Coverage Pointers - Volume I, No. 10
HOT CASES from other jurisdictions
covering a broad range of legal issues, visit the
section of the Federation of Insurance
and Corporate Counsel website:
11/08/99: ALVAREZ v. MING CHAO
Plaintiff’s action to recover damages for personal injuries arising out of an auto accident was properly dismissed where plaintiff failed to establish "serious injuries" within the meaning of Insurance Law §5102(d). Here, the defendant was granted summary judgment dismissing the complaint because plaintiff’s subjective complaints of headaches did not constitute a "serious injury." Moreover, her doctor’s affirmation failed to indicate that the opinions were based upon a recent medical exam rather than the exam he conducted 11 years earlier.
11/08/99: CUTHBERT v. PENDERSON
Defendant entered into a rental agreement with a rental car company, which required that defendant indemnify the rental car company for all claims arising out of use of the rented vehicle. Defendant was later involved in an accident while driving the rented vehicle and a third party who sustained damages commenced this action. Plaintiff named both the driver and the rental car company in the action. The court held the rental car company was entitled to contractual indemnification from defendant. It also rejected defendant’s argument that the rental car company, as a self-insurer, was required to provide minimum uninsured motorist coverage under Vehicle and Traffic Law §388 because that statute is designed to protect injured persons – the defendant was not the injured person.
11/04/99: CONSOLIDATED EDISON CO. OF
NEW YORK, INC. v. USF&G|
Courts addressing additional insured endorsements have repeatedly rejected a narrow interpretation that focuses on the precise cause of the accident. Instead, courts focus on the general nature of the operation, in the course of which the injury was sustained, finding coverage were an employee is injured in the general course of the work being done. In this case, an employee of Hallen Construction was injured while working at Con Edison, he sued Con Edison claiming that Con Edison’s placement of a barricade caused his injury. Con Edison was an additional insured under Hallen’s policy and tendered its defense to USF&G. The endorsement limited coverage to "liability arising out of ‘our work’ [Hallen] for the insured [Con Edison] by or for you." USF&G declined coverage on the basis that placement of the barricade had nothing to do with Hallen’s work. The Court rejected USF&G’s argument and held that it was obligated to provide indemnity to Con Edison, finding that the injury arose out of Hallen’s general operations at the site. The Court found the implications that Con Edison was negligent in maintaining an unsafe workplace had no bearing on the issue of USF&G’s obligations to Con Edison under the endorsement.
11/04/99:EGAN v. NEW YORK CARE PLUS INSURANCE COMPANY, INC.
New York State Supreme Court, Appellate Division, Third Department
Preliminary Injunction Warranted Following Health Insurer’s Refusal to Pay for Therapy
Plaintiff was diagnosed with central nervous system Lyme disease and was first treated with oral antibiotics. When plaintiff’s doctor determined more aggressive treatment was needed, he sought pre-approval for intravenous antibiotic therapy from plaintiff’s insurer and began the therapy before receiving a response. The insurer initially reimbursed plaintiff for the therapy without determining the pre-approval request, but later denied the request and stopped payments. The insurer resumed payments for a period of time and then discontinued payments altogether. Plaintiff commenced this action and simultaneously moved for a preliminary injunction requiring the insurer to continue payments, which the lower court granted. On appeal, the court held plaintiff was entitled to the preliminary injunction because he established: (1) a likelihood of success on the merits; (2) irreparable injury absent the injunction; and (3) a balancing of equities in the movant’s favor. Here, the court found that the existence questions of fact for trial does not preclude issuance of the injunction because plaintiff need not show that success on the merits is a certitude. Moreover, plaintiff demonstrated he is unable to personally pay for the therapy and will suffer dire physical consequences if therapy is discontinued. However, the plaintiff would be required to post bond.
11/01/99: MATTER OF STATE FARM INS. CO. v. DOMOTOR|
This is a no-fault case where insurer denied further no-fault benefits after its doctors determined no further treatment was necessary. The insured continued to treat but submitted no further claims to the insurer. She then demanded arbitration. The insurer argued that the insured failed to provide timely written proof of the additional medical treatment as required under the policy. The arbitrator agreed and dismissed the claim. The master arbitrator vacated that decision. In upholding the master arbitrator’s award, the Appellate Court stated that a disclaimer of coverage excuses an insured from further compliance with policy conditions. An insurer may not, after repudiating liability, create grounds for its refusal to pay by demanding compliance with proof of loss provisions in the policy. "Rather, the insurer must stand or fall upon the defense upon which it based its refusal to pay."
11/01/99:KIM v. DONG KIM
New York State Supreme Court, Appellate Division, Second Department
Physician’s Affidavit Based on Prior Exam that Lacks Opinion on Permanency is Insufficient Proof of Serious Injury
Plaintiff’s action to recover damages for personal injuries arising out of an auto accident was properly dismissed where plaintiff failed to establish "serious injuries" within the meaning of Insurance Law §5102(d). The defendant was granted summary judgment dismissing the complaint because affidavits of the plaintiffs' physician merely recited the measurements of the plaintiffs' limitations of cervical and lumbar motion that had been obtained 20 months earlier (less than two weeks after the accident). In addition, the physician's affidavit failed to articulate any opinion as to permanency.
From time to time we highlight significant cases of interest from other jurisdictions. This week, we thank Jean M. Lawler ([email protected]) of Murchison & Cumming in Los Angeles, California, for this decision from California:
11/04/99:MIDIMAN v. FARMERS INSURANCE COMPANY
California Court of Appeal, Second Appellate District, Division Four
California Court Considers Effect of Not Appointing Cumis Counsel in Advertising Injury Case
The California Court of Appeal considered the effect of an insurer's failure to provide "Cumis" counsel in an advertising injury case. The insured was sued for copyright and trademark infringement and unfair competition. Farmers agreed to defend under a reservation of rights and appointed defense counsel, but rejected the insured's demand for independent counsel. Rather than accept the appointed counsel, however, the insured decided to proceed on its own and quickly reached a settlement with the plaintiff in the underlying action. The settlement was simply an agreement that it would stop selling the infringing product - it did not pay any cash to the plaintiff. It then sued Farmers for breach of contract and bad faith, alleging that it was forced to settle the case due to Farmers's refusal to supply it with an unconflicted defense and was therefore entitled to recover the consideration it paid to plaintiff in the underlying action, including lost future profits. The court of appeal recognized the traditional rule that where an insurer wrongfully refuses to defend and the insured settles the underlying claim, the settlement is presumptive evidence of the liability of the insured and the amount thereof. Here, the insured was seeking a recovery from Farmers based on its lost profits from future sales of the offending product. However, the settlement it reached in the underlying action, in which it agreed to stop producing the product, resulted in a presumption that it was liable for infringement, and thus it would not have had the right to conduct future sales. As such, there were no recoverable damages against Farmers.
As to the independent counsel issue the court and held that there was no
duty to provide independent counsel. The insured first argued that appointed
counsel could direct discovery towards items of damage not covered and
request a special verdict. The court rejected that as being a basis for
finding a conflict of interest, noting that such conduct would represent a
breach of the firm's duty of loyalty to its client and that it was "not
prepared to assume appointed defense counsel's misfeasance in the absence of
any evidence." The court also rejected other arguments made by the insured
that there was a conflict of interest, finding the potential conflicts to be
"more theoretical than real". Relying on Dynamic Concepts, Inc. v. Truck
Insurance Exchange (1998) 61 Cal.App.4th 999, the court strongly disapproved
of the insured's conduct in making an immediate demand for appointment of
independent counsel before the presence of an actual conflict was revealed,
and then when the demand was rejected, entering into a hasty settlement in
hopes of binding the insurer and building a bad faith lawsuit: "The better
practice . . . would be to cooperate with appointed counsel until an actual
conflict develops" rather than to make premature "nonnegotiable demands for
Cumis counsel based on conjecture about conflicts which might reveal
themselves in the future as the litigation progressed . . . ."
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In a proceeding pursuant to CPLR article 75 to vacate an award of a master arbitrator dated August 26, 1997, the appeal is from so much of an order of the Supreme Court, Nassau County (McCaffrey, J.), dated January 11, 1999, as, upon reargument, adhered to an order of the same court dated April 7, 1998, which granted the petition and reinstated an arbitration award dated April 1, 1997.
ORDERED that the order is reversed insofar as appealed from, on the law, with costs, the petition is denied, the order dated April 7, 1998, is vacated, and the master arbitrator's award dated August 26, 1997, is reinstated.
The appellant sustained physical injuries while riding as a passenger in a vehicle insured by the petitioner, State Farm Insurance Company. The petitioner initially provided no-fault medical benefits but, after its medical experts determined that no further treatment was necessary, it notified the appellant that it was denying all no-fault benefits. The appellant nevertheless continued under medical care although she submitted no further claims to the petitioner. Subsequently, the appellant demanded arbitration to resolve the issue of the petitioner's liability.
An insured 's failure to provide timely written proof of loss is generally an absolute defense to an action to recover on the policy (see, Igbara Realty Corp. v New York Prop. Ins. Underwriting Assn., 63 NY2d 201). However, this absolute defense may be waived (see, Igbara Realty Corp. v New York Prop. Ins. Underwriting Assn., supra; Treptow v Exchange Mut. Ins. Co., 106 AD2d 767). An insurance carrier may not insist upon adherence to the terms of its policy after it has repudiated liability on the claim by sending a letter disclaiming coverage (see, Rajchandra Corp. v Title Guar. Co., 163 AD2d 765, 769) for "[o]nce an insurer repudiates liability * * * the [in]sured is excused from any of its obligations under the policy" ( Ocean-Clear Inc. v Continental Cas. Co., 94 AD2d 717, 718).
In the instant matter, the petitioner unequivocally notified the appellant in December 1989 that it was denying all no-fault benefits based upon the opinion of its medical expert that the appellant no longer required treatment. This disclaimer of coverage excused the appellant from further compliance with conditions precedent (see, 11 NYCRR 65.12) regarding time limitations for submitting medical proofs of loss for the treatments she nevertheless continued to undergo. An insurance carrier may not, after repudiating liability, create grounds for its refusal to pay by demanding compliance with proof of loss provisions of the policy. Rather, the insurance carrier "must 'stand or fall upon the defense upon which it based its refusal to pay,' i.e., because 'no treatment [was] necessary'" ( King v State Farm Mut. Auto. Ins. Co., 218 AD2d 863, 865, quoting Beckley v Ostego County Farmers Coop. Fire Ins. Co., 3 AD2d 190). Accordingly, inasmuch as the master arbitrator possessed the authority to vacate the initial arbitrator's legally incorrect award denying the appellant's claims for failure to file timely proof of loss (see, Matter of State Farm Ins. Co. v Spilotros, 257 AD2d 577; Vago v Country Wide Ins. Co., 145 AD2d 553; Smith v Chubb & Son, 139 AD2d 897), the Supreme Court erred in vacating the master arbitrator's award (see, Central Gen. Hosp. v Liberty Mut. Ins. Co., 156 AD2d 414).
S. MILLER, J.P., SULLIVAN, KRAUSMAN, and H. MILLER, JJ., concur .
Order , Supreme Court, New York County (Ira Gammerman, J.), entered on or about May 21, 1998, which, in an action by plaintiff Consolidated Edison Company of New York (Con Edison) against defendant insurer , United States Fidelity and Guaranty Company (USF&G), for a declaration that USF&G is obligated to indemnify Con Edison in an underlying action for personal injuries brought by an employee of plaintiff’s contractor, defendant Hallen Construction, Inc. (Hallen), upon the parties’ respective cross-motions for summary judgment, declared in plaintiff’s favor that defendant is obligated to indemnify it in the underlying action, affirmed, without costs.
Con Edison was named as an additional insured in a policy obtained by its excavation contractor Hallen from defendant USF&G, under an additional insured endorsement limiting coverage to "liability arising out of 'our work' [i.e., Hallen’s work ] for the insured [i.e., the additional insured, Con Edison] by or for you". In the underlying personal injury action, Hallen's employee claimed he was injured because of Con Edison's negligent placement of a barricade, and Con Edison's third-party claim against Hallen was dismissed. Con Edison, in consultation with counsel for USF&G, then settled with the injured plaintiff. The only question reserved by USF &G was whether Con Edison's liability arose out of "our work". On appeal, USF&G argues that it is not obligated under the additional insured endorsement because placement of the barricade had nothing to do with Hallen's work for Con Edison. This precise argument, including the distinction defendant makes between the word "work" used in this endorsement and the word "operations" often used in similar endorsements (see, e.g., Consolidated Edison Co. v Hartford Ins. Co., 203 AD2d 83), was made with respect to a virtually identical additional insured endorsement in Tishman Constr. Corp. v CNA Ins. Co. (236 AD2d 211), and rejected (cf., O’Connor v Serge Elev. Co., 58 NY2d 655). Nor does the dismissal of Con Edison's third-party claim against Hallen, and any resulting implication that Con Edison was negligent in maintaining an unsafe workplace for Hallen's employees, have any bearing on the issue of USF&G's obligations to Con Edison under the additional insured endorsement (see, Tishman, supra).
All concur except Sullivan, J.P. who concurs in a memorandum as follows:
SULLIVAN , J. (concurring)
I agree with the majority that under the additional insured endorsement of its policy, USF&G is obligated to indemnify Con Edison for any liability incurred in the underlying personal injury action. The endorsement defines an additional insured as "the person or organization shown in the schedule, but only with respect to liability arising out of 'your [Hallen’s] work' for that insured [Con Edison] by or for you [Hallen]." In maintaining that, under the circumstances presented , USF&G is not obligated to indemnify Con Edison under the additional insured endorsement, USF& ;G asserts that in dismissing, in the underlying action, Con Edison’s third party action against Hallen , the court necessarily found that any liability of Con Edison would have to arise out of Con Edison’ s negligence and not out of any work performed by Hallen. USF&G thus suggests that since Hallen was found to have been free from negligence, it can not be said that there was any "liability arising out of [Hallen’s] work." The question of whether or not Hallen was negligent is, however, irrelevant to Con Edison’s coverage as an additional insured.
In construing the expression "arising out of" in the context of a liability policy exclusion which excludes injuries arising out of the ownership, maintenance, or use of a motor vehicle, the court held it to "mean originating from, incident to, or having connection with the use of the vehicle." ( New Hampshire Ins. Co. v Jefferson Ins. Co., 213 AD2d 325, 330, quoting Cone v Nationwide Mutual Fire Ins. Co., 75 NY2d 747, 750 [Kaye, J., dissenting].) There is no reason to accord the language a less expansive interpretation when contained in an additional insured definition. In Consolidated Edison Co. v Hartford Ins. Co. (203 AD2d 83), where the additional insured was covered "with respect to liability arising out of operations performed for such insured by or on behalf of the named insured," the court held that the "policy language focuses not upon the precise cause of the accident, * * * but upon the general nature of the operation in the course of which the injury was sustained." ( Id.) Thus, even if the injuries of the plaintiff in the underlying personal action - a Hallen employee - were solely attributable to Con Edison’s negligence, Con Edison’s liability for those injuries would have arisen out of Hallen’s work since the injuries were incurred during the course of the employee ’s performance of work for Hallen pursuant to the contract between Hallen and Con Edison. ( See, id.)
In an action, inter alia, to recover damages for personal injuries, the defendants appeal from an order of the Supreme Court, Kings County (G. Aronin, J.), dated April 21, 1999, which denied their motion for summary judgment dismissing the complaint on the ground that the injured plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d). The notice of appeal from the decision dated January 13, 1999, is deemed a premature notice of appeal from the order (see, CPLR 5520[c]).
ORDERED that the order is reversed, on the law, with costs, and the motion is granted, and the complaint is dismissed.
The defendants met their initial burden of demonstrating that the injured plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d). Thus, it was incumbent on the plaintiffs to come forward with admissible evidence to create an issue of fact (see, Gaddy v Eyler, 79 NY2d 955, 956-957). Contrary to the conclusion reached by the Supreme Court, we find that the plaintiffs failed to do so. The injured plaintiff's subjective complaints of headaches were insufficient to defeat the motion (see, Licari v Elliot, 57 NY2d 230, 239; Grayer v Jerez, 192 AD2d 637; Oswald v Ospina, 187 AD2d 570). In addition, the affirmation of the injured plaintiff's doctor was insufficient since it failed to indicate that the opinion expressed therein was based upon a recent medical examination rather than his examination and treatment of the injured plaintiff some 11 years earlier (see, Kosto v Bonelli, 255 AD2d 557; Attanasio v Lashley, 223 AD2d 614).
S. MILLER, J.P., THOMPSON, KRAUSMAN, FLORIO, and SCHMIDT , JJ., concur.
In an action to recover damages for personal injuries , the defendants Philip Pederson and BEM Systems, Inc., appeal from an order of the Supreme Court, Kings County (Rappaport, J.), dated June 19, 1998, which granted the motion of the defendant ELRAC, Inc., s /h/a Enterprise Rent-A-Car Company, for summary judgment on its cross claims against the defendant Pederson for contractual and common-law indemnification.
ORDERED that the appeal by the defendant BEM Systems, Inc., is dismissed, as that defendant is not aggrieved by the order appealed from (see, CPLR 5511); and it is further,
ORDERED that the order is affirmed; and it is further,
ORDERED that the respondent is awarded one bill of costs.
A rental agreement between the defendant ELRAC, Inc., s/h/a Enterprise Rent-A-Car Company (hereinafter ELRAC), and the defendant Philip Pederson provided that Pederson, as lessee of the rental vehicle, would indemnify ELRAC for all claims arising out of the use of the rental vehicle. Pederson does not dispute that he rented the vehicle, that he was involved in an accident while driving the rental vehicle, or that a third party sustained damages as a result of the accident. There is no proof in this case that ELRAC violated CPLR 4544. Therefore, ELRAC is entitled to summary judgment on its cross claim for contractual indemnity (see, ELRAC, Inc. v Beckford, 250 AD2d 725; ELRAC, Inc. v Rudel, 233 AD2d 417). Pederson's contention that ELRAC, as a self-insurer, is required to provide, at least, the minimum uninsured motorist insurance coverage pursuant to Vehicle and Traffic Law § 388 is without merit. Vehicle and Traffic Law § 388 was designed to protect injured persons (see, Morris v Snappy Car Rental, Inc., 84 NY2d 21, 27), and Pederson is not the injured person herein (see, ELRAC, Inc. v Beckford, supra; ELRAC, Inc., v Rudel, supra).
ELRAC is also entitled to summary judgment on its cross claim for common-law indemnification from Pederson (see, Naso v Lafata, 4 NY2d 585, 590; ELRAC, Inc. v Beckford, supra). ELRAC submitted evidence indicating that Pederson struck the rear-end of the plaintiff's vehicle while it was stopped. A rear-end collision with a stopped vehicle creates a prima facie case of negligence on the part of the driver of the moving vehicle, imposing a duty of explanation upon its driver (see, ELRAC, Inc. v Beckford, supra; Barile v Lazzarini, 222 AD2d 635). Pederson failed to submit a nonnegligent explanation.
Pederson's remaining contentions are without merit.
JOY, J.P., GOLDSTEIN, McGINITY, and FEUERSTEIN , JJ., concur.
Appeal from an order of the Supreme Court (Canfield, J.), entered November 24, 1998 in Albany County, which, inter alia, granted plaintiff's motion for a preliminary injunction .
In 1997, plaintiff was diagnosed as having central nervous system Lyme disease, which he apparently contracted sometime in 1994. Initially treated with high doses of oral antibiotics, it ultimately was determined by his physician, Kenneth Liegner, that a more aggressive treatment was required . Accordingly, Liegner sought from defendants, who insured plaintiff under a "Care Plus Health Care Contract", preapproval of intravenous antibiotic therapy. Shortly thereafter, Liegner began such therapy without having received a response from defendants. Defendants, without determining the preapproval request, began paying for the antibiotic therapy at rates varying from $1,400 per week to $2,250 per week. On November 3, 1997, defendants stopped reimbursing plaintiff for the therapy and on November 4, 1997 denied the request for preapproval. Defendants resumed making payments in January 1998 and continued to make such payments, with certain isolated exceptions, until May 1998 or June 1 998, when they discontinued payments altogether. Following extensive correspondence between the attorneys for the parties, a summons and complaint was served in this action and plaintiff simultaneously moved for a preliminary injunction requiring defendants to continue paying for his therapy. Supreme Court granted the preliminary injunction and this appeal by defendants ensued.
It is now firmly established that in order to be entitled to a preliminary injunction, the movant must demonstrate a likelihood of ultimate success, irreparable injury absent the injunction and a balancing of the equities in the movant's favor (see, e.g., Doe v Axelrod, 73 NY2d 748, 750). Contrary to the import of defendants' brief, the first requirement does not compel a demonstration that success on the merits is practically a certitude. As conceded by defendants, the mere fact that there indeed may be questions of fact for trial does not preclude a court from exercising its discretion in granting an injunction (see, CPLR 6312 [c]; Sau Thi Ma v Xuan T. Lien, 198 AD2d 186, lv dismissed 83 NY2d 847). Our review of the record leads us to conclude that plaintiff has demonstrated a likelihood of success on the merits in spite of the fact that defendants have raised certain questions of fact. And while defendants are correct in their assertion that an injunction should not be granted, absent extraordinary circumstances, where the plaintiff would receive the ultimate relief sought pendente lite (see, Rosa Hair Stylists v Jaber Food Corp., 218 AD2d 793), such extraordinary circumstances exist here. Plaintiff has demonstrated that he will be unable to personally pay for the therapy prescribed by his physician and, in the event that the intravenous antibiotic therapy is discontinued due to lack of payment, that he will suffer dire physical consequences, including the potential for irreversible neurologic injury.
Defendants are correct, however, in their assertion that in granting a preliminary injunction, Supreme Court was required to order plaintiff to post an undertaking ( see, CPLR 6312 [b]; W.I.L.D. W.A.T.E.R.S. v Martinez, 148 AD2d 847, 849). Accordingly, the matter must be remitted to Supreme Court for the purpose of fixing the amount of the bond (see, City Store Gates Mfg. Corp. v United Steel Prods., 79 AD2d 671, 672). We have considered defendants ' remaining contentions and find them to be without merit.
Mercure, J.P., Peters, Spain and Graffeo, JJ., concur.
ORDERED that the order is modified, on the law, without costs, by reversing so much thereof as granted plaintiff's motion for a preliminary injunction without requiring plaintiff to post an undertaking; matter remitted to the Supreme Court for the purpose of fixing the amount thereof; and, as so modified, affirmed.
In an action to recover damages for personal injuries, etc., the plaintiffs appeal from an order of the Supreme Court, Queens County (Goldstein, J.), dated October 20, 1998, which granted the respective motions of the defendants Dong Kim and Alan Karl Jacobs for summary judgment dismissing the complaint insofar as asserted against them on the ground that the infant plaintiffs did not sustain serious injuries within the meaning of Insurance Law § 5102(d).
ORDERED that the order is affirmed, with one bill of costs.
The Supreme Court did not err in ruling that the defendants established their entitlement to judgment as a matter of law by submitting evidence that the infant plaintiffs did not sustain serious injuries within the meaning of Insurance Law § 5102(d), and that the plaintiffs failed thereafter to demonstrate the existence of an issue of fact requiring a trial. The affidavits of the plaintiffs' physician merely recited the measurements of the infant plaintiffs' alleged limitations of cervical and lumbar motion that had been obtained 20 months earlier (less than two weeks after the accident). In addition, the physician's affidavit failed to articulate any opinion as to permanency (see, e.g., Mobley v Riportella, 241 AD2d 443; Gill v O.N.S. Trucking, 239 AD2d 463; Beckett v Conte, 176 AD2d 774).
BRACKEN, J.P., SANTUCCI, ALTMAN, FRIEDMANN, and H. MILLER , JJ., concur.