Coverage Pointers - Volume I, No. 11

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For those interested in following
HOT CASES from other jurisdictions covering a broad range of legal issues, visit the HOT CASES section of the Federation of Insurance and Corporate Counsel website:
www.thefederation.org.

11/24/99: GENERAL ACCIDENT INSURANCE v. ROBERTS

New York State Supreme Court, Appellate Division, Third Department

Statutory Lien: Insurer’s Lien for First Party Benefits Arises by Operation of Law and Attaches to the Settlement the Instant Settlement is Reached

The defendants (Bakers) were involved in an auto accident when their vehicle collided with a farm tractor owned by defendants (Roberts). The Bakers and their passengers all sustained personal injuries and their insurer paid first-party benefits totaling $56,000 (for basic economic loss). An action commenced by the Bakers against the Roberts was settled for $200,000, paid by the Roberts’ farmowner’s insurer and, in connection therewith, the Bakers’ signed general releases and a stipulation discontinuing the action. The general releases and stipulation provided that the Bakers would "satisfy all liens asserted in the matter from the settlement proceeds." However, the Bakers did not reimburse their insurer for first party benefits paid for basic economic loss.

The Bakers’ insurer then commenced this action to enforce its lien under Insurance Law § 5104 (b), which creates a statutory lien in favor of an insurer who pays first party benefits on account of the same injuries. The Roberts moved for summary judgment dismissing the insurer’s action and for summary judgment on its cross-claim against the Bakers based on the Bakers’ agreement to satisfy all liens from the settlement proceeds. The court denied the motion, holding first that an insurer is not precluded from enforcing the lien because it failed to assert its rights at the time of settlement. "The lien is created by operation of law and attached to the instant the settlement was made." Furthermore, the court found issues of fact whether the agreement merely encompassed liens of medical providers and as to the portion of the settlement representing compensation for basic economic loss precluded summary judgment.

11/24/99: SEDLACEK v. DRYDEN MUTUAL INS. CO.

New York State Supreme Court, Appellate Division, Third Department

Policy Cancellation: Insured’s Bad Check Discharged Insurer’s Obligation to Reinstate Policy; Mortgagee can not Rely on Reinstatement Notice to Avoid Forfeiture Where Cancellation Notice Received Prior to Loss

Plaintiff sold a four-family apartment building to his daughter (Hamilton) pursuant to an oral agreement. Under the agreement, Hamilton was responsible for insuring the property and purchased a fire insurance policy listing the Plaintiff as mortgagee accordingly. On November 27, 1996, the insurer sent Hamilton and Plaintiff a notice of cancellation for nonpayment of premium effective December 14, 1996. The insurer received a check from Hamilton for payment of the overdue premium on December 16, 1996, and issued a notice of reinstatement to Hamilton and the Plaintiff the following day. The bank later dishonored Hamilton’s check due to insufficient funds and, on December 23, 1996, the insurer issued a second notice of cancellation to Hamilton and the Plaintiff.

The apartment building was damage by fire on December 27, 1996, and the insurer denied Hamilton’s claim under the policy. The court held that a check given in payment of an underlying obligation constitutes conditional payment and the obligation is discharged if the check is dishonored (UCC 3-802 (1) (b)). Therefore, the insurer’s underlying obligation to reinstate the policy was discharged when the insured’s check was dishonored for insufficient funds. The court rejected Plaintiff’s contention that, as mortgagee, he was entitled to rely on the insurer’s reinstatement notice and that the insurer is thereby estopped from declaring a forfeiture of the policy. Plaintiff received the December 23, 1996, cancellation notice prior to the loss and, therefore, could not reasonably rely on the December 17, 1996, reinstatement notice.

11/23/99: BOOKSTEIN v. REPUBLIC INS. CO.

New York State Supreme Court, Appellate Division, First Department

Civil Practice Tolling Statute for Disabled Persons Applies to Insurance Policy’s Two-Year Suit Limitation Provision

The court held that the provisions of CPLR §208, which toll the statute of limitations for infancy or insanity, also applies to the two-year suit limitation provision in an insurance policy, notwithstanding the disabled insured's execution of a power of attorney five years before entering a nursing home. The two-year limitation period was therefore tolled until the insured’s death.

11/19/99: QUITMAN MANUFACTURING CO. INC. v. NORTHBROOK NATIONAL INS. CO.

New York State Supreme Court, Appellate Division, First Department

Advertising Injury Clause Covers Copyright Infringement for Advertising Activities – Not Manufacturing or Sales Activities

The insured sought coverage under the advertising injury provisions of its commercial general liability policy for defense and settlement costs in a copyright infringement action. The underlying action alleged copyright infringement by reason of the insured’s manufacture and sale of goods. The court found no coverage, holding that the policy only affords coverage for copyright infringement arising out of the insured’s advertising of goods, products or services, not for the manufacture and sale of goods.

11/19/99: RAFFAELE v. THE UNITED STATES LIFE INS. CO.

New York State Supreme Court, Appellate Division, First Department

Evidence that Insured Misrepresented Drug Use in Life Insurance Application Precludes Summary Judgment for Policy Proceeds

In this action for the proceeds of a life insurance policy, the court held that issues of fact whether insured’s application for life insurance misrepresented that he never used cocaine, barbiturates, amphetamines or other drugs which might cause dependency, were raised by statements in the autopsy report and death certificate that insured had a history of acute and chronic substance abuse; that the cause of death was intoxication due to the combined effects of opiate, ethanol and cocaine; the proximity of his death to the purchase of the policy; and his family’s refusal to cooperate with the insurer’s investigation. The court denied summary judgment accordingly.

11/16/99 TRAVELERS PROPERTY CASUALTY CORP. v. FUSILLI

New York State Supreme Court, Appellate Court, First Department

SUM Endorsement: Notice of Claim for Undersinured Motorist Benefits Two Years After Filing Suit is Timely Where Insured Diligently Requested Limits of Tortfeasor’s Policy

The insured was injured in an auto accident when another struck the vehicle he was driving. The insured’s mother promptly reported the incident to her insurer and furnished the insurer with an application for no-fault benefits. Following proof of disability and a physical examination, the insurer compensated the insured for lost wages.

The insured later commenced a negligence action against the owner and operator of the other vehicle. The insurer of the other vehicle denied liability and did not disclose the limits of its policy until two years later, when the insured first learned that the policy afforded only the minimum $10,000/$20,000 coverage. The insured notified his insurer that a claim was being made for underinsured motorist benefits within fifteen days of learning the policy limits and the insurer disclaimed based on late notice.

The court held that the insured’s notice was timely as a matter of law. A policy provision requiring notice "as soon as practicable" is construed to mean that the insured must give notice with reasonable promptness after the insured knew or should reasonably have known that the tortfeasor was underinsured. Here, notice was given "as soon as practicable" after learning that the owner and operator of the other vehicle was underinsured. Speculation that the insured could have learned of the coverage at an earlier time had his attorney been more aggressive had no bearing where the record reflected the insured’s counsel was diligent in requesting the information, and there was no indication that further requests would have produced the information sooner.

11/15/99: SLOMAN v. FIRST FORTIS LIFE INS. CO.

New York State Supreme Court, Appellate Division, Second Department

Disability Policy’s Preexisting-Condition Exclusion Bars Coverage for Related Injuries

The insured enrolled in a group long-term disability policy, which contained a preexisting-condition exclusion. The exclusion precluded coverage for injuries or related injuries for which the insured received medical advice or consultation during the six months before the policy became effective. During that six-moth period, the insured underwent surgery to remove herniated discs at the C4–C5 and C5–C6 levels and to fuse his vertebrae. After the policy became effective, the insured was diagnosed with a herniated disc at the C3-C4 level and also complained of depression. The court held that the policy exclusion barred coverage for these later injuries because the insured’s doctor found the herniation at C3-C4 level was caused by the spinal fusion surgery and the removal of herniated discs at C4-C5 and C5-C6 levels. Similarly, doctors who examined the insured in connection with his depression concluded he had a preexisting mental condition exacerbated by pain and loss of physical function, which were directly attributable to the herniated discs, subsequent surgery, and the recent herniation.

11/15/99: DAVIDSON v. HILTON HOTELS CORP.

New York State Supreme Court, Appellate Division, Second Department

Duty to Defend: Insurer Owed Duty to Defend Additional Insured Where Allegations in Complaint Were Within Scope of Insurance Policy

DiMarino Landscaping, Inc. entered into a landscaping service agreement with Hilton Hotels Corporation, pursuant to which DiMarino was to assume the defense of Hilton for any action commenced against Hilton "arising out of or connected with" the agreement. The agreement also required that DiMarino procure insurance naming Hilton as an additional insured. DiMarino obtained insurance providing coverage for Hilton for liability arising out of DiMarino’s work. The plaintiff in the main action was injured while performing work under the agreement and commenced an action for personal injuries against Hilton. When Hilton tendered its defense to DiMarino and its insurer, both refused to assume its defense. The court held that both DiMarino and its insurer breached their obligations to provide a defense to Hilton, as the allegations in plaintiff’s complaint were within the scope of the insurance policy and the agreement between Hilton and DiMarino.

11/12/99: PRUDENTIAL PROPERTY & CASUALTY INS. CO. v. GALIOTO

New York State Supreme Court, Appellate Division, Fourth Department

SUM Endorsement: An Insured Can Have More than One Residence for Insurance Coverage Purposes

Claimant, who was injured in an auto accident, established as a matter of law that he was a resident of his mother’s household and thus an insured person under the supplementary uninsured motorist endorsement to his mother’s auto policy. The claimant submitted proof demonstrating he had his own key to his mother’s home; was free to come and go at will; kept clothing and received his mail there; and spent three to four nights each week at her home. Although he spent the remainder of his time at another residence, the Court held that "an individual can have more than one residence for insurance coverage purposes."

11/12/99: PAGELS v. P.V.S. CHEMICALS, INC.

New York State Supreme Court, Appellate Division, Fourth Department

Serious Injury Threshold: Proof of Chronic Pain Syndrome Raises Issue of Fact of Serious Injury

To maintain an action for personal injury arising from an auto accident, plaintiff must establish a "serious injury" within the meaning of Insurance Law §5102(d). In this case, plaintiff claims fibromyalgia and chronic pain syndrome that significantly limit the use of her spine and upper torso. The court found issues of fact whether the plaintiff suffered a "permanent consequential limitation of use of a body organ or member or a significant limitation of use of a body function or system" based on assertions in plaintiff’s expert’s affirmation; the sworn report of an IME physician who concludes she suffers from chronic pain syndrome related to the accident; and, medical records documenting muscle spasms, trigger points and restricted ranges of motion and muscular weakness in the cervical and lumbar regions of the spine. The same medical proof raised an issue of fact whether plaintiff suffered a medically determined injury that prevented her from performing substantially all the material acts that constitute her usual and customary daily activities for not less than 90 during the first 180 days following the accident under the statute.

11/12/99: BREHAUT v. LAVECK

New York State Supreme Court, Appellate Division, Fourth Department

Serious Injury Threshold: Chiropractor’s Affidavit that Fails to Specify Degree of Injury or Include Objective Findings is Insufficient Proof of Serious Injury

In this action for injuries sustained in an auto accident, the plaintiff failed to submit sufficient evidence of "serious injury" under Insurance Law § 5102 (d) to defeat summary judgment. The affidavit of plaintiff’s chiropractor asserting that plaintiff had a decreased range of motion in her spine did not specify the extent or degree of that decrease. Therefore, the affidavit failed to raise an issue of fact whether that limitation was "significant" or "consequential" as required by the statute. Moreover, the affidavit did not contain objective findings to support conclusory assertions that the injury was permanent. The court held that plaintiff’s subjective complaints of pain were also insufficient to defeat the motion.

 

ACROSS BORDERS

From time to time we highlight significant cases of interest from other jurisdictions. This week, we offer a decision from the Second Circuit Court of Appeals.

11/22/99: HAMILTON v. ATLAS TURNER, INC.

United States Court of Appeals, Second Circuit

Personal Jurisdiction Defense "Forfeited" -- Defendant Raised Affirmative Defense in Answer but Forfeited the Defense by not Moving to Dismiss for Four Years Thereafter
In its answer, the defendant raised affirmative defense of lack of personal jurisdiction. It thereafter participated in pretrial proceedings but never moved to dismiss for lack of personal jurisdiction, despite several clear opportunities to do so during the four-year interval after filing its answer. The Second Circuit, holding it an abuse of discretion for the District Court not to strike the defense, finds that these circumstances establish a forfeiture. Personal jurisdiction defense "may be lost by failure to assert it seasonably. Excuse that discovery was not complete is insufficient."

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REPORTED DECISIONS

BOOKSTEIN v. REPUBLIC INS. CO.

Order, Supreme Court, New York County (Barry Cozier , J.), entered November 6, 1998 which granted plaintiff’s motion for reargument and, upon reargument, denied defendant’s previously granted motion for summary judgment dismissing the complaint, unanimously affirmed, with costs.

The motion court properly held that the tolling provision set forth in CPLR 208 applies in this case, and thus, the two-year suit limitation provision in the insurance policy was tolled until the insured’s death on August 29, 1995. The mere execution of a power of attorney by the disabled insured to her son approximately five years before she entered a nursing home did not function to deprive her of the protection to which she was entitled as a disabled person pursuant to the tolling provision

(see, Stackrow v New York Prop. Ins. Underwriter’s Assn., 115 AD2d 883). We have considered defendant’s remaining contentions and find them unavailing.

QUITMAN MANUFACTURING CO. INC. v. NORTHBROOK NATIONAL INS. CO.

Order, Supreme Court, New York County (Elliott Wilk, J.), entered on or about July 21, 1998, which, in an action by plaintiff insured against defendant insurer for breach of the advertising injury clause of a commercial general liability policy, denied plaintiff’s motion for summary judgment and granted defendant’s cross motion for summary judgment, unanimously affirmed, with costs.

The action was properly dismissed. While the subject policy covers a claim of copyright infringement only insofar as such claim arises out of plaintiff’s advertising of goods, products or services, the complaint in the underlying action, for which plaintiff seeks to recover its defense and settlement costs, alleged copyright infringement only by reason of plaintiff’s

manufacture and sale of goods (see, Jerry Madison Enters. v Grasant Mfg. Co., No 89 Civ 2346 [MBM], 1990 US Dist LEXIS 1649 [SDNY], *10-12). No advertising injury having been alleged in the underlying action, the advertising injury clause is inapplicable (id., at *4).

TRAVELERS PROPERTY CASUALTY CORP. v. FUSILLI

Judgment, Supreme Court, New York County (Herman Cahn , J.), entered September 21, 1998, which granted petitioner's application for a stay of motorist underinsurance arbitration to the extent of holding the motion in abeyance and temporarily staying arbitration pending a hearing and report on the matter by a Special Referee, unanimously reversed, on the law, without costs , the stay vacated and the petition dismissed.

The relevant facts are not in dispute. Respondent Daniel Fusilli, while operating a 1991 Volkswagen Jetta owned by his mother Johanna Fusilli and insured by petitioner Travelers Property Casualty Corp., sustained injury when his vehicle was struck by one driven by Manuel Martinez, Jr. The Martinez vehicle was insured by Allcity Insurance Co. under a policy issued to its owner, Manuel Martinez, Sr. Respondent's mother promptly reported the incident to Travelers , and respondent expeditiously furnished the insurer with an application for no-fault benefits.

When respondent's symptoms intensified, he retained counsel who, on May 19, 1995, filed a claim with Travelers, which acknowledged in a letter dated May 24, 1995 the "receipt of your client's claim for Loss of Earnings". Following submission of proof of disability and a physical examination, Travelers compensated respondent for lost wages for the period ending January 27, 1996.

Meanwhile in August of 1995, respondent commenced an action against the owner and operator of the Martinez vehicle alleging negligence in its operation. When no answer was forthcoming, counsel wrote to their insurer, Allcity Insurance Co., and eventually procured its verified answer, which was filed on or about January 14, 1 996. Allcity continued to deny all liability for the accident and failed to respond to a notice for discovery and inspection which sought to elicit the limits of the available coverage. It was not until early July of 1997 that respondent was finally apprised that the Allcity policy afforded only the minimum $10,000/$20,000 coverage. On July 16, 1997, his attorney wrote to Travelers advising the insurer that "claim is being made at this time for underinsured motorist benefits * * * in the sum of $100,000, pursuant to the provisions of Johanna Fusilli's policy." Petitioner disclaimed coverage in reliance on the notice provision of its policy, which provides that notice must be given "as soon as possible", taking the position that respondent's delay "constitutes a material violation of the above policy condition". Respondent thereupon filed a demand for arbitration under the policy, and Travelers instituted this proceeding to permanently stay arbitration, again relying on the notice provision.

Supreme Court granted a temporary stay of arbitration pending a report and recommendation by a Special Referee. The court held that whether the delay in notifying the insurer was excusable represents a question of fact on which the insured bears the burden to show that the claim was made as soon as practicable and that his actions were reasonable under the circumstances.

While we agree with Supreme Court that the recent amendment to Insurance Law § 3420(f)(2)(A), requiring an insurer to disclose within 45 days the extent of the coverage provided under its policy, is not retroactively applicable to the facts of this case, we conclude that the notice given by the insured was reasonable and timely as a matter of law. We also reject the position of the insurer that no appeal lies because the referral of this matter to

a Referee does not affect a substantial right of a party ( New York State Crime Victims Bd. v Abbott, 212 AD2d 22, 28; see also, General Elec. Co. v Rabin, 177 AD2d 354, 356), particularly in view of its concession that the parties advised Supreme Court that "this matter presented an issue of law that could be determined on the papers submitted."

This dispute is governed by the Court of Appeals' recent decision in Matter of Metropolitan Prop. and Cas. Ins. Co. v Mancuso (93 NY2d 487), which is dispositive of the issue presented. Petitioner essentially concedes that respondent discovered the limits of the Allcity policy on or about July 1, 1997 and gave notice of his claim to Travelers on July 16, 1997. A provision requiring notice to be given "as soon as practicable" is construed to mean that "the insured must give notice with reasonable promptness after the insured knew or should reasonably have known that the tortfeasor was underinsured " (93 NY2d, supra, at 495). Although Travelers speculates that respondent might have learned about the coverage afforded by the Allcity policy at an earlier time had his attorney been more aggressive in pursuing the matter, the record reflects that counsel was diligent in requesting the information, and there is nothing to indicate that further requests would have produced the information sought any sooner.

RAFFAELE v. THE UNITED STATES LIFE INS. CO.

Order, Supreme Court, New York County (Herman Cahn, J.), entered January 13, 1999, which, in an action on a life insurance policy, denied plaintiff’s motion for summary judgment, unanimously affirmed, without costs.

An issue of fact exists as to whether the decedent’s application for life insurance, submitted four months before his death, misrepresented that he never "used cocaine, barbiturates, amphetamines or any other drug which might cause a dependency, other than as prescribed by a licensed physician". Such issue is raised by statements in the autopsy report and death certificate that the decedent had a history of "acute and chronic substance abuse" and that the cause of death was "intoxication due to combined effect of opiate, ethanol and cocaine"; the proximity of the decedent’s death to the purchase of the policy; and the decedent’s family’s refusal to cooperate with defendant’s investigation and their request that an autopsy not be performed. Whether the decedent was a drug user at the time he submitted the application is a matter peculiarly within the knowledge of plaintiff, who was the decedent ’s wife, and the decedent’s other family members, and a summary disposition in plaintiff’s favor would be premature at least until disclosure from her, and any other family members claiming knowledge of the decedent’s abstinence from drugs, is complete ( CPLR 3212[f]).

DAVIDSON v. HILTON HOTELS CORPORATION

In an action to recover damages for personal injuries, etc., the defendant third-party plaintiff Hilton Hotels Corporation d/b/a Rye Town Hilton, appeals from stated portions of an order of the Supreme Court, Westchester County (Rudolph, J.), entered January 2 0, 1999, which, inter alia, upon reargument, denied those branches of its cross motion which were for summary judgment on its cross claim against the defendant DiMarino Landscaping, Inc., and on its third -party complaint against the third-party defendants CNA Insurance Company and Transcontinental Insurance Company.

ORDERED that the order is modified, on the law, by deleting the provisions thereof denying those branches of the cross motion which were for partial summary judgment on the issue of liability on the third cross claim of Hilton Hotels Corporation d/b/a Rye Town Hilton against the defendant DiMarino Landscaping, Inc., to recover the costs of defending the main action, and for partial summary judgment on the third-party complaint on the issue of liability for the costs of defending the main action, and substituting therefor a provision granting those branches of the cross motion; as so modified, the order is affirmed insofar as appealed from, with one bill of costs payable to the defendant third-party plaintiff by the respondents appearing separately and filing separate briefs.

Pursuant to a landscaping service agreement between the defendant third-party plaintiff Hilton Hotels Corporation d/b/a Rye Town Hilton (hereinafter Hilton) and the defendant DiMarino Landscaping, Inc. ( hereinafter DiMarino), DiMarino was required to assume the defense of any action commenced against Hilton "arising out of or connected with" the agreement. In addition, DiMarino was obligated to procure insurance naming Hilton as an additional insured. DiMarino obtained insurance from the third-party defendants providing coverage for Hilton with respect to liability arising out of DiMarino's work. Both DiMarino and the third-party defendants refused to assume the defense of Hilton in the main action.

An insurer's duty to defend is "exceedingly broad" and it must defend "whenever the four corners of the complaint suggest * * * a reasonable possibility of coverage" ( Continental Cas. Co. v Rapid-Am. Corp., 80 NY2d 640, 648). Here, the allegations of the complaint brought this action within the scope of the insurance policy and the agreement between Hilton and DiMarino . Therefore, the third-party defendants and DiMarino breached their respective obligations to provide a defense to Hilton. Consequently, the Supreme Court erred in denying those branches of Hilton's cross motion which were for summary judgment insofar as Hilton sought to recover the costs of its defense in the main action.

In light of our determination in the companion appeal (see, Davidson v Hilton Hotels Corporation, AD2d [Appellate Division Docket No. 98-07231, decided herewith]), Hilton's contention that it is entitled to be indemnified by DiMarino and the third-party defendants for any liability to the plaintiffs is academic.

Hilton's remaining contentions are either without merit or academic.

 

ALTMAN, J.P., FLORIO, H . MILLER, and SCHMIDT, JJ., concur.

SLOMAN v FIRST FORTIS LIFE INSURANCE COMPANY

In an action to recover damages for breach of an insurance contract, the defendant , First Fortis Life Insurance Company, appeals from a judgment of the Supreme Court, Westchester County (DiBlasi, J.), entered August 4, 1998, which, upon an order of the same court (Silverman, J.), entered November 12, 1997, inter alia, granting the plaintiff's motion for summary judgment, and upon a stipulated statement of facts as to damages, is in favor of the plaintiff Frank Sloman and against it in the principal sum of $9,000 and, in effect, directed the defendant to continue to pay the plaintiff the sum of $300 per month.

ORDERED that the judgment is reversed, on the law, with costs, the order entered November 12, 1997, is vacated, the motion is denied, and the complaint is dismissed.

The plaintiff, Frank Sloman, enrolled in a group, long-term disability policy issued to his employer by the defendant First Fortis Life Insurance Company (hereinafter First Fortis). The long-term disability policy contained a preexisting-condition exclusion which precluded coverage, inter alia, for an injury or related injury for which Sloman consulted with or received advice from a licensed medical practitioner during the six months before the effective date of the policy. During the six month exclusionary period, Sloman underwent surgery to remove herniated discs at the C4-C5 and C5-C6 levels and to fuse his vertebrae. After the effective date of the long term disability policy, Sloman was diagnosed with, inter alia, a herniated disc at the C3-C4 level. He also claims that as a result of this problem he began to suffer from depression. First Fortis relied upon the preexisting-condition exclusion and denied Sloman's application for long-term disability benefits.

The sole issue is whether Sloman's herniated disc at the C3-C4 level and his depression are related to his preexisting injury for which there was no coverage. While any ambiguities in the preexisting-condition exclusion are to be construed in Sloman's favor (see, Mannino v Agway, Inc. Group Trust, 192 AD2d 131; Bunk v Blue Cross & Blue Shield of Utica-Watertown, 170 Misc 2d 416, mod on other grounds 244 AD2d 86 2; see also, Insurance Law § 3234), an undefined term in an insurance policy is to be construed so as to give the term its ordinary and accepted meaning (see, Michaels v City of Buffalo, 85 NY2d 754, 757; County of Columbia v Continental Ins. Co., 83 NY2d 618, 628; Hartford Ins. Co. of Midwest v Halt, 223 AD2d 204, 212-213).

Prior to the commencement of litigation, Sloman 's doctor stated unequivocally that the herniation at the C3-C4 level was caused by the spinal fusion surgery and the removal of the two herniated discs at the C4-C5 and C5-C6 levels. Similarly, after the litigation began, his doctor opined that the surgery was more than fifty percent responsible for the herniation at the C3-C4 level. Giving the word "related" its ordinary and accepted meaning (see, Michaels v City of Buffalo, supra; Hartford Ins. Co. of Midwest v Halt, supra), it is clear that the preexisting-condition exclusion applies to bar coverage for the herniated C3-C4 disc. Similarly, two doctors who examined Sloman in connection with his depression concluded that Sloman had a preexisting mental condition which was greatly exacerbated by, inter alia, his physical pain and suffering and his loss of physical functions, both of which were directly attributable to his preexisting herniated discs, the subsequent surgery, and the herniation of the C3-C4 disc. Accordingly, the preexisting-condition exclusion also barred coverage for Sloman' s depression.

KRAUSMAN, J.P., McGINITY, FEUERSTEIN, and SMITH, JJ., concur.

GENERAL ACCIDENT INSURANCE v. ROBERTS

Appeal from that part of an order of the Supreme Court (Dier , J.), entered September 11, 1998 in Washington County, which denied a motion by defendants Joseph Roberts and Cynthia Roberts, inter alia, for partial summary judgment dismissing the first and third causes of action of the complaint.

As of December 15, 1993, plaintiff had in effect a policy of automobile insurance covering defendants Clarence Baker and Helen Baker. On that date, the Bakers' automobile was involved in a collision with a farm tractor owned by defendants Joseph Roberts and Cynthia Roberts (hereinafter defendants). Clarence Baker, along with Michael Martin, Rose Wideawake and Gerald Wideawake, who were passengers in the Baker vehicle, all sustained personal injuries ; plaintiff paid them first-party benefits (see, Insurance Law § 5102 [4] [b]) totaling approximately $56,000. An action brought by the Bakers against defendants was settled for $200,000, paid by defendants' farmowner's insurer, Claverack Cooperative Insurance Company. In connection with the settlement, the Bakers executed a general release and their counsel signed a "Stipulation Discontinuing Action" which provided, among other things, that they would "satisfy all liens asserted in this matter from the settlement proceeds". A separate action brought by Martin against the Bakers and defendants was settled for $10,000, with the Bakers' and defendants' carriers each paying one half of that amount.

Plaintiff thereafter commenced this action to enforce its lien pursuant to Insurance Law § 5104 (b).[1] Defendants asserted an affirmative defense and cross claims grounded upon the agreement expressed in the stipulation discontinuing the Bakers' action to "satisfy all liens asserted in this matter" and, following joinder of issue, moved for summary judgment dismissing the first and third causes of action or granting judgment on their cross claims against the Bakers. Supreme Court denied the motion and defendants appeal.

We affirm. We first reject the contention that plaintiff is precluded from enforcing its lien because it failed to assert its rights at the time the Bakers settled their action with defendants. Plaintiff's lien was created by operation of law (see, Insurance Law § 5104 [b]) and attached the instant the settlement was made (see, Dymond v Dunn, 148 AD2d 56, 58). We also agree with Supreme Court's conclusion that questions of fact existed which precluded a grant of summary judgment in favor of defendants. In our view, the evidence submitted on the motion raises issues as to whether the Bakers' agreement merely encompassed liens of medical providers that had been already "asserted" at the time of the settlement and as to the portion of the settlement that reasonably represents compensation for basic economic loss (see, Government Empls. Ins. Co. v Jacobson, 98 AD2d 811, 813; Aetna Cas. & Sur. Co. v Jackowe, 96 AD2d 37, 45-46; Matter of Celona v Royal Globe Ins. Co., 85 AD2d 635, 636).

The parties' remaining contentions need not be addressed.

Mikoll, J.P., Yesawich Jr., Peters and Mugglin, JJ., concur.

**FOOTNOTES**

[1 ]: Insurance Law § 5104 (b) provides in pertinent part:

In any action by or on behalf of a covered person, against a non-covered person, where damages for personal injuries arising out of the use or operation of a motor vehicle * * * may be recovered, an insurer which paid or is liable for first party benefits on account of such injuries has a lien against any recovery to the extent of benefits paid or payable by it to the covered person. No such action may be compromised by the covered person except with the written consent of the insurer, or with the approval of the court, or where the amount of such settlement exceeds fifty thousand dollars.

ORDERED that the order is affirmed, with one bill of costs.

SEDLACEK v. DRYDEN MUTUAL INSURANCE COMPANY

Appeal from an order of the Supreme Court (Coutant, J.), entered September 10, 1998 in Broome County, which granted defendant's motion for summary judgment dismissing the complaint .

Plaintiff owned a four-family apartment building in the City of Binghamton, Broome County, which he sold to his daughter, Mary Beth Hamilton, pursuant to an oral agreement. No deed was executed and plaintiff remained the titled owner. The agreement between plaintiff and Hamilton provided , inter alia, that the latter was responsible to insure the property and, in accordance therewith , she purchased a policy of fire insurance from defendant, which listed plaintiff as mortgagee.

On November 27, 1996, defendant sent Hamilton a notice of cancellation, together with a copy to plaintiff for nonpayment of premium effective December 14, 1996. On December 16, 1996, defendant received a check from Hamilton for payment of the overdue premium and, the following day, issued a notice of reinstatement to Hamilton with a copy to plaintiff. Upon presentation of Hamilton's check to the bank, it was dishonored due to insufficient funds and, accordingly, on December 23, 1996 defendant issued a second notice of cancellation to Hamilton with a copy forwarded to plaintiff. On December 27, 1996, the apartment building was damaged by fire and plaintiff sought reimbursement from defendant . When defendant denied the claim, plaintiff commenced this action seeking damages in the amount of $35,000. Following joinder of issue, defendant moved for summary judgment dismissing the complaint. Supreme Court granted defendant's motion and this appeal by plaintiff ensued.

As a starting point, it is axiomatic that a check given in payment of an underlying obligation constitutes conditional payment and the obligation is discharged if the check is dishonored (see, UCC 3-802 [1] [b]). Therefore, as to Hamilton, defendant's underlying obligation to reinstate the insurance policy was discharged when Hamilton's check was dishonored for insufficient funds. Plaintiff contends, however, that as a mortgagee, he was entitled to rely upon defendant's reinstatement notice and, as to him, defendant is estopped from declaring a forfeiture of the policy. We disagree. The record makes plain that plaintiff received the copy of defendant's December 23, 1996 notice of cancellation prior to the loss in question and, therefore, he could not reasonably have relied upon the December 17, 1996 reinstatement notice.

Cardona, P.J., Mikoll, Yesawich Jr. and Mugglin, JJ. , concur.

ORDERED that the order is affirmed, with costs.

PAGELS v. V.P.V.S. CHEMICALS, INC.

Order unanimously affirmed with costs. Memorandum: Supreme Court properly denied defendants ’ motion for summary judgment dismissing the complaint. In support of their motion, defendants submitted unsworn reports of plaintiff’s treating physicians, physical therapist and occupational therapist, along with an affirmation of defendants’ expert neurologist. The expert neurologist concludes that, contrary to plaintiff’s allegations, plaintiff does not suffer from fibromyalgia syndrome and that, in any event , a traumatic event like an automobile accident is not a precipitating factor for fibromyalgia.

Even assuming, arguendo, that defendants met their initial burden on the motion, plaintiff’s submissions raise triable issues of fact whether plaintiff suffered a serious injury as defined in Insurance Law § 5102 (d). Plaintiff’s expert asserts in his affirmation that plaintiff suffers from fibromyalgia and chronic pain syndrome as a result of the accident that significantly limit the use of her upper torso and may also result in a permanent consequential limitation of use of her spine and upper torso. Plaintiff also submitted the sworn report of the physician who conducted the independent medical examination for defendants’ insurance carrier; he also concluded that plaintiff suffers from chronic pain syndrome and that her condition is likely related to the accident. In addition, the medical records submitted by defendants document muscle spasms, trigger points and restricted ranges of motion and muscular weakness in the cervical and lumbar regions of the spine continuing from the date of the accident. That proof is sufficient to raise a triable issue of fact whether plaintiff suffered a "permanent consequential limitation of use of a body organ or member; [or a] significant limitation of use of a body function or system" ( Insurance Law § 5102 [d]; see, Adetunji v U-Haul Co. of Wisconsin, 250 AD2d 483; Larrabee v State of New York, 216 AD2d 772, 773; Stanavich v Pakenas, 190 AD2d 184, 187, lv denied 82 NY2d 659). The differences of opinion among the medical experts with respect to the nature, cause and extent of plaintiff’s injuries raise issues of credibility that must be resolved by a jury (see, Weider v Senebouthyrath, 182 AD2d 1124, 1125). Further, contrary to defendants’ contention, plaintiff is entitled to oppose the motion based upon the same unsworn medical reports submitted in support of the motion, even though those reports are not in admissible form (see, Pietrocola v Battibulli, 238 AD2d 864, 866, n). Finally, the medical proof, combined with evidence that the injuries sustained in the accident prevented plaintiff from resuming her employment, performing her household duties and participating in recreational activities, raises an issue of fact whether plaintiff suffered a medically determined injury that prevented her from performing substantially all the material acts that constitute her usual and customary daily activities for not less than 90 days during the 18 0 days following the accident (see, Insurance Law § 5102 [d]; Vasquez v Weiss, 234 AD2d 658, 659). (Appeal from Order of Supreme Court, Erie County, Sedita , Jr., J. - Summary Judgment.) PRESENT: GREEN, J. P., HAYES, PIGOTT, JR., AND SCUDDER, JJ. (Filed Nov. 12, 1999.)

BREHAUT v. LAVECK

Order unanimously affirmed without costs. Memorandum: Supreme Court properly granted defendants’ motion for summary judgment dismissing the complaint. Defendants submitted evidence in admissible form establishing as a matter of law that plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102 (d) (see, Gaddy v Eyler, 79 NY2d 955, 956-957; Muratore v Tierney, 229 AD2d 1018). "The burden then shifted to plaintiff to come forward with sufficient evidence to overcome defendant[s’] motion by demonstrating that she sustained a serious injury within the meaning of the No-Fault Insurance Law" (Gaddy v Eyler, supra, at 957). Plaintiff failed to meet that burden. Plaintiff submitted no proof establishing a causal connection between the alleged injury to her right index finger and the accident (see, Dubois v Simpson, 182 AD2d 993, 994; Ray v Ficchi, 178 AD2d 988, 989, lv denied 80 NY2d 958). With respect to her alleged neck and back injuries, plaintiff submitted the affidavit of a chiropractor asserting that plaintiff has a decreased range of motion in her spine as a result of the accident. Because the affidavit does not specify the extent or degree of that decrease, however, it fails to raise an issue of fact whether the limitation allegedly resulting from the accident is "significant" (see, Licari v Elliott, 57 NY2d 230, 236; Curry v Velez, 243 AD2d 442, 443) or "consequential" (see, Jordan v Baine, 241 AD2d 894, 895; Podwirny v De Caprio, 194 AD2d 1057) within the meaning of Insurance Law § 5102 (d). In addition, the affidavit contains no objective findings to support the chiropractor’s conclusory assertion that the injury is permanent (see, Gaddy v Eyler, supra, at 957-958; Uhl v Sofia, 245 AD2d 988, 990; Mickelson v Padang, 237 AD2d 495, 496). Finally, the subjective complaints of pain set forth in the affidavit of plaintiff are insufficient to raise a triable issue of fact whether she sustained a serious injury (see, Scheer v Koubek, 70 NY2d 678, 679; Thousand v Hedberg, 249 AD2d 941). (Appeal from Order of Supreme Court, Monroe County, Affronti , J. - Summary Judgment.) PRESENT: GREEN, J. P., LAWTON, PIGOTT, JR., HURLBUTT AND CALLAHAN, JJ. ( Filed Nov. 12, 1999.)

PRUDENTIAL PROPERTY & CASUALTY INS. CO. v. GALIOTO

Order unanimously affirmed without costs. Memorandum : Supreme Court properly dismissed the petition seeking to stay arbitration pursuant to CPLR 7503 (b). The court properly determined that respondent was a resident of his mother’s household and was thus an insured person under the supplementary uninsured motorists endorsement to the automobile liability policy issued by petitioner to respondent’s mother. The unsworn statement of respondent’s mother and the hearsay letter offered by petitioner in support of the petition are without evidentiary value (see, Zuckerman v City of New York, 49 NY2d 557; Bendik v Dybowski, 227 AD2d 228, 229; Rue v Stokes, 191 AD2d 245, 246). The remaining submissions supporting the petition were not sufficient to entitle petitioner to a stay of arbitration in light of the affidavits of respondent stating that he had his own key to his mother’s home and was free to come and go at will; that he kept clothing and received mail there; and that he spent three to four nights each week there, spending the remainder of his time at the home of his mother’s former boyfriend (see, Nationwide Ins. Co. v Allstate Ins. Co., 181 AD2d 1022; cf., Matter of Aetna Cas. & Sur. Co. v Gutstein, 80 NY2d 773). "[A]n individual can have more than one residence for insurance coverage purposes" ( Walburn v State Farm Fire & Cas. Co., 215 AD2d 837, 838), and respondent established as a matter of law that he was a resident of his mother’s household. (Appeal from Order of Supreme Court, Erie County, Michalek, J. - Arbitration.) PRESENT: GREEN, J. P., LAWTON, PIGOTT, JR., HURLBUTT AND CALLAHAN, JJ. (Filed Nov. 12, 1999.)

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