirm.

Contrary to plaintiff's contention on appeal, we conclude that Supreme Court properly denied that part of her motion with respect to the issue of defendant's negligence, inasmuch as her own submissions raise triable issues of fact whether plaintiff's daughter was comparatively negligent and whether defendant exercised due care to avoid striking her (see D.F. v Wedge Mascot Corp., 43 AD3d 1372, 1373). In support of the motion, plaintiff contended that defendant violated Vehicle and Traffic Law § 1131, pursuant to which "no motor vehicle shall be driven over, across, along, or within any shoulder or slope of any state controlled-access highway . . . ." Plaintiff, however, submitted the deposition testimony of defendant, who testified that he did not cross into the shoulder of the street in question and that plaintiff's daughter crossed into the street immediately prior to the accident. Plaintiff also submitted the deposition testimony of her daughter's friend, who was with her daughter at the time of the accident and who testified that she did not observe defendant cross into the shoulder of the street.

In addition, plaintiff failed to make a prima facie showing that defendant violated Vehicle and Traffic Law § 1146 or a similar duty of care (see generally Long v Niagara Frontier Transp. Auth., 81 AD3d 1391, 1392). Pursuant to section 1146 (a), "every driver of a vehicle shall exercise due care to avoid colliding with any . . . pedestrian . . . upon any roadway and shall give warning by sounding the horn when necessary." Further, defendant also had the "common-law duty to see that which he should have seen [as a driver] through the proper use of his senses" (Barbieri v Vokoun, 72 AD3d 853, 856). Although it is undisputed that defendant struck plaintiff's daughter with his vehicle, defendant testified at his deposition that the street in question has few lights, that he was driving in his lane and that he was driving at or under the speed limit. Defendant further testified that he did not have time to avoid the accident after observing plaintiff's daughter in the path of his vehicle. Contrary to plaintiff's further contention, any inconsistencies in the deposition testimony of defendant concerning when he first observed plaintiff's daughter merely present a credibility issue to be resolved at trial (see Palmer v Horton, 66 AD3d 1433, 1434; Dietzen v Aldi Inc. [New York], 57 AD3d 1514). In light of our conclusion that plaintiff failed to meet her initial burden on the motion, we do not address her contention that the affidavit of defendant's accident reconstructionist is speculative and lacks an evidentiary foundation.

We further conclude that the court properly denied that part of plaintiff's motion with respect to the issue whether her daughter sustained a serious injury within the meaning of Insurance Law § 5102 (d). As the moving party, plaintiff bore the burden of demonstrating that her daughter sustained a serious injury as a matter of law "by tender of evidentiary proof in admissible form" (Zuckerman v City of New York, 49 NY2d 557, 562; see generally Alvarez v Prospect Hosp., 68 NY2d 320, 324). In support of the motion, plaintiff submitted her daughter's medical records, which included a report from a radiologist diagnosing plaintiff's daughter with a "[l]inear skullbase fracture" after the accident. Although there is no question that a fracture constitutes a serious injury (see § 5102 [d]), plaintiff is not entitled to summary judgment because the radiologist's report was not submitted in admissible form (see generally Toure v Avis Rent A Car Sys., 98 NY2d 345, 350; Grasso v Angerami, 79 NY2d 813, 815; Zuckerman, 49 NY2d at 562). The report is unsworn (see Grasso, 79 NY2d at 814; Feggins v Fagard, 52 AD3d 1221, 1223; cf. Bojorquez v Sanchez, 65 AD3d 1179), and it was not properly certified as a business record (see CPLR 4518 [a]; cf. Salman v Rosario, 87 AD3d 482, 483 n; Mayblum v Schwarzbaum, 253 AD2d 380).

Contrary to defendant's contention on his cross appeal, we conclude that the court properly denied his cross motion inasmuch as he "failed to submit evidence sufficient to establish, prima facie, that the . . . alleged negligence [of plaintiff's daughter] was the sole proximate cause of the accident, that he kept a proper lookout, and that his alleged negligence, if any, did not contribute to the happening of the accident" (Topalis v Zwolski, 76 AD3d 524, 525; see Ryan v Budget Rent a Car, 37 AD3d 698).

Diaz v. Chaudhry

Zinbarg & Emanuel, Jackson Heights, N.Y. (Douglas A. Emanuel of counsel), for appellant.
Baker, McEvoy, Morrissey & Moskovits, P.C., New York, N.Y. (Stacy R. Seldin of counsel), for respondents.

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 (Knipel, J.), entered September 30, 2010, as (a) granted the defendants' motion to vacate their default in opposing his motion for leave to renew his opposition to the defendants' motion for summary judgment dismissing the complaint on the ground that he did not sustain a serious injury within the meaning of Insurance Law § 5102(d), and (b) vacated the determination in an order of the same court dated January 8, 2010, entered upon the defendant's default, upon renewal, denying the defendants' motion for summary judgment dismissing the complaint on the ground that he did not sustain a serious injury within the meaning of Insurance Law § 5102(d), and thereupon adhered to the determination in an order dated July 21, 2009, granting the defendants' motion for summary judgment dismissing the complaint on that ground.
ORDERED that the order entered September 30, 2010, is affirmed insofar as appealed from, with costs.

While we affirm the order entered September 30, 2010, insofar as appealed from, we do so, in part, on a ground not relied upon by the Supreme Court.
The Supreme Court providently exercised its discretion in granting the defendants' motion to vacate their default in opposing the plaintiff's motion for leave to renew his opposition to their summary judgment motion, as their claim of law office failure was supported by a detailed and credible explanation of the default (see Kohn v Kohn, 86 AD3d 630; Remote Meter Tech. of NY, Inc. v Aris Realty Corp., 83 AD3d 1030). Moreover, the defendants demonstrated the existence of a potentially meritorious opposition.

Contrary to the plaintiff's assertion on appeal, the Supreme Court, upon renewal, did not err in adhering to its initial determination granting the defendants' motion for summary judgment dismissing the complaint on the ground that he did not sustain a serious injury within the meaning of Insurance Law § 5102(d). In support of their motion for summary judgment, the defendants met their prima facie burden of showing that the plaintiff did not sustain a serious injury to his right knee under the permanent consequential limitation of use or the significant limitation of use categories 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). Upon renewal, the vast majority of the plaintiff's medical submissions in opposition to the defendants' showing failed to raise a triable issue of fact since they were not in admissible form (see Grasso v Angerami, 79 NY2d 813, 814-815; Kolodziej v Savarese, 88 AD3d 851; Capriglione v Rivera, 83 AD3d 639, 640), while the contents of the remainder of the submissions were factually insufficient. Furthermore, the plaintiff failed to adequately explain the cessation of his treatment after 2003 (see Pommells v Perez, 4 NY3d 566, 574; Vasquez v John Doe #1, 73 AD3d 1033, 1034; Haber v Ullah, 69 AD3d 796).
Since the new facts submitted by the plaintiff on the motion for leave to renew were insufficient to change the prior determination (see CPLR 2221[e]), the Supreme Court correctly determined that the plaintiff, upon renewal, failed to raise a triable issue of fact.

Johnson v. Cristino

Sim & Park, LLP, New York, N.Y. (Sang J. Sim of counsel), for appellants.
Adams, Hanson, Finder, Hughes, Rego, Kaplan & Fishbein,
Yonkers, N.Y. (E Richard Vieira of counsel), for respondent.

DECISION & ORDER

In an action to recover damages for personal injuries, the plaintiffs appeal from an order of the Supreme Court, Kings County (Rothenberg, J.), dated September

21, 2010, which granted the defendant's motion for summary judgment dismissing the complaint on the ground that neither of them sustained a serious injury within the meaning of Insurance Law § 5102(d).
ORDERED that the order is modified, on the law, by deleting the provision thereof granting that branch of the defendant's motion which was for summary judgment dismissing the complaint insofar as asserted by the plaintiff Hee Goo Kim, and substituting therefor a provision denying that branch of the defendant's motion; as so modified, the order is affirmed, without costs or disbursements.
The Supreme Court properly determined that the defendant met his prima facie burden of showing that neither of the plaintiffs sustained 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; see also Giraldo v Mandanici, 24 AD3d 419).

However, in opposition, the plaintiffs raised a triable issue of fact as to whether the plaintiff Hee Goo Kim sustained a serious injury within the meaning of Insurance Law § 5102(d). In opposition to the defendant's motion, Kim relied on the affidavit of her treating physician, Dr. Sang Y. Lee. In his affidavit concerning Kim, Dr. Lee concluded, based upon his most recent examinations of her, which revealed significant limitations in the cervical and lumbar regions of her spine and right shoulder, that her injuries were permanent. Dr. Lee opined that she sustained a permanent consequential limitation of use and a significant limitation of use of those areas as a result of the subject accident. Thus, Dr. Lee's findings concerning Kim were sufficient to raise a triable issue of fact as to whether, as a result of the subject accident, she sustained a serious injury to the cervical and lumbar regions of her spine and right shoulder under the permanent
consequential limitation of use and/or the significant limitation of use categories of Insurance Law § 5102(d) (see Perl v Meher,NY3d, 2011 NY Slip Op 08452; Young Chool Yoo v Rui Dong Wang, 88 AD3d 991; Dixon v Fuller, 79 AD3d 1094; Gussack v McCoy, 72 AD3d 644). Contrary to the Supreme Court's determination, Kim adequately addressed the issue of degeneration and preexisting injuries raised by the defendant's experts, in the affidavit of Dr. Lee concerning Kim. Dr. Lee also explained the lengthy gap in Kim's treatment.
Contrary to the plaintiffs' assertions on appeal, the affidavit of Dr. Lee concerning the plaintiff Chun C. Johnson failed to raise a triable issue of fact as to whether that plaintiff sustained a serious injury to her right shoulder or right knee within the meaning of Insurance Law § 5102(d) as a result of the subject accident. On appeal, the plaintiffs contend that the affidavit of Dr. Lee concerning Johnson demonstrated significant limitations in right shoulder and right knee range of motion. We disagree. The limitations noted by Dr. Lee in his affidavit concerning Johnson were insignificant within the meaning of the no-fault statute (see Licari v Elliott, 57 NY2d 230, 236).

Connis v. Menichetti

Calendar Date: November 15, 2011
Before: Spain, J.P., Lahtinen, Malone Jr., Stein and Egan Jr., JJ.

Stanley Law Offices, Syracuse (Robert A. Quattrocci of counsel), for appellant.
Smith, Sovik, Kendrick & Sugnet, Syracuse (Robert Cahalan), for respondent.
MEMORANDUM AND ORDER
Spain, J.P.

Appeal from an order of the Supreme Court (Lebous, J.), entered December 2, 2010 in Broome County, which partially granted plaintiff's motion for, among other things, summary judgment.

In this personal injury action involving a rear-end automobile accident, plaintiff successfully moved for summary judgment on the issue of negligence, but his motion for summary judgment on the issue of serious injury was denied. Only plaintiff appeals. Finding questions of fact which preclude summary judgment on the issue of serious injury, we now affirm.

Plaintiff alleges a "permanent consequential limitation of use of a body organ or member" and "significant limitation of use of a body function or system" (Insurance Law § 5102 [d]). To support his motion for summary judgment, in addition to his own testimony describing debilitating pain, mobility restrictions and efforts to manage his pain, plaintiff submitted reports from a CT scan taken after the accident and a subsequent MRI showing degenerative disc disease and bulging at the C3-4 and C4-5 levels. Plaintiff's chiropractor, his primary care physician and three other physicians, each of whom examined plaintiff, all described significant limitations in plaintiff's range of motion. The expert medical opinions submitted also provide evidence of causation, in that plaintiff was diagnosed with cervical strain resulting from the automobile accident that aggravated his preexisting degenerative disc disease.

In response, defendant did not argue that plaintiff failed to make a prima facie case, but instead creates a material issue of fact precluding summary judgment by offering evidence to undermine plaintiff's credibility. Defendant provided evidence that plaintiff misrepresented the reason that he eventually stopped working after the accident, a videotape which suggests that defendant may have a greater range of motion in his neck than he claims and various comments from doctors suggesting that plaintiff's description of pain did not always comport with their observations. Inasmuch as the medical testimony submitted relied in large measure on tests necessitating a reliance on plaintiff's subjective complaints, an assessment of plaintiff's credibility by the trier of fact is necessary before a finding of serious injury can be made. Plaintiff relies on defendant's concession that he has submitted sufficient objective medical evidence to legally sustain a finding of serious injury, but that inquiry is distinct from the factual issue of whether he has sustained a serious injury. Indeed, after a court determines in the first instance whether, as a matter of law, the plaintiff has made a prima facie showing of an Insurance Law § 5102 (d) serious injury, "it is then a question of fact for the jury" (Holbrook v Jamesway Corp., 172 AD2d 910, 910 [1991]; see Stanavich v Pakenas, 190 AD2d 184, 187 [1993], lv denied 82 NY2d 659 [1993]; compare Horton v Warden, 32 AD3d 570, 572-573 [2006]).

In addition, defendant provided evidence that plaintiff failed to disclose at his deposition or to his doctors that he was treated briefly for a neck injury following a car accident in 1990, thus raising a question of fact as to the validity of his doctors' assumptions regarding causation (see Pampris v Egnasher, 20 AD3d 746, 747 [2005]). Accordingly, because a finding of serious injury in this case necessitates reliance, in part, on plaintiff's subjective complaints, Supreme Court properly denied his motion for summary judgment on the issue of serious injury.

In re Allstate Insurance Company v. LeGrand

Votto & Cassata, LLP, Staten Island (Christopher J. Albee of counsel), for appellant.

Order and judgment (one paper), Supreme Court, New York County (Alice Schlesinger, J.), entered November 8, 2010, which denied the petition seeking, inter alia, a permanent stay of arbitration, and dismissed the proceeding brought pursuant to CPLR article 75, unanimously reversed, on the law, without costs, and the petition granted.

The failure to move to stay arbitration within the 20-day period specified in CPLR 7503(c) generally "constitutes a bar to judicial intrusion into arbitration proceedings" (Aetna Life & Cas. Co. v Stekardis, 34 NY2d 182, 184 [1974]; see Matter of Spychalski [Continental Ins. Cos.], 45 NY2d 847 [1978]). However, a motion to stay arbitration may be entertained outside the 20-day period when "its basis is that the parties never agreed to arbitrate, as distinct from situations in which there is an arbitration agreement which is nevertheless claimed to be invalid or unenforceable because its conditions have not been complied with" (Matter of Matarasso [Continental Cas. Co.], 56 NY2d 264, 266 [1982]).

It is undisputed that the subject accident occurred while the insured was driving a rental car in Mexico. The insured's automobile insurance policy provided benefits for accidents that occurred within the State of New York, "the United States, its territories or possessions, or Canada." Since the policy did not provide for coverage in the geographic area where the accident occurred, it cannot be said that the parties ever agreed to arbitrate this claim (see Matter of Allstate Ins. Co. (Richards), 178 AD2d 142 [1991], lv denied 79 NY2d 756 [1992]; cf. Matter of Fiveco, Inc. v Haber, 11 NY3d 140 [2008]).

 

George Campbell Painting v. National Union Fire Ins. Co.

Cross-appeals from the order of the Supreme Court, New York County (Walter B. Tolub, J.), entered May 21, 2009, which granted plaintiffs' motion for summary judgment and denied defendant's cross motion for summary judgment.

Sedgwick, Detert, Moran & Arnold LLP, New York (Jeffrey M. Winn and Lawrence Klein of counsel), for appellant-respondent.
Traub Lieberman Straus & Shrewsberry LLP, Hawthorne (Lisa J. Black, Meryl R. Lieberman and Robert S. Nobel of counsel), for respondents-appellants.

FRIEDMAN, J.

Insurance Law § 3420(d) (redesignated as § 3420[d][2] by L 2008, ch 388, § 5) requires a liability insurer to give the insured or the injured person written notice of disclaimer of a personal injury claim "as soon as is reasonably possible."  In DiGuglielmo v Travelers Prop. Cas. (6 AD3d 344 [2004], lv denied 3 NY3d 608 [2004]), we held that, notwithstanding this statutory language, "[a]n insurer is not required to disclaim on timeliness grounds before conducting a prompt, reasonable investigation into other possible grounds for disclaimer" (6 AD3d at 346) (hereinafter, the DiGuglielmo rule). Today, we decline to follow, and expressly overrule, the DiGuglielmo rule, because we find it to be inconsistent with the text of § 3420(d) and with the decisions of the Court of Appeals interpreting that statute. In so doing, we are mindful of the important role precedent plays in common-law adjudication and of the reliance insurers may have placed on the DiGuglielmo rule in conducting their business (although the rule has never been adopted by the Second Department). Nonetheless, as more fully explained below, our determination of this appeal is dictated by fidelity to the plain language chosen by the Legislature, the teachings of our state's highest court, and the policy considerations embodied in the law.

Accordingly, we now hold, in agreement with the Second Department's decision in City of New York v Northern Ins. Co. of N.Y. (284 AD2d 291 [2001], lv dismissed 97 NY2d 638 [2001]), that § 3420(d) precludes an insurer from delaying issuance of a disclaimer on a ground that the insurer knows to be valid —- here, late notice of the claim —- while investigating other possible grounds for disclaiming.  In this case, therefore, where the record establishes that the insurer had sufficient information to disclaim coverage on the ground of late notice no later than January 19, 2006, a disclaimer issued on that ground nearly four months later, on May 17, 2006, was ineffective as a matter of law. Once the insurer (defendant National Union Fire Insurance Company of Pittsburgh, Pa. [NUFIC]) possessed all the information it needed to determine that plaintiffs, which sought coverage as additional insureds, had failed to give NUFIC timely notice of the claim as required by the policy, NUFIC had no right to delay disclaiming on the late-notice ground while it continued to investigate whether plaintiffs were, in fact, additional insureds (as NUFIC ultimately determined they were).

This insurance dispute arises from an occurrence during renovation work on the Henry Hudson Bridge, a structure owned by plaintiff Triborough Bridge and Tunnel Authority (TBTA). Plaintiff George Campbell Painting (Campbell) was the general contractor for the project in question, and nonparty Safespan Platform Systems, Inc. (Safespan) was a subcontractor on the project. On August 11, 2003, nonparty James Conklin, a Safespan employee, was injured when he lost his footing and fell down a makeshift hillside ramp that provided access to a shanty office at the work site.

Under its subcontract with Campbell, Safespan was required to obtain liability insurance covering both Campbell and TBTA as additional insureds. At the time of Conklin's accident, Safespan had primary liability coverage, with a per-occurrence limit of $1 million, under a policy issued by Gulf Insurance Company (Gulf). Safespan also had excess liability coverage under an umbrella policy issued by defendant NUFIC, with a per-occurrence limit of $10 million excess of the $1 million limit of the underlying Gulf policy. The "Additional Insured" endorsement to the Gulf policy provided that the policy would cover "any person or organization for whom you [Safespan] are performing operations when you and such person or organization have agreed in writing in a contract or agreement that such person or organization be added as an additional insured on your policy." The NUFIC umbrella policy provided that it would provide excess coverage to "[a]ny person or organization . . . included as an additional insured" in the underlying Gulf policy.

In December 2003, Conklin commenced a lawsuit against Campbell and TBTA in Supreme Court, Bronx County (the Conklin action), in which he sought recovery for his injuries under the common law and Labor Law §§ 200, 240(1) and 241(6). In January 2004, Campbell and TBTA tendered their defense in the Conklin action to Gulf, Safespan's primary insurer, pursuant to the "Additional Insured" endorsement to the Gulf policy. Gulf accepted the tender and appointed a law firm to defend both Campbell and TBTA (collectively, Campbell/TBTA) in the Conklin action. NUFIC, Safespan's excess insurer, was not notified of the Conklin action when the defense was tendered to Gulf.

During the course of the Conklin action, Campbell/TBTA's counsel periodically sent status reports on the litigation to Gulf. In a status report dated August 23, 2004, counsel discussed potential damages in the case in light of the bill of particulars that Conklin had served. As pertinent to this appeal, the August 2004 status report stated:

"The plaintiff is alleging that due [to] the incident he sustained three herniated discs at L3-L4 with nerve impingement at L4-L5 and L5-S1, a bulging disc at L1-L2 as well as an internal derangement of the shoulder. The herniation at the L3-L4 space required a spinal fusion, indicating a severe injury.

"Although the plaintiff continued to work for almost a month following the incident, he claims he was confined to bed due to his injuries from September 2003 through February 2004. The plaintiff apparently is still primarily confined to home.
"Based on the plaintiff's claim that he was earning approximately $3,200 a week, his lost earnings total is currently $130,000. The future lost wage claim is $9,000,000, which seems quite inflated. It assumes that this relatively young 38 year old plaintiff will never return to any work."

Notwithstanding that, as of August 2004, Campbell/TBTA knew from Conklin's bill of particulars that he was alleging "a severe injury" and was asserting a multi-million-dollar lost wages claim —- which, if successful, would far exceed Safespan's primary insurance —- NUFIC, the excess insurer, was not given notice of the claim until November 2005, more than a year later. By letter to NUFIC dated November 16, 2005, Campbell/TBTA's counsel advised NUFIC of the pendency of the Conklin action and brought to NUFIC's attention that "[Conklin's] attorney has recently represented that [his] damages may substantially exceed the $1,000,000 limit of liability of the [Gulf] policy."  Noting that NUFIC was Safespan's excess carrier, the November 16 letter requested that "[NUFIC], as the excess insurer of [TBTA] and [Campbell] with regard to the captioned action, participate with [Gulf] in the handling and resolution of the Conklin Action." A copy of the Conklin complaint was enclosed with the letter.

According to NUFIC, it received the November 16 letter from Campbell/TBTA's counsel on November 23, 2005. A NUFIC claims adjuster responded by letter dated December 23, 2005. While the December 23 letter acknowledged the existence of "potential excess coverage for Safespan" in connection with the Conklin action, NUFIC purported to reserve all of its rights under the policy. In that regard, NUFIC raised, inter alia, the possibility that Campbell/TBTA's notice to NUFIC may have been untimely under the terms of Safespan's policy. As noted in the December 23 letter, one of the "Conditions" of the NUFIC policy provided: "If a claim is made or suit is brought against the Insured that is reasonably likely to involve this policy you must notify us in writing as soon as practicable" (emphasis added). The December 23 letter stated:

"[T]he policy conditions require timely notice. We note that your tender request is our first notice of this loss. It further appears [that] this matter has been in suit for approximately 2 years. However, first notice to NUFIC was not [received] until November 23, 2005. This notice may have breached the foregoing policy conditions."

The December 23 letter requested that Campbell/TBTA provide NUFIC with the Gulf policy, "all contracts between the defendants [in the Conklin action] and our insured," "all of counsel's evaluations of liability and/or damages," and "your explanation as to why notice to us was delayed."

By letter to Campbell/TBTA's counsel dated January 17, 2006, the NUFIC claims adjuster noted that NUFIC had not yet received any response to its December 23 letter. Counsel to Campbell/TBTA responded to NUFIC by letter dated January 19, 2006, enclosing (1) Safespan's certificate of insurance under the Gulf policy (the policy itself, the letter stated, would be "forwarded under a separate cover"), (2) the contract between TBTA and Campbell, (3) the subcontract between Campbell and Safespan, and (4) "[a] copy of our previous status reports to [Gulf] which reflect our evaluations of liability and damages."

Among the documents transmitted to NUFIC with the January 19, 2006 letter from Campbell/TBTA's counsel was the aforementioned August 2004 status report. However, rather than promptly disclaim on the ground of late notice, NUFIC sent counsel for Campbell/TBTA letters dated March 20 and April 5, 2006, repeating its requests for the Gulf policy. NUFIC finally received a copy of the policy on or about May 1, 2006.

Based on the Gulf policy, NUFIC's claims adjuster concluded that Campbell and TBTA were, in fact, additional insureds under the NUFIC umbrella policy, which "followed form" to the Gulf policy. Nonetheless, by letter dated May 17, 2006, NUFIC rejected the claim on the ground of late notice. NUFIC's May 17 letter stated in pertinent part:

"In his bill of particulars, Conklin alleges a future lost wage claim of $9 million, which substantially exceeds the limits of the Gulf Policy. Conklin further alleges severe and serious spinal injuries that required, among other things, spinal fusion surgery. This is information that was available to you no later than August 2004. However, we received first notice of the suit when we received the tender letter on November 23, 2005, almost two years after the complaint was filed on January 9, 2004. Moreover, the tender letter enclosed only the complaint, and we did not receive the August 2004 report on plaintiff's first bill of particulars until January 2006, more than sixteen months after you received the first bill of particulars indicating that coverage under the NUFIC Policy may be implicated.
"By letter dated December 23, 2005, we responded to your tender, noting potential coverage under the NUFIC Policy and reserving rights on the basis of, among [*6]other things, late notice. We requested a copy of the Gulf Policy and an explanation as to the delay in notifying us of the lawsuit. Following our third request for the Gulf Policy, we finally received a copy on or about May 1, 2006. To date, you have not provided us with any explanation for the delay in providing notice to NUFIC.

"An insured's duty to notify its excess insurer arises when the insured has reason to believe that an occurrence is likely to involve excess coverage. Based on our review of the information provided to us, we conclude that NUFIC did not receive timely notice of the lawsuit; therefore, there is no coverage under the NUFIC Policy."

About two years after NUFIC's May 2006 disclaimer, Conklin, Campbell/TBTA and three of Campbell/TBTA's insurers entered into a settlement agreement, dated July 21, 2008, resolving the Conklin action for total consideration of $5,500,000. The settlement was funded as follows: Gulf contributed its full $1 million policy limit; Campbell's primary insurer, American Home Insurance Company (American Home), contributed its full $1 million limit; and Campbell's excess insurer, Westchester Fire Insurance Company (Westchester), contributed $3.5 million. The settlement agreement provided that payment of $1 million of Westchester's share would not become due until July 1, 2009, and that Campbell/TBTA reserved the right to bring a declaratory judgment against NUFIC challenging the latter's refusal to provide coverage.

Campbell/TBTA commenced this action against NUFIC in December 2008. The complaint seeks, inter alia, (1) a declaration that NUFIC's late-notice disclaimer was untimely under Insurance Law § 3420(d) and (2) recovery from NUFIC of $999,950, NUFIC's alleged pro rata share of the $3,500,000 excess layer of the settlement of the Conklin action. After joinder of issue, Campbell/TBTA moved for summary judgment. NUFIC opposed Campbell/TBTA's motion and cross-moved for summary judgment in its own favor, arguing, inter alia, that Campbell/TBTA had given it late notice of the Conklin action and that its disclaimer on that ground had been timely under Insurance Law § 3420(d). Supreme Court granted summary judgment to Campbell/TBTA, holding NUFIC liable "to pay $999,950.00 as its pro rata share of the excess layer settlement" in the Conklin action. NUFIC has appealed, and Campbell/TBTA has cross-appealed on one issue on which it deems itself aggrieved. We modify to deny Campbell/TBTA summary judgment as to the amount of the settlement NUFIC is obligated to pay, but otherwise affirm.

In determining whether NUFIC's disclaimer was timely under Insurance Law § 3420(d), we begin with the statutory language, which, on its face, requires the insurer to disclaim "as soon as is reasonably possible." This plain language cannot be reconciled with allowing the insurer to delay disclaiming on a ground fully known to it until it has completed its investigation (however diligently conducted) into different, independent grounds for rejecting the claim. If the insurer knows of one ground for disclaiming liability, the issuance of a disclaimer on that ground without further delay is not placed beyond the scope of the "reasonably possible" by the insurer's ongoing investigation of the possibility that the insured may have breached other policy provisions, that the claim may fall within a policy exclusion, or (as here) that the person making the claim is not covered at all. Stated otherwise, the statute mandates that the disclaimer be issued, not "as soon as is reasonable," but "as soon as is reasonably possible" (emphasis added).

Here, NUFIC's May 17, 2006 disclaimer letter itself demonstrates that NUFIC had all the information it needed to disclaim on late-notice grounds as of January 19, 2006. As set forth in the excerpt from the May 2006 disclaimer quoted earlier in this opinion, the information on which NUFIC relied in disclaiming —- that, as of August 2004, Campbell/TBTA knew from Conklin's first bill of particulars that "coverage under the NUFIC [umbrella] Policy may be implicated" because there was a significant likelihood that the value of the claim would exceed the amount of primary coverage —- was received by NUFIC on or about January 19, 2006, when it received a copy of the August 2004 status report describing the contents of Conklin's first bill of particulars. By NUFIC's own account, the contents of the August 2004 status report —- which, to reiterate, NUFIC received in January 2006 —- were sufficient to put Campbell/TBTA on notice that the Conklin action was "reasonably likely to implicate the excess coverage" (Century Indem. Co. v Brooklyn Union Gas Co., 58 AD3d 573, 574 [2009] [internal quotation marks omitted]). Nonetheless, NUFIC did not receive notice of the claim from Campbell/TBTA until November 2005, more than a year after the August 2004 status report. To be clear, not a single document or piece of information that NUFIC's May 17 letter referenced in setting forth its basis for disclaiming on late-notice grounds came into NUFIC's possession after January 2006.

Notably, the possible basis for denial of coverage that NUFIC was investigating while withholding its late-notice disclaimer until May 17 —- the possibility that Campbell and TBTA were not additional insureds under Safespan's NUFIC policy and therefore not covered at all —- would not even have been subject to § 3420(d) had it proven meritorious (see Zappone v Home Ins. Co., 55 NY2d 131, 138 [1982] ["the Legislature in using the words denial of coverage' did not intend to require notice when there never was any insurance in effect"]). Zappone supports Campbell/TBTA's position in this appeal, since that case establishes that a timely disclaimer on the ground of late notice would not have prejudiced NUFIC's ability to reject the claim subsequently on the additional ground that Campbell and TBTA were not insured, had NUFIC ultimately discovered that the facts justified such a position.

NUFIC contends that the timeliness of its disclaimer is established by the DiGuglielmo rule discussed in the first paragraph of this opinion, i.e., the holding that "[a]n insurer is not required to disclaim on timeliness grounds before conducting a prompt, reasonable investigation into other possible grounds for disclaimer" (6 AD3d at 346). As previously stated, we decline to follow the DiGuglielmo rule because we find it to be inconsistent with the text of the governing statute —- which, to reiterate, requires that a disclaimer be issued "as soon as is reasonably possible" — and with the Court of Appeals' jurisprudence on that statute.

To follow the DiGuglielmo rule would be in effect to permit an insurer to delay deciding whether to disclaim on grounds known to it while pursuing an investigation of other potential grounds for disclaiming liability or denying coverage. More than 40 years ago, however, the Court of Appeals specifically rejected an insurer's argument that the statute (then codified as Insurance Law § 167[8]) should be read to "requir[e] speed [in giving notice] once the decision to disclaim has been made . . . [but to] permit[] delay in making the decision" (Allstate Ins. Co. v Gross, 27 NY2d 263, 268 [1970]). Thus, "[t]he literal language of th[e] statutory provision requires prompt notice of disclaimer after decision to do so, and by logical and practical exclusion, there is imported the obligation to reach the decision to disclaim liability or deny coverage promptly too, that is, within a reasonable time" (Payne and Wilson, New York Insurance Law § 31:15, at 927 [31 West's NY Prac Series 2010-2011], citing Gross). The proposition that an insurer is entitled to hold a known ground for disclaiming in reserve while investigating other grounds for rejecting the claim cannot be squared with Gross.

Further, the Court of Appeals has made it abundantly clear that the determination of whether the disclaimer was issued "as soon as [was] reasonably possible" (§ 3420[d]) is made with reference to the time when the insurer first acquired knowledge of the ground upon which it disclaimed. "The timeliness of an insurer's disclaimer is measured from the point in time when the insurer first learns of the grounds for disclaimer of liability or denial of coverage" (Matter of New York Cent. Mut. Fire Ins. Co. v Aguirre, 7 NY3d 772, 774 [2006] [emphasis added; internal quotation marks omitted], quoting First Fin. Ins. Co. v Jetco Contr. Corp., 1 NY3d 64, 68-69 [2003]; see also Matter of Allcity Ins. Co. [Jimenez], 78 NY2d 1054, 1056 [1991] [same]). "When the basis for denying coverage was or should have been readily apparent before the onset of the delay [of disclaimer], the insurer's explanation is insufficient as a matter of law" (Aguirre, 7 NY3d at 774 [internal quotation marks omitted], quoting Jetco, 1 NY3d at 69). Stated otherwise, "A failure by the insurer to give such notice as soon as is reasonably possible after it first learns of the accident or of grounds for disclaimer of liability or denial of coverage, precludes effective disclaimer or denial" (Hartford Ins. Co. v County of Nassau, 46 NY2d 1028, 1029 [1979] [emphasis added]).

In view of the foregoing, adhering to the DiGuglielmo rule would be tantamount to deliberately setting aside the rule promulgated by the Court of Appeals (and flowing naturally from the language of the statute) that "once the insurer has sufficient knowledge of facts entitling it to disclaim, . . . it must notify the policyholder in writing as soon as is reasonably possible" (Jetco, 1 NY3d at 66 [emphasis added]). We decline to replace the Court of Appeals' rule with a rule that measures the timeliness of a notice of disclaimer from the point in time when the insurer has completed its investigation of any and all possible grounds for rejecting the claim, regardless of when the insurer had sufficient knowledge to disclaim on the particular grounds relied upon.

Not surprisingly, the policy behind § 3420(d) is best served by applying the rule articulated by the Court of Appeals rather than the DiGuglielmo rule. Concerning the legislative intent that motivated the enactment of the law, the Court of Appeals has said:

"While the Legislature specified no particular period of time, its words as soon as is reasonably possible' leave no doubt that it intended to expedite the disclaimer process, thus enabling a policyholder to pursue other avenues expeditiously. As the Legislature's 1975 Budget Report on the bill that ultimately became section 3420(d) noted, the purpose is to assist a consumer or claimant in obtaining an expeditious resolution to liability claims by requiring insurance companies to give prompt notification when a claim is being denied' (30-Day Budget Report on Bills, Bill Jacket, L 1975, ch 775)" (Jetco, 1 NY3d at 68).
The Court of Appeals then rejected the argument of the insurer in Jetco that it was entitled to delay disclaiming on late-notice grounds because it had been investigating other possible sources of insurance for the policyholder. The Court explained that the insurer's inquiries, even if of some potential benefit to the insured, "may detrimentally delay the policyholder's own search for alternative coverage. When the insurer promptly disclaims coverage, the policyholder —- perhaps with the aid of its own broker or insurance agent —- is best motivated by its own interest to explore alternative avenues of protection" (id. at 69). The Court of Appeals' reasoning in Jetco applies even more strongly here, where the investigation that delayed the disclaimer was NUFIC's exploration of other possible grounds for rejecting the claim —- an inquiry manifestly undertaken by NUFIC for its own benefit, not that of the parties seeking coverage.
Moreover, just as we would not permit the insured to delay giving the insurer notice of claim while investigating other possible sources of coverage, we should not permit the insurer to delay issuing a disclaimer on a known ground while investigating other possible grounds for avoiding liability. Any uncertainty as to the existence of coverage is irrelevant to the insurer's ability to issue a timely disclaimer based on the insured's breach of a condition precedent to coverage, such as late notice of claim, that is known to the insurer. As previously discussed, such a disclaimer will not prejudice the insurer's ability later to take the position that no coverage exists, should that prove to be the case.

In the final analysis, NUFIC has no answer to the argument that the DiGuglielmo rule is inconsistent with the statute and relevant Court of Appeals precedent. Nor can NUFIC convincingly demonstrate any reason to allow an insurance company that knows it has grounds to reject a claim to delay giving the insured notice that the claim will be denied. It seems to us that simple fairness, no less than the governing statute, requires us to hold that a person who is covered by an insurance policy, and is about to be denied the benefit of that coverage, is entitled to be informed of the denial "as soon as is reasonably possible." In sum,
the DiGuglielmo rule should no longer be followed because it is contrary to the plain language of § 3420(d), inconsistent with the Court of Appeals precedent applying that statute, and antithetical to the policies that statute was intended to advance.

Having established that NUFIC's disclaimer on the ground of late notice is ineffective as against Campbell and TBTA under Insurance Law § 3420(d), we must address the question of the amount of NUFIC's pro rata share of the settlement. Again, the total amount of the settlement was $5.5 million, of which $2 million was funded by paying out the limits of the primary policies issued by Gulf to Safespan and by American Home to Campbell. Accordingly, Campbell/TBTA argues that the excess portion of the settlement is $3.5 million, to be divided between NUFIC (Safespan's excess carrier) and Westchester (Campbell's excess carrier). Since the limits of the NUFIC and Westchester policies are, respectively, $10 million and $25 million, Campbell/TBTA contends that NUFIC's pro rata share is $999,950.

NUFIC contends that the excess share of the settlement is actually less than $3.5 million because, in NUFIC's view, coverage is available from TBTA's primary carrier, which has not yet made any payment in connection with the Conklin action. Specifically, NUFIC states that, during discussions aimed at resolving this matter in June 2008 (before the commencement of this action), Campbell/TBTA's defense counsel in the Conklin action, in response to NUFIC's request, produced a document referring to an insurance policy issued to TBTA by nonparty First Mutual Transportation Assurance Company (First Mutual). In his e-mail transmitting the document to NUFIC, Campbell/TBTA's counsel described the document as "the TBTA primary policy." Based on this representation, NUFIC argues that First Mutual must contribute to the settlement up to its policy limits
before coverage under NUFIC's umbrella policy is triggered.

Notwithstanding what their counsel told NUFIC in June 2008, Campbell and TBTA now argue that the document counsel transmitted to NUFIC at that time is not an insurance policy at all, but a reinsurance policy covering First Mutual with respect to its coverage of TBTA. In support of this position, Campbell and TBTA submitted to Supreme Court the affidavit of the Director of Risk and Insurance Management of the Metropolitan Transportation Authority (MTA) (with which TBTA is affiliated), who asserted that the document in question "is not a true and correct copy of a policy issued by [First Mutual] to TBTA. Nor does that policy provide coverage to TBTA."

Supreme Court resolved the dispute over the alleged First Mutual policy by giving effect to the "Other Insurance" provision therein, which, in summary, states that the coverage afforded thereby is excess to any "other insurance protecting the named insured . . . [that] exists," not including other insurance actually purchased by the named insured. Since there is no evidence that TBTA itself purchased other insurance covering its liability in the Conklin action, Supreme Court concluded that the First Mutual policy was excess to all other available coverage, meaning that First Mutual was not obligated to contribute to the settlement so long as the NUFIC and Westchester policies had not been exhausted.

On its appeal, NUFIC argues that Supreme Court's treatment of the First Mutual policy contravenes the rules of priority of coverage established in this Court's precedents (see e.g. Tishman Constr. Corp. of N.Y. v Great Am. Ins. Co., 53 AD3d 416 [2008]; Bovis Lend Lease LMB, Inc. v Great Am. Ins. Co., 53 AD3d 140 [2008]). Campbell and TBTA, while not objecting to the court's conclusion that First Mutual need not contribute to the settlement, have cross-appealed on the ground that the court should not have considered the alleged First Mutual policy at all.

In our view, the record is not sufficiently developed for us to render definitive rulings on the nature of the First Mutual policy (if that is what it is) and First Mutual's obligation, if any, to contribute to the settlement. On its face, the document in question does appear to be a reinsurance policy, although it sets forth the terms of an underlying insurance policy issued by First Mutual to the MTA and its affiliates, including TBTA. Notably, the meaning of the portion of the document addressing policy limits ("Addendum No. 1") is not transparent; in any event, it is not clear whether the limit provisions are those of the underlying insurance policy or those of the reinsurance contract. Moreover, the document itself is not complete; the word "SCHEDULE" is printed at the top of the first page, and the reinsurer does not seem to be identified. Nor do the affidavits in the record cast much light on the nature of the alleged First Mutual coverage. In particular, the aforementioned affidavit of the MTA's Director of Risk and Insurance Management is terse to the point of being cryptic. In sum, further proceedings are required to develop an evidentiary record sufficient to establish precisely what kind of coverage, if any, is available to TBTA from First Mutual, and how any such coverage affects the amount NUFIC is obligated to contribute to the settlement under applicable case law. Accordingly, we modify to deny Campbell and TBTA summary judgment as to the amount of NUFIC's pro rata share of the settlement.

Finally, NUFIC argues that Campbell and TBTA (the insureds) are no longer the real parties in interest in this matter because the agreement settling the Conklin action required Westchester to pay the final $1 million of the settlement consideration on or before July 1, 2009. In this regard, NUFIC interprets a statement in Campbell/TBTA's brief to the effect that Westchester "contributed $3.5 million" to the settlement as an admission that the full amount of the settlement has been paid. If the settlement has been fully paid by insurers —- leaving the insureds with no actual interest in the case and making Westchester, the other excess insurer, the real party in interest —- the argument that NUFIC's disclaimer was invalid under Insurance Law § 3420(d) would be unavailing, since "the protections of . . . § 3420(d) [are] inapplicable to one insurer's claim for reimbursement from another insurer" (American Guar. & Liab. Ins. Co. v State Natl. Ins. Co., 67 AD3d 488, 488 [2009], citing Bovis Lend Lease LMB, Inc. v Royal Surplus Lines Ins. Co., 27 AD3d 84, 91-92 [2005]).

An appeal is decided based on the record on which the order appealed from was rendered. There is no indication in the record on this appeal that Westchester paid the final $1 million of the settlement of the Conklin action at any time before Supreme Court entered its order granting summary judgment to Campbell/TBTA on May 21, 2009 (more than a month before the due date of the final payment under the settlement agreement). Moreover, although NUFIC was at all relevant times aware of the terms of the settlement agreement, in the motion practice leading to the order appealed from, NUFIC never raised the argument that Campbell and TBTA would cease to be real parties in interest upon Westchester's payment of the final portion of the settlement on July 1, 2009, as required by the settlement agreement. Thus, no basis exists for us to consider, in reviewing the order appealed from, whether Campbell and TBTA ceased to be real parties in interest at some point after Supreme Court granted them summary judgment. It suffices to say that there is no indication that they were not real parties in interest when the order under review was rendered.

Accordingly, the order of the Supreme Court, New York County (Walter A. Tolub, J.), entered May 21, 2009, which granted plaintiffs' motion for summary judgment and denied defendant's cross motion for summary judgment, should be modified, on the law, to deny plaintiffs summary judgment on the issues of defendant's pro rata share of the settlement of the underlying personal injury action and the dollar amount of such pro rata share, and otherwise affirmed, without costs.

Grant v. United Pavers Co., Inc.

Amy Posner, New York, for appellants.
Baxter Smith & Shapiro, P.C., White Plains (Sim R. Shapiro of counsel), for respondents.

Order, Supreme Court, Bronx County (Alison Y. Tuitt, J.), entered July 23, 2010, which granted defendants' motion for summary judgment dismissing the complaint, unanimously modified, on the law, to deny the motion, except as to the claim under the 90/180-day category of the Insurance Law, and otherwise affirmed, without costs.

In this action for personal injuries, plaintiff Hopeton Grant (plaintiff) alleges that he sustained a serious injury as a result of a car accident that occurred on September 15, 2007. Plaintiff's vehicle was struck in the rear by a dump truck owned by defendant United Pavers Co., Inc. and operated by defendant Antonio Ricci, while plaintiff attempted to make a left turn. Plaintiff was removed from the scene by ambulance and taken to a nearby hospital, where he was treated, stayed for a few days due to his blood pressure and released.

Plaintiffs commenced this action alleging that plaintiff sustained a serious injury under Insurance Law § 5102(d). Defendants subsequently moved for summary judgment dismissing the complaint based on the degenerative nature of plaintiff's injuries so that he would not be able to establish that the automobile accident caused his injuries. Defendants further argued that any injuries plaintiff sustained were resolved, and thus not "significant."

Defendants made a prima facie showing that plaintiff's injuries were not permanent or significant because the injuries had resolved and plaintiff had full range of motion in his left knee and cervical and lumbar spine (see Insurance Law § 5102[d]; Porter v Bajana, 82 AD3d 488 [2011]). On review of plaintiff's MRI films, defendants' radiologist noted that plaintiff suffered from a preexisting degenerative condition and that the motor vehicle accident did not proximately cause his injuries (see Arroyo v Morris, 85 AD3d 679 [2011]; Shu Chi Lam v Wang Dong, 84 AD3d 515 [2011]). These findings establish that any injury to plaintiff's left knee and cervical and lumbar spine was not causally related to the accident (see Depena v Sylla, 63 AD3d 504 [2009], lv denied 13 NY3d 706 [2009]). Thus, the burden shifted to plaintiff to raise a triable issue of fact.

In opposition to defendants' motion, plaintiffs submitted the affirmation of his treating physicians, Dr. Cabatu and Dr. Liebowitz, who both concluded that plaintiff's injuries were caused by the accident. Dr. Cabatu based his opinion on the MRI report and his clinical examinations of plaintiff beginning a few days after the accident and continuing through the date of his affirmation. Dr. Liebowitz also based his opinion on the MRI report and his treatment of plaintiff's left knee, including arthroscopic surgery that an associate performed in March 2009, 18 months after the accident.

Although plaintiff's physicians did not expressly address defendants' expert's conclusion that the injuries were degenerative in origin, by relying on the same MRI report as defendants' expert, and attributing plaintiff's injuries to a different, yet equally plausible cause, plaintiffs raised a triable issue of fact (see Lee Yuen v Arka Memory Cab Corp., 80 AD3d 481, 482 [2011]; Linton v Nawaz, 62 AD3d 434, 440 [2009], affd 14 NY3d 821 [2010]). Although "[a] factfinder could of course reject this opinion" (Perl v Meher, __ NY3d __, 2011 NY Slip Op 08452 [2011]), we cannot say on this record, as a matter of law, that plaintiff's injuries had no causal connection to the accident.

Plaintiff's deposition testimony that he missed two months from work and that he had significant impairment of his usual and customary activities was insufficient to establish that plaintiff was prevented from performing his usual and customary activities for at least 90 of the 180 days following the accident (Insurance Law § 5102[d]; see Williams v Baldor Specialty Foods, Inc., 70 AD3d 522, 523 [2010]; Valentin v Pomilla, 59 AD3d 184, 186-87 [2009]).

W & W Glass Systems, Inc. v. Admiral Insurance Company

Litchfield Cavo LLP, New York (Joseph E. Boury of counsel) for appellants.
James J. Toomey, New York (Eric P. Tosca of counsel), for respondent.
Order, Supreme Court, New York County (Martin Shulman, J.), entered September 14, 2010, which, to the extent appealed from, granted plaintiffs' motion for summary judgment declaring that defendant Admiral Insurance Company (Admiral) had a duty to defend plaintiff in the underlying action, awarding past defense costs, and referring the calculation of defense costs to a special referee, unanimously affirmed, with costs.

In this declaratory judgment action, plaintiff general contractor seeks a declaration that it was entitled to defense and indemnification from Admiral in connection with an underlying personal injury action in which an employee of defendant Metal Sales Company, Inc., a subcontractor hired by plaintiff, was injured. Metal Sales had a commercial general policy with Admiral pursuant to which plaintiff was named as an additional insured. The policy provided that plaintiff was covered "only with respect to liability caused by [the subcontractor's] ongoing operations performed for that insured [i.e., plaintiff]." The policy further provided that it "does not apply to liability caused by the sole negligence of the person or organization [named as an addition insured]."

Contrary to defendants' argument that the "caused by" language in the policy is "narrower" than the "arising out of" language in BP Air Conditioning Corp. v One Beacon Ins. Group (8 NY3d 708 [2007]), the case relied on by the motion court, the phrase "caused by your ongoing operations performed for that insured," does not materially differ from the general phrase, "arising out of" (see Regal Constr. Corp. v Natl. Union Fire Ins. Co. of Pittsburgh, PA, 15 NY3d 34, 38 [2010]; see also QBE Ins. Corp. v Adjo Contr. Corp., 32 Misc 3d 1231 [2011]). The language in the additional insured endorsement granting coverage does not require a negligence trigger (see Hunter Roberts Const. Group, LLC v Arch Ins. Co., 75 AD3d 404, 407-08 [2010]), and the record demonstrates that the loss involves an employee of Metal Sales, the named insured, who was injured while performing the named insured's work under the subcontract. It is immaterial that the complaint against the insured asserts additional claims which fall outside the policy's general coverage or within its exclusory provisions (BP Air Conditioning, 8 NY3d at 714). The duty to defend is "exceedingly broad and an insurer will be called upon to provide a defense whenever the allegations of the complaint suggest . . . a reasonable possibility of coverage" (id. [internal quotation marks and citation omitted).

Defendants' argument that further discovery is warranted and that the motion is therefore premature, is unavailing. Defendants participated in lengthy discovery in the underlying action. Admiral had all of the relevant policies of insurance and had ample opportunity to gather evidence.

No proof was offered demonstrating that wrap-up coverage may have been in effect, and Admiral's bare affirmation raising speculative defenses is insufficient to defeat a prima facie showing of entitlement to summary judgment (see Gilbert Frank Corp. v Federal Ins. Co., 70 NY2d 966 [1988]). Defendants cannot avoid summary judgment based on speculation that further discovery may uncover something.

We have considered defendants' remaining arguments and find them unavailing.

Singer v. Gae Limo Corp.

Majorie E. Bornes, New York, for appellant.
Joelson & Rochkind, New York (Geofrey Liu of counsel), for respondent.
Order, Supreme Court, New York County (George J. Silver, J.), entered March 24, 2011, which, insofar as appealed from as limited by the briefs, denied defendant Xiu-Bi Chen's motion for summary judgment dismissing the complaint alleging serious injuries under the "permanent consequential limitation of use," "significant limitation of use," and 90/180-day categories of Insurance Law § 5102(d), unanimously affirmed, without costs.
On September 15, 2006, plaintiff allegedly sustained serious injuries when the livery cab in which she was a passenger collided with another livery cab. After she complained of persisting pain and discomfort emanating from the left buttock area and radiating down her left leg, plaintiff's treating physician confirmed that she sustained left piriformis syndrome and left sacroiliac joint syndrome, based on diagnostic sacroiliac joint block and piriformis block injections. Plaintiff also alleges, inter alia, that she sustained acute thoracic and lumbar sprain/strain as a result of the accident, and that she was confined to bed and home, and was unable to work, as advised by her doctor, for about four months immediately after the accident.
We affirm the motion court's denial of summary judgment, although on partly different grounds. Contrary to the motion court's finding, the reports of defendant's medical experts were sufficient to meet defendant's prima facie burden of showing an absence of serious injury to plaintiff's cervical, thoracic and lumbar spine, left hand/wrist, left knee, and left foot/ankle. Defendant's neurologist and orthopedist set forth the tests they performed and recorded ranges of motion expressed in numerical degrees and the corresponding normal values. The objective tests they performed provided support for their conclusions that the ranges of motion were normal and that plaintiff suffered no permanent injury to those parts as a result of the accident (see Spencer v Golden Eagle, Inc., 82 AD3d 589 [2011]; Glover v Capres Contr. Corp., 61 AD3d 549 [2009]; DeLeon v Ross, 44 AD3d 545 [2007], citing Toure v Avis Rent A Car Sys., 98 NY2d 345, 350-351 [2002]; cf. Beazer v Webster, 70 AD3d 587 [2010]). In addition, defendant's radiologist opined that the MRI of plaintiff's lumbar spine showed preexisting degenerative changes. In opposition, plaintiff did not submit any evidence to substantiate her claim of serious injury to those body parts, and therefore failed to raise an issue of fact as to those claims of serious injury.
However, in support of his motion, defendant failed to submit any medical evidence addressing plaintiff's claim of serious injury based on piriformis syndrome and left sacroiliac joint syndrome in her pelvis/left buttock. Further, since defendant's experts examined her more than three years after the accident and did not address those claimed injuries, and defendant submitted no other evidence concerning plaintiff's condition in the 180 days following the accident, defendant also failed to meet his burden on plaintiff's 90/180-day claim (see e.g. Quinones v Ksieniewicz, 80 AD3d 506, 506-507 [2011]; Feaster v Boulabat, 77 AD3d 440, 441 [2010]). Since defendant did not meet his prima facie burden as to those claims, the burden did not shift to plaintiff and it is unnecessary to consider the sufficiency of her evidence in opposition (see Reyes v Diaz, 82 AD3d 484 [2011]; Shumway v Bungeroth, 58 AD3d 431 [2009]). If the trier of fact determines that plaintiff sustained a serious injury, 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]).
Mahar v. Bartnick

Calendar Date: November 14, 2011
Before: Mercure, Acting P.J., Rose, Lahtinen, Kavanagh and McCarthy, JJ.

Poklemba & Hobbs, L.L.C., Malta (John J. Poklemba of counsel), for appellant.
Law Offices of Epstein & Rayhill, Latham (Jeffrey T. Culkin of counsel), for respondent.
MEMORANDUM AND ORDER
Kavanagh, J.
Appeal from an order of the Supreme Court (Nolan Jr., J.), entered August 27, 2010 in Saratoga County, which granted defendant's motion for summary judgment dismissing the complaint.
On December 29, 2007, plaintiff was briefly hospitalized after being involved in a two-car motor vehicle accident with defendant in the Town of Waterford, Saratoga County. Because plaintiff had a laceration on the back of her head and had lost consciousness after the accident, a CT scan was performed, which failed to reveal evidence of any acute injury. After receiving sutures for the head laceration, plaintiff was released from the hospital. Plaintiff commenced this action against defendant for the injuries she had sustained as a result of this accident. Supreme Court subsequently granted defendant's motion for summary judgment dismissing plaintiff's complaint on the ground that plaintiff had not sustained a serious injury (see Insurance Law § 5102 [d]). Plaintiff now appeals.
Initially, plaintiff argues that questions of fact exist regarding whether she sustained a serious injury based on evidence submitted to Supreme Court in connection with defendant's motion. In support of that motion, defendant relied upon plaintiff's medical records, the results of an MRI, records of plaintiff's physical therapy sessions, deposition testimony and reports regarding plaintiff's condition prepared by an orthopedic surgeon retained by her carrier to examine her (see Clark v Basco, 83 AD3d 1136, 1137 [2011]; Dean v Ahn Ja Jin, 78 AD3d 1297, 1298 [2010]). Specifically, this evidence established that shortly after the accident, plaintiff was treated by a physician, Asim Yousuf, for headaches, neck pain and bruises to her knees. Yousuf initially told plaintiff not to work for two weeks, and prescribed physical therapy for her neck pain. After plaintiff participated in a four-month physical therapy regimen, her physical therapist reported, in April 2008, that while plaintiff continued to have some tenderness and muscular tightness in the cervical region, her neck pain had diminished, her "cervical [range of motion was] within functional limits" and her "[s]trength throughout the bilateral upper extremities [was] also within functional limits." In addition, defendant submitted reports of two examinations performed on plaintiff by Jeffrey Gundel, an orthopedic surgeon retained by her insurance company. Gundel initially diagnosed plaintiff with cervicothoracic strain and concluded that she could "rotate 60 degrees to the right and 45 degrees to the left." In a subsequent examination, Gundel noted that plaintiff had only "some slight decrease in rotation to the right with discomfort" and "full rotation without pain to the left," and determined that further orthopedic treatment was not necessary. Finally, plaintiff was able to return to work three weeks after the accident, and an MRI performed on her cervical spine three months later revealed minimal cervical disc bulges, but was otherwise unremarkable. Based on this evidence, defendant argued that plaintiff did not sustain a serious injury in this accident.
In response to defendant's motion and in support of her claim that she did sustain a serious injury in this accident, plaintiff referred to the MRI examination and the fact that it found disc bulges in her cervical spine. She also points to tests performed after the accident, which revealed that she had suffered a decreased range of motion in her cervical spine. Plaintiff contends that defendant's motion should have been denied because this evidence creates, at the very minimum, a question of fact as to whether she sustained either a permanent consequential limitation of the use of her cervical spine or a significant limitation of its use as a result of the injuries she sustained in this accident (see Insurance Law § 5102 [d]; Toure v Avis Rent A Car Sys., 98 NY2d 345, 352 [2002]; Hildenbrand v Chin, 52 AD3d 1164, 1165 [2008]).
Initially, we note that a bulging disc under certain circumstances can qualify as a serious injury if it results in a quantifiable loss in an individual's range of motion (see Sferra v McGregor, 69 AD3d 1200, 1202 [2010]; Dean v Brown, 67 AD3d 1097, 1097 [2009]). In that regard, plaintiff submitted an affidavit by Yousuf and argued that, when considered in connection with the findings of bulging discs as noted in the MRI, it constituted objective medical evidence establishing that she sustained a serious injury in this accident. However, Yousuf's affidavit and, in particular, his conclusion regarding plaintiff's restrictions in her range of motion was based entirely upon an assessment performed by the physical therapist when plaintiff began her regimen of physical therapy and was not the result of any independent examination that Yousuf performed on her. Moreover, while the physical therapist initially reported restrictions in plaintiff's range of motion, she ultimately concluded, when therapy ended four months later, that plaintiff's cervical range of motion was within functional limits. Plaintiff also submitted as part of her opposition to this motion the findings of neurological exams that Yousuf performed when he treated her, but these tests simply confirmed that plaintiff's symptoms were not the result of any nerve injury. In our view, such evidence, even when viewed in a light most favorable to plaintiff, does not establish the existence of factual questions regarding whether she sustained either a permanent consequential limitation or significant limitation of the use of her cervical spine as the result of this accident (see Dean v Ahn Ja Jin, 78 AD3d at 1298; Houston v Hofmann, 75 AD3d 1046, 1049 [2010]), and defendant's motion for summary judgment in this regard was properly granted.

Plaintiff also claims that she sustained a serious injury because her injuries prevented her from performing substantially all of her regular activities for 90 of the 180 days immediately following the accident (see Insurance Law § 5102 [d]; Howard v Espinosa, 70 AD3d 1091, 1093 [2010]; Tuna v Babendererde, 32 AD3d 574, 575 [2006]). As to this claim, we note that plaintiff returned to work within three weeks of the accident, and while she claimed to have lost additional time from work, she was unable to quantify the total amount of time that she missed during this 180-day period. Also, plaintiff did not specifically identify what activities she could no longer perform as a result of the injuries she sustained in this accident. Instead, she claimed that her activities were restricted because "[a]nything that causes — that you need your neck or back for that causes stress . . . I may be able to start doing it but I may not be able to complete it." Such evidence is simply not sufficient to establish the existence of a serious injury under this category of the Insurance Law (see Solis v Silvagni, 82 AD3d 1349, 1350 [2011], lv denied 17 NY3d 715 [2011]), and defendant's motion for summary judgment on this category of serious injury was also properly granted.

Finally, we agree with Supreme Court's conclusion that the scar that plaintiff now has as a result of this accident does not constitute a significant disfigurement and does not qualify as a serious injury (see Insurance Law § 5102 [d])[FN1] . A scar constitutes a significant disfigurement if a reasonable person upon examining it would conclude that it is "'unattractive, objectionable or the subject of pity or scorn'" (Doty v McInerny, 77 AD3d 1264, 1265 [2010], lv denied 16 NY3d 703 [2011], quoting Baker v Thorpe, 43 AD3d 535, 537 [2007]; see Caruso v Hall, 101 AD2d 967, 968 [1984], affd 64 NY2d 843 [1985]). Here, the scar was located on the back of plaintiff's head and, as she concedes, can be covered by her hair. As such, it is not readily visible and, on these facts,[FN2] does not constitute a significant disfigurement that would qualify as a serious injury resulting from this accident (see Doty v McInerny, 77 AD3d at 1265).
Footnotes

Footnote 1: Plaintiff did not allege in her bill of particulars, as noted by Supreme Court, that this scar constituted a significant disfigurement.

Footnote 2: The record contains no picture or specific description of the scar.

Ocean Gardens Nursing Facility, Inc. v. Travelers Companies, Inc.,

Drabkin & Margulies (Arnold E. DiJoseph, P.C., New York, N.Y.,
of counsel), for appellant.
Putney Twombly Hall & Hirson LLP, New York, N.Y. (James
M. Strauss of counsel), for respondent.


DECISION & ORDER
In an action for a judgment declaring that the defendant is obligated to indemnify the plaintiff in an underlying action entitled Pinto v Tenenbaum, pending in the Supreme Court, Kings, County, under Index No. 35332/05, the plaintiff appeals from an order and judgment (one paper) of the Supreme Court, Queens County (Kelly, J.), entered April 23, 2010, which granted the defendant's motion for summary judgment and declared, inter alia, that the defendant has no obligation to indemnify the plaintiff in the underlying action.

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

The plaintiff, Ocean Gardens Nursing Facility, Inc., doing business as Horizon Care Center (hereinafter Horizon), commenced this action for a judgment declaring that the defendant, Travelers Companies, Inc. (hereinafter Travelers), was obligated to indemnify it in an underlying personal injury action alleging that Horizon's employee caused damages in an automobile accident. The Supreme Court granted Travelers' motion for summary judgment on the ground that Horizon's employee, the defendant in the underlying action, was not driving a covered automobile at the time of the accident, and declared, inter alia, that Travelers had no duty to indemnify Horizon.

"While the duty to defend is measured against the possibility of a recovery, the duty to pay is determined by the actual basis for the insured's liability to a third person" (Frontier Insulation Contrs. v Merchants Mut. Ins. Co., 91 NY2d 169, 178 [internal quotation marks omitted]; see Servidone Constr. Corp. v Security Ins. Co. of Hartford, 64 NY2d 419, 424). Here, Horizon seeks only a declaration that Travelers is required to indemnify it. We note that Horizon does not seek to enforce a contractual duty to defend. Since Horizon's liability to the plaintiff in the underlying action has yet to be determined, it was premature for the Supreme Court to pass on the question of whether such loss would be covered by the policy (see Frontier Insulation Contrs. v Merchants Mut. Ins. Co., 91 NY2d at 178; Garcia v Utica First Ins. Co., 7 AD3d 665, 666). [*2]

Additionally, we disagree with Travelers' contention that the order and judgment should be affirmed on the alternative ground that Horizon failed to give notice of the accident "as soon as reasonably possible," as required by the policy. "While the reasonableness of an insured's good faith belief in nonliability is a matter ordinarily left for a trial, it may be determined as a matter of law where the evidence, construing all inferences in favor of the insured, establishes that the belief was unreasonable or in bad faith" (McGovern-Barbash Assoc., LLC v Everest Natl. Ins. Co., 79 AD3d 981, 983 [citations omitted]; see Argentina v Otsego Mut. Fire Ins. Co., 86 NY2d 748, 750). Under the law as it existed at the time that this insurance policy was issued, which was prior to the 2008 amendments to Insurance Law § 3420(c)(2)(A) (see L 2008, ch 388, § 4), the insured bears the burden of raising an issue of fact as to the existence of a reasonable excuse for the delay in giving notice in opposition to the insurer's prima facie showing (see McGovern-Barbash Assoc., LLC v Everest Natl. Ins. Co., 79 AD3d at 983; Ponok Realty Corp. v United Natl. Specialty Ins. Co., 69 AD3d 596, 596-597). "[C]ircumstances may exist that will excuse or explain the insured's delay in giving notice, such as a reasonable belief in nonliability, but the insured has the burden of demonstrating the reasonableness of the excuse" (Genova v Regal Mar. Indus., 309 AD2d 733, 734). Here, in opposition to Travelers' prima facie showing that notice, given approximately 15 months after the accident, was not "as soon as reasonably possible," Horizon raised an issue of fact as to whether its good faith belief in nonliability constitutes a reasonable excuse for the delay (see 25th Ave., LLC v Delos Ins. Co., 84 AD3d 781). The evidence submitted by Horizon supports its reasonable belief that it bore no liability for the accident involving its employee and the plaintiff in the underlying action. According to deposition testimony, at the time of the accident, Horizon's employee was driving in his own personal vehicle and was not engaged in any matters which were related to his employment with Horizon. Moreover, Horizon was not named as a defendant in the underlying action and was not contacted regarding the case until more than a year after the accident occurred, when it was subpoenaed to produce records for inspection by the underlying plaintiff.

Shortly after being subpoenaed, Horizon gave notice to Travelers, which was before Horizon was even summoned and named as a defendant in the amended complaint in the underlying action. Under these circumstances, there is an issue of fact as to whether Horizon's notice to Travelers was given as soon as reasonably possible (id.).

IMPERATI v KOHL'S DEPARTMENT STORES, INC.

Calendar Date: November 16, 2011
Before: Peters, J.P., Rose, Kavanagh, McCarthy and Garry, JJ.


Melley Platania, P.L.L.C., Rhinebeck (Kevin J.
Rumsey of counsel), for appellants.
Gruvman, Giordano & Glaws, L.L.P., New York City
(Charles T. Glaws of counsel), for defendant and third-party
plaintiff- respondent-appellant and for appellant.
Office of Michael E. Pressman, New York City (Alan
R. Meller of counsel), for third-party defendant-respondent-
appellant.
MEMORANDUM AND ORDER

Kavanagh, J.

Cross appeals from an order of the Supreme Court (Melkonian, J.), entered December 13, 2010 in Ulster County, which, among other things, granted defendants' motion for, among other things, summary judgment dismissing the complaint.

In February 2007, plaintiff Vicki Imperati (hereinafter plaintiff) was injured as the result of a fall she took on ice in the parking lot of defendant Kohl's Department Stores, Inc. (hereinafter Kohls). Kohls was responsible for maintaining the property pursuant to its lease with the owner of the property, defendant Dena Marie, LLC, and had contracted with third-party defendant, Tower Cleaning Systems, Inc., to perform snow and ice removal on the premises. Plaintiff, and her husband, derivatively, commenced this action against Kohls and Dena Marie (hereinafter collectively referred to as defendants),[FN1] and Kohls, in turn, commenced a third-party action against Tower [FN2]. Defendants moved for summary judgment dismissing the complaint, and Kohls sought a judgment against Tower on its claims of contractual and common-law indemnification. Tower cross-moved for, among other things, summary judgment dismissing Kohls' third-party claims against it, and plaintiffs cross-moved for summary judgment in their favor on the issue of liability. Supreme Court granted defendants' motion for summary judgment dismissing the complaint, but denied the other motions, including Kohls' motion for summary judgment on its indemnification claims and Tower's motion for dismissal of the third-party complaint. Plaintiffs appeal, and defendants [FN3] and Tower cross-appeal.

 

 

Plaintiffs contend that Supreme Court erred when it granted Kohls' motion for summary judgment on the ground that, as a matter of law, the storm in progress doctrine applied to the circumstances surrounding this accident. Specifically, Kohls claimed that on the facts presented, Kohls did not have a reasonable amount of time to address the hazardous conditions created by the storm because it had ended only a short time prior to plaintiff's accident (see O'Neil v Ric Warrensburg Assoc., LLC, ___ AD3d ___, ___, 933 NYS2d 768, 769 [2011]; Sanders v Wal-Mart Stores, Inc., 9 AD3d 595, 595 [2004]; Howard v J.A.J. Realty Enters., 283 AD2d 854, 855 [2001]; Schleifman v Prime Hospitality Corp., 246 AD2d 789, 789 [1998]). Plaintiffs, in opposition to the motion, submitted a report from a hydrogeologist, John A. Conrad, which included weather station data indicating that 4½ miles from the scene of the accident the temperature that day ranged between 16 to 40 degrees Fahrenheit, and two inches of precipitation in the form of ice pellets and snow had fallen to the ground. Another expert, William Marletta, also reported that it had snowed in the area on the previous evening, neither expert was able to state with any certainty when the storm had ended. Also, plaintiff recalled that it had snowed the prior evening, but it was sunny and clear when she arrived at the store parking lot that morning between 10:00 A.M. and 11:00 A.M. In addition, Steven Heller, a Kohls employee, testified that he was on the premises by 8:00 A.M. and, while there was no precipitation at that time, he noticed that ice had formed in areas of the store parking lot. This evidence supports defendants' position that some precipitation fell in the area during the evening before plaintiff's accident, but does not definitively establish when this precipitation occurred or, more importantly, when it ended. Since it is uncontroverted that there was no precipitation in the area for at least two hours prior to plaintiff's accident, a question of fact necessarily exists as to whether Kohls had a reasonable amount of time to alleviate any hazardous conditions that existed in the parking lot which may have been created by the storm (see Baker v Cayea, 74 AD3d 1619, 1620 [2010]). Therefore, defendants' motion for summary judgment dismissing plaintiffs' complaint should have been denied.
Plaintiffs, in their motion for summary judgment, maintain that the icy conditions in the parking lot existed before precipitation fell in the area on the night prior to plaintiff's accident and those conditions were caused by water that froze after it flowed onto the parking lot from snow banks created when Tower plowed to clear the premises of snow. On this issue, initially we note that there appears to be no question that some precipitation fell in the area the night before plaintiff's accident, and it is not at all clear from the evidence submitted what effect this precipitation had on the conditions that existed on the premises immediately before plaintiff's accident. Also, plaintiffs' experts acknowledge never personally observing water flowing from snow banks onto the area of the parking lot where plaintiff fell, and she admits never actually seeing water running from the snow banks onto the parking lot, but rather assumed that the icy conditions were created by snow melt from snow banks created when Tower plowed the parking lot. However, defendants presented testimony from Kohls' employees that when the premises were plowed, the snow was pushed onto an isolated area of the parking lot where water could not have flowed to where plaintiff had her accident. Simply stated, questions abound as to how the conditions that caused plaintiff's fall were created and, as a result, plaintiffs' motion for summary judgment was properly denied (see O'Neil v Ric Warrensburg Assoc., LLC, 933 NYS2d at 769; Wood v Schenectady Mun. Hous. Auth., 77 AD3d 1273, 1274 [2010]; Spicer v Estate of Ondek, 60 AD3d 1234, 1235 [2009]; see also Hayes v Norstar Apts., LLC, 77 AD3d 1329, 1330 [2010]; Parker v Rust Plant Servs., Inc., 9 AD3d 671, 673 [2004]; Convertini v Stewart's Ice Cream Co., 295 AD2d 782, 783-784 [2002]).

Turning to the cross appeals,[FN4] Kohls claims that Tower, by their contract, was obligated to indemnify it if it was found liable for the injuries plaintiff sustained in this accident [FN5]. Tower argues that Kohls' claim should be dismissed because the contract required certain weather conditions to exist at the premises before it was obligated to plow and salt the parking lot, and those conditions did not exist on the date of plaintiff's accident (see Perales v First Columbia 1200 NSR, LLC, 88 AD3d 1213, 1214 [2011]; Kearsey v Vestal Park, LLC, 71 AD3d 1363, 1366 [2010]). In that regard, the contract provides that "[Tower] shall indemnify, defend and hold [Kohls] . . . harmless from any and all liability, injury, judgments, causes of action, claims, . . . asserted, alleged, demanded, claimed or recovered by or on behalf of any person . . . arising out of, growing out of or related whatsoever to [Tower's] performance or failure to perform under the terms of this Agreement, including but not limited to personal injuries." Also, Tower was obligated under the contract to perform "[a]ll snowplowing and salting . . . automatically, without [Kohls'] request, whenever the weather conditions deem it necessary" (emphasis added) and, when snow had accumulated to one inch or more, "[Tower] shall be responsible for all areas including, but not limited to, drive lanes, parking lot, sidewalks, entrances, emergency exit doors, and steps, etc." When read together, these provisions in the contract required Tower to salt and plow the property whenever weather conditions in the area warranted, and automatically required it to plow whenever precipitation resulted in snow accumulations of one inch or more on the premises. Here, the undisputed testimony is that precipitation fell in the area the night before plaintiff's accident, and parts of the parking lot that morning were covered with ice. Given the broad scope of the obligation assumed by Tower under this contract, it is, as a matter of law, required to indemnify Kohls if Kohls is held responsible for plaintiff's accident, and Kohls' motion for summary judgment in that regard must be granted. As a result, we need not reach Kohls' claim regarding common-law indemnification, and note that since it was raised on appeal for the first time in Kohls' reply brief, it is not properly before us (see Giblin v Pine Ridge Log Homes, Inc., 42 AD3d 705, 706 [2007]).

Peters, J.P., Rose, McCarthy and Garry, JJ., concur.

ORDERED that the order is modified, on the law, without costs, by reversing so much thereof as granted defendants' motion for summary judgment dismissing the complaint and dismissed, as moot third-party plaintiff's motion for summary judgment on its claim for contractual indemnification; defendants' motion denied and third-party plaintiff's motion granted to said extent; and, as so modified, affirmed.
Footnotes


Footnote 1: Kohls assumed the defense for Dena Marie.

Footnote 2: Tower brought a fourth-party action against various contractors it hired to perform maintenance on the premises.

Footnote 3: Although Dena Marie is listed on the notice of cross appeal filed jointly with Kohls, the cross appeal is only from so much of the order as denied Kohls' motion seeking contractual and common-law indemnification in its third-party action against Tower, and Dena Marie is not a party to said action.

Footnote 4: Supreme Court dismissed, as moot, Kohls' and Tower's motion for summary judgment on the issue of contractual indemnification.

Footnote 5: At oral argument, Kohls indicated that it had withdrawn its claim that Tower breached the contract by failing to procure liability insurance naming Kohls as an additional insured.
Decided on December 27, 2011
Mazzarelli, J.P., Friedman, Catterson, Renwick, Freedman, JJ.


American Home Assurance Company v. Everest Reinsurance Company

Cahill Gordon & Reindel LLP, New York (Edward P.
Krugman of counsel), for appellant.
Pitchford Law Group LLC, New York (David L. Pitchford of
counsel), for respondent.

Judgment, Supreme Court, New York County (Charles E. Ramos, J.), entered June 23, 2010, dismissing the complaint seeking, inter alia, recovery of amounts due from defendant Everest Reinsurance Company with respect to losses paid by plaintiff National Union Fire Insurance Company of Pittsburg, Pa. pursuant to a settlement agreement with the underlying insured, unanimously reversed, on the law, with costs, the judgment vacated, and the complaint reinstated. Appeal from order, same court and Justice, entered on or about May 24, 2010, which, inter alia, granted Everest's motion for summary judgment dismissing the complaint, unanimously dismissed, without costs, as subsumed in the appeal from the judgment.

In 1993, National Union and its affiliates settled massive coverage litigation arising from the underlying insured's manufacture of the contaminant polychlorinated biphenyl (PCB) continuously from 1929 to 1971 at 80 sites around the country (the 1993 Settlement). The 1993 Settlement Agreement had two parts: a cash payment to resolve all existing and future governmental clean-up claims at the 80 sites, and an agreement as to how any future private bodily injury or property damage claims at those sites would be handled. Several years after the 1993 Settlement was consummated, the underlying insured became subject to claims for bodily injury and property damage arising from PCB contamination in and around Anniston, Alabama, where the insured had a manufacturing facility. In 2004, the insured settled the Anniston litigation for $600 million, and presented a claim for $150 million to National Union and its affiliates. The insurers paid the loss and turned to their reinsurers for reimbursement. When Everest Re (and three others that have now settled) refused to pay, the insurers commenced this action.

A reinsurer will be bound by a settlement agreed to by the ceding company if it is reasonably within the terms of the original policy, even if not technically covered by it (see Travelers Cas. & Sur. Co. v Certain Underwriters at Lloyd's of London, 96 NY2d 583, 596-97 [2001]; Allstate Ins. Co. v American Home Assur. Co., 43 AD3d 113, 120-21 [2007], lv denied 10 NY3d 711 [2008]). This doctrine prevents the reinsurer from "second-guessing" the settlement decisions of the ceding company, and "imposes a contractual obligation upon the reinsurer to indemnify the ceding company for payments it makes pursuant to a loss settlement under its own policy, provided that such settlement is not fraudulent, collusive or otherwise made in bad faith, and provided further that the settlement is not an ex gratia payment, i.e., one made by a party that recognizes no legal obligation to pay, but makes payment to avoid greater expense, as in the case of a settlement by an insurance company to avoid the cost of a suit" (Granite State Ins. Co. v ACE Am. Reins. Co., 46 AD3d 436, 439 [2007] [citation omitted]).

There is no evidence that, at the time of the 1993 Settlement, National Union acted other than in good faith, as during the years leading up to the settlement, the pollution exclusion, as well as other coverage terms and defenses were both litigated and negotiated. The settlement was also favorable to both parties. The limits of the reinsured policies applied on a "per occurrence" basis. The underlying insured settled the Anniston litigation in 2004 for $600 million. Thereafter, it presented a claim to National Union and its affiliates for a capped amount of $150 million once the $80 million "deductible" had been satisfied by the insured.

However, on December 9, 1993, mere months after the 1993 Settlement was reached, the Delaware Superior Court ruled in a declaratory judgment action commenced by the underlying insured against National Union and others, that the sudden and accidental pollution exclusions of 38 moving insurers barred coverage in this matter (see Monsanto Co. v Aetna Cas. & Sur. Co., 1993 WL 563253 [1993], affd 653 A2d 305 [Sup Ct Del 1994]). This circumstance presents issues of fact as to whether National Union settled in good faith. Moreover, the affidavit of Everest Re's claims representative, who attested that he had read the 1993 Settlement Agreement by 2003, raises issues of fact as to the applicability of waiver and estoppel.

In re. Commissioners of State Insurance Fund v P.S.G. Construction Co., Inc.

Gregory J. Allen (Jan Ira Gellis, P.C., New York, N.Y. [Lee
Mermelstein], of counsel), for appellant.
Franklin, Gringer & Cohen, P.C., Garden City, N.Y. (Michael
S. Mosscrop of counsel), for
respondent.


DECISION & ORDER

In a proceeding by a judgment creditor pursuant to CPLR 5225 and 5227 to recover money owed to a judgment debtor, the petitioner appeals from an order of the Supreme Court, Kings County (Schneier, J.), dated August 13, 2010, which dismissed the proceeding as time-barred.

ORDERED that the order is reversed, on the law, with costs, the petition is reinstated, and the matter is remitted to the Supreme Court, Kings County, for further proceedings on the petition.

On July 24, 2001, the petitioner, Commissioners of the State Insurance Fund, commenced an action against Bridgeworks of Greater New York, Inc. (hereinafter Bridgeworks), to recover unpaid Workers' Compensation insurance premiums. While that action was pending, Bridgeworks made several loans to P.S.G. Construction Co., Inc. (hereinafter PSG), some of which remain unpaid. On April 24, 2009, the petitioner obtained a judgment against Bridgeworks in the total sum of $1,087,311.44. However, Bridgeworks dissolved on November 4, 2005, and did not satisfy the judgment.

On April 13, 2010, the petitioner commenced this special proceeding to recover from PSG the unpaid balance of the loans made by Bridgeworks. The petitioner maintained that the loans made by Bridgeworks to PSG were fraudulent pursuant to Debtor and Creditor Law § 273-a. The Supreme Court denied the petition on the ground that the proceeding was barred by the six-year statute of limitations applicable to constructive fraud causes of action (see CPLR 213[1]).

Debtor and Creditor Law § 273-a provides: "Every conveyance made without fair consideration when the person making it is a defendant in an action for money damages or a judgment in such an action has been docketed against him [or her], is fraudulent as to the plaintiff in that action without regard to the actual intent of the defendant if, after final judgment for the plaintiff, the defendant fails to satisfy the judgment."

The existence of an "unsatisfied judgment" is an essential element of a cause of action pursuant to Debtor and Creditor Law § 273-a (Coyle v Lefkowitz, 89 AD3d 1054, *2; see Frybergh v Weissman, 145 AD2d 531, 531; Cohan v Misthopoulos, 118 AD2d 530). Thus, as recently held by this Court in Coyle v Lefkowitz 89 AD3d 1054), the six-year limitations period for a cause of action pursuant to Debtor and Creditor Law § 273-a (see CPLR 213[1]) begins to run on the date of entry of the judgment (see Coyle v Lefkowitz, 89 AD3d 1054).

In this case, therefore, the six-year statute of limitations applicable to the petitioner's Debtor and Creditor Law § 273-a cause of action began to run on April 24, 2009, the date of entry of the judgment. As a result, this special proceeding, which was commenced within six years of that date, is timely.

We decline to address the merits of the petition, as they were not ruled upon by the Supreme Court (see Shister v City of New York, 309 AD2d 915; Pepe v Tannenbaum, 262 AD2d 381, 383; Katz v Katz, 68 AD2d 536, 542-543).

Accordingly, the matter must be remitted to the Supreme Court, Kings County, for further proceedings on the petition.

Makris v. Masjid

Max W. Gershweir, New York, N.Y., for appellant.
Leavitt, Kerson & Duane, Forest Hills, N.Y. (Paul E. Kerson
and Isaac Abraham of counsel), for
respondents.


DECISION & ORDER

In an action, inter alia, to recover damages for breach of an insurance contract, the defendant Tower Insurance Company of New York appeals from an order of the Supreme Court, Queens County (Markey, J.), entered May 27, 2011, which denied its motion pursuant to CPLR 3211(a)(1) and (7) to dismiss the complaint insofar as asserted against it.

ORDERED that the order is affirmed, with costs.

The plaintiffs commenced this action against Tower Insurance Company of New York (hereinafter Tower), among others, alleging, inter alia, that Tower had wrongfully denied their claim to recover pursuant to their homeowners insurance policy for damage to their property caused by negligent demolition, construction, building, excavation, and blasting occurring on the property adjacent to the plaintiffs' property. Tower moved pursuant to CPLR 3211(a)(1) and (7) to dismiss the complaint insofar as asserted against it, arguing that the policy's "faulty workmanship" exclusion applied to the plaintiffs' claim. The Supreme Court denied its motion.

"On a motion to dismiss the complaint pursuant to CPLR 3211(a)(7) for failure to state a cause of action, the court must afford the pleading a liberal construction, accept all facts as alleged in the pleading to be true, accord the plaintiff the benefit of every possible inference, and determine only whether the facts as alleged fit within any cognizable legal theory" (Breytman v Olinville Realty, LLC, 54 AD3d 703, 703-704; see Leon v Martinez, 84 NY2d 83, 87). Where evidentiary material is submitted and considered on a motion to dismiss a complaint pursuant to CPLR 3211(a)(7), and the motion is not converted into one for summary judgment, the question becomes whether the plaintiff has a cause of action, not whether the plaintiff has stated one and, unless it has been shown that a material fact as claimed by the plaintiff to be one is not a fact at all and unless it can be said that no significant dispute exists regarding it, dismissal should not eventuate (see Guggenheimer v Ginzburg, 43 NY2d 268, 274-275; Fishberger v Voss, 51 AD3d 627, 628). "A motion pursuant to CPLR 3211(a)(1) to dismiss the complaint on the ground that the action is [*2]barred by documentary evidence may be granted only where the documentary evidence utterly refutes the plaintiff's factual allegations, thereby conclusively establishing a defense as a matter of law" (Mendelovitz v Cohen, 37 AD3d 670, 670; see Goshen v Mutual Life Ins. Co. of N.Y., 98 NY2d 314, 326).

Contrary to Tower's contention, the Supreme Court properly denied its motion to dismiss the complaint pursuant to CPLR 3211(a)(1) and (7). Tower failed to carry its burden of demonstrating that the faulty workmanship exclusion applies in this particular case, and that the exclusion is subject to no other reasonable interpretation than the one offered by it (see Cragg v Allstate Indem. Corp., 17 NY3d 118, 122; Insurance Co. of Greater N.Y. v Clermont Armory, LLC, 84 AD3d 1168, 1170; 242-44 E. 77th St., LLC v Greater N.Y. Mut. Ins. Co., 31 AD3d 100, 104-106). Consequently, Tower failed to utterly refute the plaintiffs' allegation that Tower wrongfully denied their claim or to establish that their allegation was "not a fact at all" (Guggenheimer v Ginzburg, 43 NY2d at 275; see Granada Condominium III Assn. v Palomino, 78 AD3d 996, 997).

Toledo v. Ni Christo

Richard J. Montes, for appellant.
David M. Schuller, for respondent.
Defense Association of New York, Inc., amicus curiae.


CIPARICK, J.:

The sole issue on this appeal is whether the trial court, in awarding preverdict interest, properly discounted future wrongful death damages back to the date of decedent's death and awarded interest from the date of death to the date of verdict. We agree with the courts [*2]below and affirm the judgment as entered. We do not reach the question of whether the interest should have been added to the future damage award discounted to the date of verdict or added to the award discounted to the date of death as that issue is not before us.

Decedent Joaquin Martinez Vargas was killed in aconstruction accident on September 21, 2002. Plaintiff Jose Luis Toledo, the administrator of decedent's estate, brought this negligence and wrongful death action against defendant church. Supreme Court granted summary judgment on the issue of liability on August 14, 2006. In November 2007, a jury trial was held to determine both past and future damages. Supreme Court instructed the jury to "determine the economic value of Joaquin Martinez to Claudia Vera [decedents's wife], Henri Hernan Martinez and Christopher Martinez [decedent's children] on September 21, 2002, the date on which Mr. Martinez died."

On December 3, 2007, the jury rendered a verdict awarding plaintiff $150,000 for decedent's conscious pain and suffering, $310,000 for loss of earnings from date of death to date of verdict, $35,000 for spousal services lost from date of death to date of verdict, $50,000 for loss of parental support for infant Henri from date of death to date of verdict, $15,000 for loss of parental support for infant Christopher from date of death to date of verdict, $2,000,000 for future lost earnings for 27 years, $0 for future lost spousal services, $400,000 for future parental loss for Henri for 16 years and $250,000 for future parental loss for Christopher for 17 years. After post-trial motions, defendant, relying on the testimony of its economist, stipulated to an additional $912,000 for future loss of spousal services representing 38 years from the date of verdict. The total jury award for future damages was $3,562,000.

Plaintiff submitted a proposed judgment to Supreme Court. That judgment included an award for future damages of $4,295,595 computed as follows: pursuant to CPLR 5041, plaintiff first subtracted the $250,000 lump sum from the jury's award of future damages of $3,562,000 and then discounted that total at a discount rate of approximately 4.33% to the date of verdict, December 3, 2007. The award (less the $250,000 lump sum) discounted back to the date of verdict was $3,104,848. Plaintiff then further discounted the award to the date of decedent's death, arriving at a value of $2,487,465. Plaintiff then calculated the interest on that discounted amount at the statutory interest rate of 9% from the date of death to the date of verdict (see CPLR 5004). The interest calculated was $1,190,747. Plaintiff then added the amount of the calculated interest from the date of death to the date of verdict to the discounted award as of the date of verdict, arriving at a total future damages award of $4,295,595.

Defendant submitted its own proposed counter-judgment, which neither discounted the verdict back to the date of death nor included any preverdict interest for the future wrongful death award. Supreme Court accepted plaintiff's proposed judgment and signed it on October 23, 2008.

Defendant then moved to resettle the award. Supreme Court denied the motion [*3]holding that, in actuality, the motion was one for reargument and that there were no matters of fact or law misapprehended by the court. Defendant appealed the judgment. Prior to the appeal, the parties entered into a stipulation which provided: "The sole issue to be presented on this appeal is the question whether the trial court properly discounted the future wrongful death damages back to the date of death, and awarded interest thereon from the date of death to the date of judgment." The Appellate Division initially reversed holding that interest on future damages should only have been calculated from the date of the verdict (see Toledo v Christo, 71 AD3d 404, 405 [1st Dept 2010]). Upon reargument, the Appellate Division recalled and vacated its decision and, relying on EPTL 5-4.3 and our cases interpreting the statute, namely Milbrandt v Green Refractories Co. (79 NY2d 26 [1992]) and Rohring v City of Niagara Falls (84 NY2d 60 [1994]), held "[w]here as here, the award of future damages was discounted by the court to the date of liability, which is the date of death, the award of interest from that date to the date of judgment was proper" (Toledo v Ni Christo, 75 AD3d 436, 436 [1st Dept 2010]). We granted defendant leave to appeal (15 NY3d 713 [2011]) and now affirm.
Defendant argues that our holding in Milbrandt prevents a plaintiff from collecting preverdict interest on future damages in a wrongful death action, because the interest from the date of death to the date of verdict has already been included in the discounted award at the time of the verdict, and that any additional interest would be an impermissible windfall to the plaintiff. Defendant further argues that awarding interest on future damages that have yet to be realized also constitutes an unfair windfall for plaintiff. We disagree.
Wrongful death awards in New York are provided for in the EPTL. Specifically, EPTL 5-4.3, relating to the amount of recovery in a wrongful death action, provides in pertinent part:
"(a) The damages awarded to the plaintiff may be such sum as the jury or, where issues of fact are tried without a jury, the court or referee deems to be fair and just compensation for the pecuniary injuries resulting from the decedent's death to the persons for whose benefit the action is brought . . . Interest upon the principal sum recovered by the plaintiff from the date of the decedent's death shall be added to and be a part of the total sum awarded."

Applying this statute and its predecessor statutes, this Court and the courts below have long held that "prejudgment interest in a wrongful death action is 'part of the damages'" (Davenport v Webb, 11 NY2d 392, 394 [1962], quoting Cleghorn v Ocean Acc. & Guar. Corp. 244 NY 166, 167 [1926]; see also Welsh v Peerless Cas Co., 8 AD2d 373, 376 [1st Dept 1959]; Ashkenazy v National Union Fire Ins. Co. of Pittsburgh, Pa., 245 AD2d 326, 327 [2d Dept 1997]), and that such interest should run from the date of death to the date of verdict (see Alfieri v Cabot Corp. 17 AD2d 455, 461 [1st Dept 1962] ["interest from the date of the wrongful death is an element of [*4]damages"]; see also Duffy v City of New York, 7 AD2d 988, 988 [1st Dept 1959]).

Furthermore, it has long been the rule in New York that the damages on a wrongful death action are due on the date of the death of the plaintiff's decedent (see Radley v Leray Paper Co., 214 NY 32, 36 [1915]); Murmann v New York, New Haven & Hartford R.R. Co., 233 AD 446, 448 [2d Dept 1931] revd on other grounds 258 NY 447 [1932] ["The damages, theoretically, should have been paid at the time the loss was suffered, to wit, the date of death"]). Future damages are thus a debt owed entirely as of the date of liability — the date of death (see Rohring, 94 NY2d at 69-70) — and such damage award properly should include preverdict interest calculated from the date of death.
Consistent with this analysis, in Milbrandt we ruled "that no preverdict interest should be added to an award for postverdict losses if the award has not been discounted to a time prior to the award" (79 NY2d at 31). There, we observed that since the verdicts in Milbrandt and in the companion case Schmertz v Presbyterian Hosp. in City of N.Y. had not been properly discounted, preverdict interest on future damage awards would have been improper as it would indeed constitute a windfall (see id. at 36). Following the adoption of CPLR articles 50-A and 50-B, however, discounting is performed by the trial court and juries are specifically instructed, pursuant to CPLR 4111 (e), to award a full amount of future damages, without a reduction to present value [FN1].
Moreover, in Rohring we stated "that future damages should be discounted to the date of liability, which by statute is the date of death, before interest is calculated on them" (84 NY2d at 69). We now conclude that the proper method for calculating preverdict interest in a wrongful death action is to discount the verdict to the date of liability, i.e., the date of death, and award interest on that amount from the date of death to the date of judgment [FN2]. [*5]
Finally, it should be noted that awarding preverdict interest on future damages to plaintiff is not a penalty against defendant. "The purpose of interest is to require a person who owes money to pay compensation for the advantage received from the use of that money over a period of time" (Manufacturer's & Traders Trust Co. v Reliance Ins. Co., 8 NY3d 583, 589 [2007]). "The plaintiff has been deprived of the use of money to which he or she was entitled from the moment that liability was determined. That is a loss for which the plaintiff should be compensated." (Love v State of New York, 78 NY2d 540, 545 [1991]). "[A] rule that would permit the defendant to retain the cost of using the money (i.e., interest) would provide the defendant with a windfall" (id. [emphasis added]) — a result we do not countenance.
Insofar as there is any issue concerning the accuracy of Supreme Court's calculation of the future damages award, that issue is not before us, nor was it litigated below. The stipulation entered into by the parties narrowed the scope of this appeal solely to the issue of "whether the trial court properly discounted the future wrongful death damages back to the date of death, and awarded interest thereon from the date of death to the date of judgment," not whether the calculation itself was accurate. Hence, we do not address whether the preverdict interest should have been added to the award discounted to the date of death or to the award discounted to the date of verdict.
Accordingly, the order of the Appellate Division should be affirmed, with costs.


SMITH, J.(dissenting):
In Milbrandt v Green Refractories Co. (79 NY2d 26, 36 [1992]) we held that, where future damages have been discounted to the date of a jury's verdict, the amount so calculated already includes interest up to that date and no further calculation of pre-verdict interest is necessary or appropriate. Milbrandt was a well-reasoned decision that reached a fair result, and the application of Milbrandt would produce a fair result in this case.
The majority here, however, holds that the date-of-verdict damages must be discounted back to the date of decedent's death, and that interest must then be added from the [*6]date of death to the date of verdict. This should be a useless but harmless exercise, for the two calculations should cancel each other; but here, for reasons no one has attempted to explain, the discounting was done using an interest rate of roughly 4%, while interest was calculated at the statutory rate of 9% — in effect doubling the interest and giving plaintiff a significant windfall. I see no justification for this procedure, and I therefore dissent.
I
Milbrandt, like this case, was an action for wrongful death. In Milbrandt, as in this case, part of the jury's award was for "postverdict losses," — i.e., "what decedent would, in the future, have contributed to the care and support of his family" (79 NY2d at 32). In Milbrandt, "the court instructed the jury to discount the [post-verdict] damages by reducing the award to its cash value on the day of the verdict" (id.). Here, pursuant to CPLR article 50-B, the jury verdict included an undiscounted amount of post-verdict damages; the trial court, after modifying the verdict as the result of a pretrial motion and making certain other adjustments required by statute, calculated a date-of-verdict present value (see majority op at 3)[FN3]. I see no reason why this difference — the difference between a calculation by the jury and one by the judge — should be significant, and I find Milbrandt controlling here.
In Milbrandt, we rejected the idea that the date-of- verdict present value needed to be the subject of any further interest calculation. We said:
"When, as with the awards in the cases before us, an intended amount is not discounted to the date of death, but only to the date of the verdict, the award includes the return that would be earned on the principal from the date of death to the date of the verdict.
. . .
"If, as in the cases before us, the damages are discounted only to the date of verdict, then that award already includes interest on the principal sum from the date of death to the date of verdict, and additional interest is a windfall."
[*7]
(79 NY2d at 35, 36 [emphasis added].)
We therefore held in Milbrandt that no pre-verdict damages should be added to future damages discounted by the jury to present value at date of verdict. For the same reason, in this case there is no reason to add anything to the $3,104,848 in date-of-verdict present value calculated by the court. That amount fully compensates plaintiff for his future losses as of the date of verdict.
II
Plaintiff nevertheless asked the trial court for, and was granted, what he called "Interest on Future Wrongful Death Damages." He began his calculation of this amount by discounting the $3,104,848 from the date of verdict to the date of death. He did not disclose the interest rate he used in the discounting process, but it is clear from his result that it was approximately (or perhaps exactly) 4.36%. He arrived at a date-of-death value of $2,487,465, then calculated interest going forward to the date of verdict at 9%, producing an interest figure of $1,190,747. Then — for reasons I cannot fathom, and which plaintiff has not explained — he added this interest not to the date-of-death value, but to the date-of-verdict value of $3,104,848 (an amount which, by definition, already included interest at 4.36% from date of death to date of verdict), reaching a sum of $4,295,595 in future damages plus interest.
I put aside plaintiff's bizarre choice to add the interest to the date-of-verdict value, rather than to the date-of-death value on which it was calculated. This was obviously wrong — by adding interest to an amount that already included interest, plaintiff essentially claimed, and obtained, interest at more than 13% on his date-of-death value — but I acknowledge that, since defendant failed to complain of this error, we may be powerless to correct it. The more basic problem, of which defendant did complain, is that plaintiff's whole calculation of "Interest on Future Wrongful Death Damages" makes no sense.
In principle, there is no harm in discounting back from date of verdict to date of death and adding interest from date of death to date of verdict — because if the discounting is done correctly, there is no difference between following that procedure and simply awarding the date-of-verdict present value, as Milbrandt did. The discount rate and the interest rate should be identical, and the amount subtracted and the amount added will thus cancel each other. As a federal Court of Appeals explained in Woodling v Garrett Corp. (813 F2d 543, 560 [2d Cir 1987]), a case we approved in Milbrandt (79 NY2d at 36, 37): "Assuming that the inflation-adjusted discount rate is based on the legal rate of interest, which is used in calculating prejudgment interest, this practice [discounting and adding interest] reaches precisely the same result [as awarding date-of-verdict value]."
The calculations, if done properly, reach the same result because the whole point of discounting is to find the amount of money on an earlier date that is equivalent in value to a [*8]given amount on a later date. To do so, one must choose a discount rate equal to the rate of interest the person holding the funds between the two dates is expected to earn (see generally Gilbert, Forensic Discount Rates, 1 J. Legal Econ. 40 [1991]). Here, choosing the discount rate is an easy task, because we know the interest rate plaintiff could expect to earn from the date of death to the date of verdict: 9%, by statute (CPLR 5004). And if we use that discount rate there is no need to do the exercise at all, because it consists in effect of subtracting and adding the same amount of money.
In Rohring v City of Niagara Falls (84 NY2d 60, 69 [1994]), we recognized the equivalence between the Milbrandt approach of awarding date-of-verdict value and the discounting and adding approach. We said in Rohring, "in [Milbrandt] we held that future damages should be discounted to the date of liability, which by statute is the date of death, before interest is calculated on them" (84 NY2d at 69). The majority quotes part of this language (majority op at 7), but omits Rohring's reference to Milbrandt and thus obscures the key point: The discounting and adding approach is identical in substance to the Milbrandt approach — if the discounting and adding is done correctly.
It was not done correctly here. Plaintiff presented to Supreme Court, and obtained approval of, a calculation in which the discount rate was 4.36% and the interest rate from date of death was 9%. (I am ignoring the distinction between compound and simple interest, which does not affect the argument.) I do not find in plaintiff's submissions, or in the opinions below, or in today's majority opinion, any reasoned argument that supports discounting with a lower interest rate, and then adding back interest at a higher one. That is not only inconsistent with Milbrandt: it is an irrational procedure that accomplishes nothing except putting defendant's money in plaintiff's pocket.
* * * * * * * * * * * * * * * * *
Order affirmed, with costs. Opinion by Judge Ciparick. Chief Judge Lippman and Judges Graffeo, Pigott and Jones concur.
Judge Smith dissents in an opinion in which Judge Read concurs.
Decided January 10, 2012
Footnotes


Footnote 1: We note that CPLR Article 50-A was amended in 2003, such that wrongful death damages in medical malpractice cases are awarded as a lump sum and not subject to structuring.

Footnote 2: The dissent concludes that there is no justification under Milbrandt to discount the award back to the date of death at a discount rate which is "equal to the rate of return to be expected from reasonably safe investments" (79 NY2d at 32) and then add interest at the statutory rate of 9% (see CPLR 5004); (see dissent at 1). However, the concern in Milbrandt was not the discrepancy between the discount rate and the statutory interest rate, but the windfall that would occur if one added interest to an undiscounted award. To interpret Milbrandt in the manner in which the dissent does makes the distinction between personal injury awards which are due at the time of verdict and wrongful death awards which are due at the time of death meaningless. Such a reading also renders the language in Rohring that "future damages should be discounted to the date of liability, which by statute is the date of death, before interest is calculated on them" (84 NY2d at 69) similarly meaningless. That the difference between the discount rate and the statutory interest rate provides a benefit to plaintiff is an issue for the legislature and not one for judicial determination (see Desiderio v Ochs, 100 NY2d 159, 176 [2003, Rosenblatt, J. concurring]).

Footnote 3:The parties and the majority assume, as do I, that the date of the damages verdict is an appropriate date for a present value calculation. In principle, for the reasons I explain below, it should not matter what date is chosen as long as there is no discrepancy between the rate used in discounting back to a date and in adding interest after that date.