Coverage Pointers - Volume II, No. 20

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03/22/01:         CHASE SCIENTIFIC RESEARCH, INC. v. NIA GROUP, INC.

New York Court of Appeals
Insurance Agents and Brokers are Not Professionals for Statute of Limitations Purposes

New York has adopted a three year statute of limitations for non-medical, professional malpractice (even if cause of action sounds in breach of contract, which would normally be a six year statute). New York high court defines a “professional” as having “those qualities [which] include extensive formal learning and training, licensure and regulation indicating a qualification to practice, a code of conduct imposing standards beyond those accepted in the marketplace and a system of discipline for violation of those standards. Additionally, a professional relationship is one of trust and confidence, carrying with it a duty to counsel and advise clients.”  Applying those principles to this case, the court concludes that insurance agents and brokers are not “professionals”.  While agents and brokers must be licensed, they are not required to engage in extensive specialized education and training; rather, a person who has been regularly employed by an insurance company, agent or broker for at least one year during the three years preceding the date of license application may qualify to be a broker.  Nor are they bound by a professional standard of conduct for which discipline may be imposed.

 

03/29/01:         LABATT BREWING CO. v. ZURICH INS. CO.

New York State Supreme Court, Appellate Division, First Department

Counsel Fee Coverage in Occurrence-Based Multimedia Policy Triggered by Conduct, Not Injury

The Court held that an insurance policy providing umbrella and excess coverage did not obligate the insurer to defend its insured in an underlying action for false advertising or to reimburse insured for its attorneys’ fees in defending the action.  The umbrella coverage that required the insurer to provide a defense was not implicated because there was primary insurance covering the claims.  The excess insurance in effect on the date of plaintiff’s alleged acts of false advertising specifically excluded legal expenses from the losses that defendant was required to pay.  The court rejected the insured’s contention that under the “Liberalization Clause,” the excess insurance policy incorporated the terms of the underlying “Multimedia Policy” with respect to coverage for legal expenses in defending covered lawsuits. Although the counsel fee coverage was provided prospectively, this was an “occurrence” policy, where the acts of false advertising that gave rise to liability commenced before the “Liberalization Clause” became effective. The controlling event that triggered coverage was the occurrence that caused injury, not the injury resulting from the alleged act of false advertising.

 

03/27/01:         NEW YORK CENTRAL MUTUAL FIRE INS. CO. v. ROZENBERG

New York State Supreme Court, Appellate Division, First Department

Temporary Stay of Arbitration Deemed Proper Where Trial Necessary to Determine Whether Driver had Coverage

Rozenberg demanded arbitration under his policy’s uninsured motorist endorsement following his involvement in a two-car collision with a vehicle owned by Diaz and driven by Mizhquiri.  New York Central sought a stay of arbitration on the ground that the Diaz vehicle was insured by Allstate and that the driver (Mizhquiri) was covered under his brother’s policy issued by Country-Wide, who was not a party to the proceeding.  The lower court grated the petition to stay pending a preliminary trial to determine whether the owner of the offending vehicle was covered under a policy, but denied the request to join Country-Wide because it had timely disclaimed coverage.  The appellate court held that New York Central’s submission of DMV records confirming coverage by Country-Wide, and a police accident report indicating that Mizhquiri resided with his brother at the time of the accident, established prima facie that the driver was insured by Country-Wide.  Country-Wide’s disclaimer created only an issue of fact warranting a hearing.  Moreover, Country-Wide was a necessary party to the resolution of the issue.

 

03/26/01:         FAAS v. NEW YORK CENTRAL MUTUAL FIRE INS. CO.

New York State Supreme Court, Appellate Division, Second Department

Untimely Disclaimer Results in Defense and Indemnification Obligation

In an action for judgment declaring that an insurer was obligated to defend and indemnify its insureds in an underlying action, court held that the insurer’s unexcused 42-day delay in disclaiming coverage was unreasonable as a matter of law.  Additional evidence submitted on the insurer’s motion to reargue, which tended to explain part of the delay, should have been submitted in opposition to the original motion and, therefore, could not be relied upon.

 

 

03/22/01:         COIN ROBERTO INC. v. RELIANCE INS. CO.

New York State Supreme Court, Appellate Division, First Department

Coverage Lost for Failure to Comply with Record-Keeping Provisions of Jeweler’s Block Policy

Court held that insurer’s disclaimer was proper where insured did not substantially comply with provisions of its jeweler’s block policy requiring it to maintain a detailed and itemized inventory, including a separate listing of all travelers’ stock.  There was no evidence in the record that the insured had maintained records “sufficient to disclose to the insurer the extent of its liability, independently of any need to resort to evidence outside the records to explain the records other than might be necessary to disclose the bookkeeping methods employed.”  The disclaimer conditions of Insurance Law §3106 did not apply because the record-keeping provisions at issue did not entail provision of a “warranty.”

 

03/22/01:         NATIONAL UNION FIRE INS. CO. OF PITTSBURGH, P.A. v. RED APPLE GROUP, INC.

New York State Supreme Court, Appellate Division, First Department

Insurer’s Settlement with Third-Party Claimant did not Breach Indemnification Agreement with its Insured – There was No Provision in Agreement Requiring Consultation with Insured 

Plaintiff retroactively insured commercial real estate leased by defendant, which was damaged by hurricane during the period of retroactive coverage.  The coverage was therefore issued only upon the insured’s agreement to indemnify the insurer for all claims arising out of loss during the retroactive period of coverage.  The owner of the property made a claim for loss attributable to the hurricane, which the insurer settled without its insured’s participation.  This action was commenced by the insurer to obtain contractual indemnification for the settlement amount paid by the insurer.  The insured raised various counterclaims and affirmative defenses premised upon theories of breach of contract, breach of duty of good faith and fair dealing, breach of fiduciary duty, and fraud, all of which were dismissed.  The court held that, while the insured may defend on the grounds that they were not afforded notice of the settlement and that the settlement was unreasonable, there was no basis for their counterclaim that nondisclosure of the settlement constituted breach of contract, since there was no provision in the indemnity agreement or policy that required the insurer to notify or consult with its insured in the settlement of the claim.  Defenses premised on breach of fiduciary duty were dismissed because the insurance contract was the product of an arms-length transaction between sophisticated commercial entities.

 

03/21/01:         ALLSTATE INS. CO. v. DENBLEYKER

New York State Supreme Court, Appellate Division, Fourth Department

No “Kelly” Rights in Automobile Insurance Subrogation Matters

The court considered whether an insured is entitled to a reduction in the amount of a no-fault insurer’s lien for additional personal injury protection (APIP) benefits paid by the no-fault insurer to contribute to the attorneys’ fees of the insured in the underlying personal injury action. The insured’s no-fault insurance carrier paid out $50,000 in personal injury protection (PIP) benefits, and $26,000 in APIP benefits.  Following settlement of the insured’s personal injury action, the insured’s attorney claimed entitlement to one third of the insurance carrier’s lien for APIP benefits as attorneys’ fees pursuant to Matter of Kelly v State Ins. Fund.  The insurance carrier responded that there were no such “Kelly rights” in automobile insurance subrogation matters, and sought to enforce its lien under the subrogation provisions of its policy.  The court held that Kelly has no application to the case, as Kelly was decided under Workers’ Compensation Law § 29 and addresses specific statutory rights and obligations of employees and compensation carriers with respect to actions arising out of injuries caused by third-party tortfeasors. Therefore, the insured’s attorneys were not entitled to any recovery against the lien amount based on the “Kelly” principle.  Rather, the case was controlled by Breier v Government Empls. Ins. Co., which held that, “[ w]hile the services of counsel led to the availability of the fund against which [the insurer] placed its lien, the contingency fee arrangement between the [insured] and her counsel could not be enforced against the lienor”.

 

03/21/01:         DUDLEY v. ALLSTATE INS. CO.

New York State Supreme Court, Appellate Division, Fourth Department

SUM Carrier Entitled to Offset for Payment Made by Other Insurer

In this action seeking a judgment declaring that plaintiff is entitled to receive $100,000 as the limits of coverage under the supplementary uninsured motorists (SUM) endorsement of her decedent's auto policy, the court held that the SUM carrier was entitled to an offset for a payment of $50,000 previously made to plaintiff by another insurer. In accordance with 11 NYCRR 60-2.3, Condition 8 of the SUM provisions of the policy provided: “Priority of Coverage. If an insured is entitled to uninsured motorists coverage or supplementary uninsured motorists coverage under more than one policy, the maximum amount such insured may recover shall not exceed the highest limit of such coverage for any one vehicle under any one policy”. The condition limited plaintiff's potential recovery to $100,000. Condition 8 further provided that the coverage available under the “’lower priority policy’ applies only to the extent that it exceeds the coverage” provided by the “higher priority policy”. Thus, the insurer was entitled to an offset for the $50,000 paid by the other carrier.

 

03/21/01:         CHASE’S CIGAR STORE, INC. v. THE STAM AGENCY, INC.

New York State Supreme Court, Appellate Division, Fourth Department

Insurance Agent’s Duty to Obtain Insurance is Defined by Nature of Request – Duty Discharged by Obtaining Requested Coverage

Plaintiff, owner and operator of a retail store, alleged that an agent of defendant insurance agency made an unsolicited call and offered to procure a business owners policy for plaintiff. Plaintiff never requested any specific coverage, but agreed to a proposal that stated the coverage to be provided and signed a written application that did not include coverage for employee dishonesty. The policy that was issued to plaintiff contained an exclusion for employee dishonesty.  Plaintiff commenced this action for breach of contract and breach of duty to procure appropriate insurance coverage after an employee stole money and plaintiff learned that the policy did not cover the loss.  The court held that the claims were properly dismissed.  The duty owed by an insurance agent to an insurance customer is ordinarily defined by the nature of the request a customer makes to the agent.  Plaintiff did not requested employee theft/dishonesty coverage. Because defendant obtained the insurance coverage that plaintiff requested, it fully discharged its duty.  Plaintiff’s contention that defendant breached its agreement to review plaintiff’s existing insurance policy and obtain appropriate business owners insurance coverage was also rejected because there was no special relationship between the parties such that plaintiff was entitled to rely upon the representations of defendant’s agent that the new policy was “a better policy”.   Moreover, once plaintiff received the declaration pages and insurance policy, it had “conclusive presumptive knowledge” of the terms and limits of the policy.

 

03/21/01:         ROCHE v. GE CAPITAL LIFE ASSURANCE CO. OF NEW YORK

New York State Supreme Court, Appellate Division, Fourth Department

Violation of 45-day Notice Provision in Disability Policy Without Excuse Vitiates Policy

The court held that plaintiff’s claim for coverage under its disability policy was properly dismissed.  The policy required written notice within 45 days of the possibility of a claim.  Plaintiff’s notice of disability to defendant was untimely and there was no reasonable excuse for the four-year delay. “[T]he giving of the required notice is a condition to the insurer’s liability. . . . Absent a valid excuse, a failure to satisfy the notice requirement vitiates the policy”.  The court rejected plaintiff’s contention that the policy language with respect to notice was ambiguous.  “Unless otherwise defined by the policy, words and phrases are to be understood in their plain, ordinary, and popularly understood sense, rather than in a forced or technical sense.”

 

03/21/01:         JANES v. NEW YORK CENTRAL MUTUAL INS. CO.

New York State Supreme Court, Appellate Division, Fourth Department

Exclusion in Fire Policy Invalid Where Insurer Failed to Inform Insured of Policy Change

The Court held that insurer was obligated to provide coverage under its fire policy.  It rejected the contention that a vacancy exclusion clause that was changed when the policy was renewed precluded coverage.  The insurer was bound by the coverage provided under the policy as originally issued because, upon renewing the policy, the insurer failed to inform plaintiff of the changes in the exclusion that reduced coverage.  “Policies of fire insurance are rarely examined by the insured”.  Thus, it is “bad faith on the part of [an insurer] to change so radically the terms of the policy, and deliver it as a policy simply renewing the old one, without notice of the change”.

 

03/21/01:         JONES v. PEERLESS INS. CO.

New York State Supreme Court, Appellate Division, Fourth Department

When Only One Person is Injured in Accident, Claimant’s Single Limit is Compared with Tortfeasor’s Per Person Limit for SUM Trigger

Plaintiff commenced this action seeking a judgment declaring he is entitled to pursue a claim for $50,000 under the supplemental uninsured motorist (SUM) provision of his auto policy.  Plaintiff had a single limit coverage of $100,000 for both bodily injury and property damage, and the tortfeasor had a split liability limit of $50,000 per person and $100,000 per accident for bodily injury. Plaintiff, the only person injured in the accident, settled his personal injury liability claim with the tortfeasor for $50,000.  Plaintiff argued that SUM coverage was triggered because, in comparing the $100,000 single limit under his policy with the tortfeasor’s $50,000 per person limit, his bodily injury coverage was greater than the tortfeasor’s.  The court agreed.  The appropriate comparison was the plaintiff’s single limit with the tortfeasor’s per person limit when only one person is injured in the accident.

 

03/20/01:         BATAS v. THE PRUDENTIAL INS. CO. OF AMERICA

New York State Supreme Court, Appellate Division, First Department

Absent Special Relationship of Trust or Confidence, Insurer Not Liable for Breach of Fiduciary Duty

In a class action brought on behalf of all subscribers to health care plans offered by Prudential, which challenged its utilization review procedures, the court sustained claims for violations of New York General Business Law (deceptive acts and practices and false advertising); breach of contract; breach of implied covenant of good faith and fair dealing; common law fraud and deceit; and for declaratory and injunctive relief.  The court rejected Prudential’s argument that Public Health Law §4406 delegates the responsibility for regulating HMO contracts to the commissioner for the Department of Health; the statute does not preempt common law or other rights and remedies.  Likewise, plaintiffs’ challenge to the utilization review procedures used in connection with hospital stays were not mooted by enactment of statutorily mandated review procedures in Public Health Law Article 49.  The Court held, however, that plaintiffs’ claims for breach of fiduciary duty, premised on allegations that it misrepresented utilization review procedures, were properly dismissed because the allegations were insufficient to show that Prudential sought to gain subscribers’ trust and confidence.  Quoting a Court of Appeals decision from 120 years ago, the court held: “’Ordinarily, the essence of a tort consists in the violation of some duty due to an individual, which duty is a thing different from the mere contract obligation. When such duty grows out of relations of trust and confidence, as that of the agent to his principal or the lawyer to his client, the ground of the duty is apparent, and the tort is, in general, easily separable from the mere breach of contract’.  However, other than in exceptional cases, a cause of action sounding in tort, whether for fraud or otherwise, cannot depend upon a fiduciary or other character of the relationship created by the contract alone, for no such relationship exists.”  Plaintiffs made no showing that their relationship with Prudential was unique and offered no reason to depart from the general rule that the relationship between the parties to a contract of insurance is strictly contractual in nature. No special relationship of trust or confidence arises out of an insurance contract between the insured and the insurer; the relationship is legal rather than equitable.

 

03/20/01:         MCKINNON v. INTERNATIONAL FIDELITY INS. CO.

New York State Supreme Court, Appellate Division, First Department

Class Certification Improper Where Claims Require Individualized Proof

Court held that class certification was properly denied in this action alleging insurers engaged in a pattern of charging bail bond fees in excess of the statutory maximum.  The plaintiffs failed to establish that “there are questions of law or fact common to the class which predominate over any questions affecting only individual members.”  The court would have to inquire into the specific nature and purpose of fees charged to determine whether the overcharges occurred.  Moreover, inquiry would be required as to what each bail bondsmen told each client the fees were for, whether the client received additional services for the fees, and whether oral misrepresentations or written contracts were made concerning fees for additional services.

 

03/19/01:         ABBEY RICHMOND AMBULANCE SERVICE, INC. v. NORTHBROOK PROPERTY & CASUALTY INS. CO.

New York State Supreme Court, Appellate Division, Second Department

Insured’s Eight-Month Delay in Notification of Accident Excused

The court excused an insured’s eight-month delay in notifying its insurer of an underlying accident because the insured’s good faith belief in nonliability was reasonable.  The court concluded that neither the manner in which the accident occurred, the trivial nature of the injuries, nor the medical treatment rendered would have caused a prudent person to believe that a personal injury claim would be pursued.

 

ACROSS BORDERS

 

03/30/01:         CENTENNIAL INS. CO. v. UNITED STATES FIRE INS. CO.

California Court of Appeal
Court Refuses to Adopt a "Bright Line" Test That Would Equally Allocate Defense Costs Between and Among Carriers for Same Insured Based on Time on the Risk

In choosing the appropriate method of allocating defense costs among multiple liability insurance carriers, each insuring the same insured, a trial court must determine which method of allocation will most equitably distribute the obligation among the insurers “pro rata in proportion to their respective coverage of the risk,” as “a matter of distributive justice and equity.” Trial courts must maintain equitable discretion to fashion a method of allocation suited to the particular facts of each case and the interests of justice, subject to appellate review for abuse of that discretion.

 

AND IN DEFENSE . . .

 

03/29/01:         RANGOLAN v. COUNTY OF NASSAU

New York Court of Appeals

In New York, Under “Joint and Several Liability Statute” Responsible Party with Non-Delegable Duty can Still Seek Apportionment

In Rangolan v. County of Nassau and Faragiano v. Town of Concord, the New York Court of Appeals considers the extent of protection from joint and several liability afforded to municipalities and others subject to non-delegable duties in the context of CPLR Article 16.
Under CPLR article 16, a defendant may apportion its liability for non-economic damages among other tortfeasors provided that it is 50% or less at fault (CPLR 1601[1]), The issue before the state's highest court, as certified by the United States Court of Appeals for the Second Circuit in Rangolan, is whether CPLR 1602 (2)(iv) precludes apportionment where a defendant's liability arises from a breach of a non-delegable duty. The Court holds that it does not, finding that that section is not an exception to apportionment under CPLR article 16, but a savings provision that preserves the principles of vicarious liability. In Rangolan, the County, which had a non-delegable duty to protect prisoners from the attacks of other prisoners, sought article 16 apportionment of liability to the victim prisoner, between itself and the assailant prisoner.

 

However, a party with a non-delegable duty cannot seek apportionment under Article 16 from a party to whom it delegated that duty. For example, in the Faragiano, the plaintiff passenger was injured when a vehicle veered off a road. Plaintiff sued the driver, the town that owned the road and the contractor that resurfaced the road. The town has a non-delegable duty to maintain its road. The Court held that CPLR 1602(2)(iv) does not allow the town to apportion its liability with the contractor, for whose negligence it is vicariously liable. However, the town may apportion liability with the driver.

 

See also, FARAGIANO v. TOWN OF CONCORD

 

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REPORTED DECISIONS

 

LABATT BREWING CO. v. ZURICH INS. CO.

 

Judgment, Supreme Court, New York County (Ira Gammerman, J. ), entered June 20, 2000, dismissing the complaint pursuant to an order which granted defendant’s cross motion for summary judgment while denying plaintiff’s motion for summary judgment, unanimously affirmed , with costs.

 

The IAS court correctly determined that the subject insurance policy providing umbrella and excess coverage did not obligate defendant insurer to defend plaintiff insured in an underlying action for false advertising or to reimburse plaintiff for its attorneys’ fees in defending such action . Because there was primary insurance covering the claims against plaintiff, the umbrella coverage portion of the policy, which required defendant to provide a defense, was not implicated. As for the excess insurance coverage, the policy in effect on the date of plaintiff’s alleged acts of false advertising specifically excluded legal expenses from the losses that defendant was required to pay.

 

Plaintiff argues that under a so-called "Liberalization Clause," which became effective on May 1, 199 3, defendant’s excess insurance policy incorporated the terms of the underlying "Multimedia Policy " with respect to coverage for legal expenses in defending covered lawsuits. Although the counsel fee coverage was indeed provided prospectively, this was an "occurrence" policy, where the acts of false advertising that gave rise to liability commenced in April 1993. There is no merit to plaintiff’s argument that the controlling event that triggered the attachment of coverage should have been the injury resulting from the alleged act of false advertising, rather than the occurrence that actually caused the injury (see, Matter of Midland Ins. Co., 269 AD2d 50).

 

NEW YORK CENTRAL MUTUAL FIRE INS. CO. v. ROZENBERG

 

Order, Supreme Court, New York County (Diane Lebedeff, J.), entered February 2, 2000, to the extent that it denied that portion of the petition seeking to add Country-Wide Insurance Company as an additional party respondent, unanimously reversed, on the law, without costs, the petition granted in this respect, and a hearing directed on the issue of the validity of Country-Wide’s disclaimer of coverage.

 

Respondent Rozenberg, petitioner’s insured , demanded arbitration under his policy’s uninsured motorist endorsement, after his involvement in a two-car collision with a vehicle owned by additional respondent Diaz and driven by additional respondent Jose Mizhquiri. Petitioner sought a stay of arbitration, on the grounds that the Diaz vehicle was insured by additional respondent Allstate, and that the driver was purportedly covered under his brother Segundo ’s policy with proposed additional respondent Country-Wide. The motion court granted the petition to stay arbitration pending a preliminary trial on the issue of whether the owner of the offending vehicle was in fact insured by Allstate, and whether the driver of that vehicle was in fact covered under a valid policy of insurance issued to his brother, ordering all of those parties joined as additional respondents . However, the court denied the request to join Country-Wide, the purported insurer of the driver (derivatively , through his brother) of the offending vehicle, because Country-Wide had timely "disclaimed coverage ."

 

Petitioner’s submission of Department of Motor Vehicles records confirming insurance coverage to Segundo Mizhquiri by Country-Wide at the time of the accident, and the police accident report indicating that Jose Mizhquiri was living at the same address as his brother Segundo at that time, established prima facie that the driver was insured by Country-Wide (Matter of Eveready Ins. Co. v Roman, 166 AD2d 530). Country-Wide’s bald disclaimer created merely an issue of fact as to its validity, which should be explored at a hearing (id.; Matter of Nationwide Ins. Co. v Sillman, 266 AD2d 551, 552). Indeed, Country-Wide is a necessary party for the resolution of that issue (Matter of Lumbermens Mut. Cas. Co. v Beliard, 256 AD2d 579; Matter of Eagle Ins. Co. v Sadiq, 237 AD2d 605).

 

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

 

COIN ROBERTO, INC. v. RELIANCE INS. CO. 

 

Judgment, Supreme Court, New York County (Diane Lebedeff, J.), entered March 29, 2000, which, upon the prior grant of defendant’s motion for summary judgment, dismissed the complaint, unanimously affirmed, without costs. Appeal from order, same court and Justice, entered March 2, 2000, granting defendant’s motion for summary judgment, unanimously dismissed, without costs, as subsumed in the appeal from the ensuing March 29, 2000 judgment.

The motion court properly found that defendant insurer’s disclaimer was proper, because plaintiff insured did not substantially comply with the requirement in the subject jeweler’s block policy that it "maintain a detailed and itemized inventory * * *, including * * * separate listing of all travelers’ stocks". There is no indication in the record on appeal that the insured maintained records "sufficient to disclose to the insurer the extent of its liability, independently of any need to resort to evidence outside the records to explain the records other than might be necessary to disclose the bookkeeping methods employed" (see , Globe Jewelry v Pennsylvania Ins. Co., 72 Misc 2d 563, 564). Contrary to plaintiff insured’s argument in reliance upon Insurance Law § 3106, the records-keeping provision at issue does not entail provision of a "warranty " within the meaning of the statute (cf., M. Fabrikant & Sons v Overton & Co. Customs Brokers, 209 AD2d 206, 207) and, accordingly, the validity of defendant’s disclaimer is not subject to the conditions applicable pursuant to Insurance Law § 3106 to disclaimers predicated on breach of warranty. Since the grant of summary judgment to defendant may be affirmed solely on the basis of the insured’s failure to keep records in accordance with the requirements of the subject contract of insurance, we need not and do not decide whether the insured’s agent was "in or upon" the vehicle at the time of the loss within the meaning of the policy language (see, Davidoll Designs v Reliance Ins. Co., ___ AD2d ___, 2001 NY App Div LEXIS 416), or whether the loss was a "mysterious disappearance" ( see, Stella Jewelry Mfg. v Naviga Belgamar ex rel. Penem Intl., 885 F Supp 84, 86).

 

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

 

NATIONAL UNION FIRE INS. CO. OF PITTSBURGH, P.A., v. RED APPLE GROUP, INC.

 

Order, Supreme Court, New York County (Barry Cozier, J.), entered June 13, 2000, which, in an action arising out of plaintiff insurer’s issuance of retroactive property insurance covering a building leased by defendants, granted plaintiff’s motion pursuant to CPLR 3211(a)(7) to the extent of dismissing defendants’ counterclaims and fifth, sixth, and seventh affirmative defenses, unanimously affirmed, with costs.

 

Plaintiff retroactively insured commercial real estate leased by defendants which, during the period of retroactive coverage, was damaged in a hurricane. The retroactive coverage was, accordingly, issued only upon defendants’ execution of an indemnity provision pursuant to which defendants agreed to indemnify plaintiff for all claims arising out of loss at the leased location during the period of such coverage. A claim for loss attributable to the damage caused by the hurricane was made by H.E. Lockhart Management, Inc. (HELM), the owner of the premises, and although plaintiff and defendants initially presented a united front in defense of the claim, their interests diverged, and plaintiff, with defendants’ knowledge, retained separate counsel and entered into settlement negotiations with HELM, in which defendants did not participate. These negotiations concluded with plaintiff agreeing to pay $2.7 million in satisfaction of HELM’s claim. Defendants’ central contention in its counterclaims and defenses to this action by plaintiff to obtain contractual indemnification for the $2.7 million paid out under the subject retroactive insurance policy, is that plaintiff was under some obligation to disclose the terms of its settlement with HELM to defendants prior to defendants’ own settlement with HELM pursuant to which they surrendered their lease to the subject premises and abandoned claims against HELM for wrongful lease termination and tortious interference with defendants’ contract to sell their lease.

To the extent that defendants’ defenses and counterclaims were premised upon theories of breach of contract, breach of duty of good faith and fair dealing, breach of fiduciary duty, and fraud, they were properly dismissed. While defendants may defend against enforcement of the indemnity provision upon grounds that they were not afforded notice of the settlement and that the settlement was unreasonable (see, Chase Manhattan Bank v 264 Water St. Assocs., 222 AD2d 229, 231), there is no basis for their counterclaim that the nondisclosure of the disputed settlement constituted a breach of contract . No provision in the indemnity agreement or insurance policy and related coverage documents required plaintiff to provide notice or to consult with defendants in connection with its settlement of HELM’s claims and, contrary to defendants’ arguments, such a provision may not be supplied by implication ( see, W.W.W. Assocs. v Giancontieri, 77 NY2d 157, 162). Nor do defendants state any tenable claim for breach of plaintiff’s implied obligation of good faith and fair dealing in performing the parties ’ contract since they have identified no conduct by plaintiff that deprived them of the benefit of their bargain (cf., Dalton v Educational Testing Serv., 87 NY2d 384). Also insufficient were defendants’ defenses and counterclaims premised on breach of fiduciary duty and fraud. It is plain that no fiduciary relationship arose out of the insurance contract here at issue, which, as alleged, was simply the product of an arm’s-length transaction between sophisticated commercial entities, not in any realistic way to reduce defendants’ exposure to the already realized risk of property loss at the insured location , but to provide plaintiff with some basis to defend against HELM’s claim that it had breached the provision of its lease with HELM requiring it to insure the leased premises. Absent a fiduciary relation between the parties, defendants state no claim for fraud predicated upon plaintiff’s failure to disclose its settlement with HELM (see, Auchincloss v Allen, 211 AD2d 417).

 

We have reviewed defendants’ remaining contentions and find them unavailing.

 

THIS CONSTITUTES THE DECISION AND ORDER

OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.

 

BATAS v. THE PRUDENTIAL INS. CO. OF AMERICA

 

Order, Supreme Court , New York County (Herman Cahn, J.), entered May 28, 1999, which, in an action involving the provision of benefits under health insurance policies issued or administered by defendants, granted in part and denied in part defendants’ motion to dismiss the complaint, modified, on the law, to reinstate the sixth cause of action, and otherwise affirmed, without costs.

 

The facts are fairly set forth by the dissent. We would note, however, that plaintiffs bring this action on their own behalf and as representatives of a class of all subscribers to health care plans offered by defendants (Prudential). We also note that neither party challenges the liberal standard applied by the IAS court wherein, "[o]n a motion to dismiss for failure to state a cause of action, the court must accept all the facts alleged as true , accord the plaintiff the benefit of every possible inference, not evaluate the merits of the case, and determine only whether the facts as alleged fit within any cognizable legal theory (Leon v Martinez , 84 NY2d 83)".

 

Applying that standard, plaintiffs’ causes of action for breach of contract, fraud and violations of General Business Law §§ 349(a) and 350 were properly sustained over defendants’ objection that, under Public Health Law § 4406, the responsibility for regulating the contracts of Health Maintenance Organizations (HMO’s) lies with the Commissioner of the Department of Health. Nothing in that section or elsewhere in the statutory scheme suggests a clear legislative intent to preempt common-law or other rights and remedies (see, Hechter v New York Life Ins. Co., 46 NY2d 34, 39; cf., Karlin v IVF Am., 93 NY2d 282, 292-293). Nor has plaintiffs’ challenge to the utilization review procedures that defendants used in connection with plaintiffs’ hospital stays, but which allegedly were not those promised in plaintiffs’ contracts, been mooted by the enactment of statutorily mandated utilization review procedures in Public Health Law Article 49 (see, Public Health Law § 4907). Plaintiffs ’ allegations are also sufficient to show that the two

named defendants are alter egos (see , Van Valkenburgh, Nooger & Neville v Hayden Publ. Co., 30 NY2d 34, 42, cert denied 409 US 875).

 

Plaintiffs’ allegations that defendants did not conduct the utilization review procedures that they promised in their contracts state a cause of action for breach of contract . Such allegations do not implicate the "filed rate doctrine" since they neither challenge the reasonableness of the filed rate nor claim that plaintiffs should have been treated differently from other subscribers (see, Kross Dependable Sanitation v AT&T Corp., 268 AD2d 874, 874 -875). Although plaintiffs sustained no out-of-pocket costs, actual injury is sufficiently alleged in the nonreceipt of promised health care, for which restitution of premiums paid may be an appropriate remedy.

 

Plaintiffs’ fraud claim, which is based on defendants’ alleged misrepresentation of facts in materials used to induce potential subscribers to obtain defendants’ health policies, is not duplicative of plaintiffs’ breach of contract claim (see, Rosen v Spanierman, 894 F2d 2 8, 35). Plaintiffs also adequately plead reliance, and are not required at the pleading stage to set forth with particularity the materials they relied on.

 

Plaintiffs’ breach of fiduciary duty claim was properly dismissed on the ground that their allegations are insufficient to show that defendants sought to gain their trust and confidence. As acknowledged by plaintiffs on appeal, the sole remaining basis for such cause of action is the allegation that defendants failed to disclose to their policyholders that they based their determination of what is medically necessary on utilization review guidelines - including the Milliman & Robertson Guidelines - which allegedly conflict with generally accepted medical standards and usurp the role of their own primary care physicians. The crux of plaintiffs’ claim is that because current subscribers must decide each year whether to remain in the Prudential health care system, defendants breach the fiduciary duties owed to such subscribers by continuing to misrepresent their utilization review procedures.

 

The dissent concludes that because of the shocking factual allegations of the complaint, stating in essence that plaintiffs were prevented from receiving timely and necessary treatment for serious medical conditions, that plaintiffs’ fourth cause of action seeking to impose a fiduciary duty on a health insurer in this context should be read to constitute a viable cause of action by the substitution of the words "duty of good faith" instead of "fiduciary duty". Such argument relies in large part upon the recent decision in Pegram v. Herdrich (530 US 211, 120 S Ct 2143), a case cited by none of the parties on appeal, which involved an HMO dispute under ERISA (Employee Retirement Income Security Act of 1974). In urging such alternative basis for relief, the dissent acknowledges that a fiduciary duty under ERISA is inapplicable to defendants here , but argues that its existence has some relevance when considering whether medical insurers may be considered to have a fiduciary duty to their policyholders.

 

However, without deciding the issue, all the Supreme Court stated, in a footnote, in dicta, was that "it could be argued" that an HMO is a fiduciary insofar as it has discretionary authority to administer its health insurance plan and so would be obligated to disclose characteristics of the plan if that information affects beneficiaries’ material interests (120 S Ct 2143, 2153 n 8, citing Glaziers and Glassworkers Union Local No. 252 Annuity Fund v Newbridge Securities, Inc., 93 F3d 1171, 1179-1181 ["discussing the disclosure of obligations of an ERISA fiduciary"] [emphasis added]).

 

Relying on an HMO’s possibly arguable obligation to "disclose characteristics of the plan...that...affects beneficiaries’ material interests", the dissent concludes that it is understandable that a policyholder might assume that her medical insurer’s authority to administer its insurance plan creates a comparable fiduciary duty under the common law.

However, in Pegram, the sole case relied upon as a possible basis for imposing a fiduciary duty on an HMO pursuant to ERISA, the Supreme Court, as recognized by the dissent , specifically held that "mixed eligibility" decisions of this type, i.e. a combination of "eligibility" and "treatment" decisions, are not fiduciary decisions under ERISA (supra, at 2158). As one commentator has noted: "Recognizing that Congress has promoted HMOs as an institution for many years, and that these decisions are very different from traditional common law fiduciary decisions, the Court held that mixed eligibility decisions by HMO physicians are not fiduciary decisions under ERISA." (Scott M. Riemer, HMO’s Face a Post-‘Pegram’ World, NYLJ 7/13/00, at p. 36, col 5).

 

The Supreme Court, in Pegram (supra, 120 S Ct 2143, at 2154) specifically doubted that Congress would ever have thought of a mixed eligibility decision as fiduciary in nature because, at common law, fiduciary duties characteristically attach to decisions from managing assets and distributing property to beneficiaries. Indeed, the Court noted: "[W]hen Congress took up the subject of fiduciary responsibility under ERISA, it concentrated on fiduciaries’ financial decisions, focusing on pension plans, the difficulty many retirees faced in getting the payments they expected, and the financial mismanagement that had too often deprived employees of their benefits" (supra , at 2156[citations omitted].

 

The dissent attempts to bootstrap its argument by making a quantum leap from an inconclusive footnote in Pegram to the legally untenable position that defendants ’ decision to limit the length of plaintiffs’ hospital stays violated a non-existent fiduciary duty qua "duty of good faith". Thus, the dissent would analogize defendants’ so-called fiduciary duty to an insurer’s tort liability for its bad faith failure to settle third-party claims against its insured .

 

Clearly, the Supreme Court’s reasoning in Pegram was based upon the HMO’s status as a statutory fiduciary under ERISA. Here, however, as the IAS court noted, "Plaintiffs do not allege that either of these health care plans are covered by ERISA, or that defendants are statutory fiduciaries under ERISA, and thus subject to the more extensive fiduciary duties imposed therein". Nor is there any State statutory basis for imposing such a duty. In light of that, any claim of a breach of fiduciary duty on the part of defendants in this case would have to rely upon common law principles and plaintiffs would first have to show the existence of such a duty.

 

A breach of fiduciary duty is a tort and , almost 120 years ago, the Court of Appeals, with regard to a tort arising from a breach of contract , stated: "Ordinarily, the essence of a tort consists in the violation of some duty due to an individual , which duty is a thing different from the mere contract obligation. When such duty grows out of relations of trust and confidence, as that of the agent to his principal or the lawyer to his client, the ground of the duty is apparent, and the tort is, in general, easily separable from the mere breach of contract " (Rich v. N.Y.C. & H.R.R.R. Co, 87 NY 382, 390). However, other than in exceptional cases, a cause of action sounding in tort, whether for fraud or otherwise, cannot depend upon a fiduciary or other character of the relationship created by the contract alone, for no such relationship exists (id, at 395).

 

Plaintiffs make no showing that their relationship with defendants is unique or differs from that of a reasonable consumer and offer no reason to depart from the general rule that the relationship between the parties to a contract of insurance is strictly contractual in nature. No special relationship of trust or confidence arises out of an insurance contract between the insured and the insurer; the relationship is legal rather than equitable (68A NY JUR2d, Insurance, § 651).

 

As found by the IAS court, plaintiffs "have alleged no facts which suggest that defendants may have practiced the kind of overreaching found in Meagher [Meagher v. Metropolitan Life Ins. Co. (119 Misc2d 615)] or which point to the existence of any other special circumstance that might indicate other than an arm’s length association or that might give rise to a fiduciary relationship". Rather, it found, the only claimed basis for such a relationship is alleged to be defendants’ superior knowledge of their product, and a posting of promotional material on their web page in which they tout themselves as a "trusted name " in health insurance. The IAS court concluded that, in the absence of some additional allegation showing a more direct or affirmative effort by defendants to gain plaintiffs’ trust and confidence, for example the sales efforts by a salesman or the actions of a representative, no fiduciary relationship is alleged.

 

Such conclusion is in accord with this Court’s decision in Gaidon v. Guardian Life Ins. Co (255 AD2d 101, mod on other grounds 94 NY2d 330, mod upon remittitur 272 AD2d 60), wherein, in affirming the dismissal of an insured’s cause of action for breach of fiduciary duty against his insurer, this Court found that the alleged reliance and trust necessary for a finding of a fiduciary or confidential relationship to support such a cause of action were stated in conclusory fashion and that defendant insurer ’s superior knowledge did not create such a relationship. Accordingly, for the same reasons, we affirm the dismissal of plaintiffs’ fourth cause of action for breach of fiduciary duty.

 

While we agree that an insured should have an adequate remedy to redress an insurer’s bad faith refusal of benefits under its policy, the dissent’s proposed new cause of action for tortious breach of the implied covenant of good faith has no basis in the record or briefs.

The dissent claims that there is substantial reason for imposing on health insurers some special, tort duty of good faith towards their policyholders to enable them to recover damages for resulting injuries. However, plaintiffs here make no such claims of injury. Plaintiffs’ argument regarding the dismissed fourth cause of action is limited by their briefs to the claim that Prudential breached its fiduciary duty by failing to notify its policy holders that it is relying upon the Milliman and Robertson Guidelines, thereby misrepresenting its utilization review procedures and inducing plaintiffs to continue as policyholders. As pointed out above, all other claims regarding plaintiffs’ treatment have been abandoned as regards that cause of action.

The IAS court specifically noted that,"[w]hile plaintiffs contend that these ‘premature’ discharges placed their health at risk, neither plaintiff has alleged any adverse physical consequences as a result of these determinations, or incurred out-of-pocket expenses for improperly denied coverage. Instead, the two named plaintiffs are seeking a refund of paid premiums, disgorgement of profits, and various forms of equitable relief on their contract claims, as well as punitive damages on the breach of the implied covenant of good faith and fair dealing claim." Thus, the valid concerns expressed by the dissent and its well intentioned proposal of a brand new cause of action would grant relief not asked for by any party. Recognizing that plaintiffs’ allegations are insufficient to satisfy the requirement of injury , the dissent nevertheless would afford plaintiffs an opportunity to replead, again relief never sought below. Indeed, the plaintiffs do not challenge the IAS court’s dismissal of their identical third cause of action alleging breach of the implied covenant of good faith and fair dealing, which the court found was "so redundant of plaintiffs’ breach of contract claim as to require dismissal".

 

Finally, the allegations of one of the plaintiffs that defendants acted outside the scope of their authority as policy administrators in pre-authorizing her treatment and conducting a concurrent review of the medical necessity of her hospital care and length of stay, when her policy with her employer provided that such decisions were to be made by an in-network primary care physician, are sufficient to state a cause of action for tortious interference with contract (see, Hoag v Chancellor, 246 AD2d 224, 2 28-230). Accordingly, we modify to reinstate the sixth cause of action.

 

All concur except Wallach and Saxe, JJ. who dissent in part in a memorandum by Saxe, J. as follows:

 

SAXE, J. (dissenting in part)

 

When a pleading alleges conduct that manifestly constitutes a wrong, a court that is asked to decide a motion to dismiss addressed to that pleading under CPLR 3211 should not be limited in its inquiry to whether the allegations support the cause of action as pleaded. Rather, the court must consider whether, accepting the allegations as true, any viable cause of action exists, entitling the plaintiff to a remedy. To do otherwise would sanction a return to those long-forgotten days when the rigors of common-law pleading determined the life of an action solely from the choice of the writ made. Here, in view of the allegations contained in the complaint, plaintiffs' fourth cause of action , in which they plead a breach of fiduciary duty, should be read to constitute a viable cause of action . Even if the established law of this State precludes a claim for the tort of breach of fiduciary duty under circumstances such as these, we believe that the alleged conduct of the defendants is sufficient to sustain a substantially similar tort claim, recognized elsewhere, which should be adopted and applied here. Therefore, to the extent the majority affirms the dismissal of plaintiffs' fourth cause of action , we disagree and respectfully dissent.

Facts

 

Plaintiff Musette Batas ("Batas") obtained health care coverage from Prudential Health Care Plan of New York, Inc. ("PruCare -NY), a wholly-owned subsidiary of the Prudential Insurance Company of America ("Prudential"), the largest health insurance carrier in North America, serving, at present, approximately 4.5 million people. Batas is afflicted with Crohn's Disease, a chronic condition causing severe and often times debilitating inflammation of the intestines. On March 19, 1996, Batas, then six months pregnant, suffered a sudden attack and was admitted to a Prudential participating hospital. While Prudential authorized Batas's stay for one day, Batas's primary care physician requested approval for additional days due to Batas's serious intestinal swelling. On March 22, 1996, Prudential concluded that further hospitalization was not "medically necessary ." The decision was based upon a Prudential Concurrent Review Nurse's survey of Batas's chart, completed without an examination of Batas or consultation with her physician. Because she could not afford to remain hospitalized without insurance, Batas elected to be discharged.

 

On March 29, 1996, 10 days after the initial attack, Batas was rushed to the emergency room with a high fever and severe pain . Her treating physician determined that exploratory surgery was necessary and requested pre-approval from Prudential, but received no response. On April 1, 1996, the exploratory surgery still not authorized , Batas's intestine burst. She was rushed to the emergency room, where a portion of her colon was removed . Two days later -- and five days after the request -- Prudential "preauthorized" the exploratory surgery .

 

Four days after the emergency surgery, while Batas was recovering in the hospital, Prudential 's Concurrent Review Nurse contacted Batas's treating physician and demanded that Batas be discharged . Her physician refused. On April 12, 1996, the Nurse reviewed Batas's medical records, consulted the "Milliman & Robertson Guidelines" and determined that further hospitalization was not "medically necessary." Unable to afford the costs of continued care, Batas was discharged the following day.

 

Plaintiff Nancy T. Vogel, an employee of The Lutheran Church-Missouri Synod (the "Synod"), receives health care benefits through the Concordia Health Plan, the Synod's self-funded employee benefit plan . The Synod hired Prudential to administer its health care plan pursuant to an Administrative Agreement .

 

On March 26, 1996, Vogel was admitted to a participating Prudential hospital to undergo a total abdominal hysterectomy due to a fibroid tumor in her uterus, which was so large that she appeared six months pregnant. The surgery was performed that day, lasted twice as long as usual, and resulted in the removal of two tumors weighing in excess of three-and-a-half pounds. Because of the complex nature of the surgery and potential for postoperative complications, Vogel's primary care physician, along with three previously consulted gynecologists, advised that Vogel remain in the hospital for at least 96 hours .

 

Yet, on March 28, 1996, merely 48 hours later, a Prudential Concurrent Review Nurse surveyed the "Milliman & Robertson Guidelines" and concluded that further hospitalization was not "medically necessary." At 5:30 p.m., the Nurse informed Vogel's treating physician that Vogel should be discharged immediately. Though the physician adamantly disagreed, he was unable to reach Prudential, whose offices were closed. Vogel received a letter that night informing her that further hospitalization benefits were denied, and, due to financial constraints, was discharged the following morning.

 

Plaintiffs ' complaint contained causes of action for (1) violations of New York General Business Law, Article 2 2A (deceptive acts and practices and false advertising); (2) breach of contract; (3) breach of implied covenant of good faith and fair dealing; (4) breach of fiduciary duty; (5) common law fraud and deceit ; (6) improper interference with existing contractual relationships on behalf of the subclass of Synod employees who receive health benefits through the Concordia Plan; and (7) declaratory and injunctive relief voiding certain insurance provisions as against public policy.

 

On defendants' dismissal motion, the IAS court granted dismissal of the third (implied covenant of good faith), fourth (fiduciary duty), sixth (tortious interference), and seventh (injunctive and declaratory relief) causes of action , and otherwise denied the motion. For the reasons that follow, we would modify so as to reinstate the causes of action for breach of fiduciary duty as well as that for tortious interference, and otherwise affirm.

 

Breach of Fiduciary Duty

 

Although the motion court correctly dismissed plaintiffs' fiduciary duty claim insofar as it related to prospective subscribers, it also aptly remarked that the analysis used in older cases, presuming an arms-length business relationship between insured and insurer, is no longer viable. We agree with that assessment. In any event, even if the law of this State does not permit application of the concept of "fiduciary duty" to insurers in relation to their policyholders in general, the cause of action may be saved by a simple substitution of the words "duty of good faith" instead of "fiduciary duty". This alteration results in a viable cause of action which carries out plaintiffs' intention of asserting against defendants a breach of a tort duty, while avoiding any limitations created by the word "fiduciary". Accordingly, we would reverse the IAS court's dismissal of plaintiffs' fourth cause of action, for breach of fiduciary duty, to the extent it relates to plaintiffs as current subscribers.

 

The nature of the relationship between a medical insurer and its policyholder, in our society, is not simply that of two parties to an arm's length contract. Medical insurance is a necessity since, as has been widely recognized, the cost of medical treatment is often unaffordable, and treatment therefore unattainable, unless medical insurance is available to cover it (see, e.g., Krugman, The Age Boom: The Economics of the Boom ; Does Getting Old Cost Society Too Much?, New York Times, March 9, 1997, Section 6, at 58, col 1 ). In obtaining it, consumers are forced to place their trust in the accuracy and truthfulness of the insurer's representations as to the extent and scope of the coverage provided, relying upon the good faith of the insurer. Furthermore, the typical consumer in the throes of a serious medical condition has no choice but to abide by the determination made by the insurer, since very few individuals are able to independently afford the costs of serious medical treatment and hospitalization; certainly, the plaintiffs here could not. Therefore, when a medical insurer's handling of a case is contrary to the manner promised , that conduct may constitute more than simply a breach of contract.

 

Indeed, for some time, courts and commentators have noted the fundamental injustice in applying a traditional contract analysis to disputes between insurers and their policy holders (see generally, Note, The Availability of Excess Damages for the Wrongful Refusal to Honor First Party Insurance Claims–-An Emerging Trend, 45 Fordham L Rev 164, 167; Sykes, "Bad Faith" Breach of Contract by First-Party Insurers, 25 J Legal Studies 405, 408-409; Harvey & Wiseman, First Party Bad Faith: Common Law Remedies and a Proposed Legislative Solution, 72 Ky LJ 141, 167-169; see also, Couch on Insurance 3d § 19 8:15, at 198-29).

 

Where an insurer has intentionally avoided covering, or paying for, a benefit provided for in its insurance policy, the insured should have available a cause of action providing for an adequate remedy to redress the wrong. Nevertheless, in cases of this kind, a standard contract analysis is traditionally applied. The insured who proves that an insurer has breached its policy is deemed to be fully compensated with money damages calculated by the loss of the "benefit of [the] bargain" ( see, Freund v Washington Square Press, 34 NY2d 379, 382; see generally, Dobbs, Law of Remedies, at 148; Farnsworth, Legal Remedies for Breach of Contract, 70 Col L Rev 1145, 1159). While the classical rule of Hadley v Baxendale (156 Eng Rep 145) provides for an award of reasonably foreseeable, "consequential" damages, insurance policies are traditionally viewed as contracts for the payment of money only, and therefore this measure of damages is traditionally limited to the amount of the policy plus interest (see, Note, The Availability of Excess Damages for the Wrongful Refusal to Honor First Party Insurance Claims--An Emerging Trend, 45 Fordham L Rev 164, 167, supra ).

 

But, an award at the conclusion of litigation, of money damages equal to what the insurer should have paid in the first place, may in certain circumstances be inadequate. Among other things, this concept of limited damages presumes that a plaintiff has access to an alternative source of funds from which to pay that which the insurer refuses to pay. This is frequently an inaccurate assumption , particularly when it comes to the enormous cost of hospitalization, surgery, and related in-patient medical care. Furthermore, an insurer's breach of a health insurance contract may result in further physical injury, as well as pain, suffering, and emotional damage caused by the delay in, or complete inability to obtain treatment, as the present case illustrates. Contract damages, limited to the amount due under the policy (plus interest), does not in this context achieve the goal of contract damages, which is to place the plaintiff in the position she would have been in had the contract been performed. Indeed, if statutory interest is lower than that which the insurer can earn on the sums payable, the insurer has a financial incentive to decline to cover or pay on a claim.

 

Since contract analysis and contract remedies are so apparently inadequate, many States have responded to this clear need for a tort remedy in the insurance context by adopting a tort cause of action. Many have framed the tort as one for breach of the implied covenant of good faith and fair dealing (see, e.g., Gruenberg v Aetna Ins. Co., 9 Cal 3d 566; Bibeault v Hanover Ins. Co., 417 A2d 313 [R.I.]), or for the tort of "bad faith," defined as an insurer's denial of a claim without reasonable basis (see, e.g., Anderson v Continental Ins. Co., 85 Wis 2d 675; State Auto Prop & Cas. Ins. Co. v Swaim, 338 Ark 49, 55-56; Christian v American Home Assur. Co., 1977 Ok 141). Other states have enacted statutes providing for a right to bring a first party bad faith claim against an insurer (see, e.g., Fla Stat § 624.155; 42 Pa Cons Stat § 8371). Yet another court, although it declined to impose tort liability for bad faith, has remarked that a breach of the covenant of good faith and fair dealing by an insurer may warrant an award of consequential damages beyond merely the policy limits ( see, Beck v Farmers Ins. Exch., 701 P2d 795, 799-800).

 

While New York common law has adopted a tort involving bad faith breach of contract by an insurer, that tort is narrow and inapplicable to circumstances such as these. Such a claim for bad faith breach of an insurance contract, entitling a plaintiff to punitive damages, is limited to circumstances beyond merely a failure to perform the contract, and must involve egregious patterns of tortious conduct directed at the public at large as well as the individual claimant (see, Rocanova v Equitable Life Ass. Soc., 83 NY2d 603, 615; New York University v Continental Ins. Co., 87 NY2d 308). Although the egregious facts alleged here may well fall within its parameters, this extremely high threshold will not apply to most bad faith denials of benefits.

The jurisprudence of this State also provides for a cause of action against an insurer which in bad faith refuses to settle a liability claim against its insured; however, that cause of action, too, is inapplicable to situations like the present, in which insurers deny their own policyholders coverage provided for under the policy, or otherwise improperly avoid payment on first- party claims. A claim against a liability insurer for "bad faith refusal to settle" does not require, as in Rocanova, supra, a wrong against the public at large, but is satisfied where "the insurer's conduct constituted a 'gross disregard' of the insured's interests –-that is, a deliberate or reckless failure to place on equal footing the interests of its insured with its own interests when considering a settlement offer" (see, Pavia v State Farm Ins. Co., 82 NY2d 445, 453). Where such a case is successfully made out, the permissible damages may exceed the policy limits, by including the amount of the ultimate judgment entered against the insured in excess of the policy limits (see , Pavia v State Farm Ins. Co., 82 NY2d 445, 453). But, this "bad faith" cause of action, too, is inapplicable to insureds who have been improperly foreclosed from obtaining medical care to which they were entitled under their policy .

 

What is needed is a cause of action permitting an appropriate remedy when an insurer acts in bad faith in denying its own insured benefits provided for by the policy. This deficiency could be rectified by adopting the approach of numerous other States, under which a health insurer's obligations to provide promised benefits constitute a tort duty, which would allow for a corresponding tort remedy .

 

Plaintiffs, by their fourth cause of action, suggest that defendants have such a duty, and have framed that duty as a fiduciary one.

 

Admittedly, imposition of a fiduciary duty in this State has been limited to circumstances where a relationship of trust and confidence has been created between those particular parties (see, Zimmer-Masiello, Inc. v Zimmer, Inc., 159 AD2d 3 63, appeal dismissed 76 NY2d 772), while the relationship between an insurer and a policy holder has been viewed as an ordinary, arms-length commercial transaction (see, 68A NY Jur 2d, Insurance , § 651). Under this traditional view, the term "fiduciary" will normally be seen as inapplicable to a medical insurer, particularly where the dispute concerns a claim for benefits, submitted by an insured to the insurer, since the insurer has no obligation to consider the insured's interests as paramount, but rather, must only provide those benefits which its policy requires (see, e.g., Gaidon v Guardian Life Ins. Co., 255 AD2d 101, mod on other grounds 94 NY2d 330; see generally, Richmond, Trust Me: Insurers Are Not Fiduciaries to Their Insureds, 88 Ky LJ 1).

 

Despite this State's generally limited application of fiduciary duty, plaintiffs' reliance on the concept of fiduciary duty here was not unreasonable . Among those States recognizing that a tort duty is owed by insurers in relation to claims submitted by their insureds, the exact definition and nature of the duty has not been universally agreed upon.

 

The concept of fiduciary duty has been applied most frequently in the insurance context in the area of liability insurance. "[T]he nature of an insurer’s relationship with and duty to the insured " has in different contexts been variously described as "special", "fiduciary" and "quasi-fiduciary" (Couch on Insurance 3d, § 198:7, at 198-14; and see, e.g., Powers v United Servs. Auto . Assn., 114 Nev 690, 700; Decker v Browning-Ferris Indus., 931 P2d 436, 443 [Colo]; Union Bankers Ins. Co. v Shelton, 889 SW2d 278, 283 [Tex]). Another commentator has characterized the duty owed by the liability insurer to its insured, in the conduct of the litigation and settlement of third-party claims, as "somewhat of a fiduciary one" (see, 7C Appleman, Insurance Law and Practice, § 4711 at 378, § 4712 at 448 [ Berdal ed]), explaining that "[a]s the champion of the insured, [the insurer] must consider as paramount his interests, rather than its own, and may not gamble with his funds" (7C Appleman, supra, at 378). In fact, in recognition of the power wielded by the insurer, to unilaterally control whether to settle a claim, some courts have specifically characterized the relationship as a fiduciary one (see , e.g., American Fid. & Cas. Co. v G. A. Nichols Co., 173 F2d 830, 832; Allsup 's Convenience Stores v North River Ins. Co., 976 P2d 1, 15 [N.M.]).

 

It is also worth noting that the Federal Employee Retirement Income Security Act ("ERISA") (29 USC § 1001 et seq) imposes a fiduciary duty upon plan administrators (see, 29 USC §§ 1102(a), 1104). Although that fiduciary duty is inapplicable to defendants here , its existence has some relevance when considering whether a medical insurer may be considered to have a fiduciary duty to its policyholders. Indeed, in a recent opinion refining the scope of the rights and remedies available to patients of Health Maintenance Organizations (HMOs), the United States Supreme Court, in a footnote, specifically left open the possibility that an insured patient could claim that an HMO breached its fiduciary duty to a patient when the HMO's conduct was administrative in nature ( see, Pegram v Herdrich, 530 US 211). Although the Court dismissed a patient's fiduciary duty claim against an HMO because it was based upon an HMO physician's "mixed eligibility" decision concerning how to test the patient for purposes of diagnosing a medical condition, it noted that an HMO "is a fiduciary insofar as it has discretionary authority to administer the plan, and so * * * is obligated to disclose characteristics of the plan and of those who provide services to the plan, if that information affects beneficiaries' material interests (id. at *29, n8 [emphasis added]). Such a failure to disclose important characteristics of the plan is exactly the nature of the claim plaintiffs are pressing here . So, it is understandable that a policyholder might assume that her medical insurer's authority to administer its insurance plan creates a comparable fiduciary duty under the common law.

 

Even if we decline to apply the concept of fiduciary duty to circumstances such as those presented, imposition of a duty of good faith such as has been adopted elsewhere is appropriate, and comports with the reasoning by which insurers are held to have acted in bad faith in other respects. Examination of the rationale behind the "bad faith refusal to settle" rule that has evolved in the area of third-party liability claims discloses that the policies and considerations behind its creation are also applicable in the area of first-party claims for medical insurance coverage.

 

At the root of the "bad faith" doctrine is the fact that insurers typically exercise complete control over the settlement and defense of claims against their insured, and, thus, under established agency principles may fairly be required to act in the insured's best interests.

(Pavia v State Farm Ins. Co., 82 NY2d 445, 452, citing 7C Appleman, Insurance Law and Practice, at § 4711). The Pavia Court noted that the concept of bad faith failure to settle recognizes the insurer's temptation to advance its own financial interest at the expense of its insured, despite the likelihood that the insured would as a result be personally liable for a large judgment in excess of the policy limits (id. at 452-454).

 

The very same kinds of concerns articulated in the area of bad faith failure to settle come into play in the context of first-party claims for medical insurance coverage. In both, there may be a conflict between the insurer's financial position and the competing interests, financial and otherwise, of the insured. And, importantly, there is the possibility of catastrophic results to the insured when the insurer acts wrongfully, that is, contrary to the terms of the policy, in order to advance its own interests rather than protect those of the insured. Indeed , instead of merely being faced with a large money judgment in excess of the policy, an insured who is victimized by bad faith conduct of a medical insurer may be faced with the inability to obtain necessary , perhaps critical, medical care.

 

Furthermore, the position of the medical insurer is, like that of the liability insurer in the context of claim settlement, one of total control; that of the insured patient is one of powerlessness. The typical consumer in the throes of a serious medical condition has no choice but to abide by the determination made by the insurer. Very few individuals are able to independently afford the costs of serious medical treatment and hospitalization.

 

When we consider the nature of the health insurance industry, it becomes apparent that medical insurers, even more than most, should be held to a special standard of conduct toward their policyholders, beyond that required of parties to an ordinary, commercial contract. Even accepting that a formal fiduciary duty is inapplicable in this context under the traditional approach of this state, there is substantial reason for imposing on insurers, particularly health insurers, some special, tort duty of good faith toward their policyholders , a violation of which may entitle the policyholder to recover damages for resulting injuries, rather than merely a belated award of that which the insurer should have paid initially. Indeed, there is no convincing rationale for failing to provide a tort remedy for the actual damages potentially incurred by aggrieved policyholders when an insurer has unreasonably, and in bad faith, declined to cover necessary medical care, by wrongfully disclaiming coverage. Even if the law declines to impose a formal fiduciary duty in this context, there is every reason to impose a tort duty of good faith.

Although plaintiffs ' claim specifically states that it seeks damages for breach of fiduciary duty, its allegations should be read liberally so as to consider whether plaintiffs have any cognizable cause of action (see generally , CPLR 104, 3026).

 

On a motion to dismiss pursuant to CPLR 3211, the pleading is to be afforded a liberal construction (see, CPLR 3026). We accept the facts as alleged in the complaint as true , accord plaintiffs the benefit of every possible favorable inference, and determine only whether the facts as alleged fit within any cognizable legal theory.  (Leon v Martinez, 84 NY2d 83 , 87-88.) In Leon v Martinez, despite the plaintiffs' failure to mention the word "assignment " or designate a cause of action as seeking damages for breach of an assignment, or even to claim such a cause of action on appeal, the Court held that the complaint "adequately alleged for pleading survival purposes that the instrument prepared by [the lawyer] was intended by all parties to effectuate a present assignment to plaintiffs of interests in the future settlement" (84 NY2d at 88, supra).

 

I conclude that the shocking factual allegations in this case support a viable claim for a tortious breach of defendant's duty of good faith, and accordingly, it is appropriate to permit plaintiffs' fourth cause of action to proceed. Although I consider the allegations of the complaint, taken as a whole, to be sufficient to establish the cause of action, if the allegations are deemed insufficient to satisfy the requirement of injury, then plaintiffs should be offered the opportunity to replead.

Lastly , these allegations of this cause of action are not merely duplicative of plaintiffs' existing causes of action for breach of contract or fraudulent inducement. The fraudulent inducement claim is based upon the assertion that in their handbooks, directories and website, defendants falsely represented that they apply generally accepted medical standards in determining medical necessity, as distinct from the allegation that defendants failed to disclose to subscribers their intention to use the M&R guidelines exclusively.

 

THIS CONSTITUTES THE DECISION AND ORDER

OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.

 

MCKINNON v. INTERNATIONAL FIDELITY INS. CO. 

 

Order, Supreme Court, New York County (Barry Cozier, J.), entered on or about June 7, 2000, which denied plaintiff’s motion for class certification pursuant to CPLR 901 and 902, unanimously affirmed, without costs.

 

Plaintiff’s motion for class certification in this action alleging that defendants engaged in a pattern of charging fees for bail bonds in excess of the statutory maximum, was properly denied in light of her failure to demonstrate, inter alia, that "there are questions of law or fact common to the class which predominate over any questions affecting only individual members" (CPLR 901[a][2]). The alleged wrongs were individual in nature or are subject to individual defenses (see, Mitchell v Barrios-Paoli, 253 AD2d 281, 291). Here, to determine whether the alleged overcharges occurred, the court will have to inquire into the specific nature and purpose of the fees charged in each instance. In addition, inquiry will need to be made as to what each bail bondsmen told each client the fees were for, whether the client actually received additional services for the fees other than simply obtaining the bail bond, and whether any oral misrepresentations were made or written contracts entered into concerning fees for additional services. Accordingly, since substantiation of the claims herein will require individualized proof concerning the various bases of liability and are subject to individualized defenses, the motion court properly denied class certification (see , Banks v Carroll & Graf Publishers Inc., 267 AD2d 68).

 

THIS CONSTITUTES THE DECISION AND ORDER

OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.

 

FAAS v NEW YORK CENTRAL MUTUAL FIRE INS. CO.

 

In an action for a judgment declaring that the defendant is obligated to indemnify its insureds, Dan Adam and Corinne Adam, in an underlying action entitled Faas v Adam, pending in the Supreme Court, Dutchess County, under Index No. 5174/95, the defendant appeals from (1) an order of the Supreme Court, Dutchess County (Hillery , J.), dated March 13, 2000, which denied its motion for summary judgment dismissing the complaint and granted the plaintiff's cross motion for summary judgment, (2) a judgment of the same court, entered April 26, 2000, which declared that it is obligated to indemnify Dan Adam and Corinne Adam in the underlying action, and (3) so much of an order of the same court, dated September 8, 2000, as denied its motion, denominated as one for leave to renew and reargue, but which was, in effect, for leave to reargue. The notice of appeal from the order dated March 13, 2000, is also deemed to be a notice of appeal from the judgment (see, CPLR 5501[c]).

 

ORDERED that the appeal from the order dated March 13, 2000, is dismissed; and it is further,

 

ORDERED that the appeal from the order dated September 8, 2000, is dismissed, as no appeal lies from an order denying reargument; and it is further,

 

ORDERED that the judgment is affirmed; and it is further,

 

ORDERED that the respondent is awarded one bill of costs.

 

The appeal from the order dated March 13, 2000, must be dismissed because the right of direct appeal therefrom terminated with the entry of judgment in the action (see, Matter of Aho, 39 NY2d 241, 248). The issues raised on appeal from that order are brought up for review and have been considered on the appeal from the judgment (see , CPLR 5501[a][1]).

 

The defendant's motion, denominated as one for leave to renew and reargue, was allegedly based on new evidence. In fact, with reasonable diligence, the evidence could have been submitted in opposition to the plaintiff's original cross motion. Therefore, that motion was , in effect, one for leave to reargue, the denial of which is not appealable (see, CPLR 2221[e][3]; see also, Matter of Eagle Ins. Co. v Lucero, 276 AD2d 695; Sallusti v Jones, 273 AD2d 293; Nisnewitz v Renna, 273 AD2d 210; Bossio v Fiorillo , 222 AD2d 476).

 

The Supreme Court properly denied the defendant's motion for summary judgment dismissing the complaint and granted the plaintiff's cross motion for summary judgment. The defendant's unexplained 42-day delay in disclaiming coverage was unreasonable as a matter of law (see , Insurance Law § 3420[d]; Colonial Penn Ins. Co. v Pevzner, 266 AD2d 391; Nationwide Mut. Ins. Co. v Steiner, 199 AD2d 507; cf., Sphere Drake Ins. Co. v Block 7206 Corp., 265 AD2d 78). The additional evidence submitted on the defendant's subsequent motion, in effect, for leave to reargue tends to explain part of this delay. However, as it should have been submitted earlier, this additional evidence cannot be relied upon.

 

O'BRIEN, J.P., FRIEDMANN, GOLDSTEIN and H. MILLER, JJ., concur .

 

ABBEY RICHMOND AMBULANCE SERVICE, INC. v NORTHBROOK

PROPERTY & CASUALTY INSURANCE COMPANY

 

In an action for a judgment declaring that the defendants are obligated to defend and indemnify the plaintiff in an action entitled Nichols v Abbey Richmond Ambulance Serv., pending in the Supreme Court, Westchester County, under Index No. 6427/96, the defendants appeal from a judgment of the same court (Donovan, J. ), entered September 14, 2000, which, inter alia, made the declaration.

 

ORDERED that the judgment is affirmed, with costs.

 

"An insured's good faith belief in nonliability, when reasonable under the circumstances, may excuse a delay in notifying his insurer of an accident" (Chimenti v Allstate Ins. Co., 253 AD2d 534; see, Argentina v Orstego Mut. Fire Ins. Co., 207 AD2d 816, affd 86 NY2d 748). The Supreme Court properly found that the plaintiff demonstrated a good faith, reasonable belief in nonliability so as to excuse its eight-month delay in notifying the defendants of the underlying accident. Neither the manner in which the accident occurred, the apparently trivial nature of the injury, nor the medical treatment rendered would have made a prudent person believe that a personal injury claim would be pursued (see, Briggs v Nationwide Mut. Ins. Co., 176 AD2d 1113; cf., New York Cent. Mut. Fire Ins. Co. v Riley, 234 AD2d 279).

 

O'BRIEN, J.P., KRAUSMAN, FLORIO and SCHMIDT, JJ. , concur.

 

ALLSTATE INSURANCE COMPANY  v. DENBLEYKER

 

Order unanimously reversed on the law without costs, motion denied and cross motion granted. Opinion by Pigott , Jr., P. J.: At issue on this appeal is whether an insured is entitled to a reduction in the amount of the no-fault insurer’s lien for additional personal injury protection (APIP) benefits paid by the no-fault insurer to contribute to the attorneys’ fees of the insured in the underlying personal injury action. Plaintiff, Allstate Insurance Company (Allstate), contends that Supreme Court erred in denying its cross motion to enforce its lien for APIP benefits paid by Allstate on behalf of Debra A. Denbleyker (defendant), its insured, and in granting the motion of the attorneys for defendant seeking a one-third reduction in the amount of the lien. We agree.

The relevant facts are not in dispute . On November 5, 1996, defendant was involved in a motor vehicle accident, sustaining serious personal injuries. She was covered under a policy of automobile liability insurance issued by Allstate.

 

Allstate, as defendant’s no-fault insurance carrier, paid out $50,000 in personal injury protection (PIP) benefits, and $26,000 in APIP benefits. Defendant’s insurance policy with Allstate contains a provision entitled "Subrogation Rights", which provides as follows:

 

"When we pay, an insured person’s rights of recovery from anyone else become ours up to the amount we have paid. The insured person must protect these rights and help us enforce them" (emphasis in original).

 

Defendant ’s underlying personal injury action was settled for $1,150,000. Following the settlement, the attorney who represented defendant in the underlying personal injury action contacted the attorney for Allstate and stated that his firm was entitled to one third of Allstate’s lien for APIP benefits as attorneys’ fees pursuant to Matter of Kelly v State Ins. Fund (60 NY2d 131). Allstate responded that the attorney was not entitled to any portion of Allstate’s lien because there were no such "Kelly rights" in automobile insurance subrogation matters.

 

Thereafter, defendant’s attorneys made a motion to reduce the amount of Allstate’s lien for APIP benefits by one third as contribution toward their attorneys’ fees. In a supporting affirmation, the attorney who represented defendant in the underlying personal injury action stated that the settlement obtained in the personal injury case was due solely to the efforts of his firm in representing Allstate’s insured and asked that the Allstate lien of $26,000 be reduced by one third, representing the lienor’s contribution toward the attorneys’ fees.

 

Allstate opposed the motion and cross-moved to enforce its lien in the amount of $26,000, the APIP benefits paid by Allstate on behalf of its insured, pursuant to its subrogation rights under the policy. In a supporting affidavit, Allstate’s attorney averred that there is no case law to support the position of defendant ’s attorneys that "Kelly rights" apply to no-fault subrogation rights.

 

In granting the motion of defendant’s attorneys, Supreme Court relied upon Matter of Richards v United Health Servs. (121 AD2d 68), concluding that the defendant’s attorneys "created a fund" that would benefit Allstate and thus "have a right to reasonable compensation from the fund" ;. That was error. Matter of Richards is distinguishable on its facts, and has no applicability to this case.  Matter of Kelly v State Ins. Fund (supra) is likewise inapplicable to this case. Kelly was decided under section 29 of the Workers’ Compensation Law and addresses specific statutory rights and obligations of employees and compensation carriers with respect to actions arising out of injuries caused by third-party tortfeasors. Thus, defendant’s attorneys are not entitled to any recovery against the lien amount based on the so-called "Kelly fee" principle.

 

Rather, as Allstate correctly notes, the precise issue raised herein was addressed by the First Department in Breier v Government Empls. Ins. Co. (79 AD2d 967). On similar facts, the court in Breier determined that, "[ w]hile the services of counsel led to the availability of the fund against which [the insurer] placed its lien, the contingency fee arrangement between the [insured] and her counsel could not be enforced against the lienor" (Breier v Government Empls. Ins. Co., supra, at 967). We agree with that reasoning. Here, although the services of defendant’s attorneys led to the availability of the fund against which Allstate placed its lien, the contingency fee agreement was between the defendant and her attorneys and cannot be enforced against one not a party to the agreement, in this case the lienor (see, Breier v Government Empls. Ins. Co., supra).

Accordingly, we conclude that the order should be reversed, the motion of defendant ’s attorneys denied, and the cross motion of Allstate granted. (Appeal from Order of Supreme Court, Onondaga County, Murphy, J. - Lien.) PRESENT: PIGOTT, JR., P. J., PINE, HURLBUTT, KEHOE AND LAWTON, JJ. (Filed Mar. 21, 2001.)

 

DUDLEY v. ALLSTATE INSURANCE COMPANY

 

Judgment unanimously affirmed without costs. Memorandum: Plaintiff commenced this action seeking a judgment declaring that she is entitled to receive $100,000 as the limits of coverage under the supplementary uninsured motorists (SUM) endorsement of her decedent's automobile insurance policy with defendant, Allstate Insurance Company (Allstate). Supreme Court properly awarded plaintiff judgment in the amount of $50,000, thereby granting Allstate an offset for a payment of $50 ,000 previously made to plaintiff by Public Service Mutual Insurance Company (Public Service), representing the limits of coverage under the uninsured motorists endorsement of decedent's policy with Public Service . Condition 8 of the SUM coverage of the Allstate policy provides, in a form prescribed by the applicable regulation (see, 11 NYCRR 60-2.3): "Priority of Coverage. If an insured is entitled to uninsured motorists coverage or supplementary uninsured motorists coverage under more than one policy, the maximum amount such insured may recover shall not exceed the highest limit of such coverage for any one vehicle under any one policy". The condition thus limits plaintiff's potential recovery to $100,000. Condition 8 further provides that the coverage available under the "lower priority policy" issued by Allstate " applies only to the extent that it exceeds the coverage" provided by the "higher priority policy" issued by Public Service. Thus, Allstate is entitled to an offset for the $50,000 paid by Public Service ( see generally, Matter of State Farm Mut. Auto. Ins. Co. [Hill], 213 AD2d 976, 977, appeal dismissed 86 NY2d 779). (Appeal from Judgment of Supreme Court, Erie County, Mahoney, J. - Declaratory Judgment.) PRESENT: HAYES, J . P., WISNER, SCUDDER, KEHOE AND BURNS, JJ. (Filed Mar. 21, 2001.)

 

CHASE'S CIGAR STORE, INC. v. THE STAM AGENCY, INC.

 

Order unanimously affirmed without costs. Memorandum: Plaintiff, the owner and operator of a retail store in the City of Syracuse , alleges that an agent of defendant insurance agency made an unsolicited call at plaintiff’s store and offered to procure a business owners insurance policy for plaintiff. Plaintiff never requested any specific coverage, allegedly relying upon the expertise of defendant’s agent. Thereafter, plaintiff agreed to a proposal that set forth the coverage to be provided by the policy. Plaintiff also executed a written application for insurance that did not include coverage for employee dishonesty. The business owners policy that was issued to plaintiff contained an exclusion for employee dishonesty. Thereafter, one of plaintiff’s employees stole a large sum of money from plaintiff. When plaintiff learned that the insurance policy procured by defendant did not cover the loss, it commenced this action against defendant for breach of contract and breach of its duty to procure appropriate insurance coverage. Supreme Court properly granted defendant’s motion for summary judgment dismissing the complaint."

 

In New York, the duty owed by an insurance agent to an insurance customer is ordinarily defined by the nature of the request a customer makes to the agent" (Wied v New York Cent. Mut. Fire Ins. Co., 208 AD2d 1132, 1133). It is undisputed that plaintiff never requested that defendant obtain employee theft/dishonesty coverage . Because defendant obtained the insurance coverage that plaintiff requested, it fully discharged its duty to plaintiff (see, Ambrosino v Exchange Ins. Co., 265 AD2d 627, 627-628).

 

While conceding that it never requested employee theft/dishonesty coverage, plaintiff nevertheless contends that defendant breached its agreement to review plaintiff’s existing insurance policy and obtain appropriate business owners insurance coverage for plaintiff. We reject the contention of plaintiff that, under the circumstances presented here, it had a "special relationship" with defendant such that plaintiff was entitled to rely upon the representations of defendant’s agent that the new policy was "a better policy" ; than plaintiff’s existing policy (see, Murphy v Kuhn, 90 NY2d 266, 270-273; Ambrosino v Exchange Ins. Co., supra, at 628; Wied v New York Cent. Mut. Fire Ins. Co., supra, at 1133-1134).

 

In any event, once plaintiff received the declarations pages and insurance policy, it had "conclusive presumptive knowledge" of the terms and limits of the policy (Rogers v Urbanke, 194 AD2d 1024, 1024-1025; see, Madhvani v Sheehan , 234 AD2d 652, 654-655). Here, the declarations pages did not indicate that there was any optional coverage for employee theft/dishonesty. In addition, the policy itself contained an exclusion for employee dishonesty and did not contain optional coverage for employee dishonesty. The declarations pages setting forth the policy’s coverages and limits afforded plaintiff an opportunity to review the policy limits and request additional coverage if so desired (see, Madhvani v Sheehan, supra, at 655). "The final decision maker in a risk management situation is ultimately the insured who has the option to forego or obtain additional insurance coverage, which in this case would have required an additional premium" (Madhvani v Sheehan, supra, at 655). (Appeal from Order of Supreme Court , Onondaga County, Centra, J. - Summary Judgment.) PRESENT: PIGOTT, JR., P. J., WISNER, HURLBUTT, KEHOE AND LAWTON, JJ. (Filed Mar. 21, 2001.)

 

ROCHE v. G.E. CAPITAL LIFE ASSURANCE COMPANY OF NEW YORK

 

Order and judgment unanimously affirmed without costs. Memorandum: Supreme Court properly granted the motion of G.E. Capital Life Assurance Company of New York (defendant ) for summary judgment dismissing the amended complaint against it. Plaintiff’s disability insurance policy requires written notice to defendant within 45 days of the possibility of a claim, and it was not until 1998 that plaintiff notified defendant of his injury sustained in 1994. Contrary to the contention of plaintiff, the court properly determined that his notice of disability to defendant was untimely and that there was no reasonable excuse for the more than four-year delay. "[T]he giving of the required notice is a condition to the insurer’s liability. * * * Absent a valid excuse, a failure to satisfy the notice requirement vitiates the policy" (Security Mut. Ins. Co. of N. Y. v Acker-Fitzsimons Corp., 31 NY2d 436, 440; see, Todd v Bankers Life & Cas. Co., 135 AD2d 1066, 1067). Plaintiff further contends that the policy language with respect to notice is ambiguous. We disagree. "Unless otherwise defined by the policy, words and phrases are to be understood in their plain, ordinary, and popularly understood sense, rather than in a forced or technical sense" (Hartford Ins. Co. of Midwest v Halt, 223 AD2d 204, 212, lv denied 89 NY2d 813). We have considered plaintiff’s remaining contentions and conclude that they lack merit. (Appeal from Order and Judgment of Supreme Court, Monroe County, Stander, J. - Summary Judgment .) PRESENT: PIGOTT, JR., P. J., HAYES, SCUDDER, BURNS AND LAWTON, JJ. (Filed Mar. 21, 2001.)

 

JANES v.  NEW YORK CENTRAL MUTUAL INSURANCE COMPANY

 

Order unanimously affirmed with costs. Memorandum: Supreme Court properly granted plaintiff’s cross motion for summary judgment and ordered New York Central Mutual Insurance Company (defendant) to provide coverage under its policy of insurance for a fire loss suffered by plaintiff on September 23, 1993. We reject defendant’s contention that a vacancy exclusion clause that was changed when the policy was renewed in 1988 precludes coverage. Defendant is bound by the coverage provided under the policy as originally issued because, upon renewing the policy in 1988, defendant failed to inform plaintiff of the changes in the vacancy exclusion clause that reduced coverage (see, Insurance Law § 3425 [ d] [3]; 2 Couch, Insurance, § 27:78 [3d ed]; see generally, Annotation, Insurance Company as Bound by Greater Coverage in Earlier Policy Where Renewal Policy Is Issued Without Calling to Insured ’s Attention a Reduction in the Policy Coverage, 91 ALR2d 546; cf., Byron v Liberty Mut . Ins. Co., 63 AD2d 710, lv denied 45 NY2d 712). "Policies of fire insurance are rarely examined by the insured" ; and thus it is "bad faith on the part of [an insurer] to change so radically the terms of the policy, and deliver it as a policy simply renewing the old one, without notice of the change" ( Hay v Star Fire Ins. Co., 77 NY 235, 240). (Appeal from Order of Supreme Court, Wyoming County, Rath, Jr., J. - Summary Judgment .) PRESENT: GREEN, J. P., WISNER, HURLBUTT AND BURNS, JJ. (Filed Mar. 21, 2001).

 

JONES v.  PEERLESS INSURANCE COMPANY

 

Judgment unanimously reversed on the law without costs, cross motion denied, complaint reinstated, motion granted and judgment granted in accordance with the following Memorandum: Plaintiff commenced this action seeking a judgment declaring , inter alia, that he is entitled to pursue a claim for $50,000 under the supplemental uninsured motorist (SUM) provision of an automobile insurance policy issued by defendant. "Under Insurance Law § 3420 (f) (2), an insured’s [SUM] coverage is triggered when the limit of the insured’s bodily injury liability coverage is greater than the same coverage in the tortfeasor’s policy" (Matter of Prudential Prop. & Cas. Co. v Szeli, 83 NY2d 681, 684). Plaintiff, the insured, had a single limit coverage of $100,000 for both bodily injury and property damage, and the tortfeasor had a split liability limit of $50,000 per person and $100,000 per accident for bodily injury. Plaintiff, the only person injured in the accident, settled his personal injury liability claim with the tortfeasor for $50,000. Plaintiff contends that SUM coverage was triggered because, in comparing the $100,000 single limit under his policy with the tortfeasor’s $50,000 per person limit, his bodily injury coverage was greater than the tortfeasor’s. We agree. We conclude, therefore, that Supreme Court erred in determining that the appropriate comparison is between plaintiff’s $100,000 single limit and the tortfeasor’s $100,000 per accident limit where, as here, only one person was injured in the accident (cf., Matter of Prudential Prop. & Cas. Co. v Szeli, supra, at 687-688; Matter of Allstate Ins. Co. v Hager, 199 AD2d 383, 384, lv denied 83 NY2d 757). Thus, we deny defendant’s cross motion, reinstate the complaint, grant plaintiff’s motion and grant judgment in favor of plaintiff declaring that plaintiff is entitled to pursue the SUM claim against defendant. (Appeal from Judgment of Supreme Court, Onondaga County, Tormey, III, J. - Declaratory Judgment.) PRESENT: GREEN, J. P., PINE, HAYES, WISNER AND SCUDDER, JJ. (Filed Mar. 21, 2001.)

 

SANTIAGO V. 1370 BROADWAY

 

MEMORANDUM:

 

The order of the Appellate Division should be modified, without costs, in accordance with this memorandum, and as so modified, affirmed. The certified question should be answered in the negative.

 

We agree with the Appellate Division that the alleged misfeasance of insurance agents and brokers toward their clients is not "malpractice" within CPLR 214(6) (see, Chase Scientific Research , Inc. v The NIA Group, Inc. [decided today]). That a breach of contract claim against insurance agents and brokers would be governed by the six-year statute (CPLR 213[2]) does not, however, resolve this appeal because Herbert, in its third-party complaint, has not asserted a breach of contract claim against Essential. Herbert's third-party complaint charges "negligence and/or errors or omissions ," and "negligence, material misrepresentation or fraud." Fraud (CPLR 213[8]) and misrepresentation (CPLR 213[1]) have six-year limitations periods; negligence has a three-year limitations period (CPLR 214[4]). Applying these sections rather than CPLR 214(6), there should be a factual determination as to whether the action was timely commenced. Issues regarding contribution and indemnification, argued in Supreme Court, are not raised before us.

 

* * * * * * * * * * * * * * * * *

 

On review of submissions pursuant to section 500.4 of the Rules, order modified, without costs, in accordance with the memorandum herein and, as so modified, affirmed, and certified question

answered in the negative, in a memorandum. Chief Judge Kaye and Judges Smith, Levine, Ciparick, Wesley , Rosenblatt and Graffeo

concur.

 

Decided March 22, 2001

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