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05/22/01:         CHUBB & SON, INC. v. CONSOLI

New York State Supreme Court, Appellate Division, First Department

Fraud Committed by Insureds’ Public Adjuster Imputed to Insureds and Defeats Insured’s Recovery under Policy

In this action by an insurer against its insureds to recover amounts paid under their policies, the insurer alleged fraud premised on the conviction of the insured’s public adjuster for fraudulently inflating insurance claims to increase his fee.  The public adjuster admitted that the insureds’ claims were deliberately inflated.  The court held that the insurer was entitled to full recovery from the insureds.  The court concluded that general principles of agency law applied and that the public adjuster was acting within the scope of his authority when he submitted the fraudulently inflated claims.  Thus, the policy’s concealment of fraud provision precluded the insureds from obtaining any recovery under their policies.

 

05/21/01:         MATTER OF STATE FARM MUTUAL AUTOMOBILE INS. CO. v. MCGOVERN

New York State Supreme Court, Appellate Division, Second Department

Letter Disclaiming Coverage based on Insured’s Failure to Forward Suit Papers Invalid as to Injured Party

Insurer sought to disclaim coverage of the injured party on the ground that the injured party failed to timely forward the “suit papers”.  In this proceeding pursuant to CPLR article 75 to permanently stay arbitration, the court determined that the disclaimer was invalid as to the injured party, as the letter sent to the insured disclaimed coverage based on the insured’s failure to timely forward the “suit papers”, not the injured party's failure to timely forward those papers.

 

05/21/01:         CEGLIAN v. CHAN

New York State Supreme Court, Appellate Division, Second Department

Serious Injury Threshold: Disc Bulges and Herniations Alone not “Serious Injury”

Plaintiff alleged disc bulges and herniations as a result resulting of an automobile accident.  Defendant moved to dismiss the action on the ground that plaintiff did not sustain a “serious injury”, as defined by Insurance Law §5102(d).  In opposition to the motion, plaintiff submitted the affidavit of his treating physician, which confirmed the disc bulges and herniations, but failed to set forth any objective evidence concerning the extent or degree of physical limitations resulting from the injuries or that the motor vehicle accident was the cause of the disc injuries. Defendant’s motion to dismiss the complaint granted.

 

05/17/01:         CHAPMAN v. CAPOCCIA

New York State Supreme Court, Appellate Division, Third Department

PTSD Qualifies as “Serious Injury”

Plaintiff’s physical injuries did not qualify as “serious injuries” under Insurance Law §5102(2) sufficient to maintain a cause of action, but plaintiff’s emotional injury did.  Evidence of anxiety, nightmares, sleep disturbances, hyperarousal, hypervigilence, fear, depression, anger and impotence, diagnosed as Post Traumatic Stress Disorder, sufficiently established both permanent loss of use of a body function or system and a significant limitation of use of a body function or system under the statute.

 

05/14/01:         INTERESTED UNDERWRITERS AT LLOYDS v. MIDGE RESTAURANT CORP.

New York State Supreme Court, Appellate Division, Second Department

Five-month Delay in Disclaiming without Explanation Renders Disclaimer Invalid

The insured notified its insurer of an action commenced against the insured arising from an assault that occurred at the insured’s bar.  Five months after the insurer received notice, it disclaimed coverage based on an assault and battery exclusion in the policy.  The court held that the disclaimer was untimely and therefore invalid under Insurance Law §3420(d).  The insurer offered no satisfactory explanation for the delay in disclaiming coverage.

 

05/14/01:         DeSIMONE v. MEJIA

New York State Supreme Court, Appellate Division, Second Department

Serious Injury Threshold: Defendants’ Motion for Summary Judgment Denied where Defendants Failed to Establish Prima Facie Case that Plaintiff did not Sustain “Serious Injury”

Plaintiff claimed to have sustained a “medically-determined injury or impairment of a nonpermanent nature which prevented her from performing substantially all of the material acts which constituted her usual and customary activities for a period of not less than 90 days during the 180-day period immediately following the accident.”  In support of their dismissal motion, defendants submitted plaintiff’s verified bill of particulars and an affirmed report prepared by defendant’s orthopedist indicating that plaintiff advised him she missed seven months of work as a result of the accident.  The defendants’ papers, the court found, failed to make out a prima facie case that plaintiff did not sustain a serious injury.

 

05/14/01:         CHUNG v. ALLSTATE INS. CO.

New York State Supreme Court, Appellate Division, Second Department

An Insured is Presumed to Know Contents of Policy

In an action to declare the limits of liability coverage under insurer’s liability policy, the court held that the insurer established unambiguously that the liability limits of the policy in effect at the time of the accident was $250,000, not $350,000. The court stated that a party who executes a contract is presumed to know its contents and to assent to them.  The plaintiff failed to raise a triable issue of fact whether he assented to the provision concerning the policy limits.  As such, the insurer was entitled to summary judgment and a declaration that the amount of coverage was $250,000.

 

05/14/01:         MILBIN PRINTING, INC. v. LUMBERMEN’S MUT. CASUALTY INS. CO.

New York State Supreme Court, Appellate Division, Second Department

Employment Exclusion Applies where Insured is Sued or Contribution is Requested for Injuries to Insured’s Employee

The insured’s employee was injured in the course of his employment and sued the manufacturer of the machine.  When the manufacturer impleaded the insured, the insured sought defense and indemnification from its insurer, who disclaimed based on the employment exclusion.  In this action brought by the insured for a declaration that its insurer must defend and indemnify it in the underlying personal injury action, the court held that the employment exclusion applied.  The exclusion relieved the insurer of liability when its insured was sued, or contribution was requested, for damages arising out of bodily injury to its employee sustained in the course of employment.

 

05/14/01:         WESTCHESTER COUNTY MEDICAL CENTER v. ALLSTATE INS. CO.

New York State Supreme Court, Appellate Division, Second Department

Insurer’s Intentional Default Results in Coverage

In an action to recover no-fault insurance benefits, the insurer failed to timely appear or answer the complaint, and a default judgment was taken.  The insurer failed to pay the judgment or answer an information subpoena and was later found to be in contempt.  The insurer then moved to vacate the default on the ground that it did not provide coverage to the claimant on the date of the accident.  The insurer argued that its failure to timely disclaim coverage does not operate to create coverage where none exists.  The insurer admitted that it intentionally defaulted because inquires revealed that it did not provide coverage to the claimant. The court denied the insurer’s motion to vacate the default finding that, while it offered a potentially meritorious defense, it gave no excuse for its default.  In light of its intentional default, its motion to vacate was denied. 

 

05/14/01:         TOBIOLO v. FRIEDMAN

New York State Supreme Court, Appellate Division, Second Department

Serious Injury Threshold: Plaintiff’s Doctors’ Affirmations Not Probative in Absence of Recent Exam

Defendant met her burden of establishing that plaintiff did not sustain a “serious injury” by submitting affirmed medical reports of an orthopedist and neurologist, which were based on recent examinations of the plaintiff.  In opposition to the motion, plaintiff submitted two affirmations from her treating doctors, who projected permanent limitations.  Plaintiff’s doctors’ affirmations were based on examinations of the plaintiff conducted over one year before the motion for summary judgment.  The court found that the affirmations had no probative value in the absence of a recent examination.  Further, the doctors’ affirmations failed to set forth what objective tests were performed to determine the range of motion of plaintiff’s spine and shoulder.

 

05/14/01:         MATTER OF VALLEY FORGE INS. CO. v. SCHOFIELD

New York State Supreme Court, Appellate Division, Second Department

Hearing Required on Whether Insurer’s Disclaimer of SUM Benefits was Timely

This was a proceeding to stay arbitration for supplemental underinsured motorist (SUM) benefits.  The insurer disclaimed coverage, alleging that claimant failed to provide timely notice of her underlying action and timely notice of her SUM claim.  The court found that, while the claimant breached a condition precedent by failing to timely forward to the insurer a copy of the summons and complaint in her underlying action, a hearing was nonetheless necessary on the issue of whether the insurer’s disclaimer on that ground was timely.

 

05/14/01:         MATTER OF BRASCO v. NATIONWIDE MUTUAL INS. CO.

New York State Supreme Court, Appellate Division, Second Department

SUM Insurer Estopped from Denying Coverage where it failed to respond to Claimant’s Letters on Settlement of Claim against Tortfeasor

Proceeding to compel arbitration of claims for uninsured and underinsured motorist benefits.  Claimant was a passenger in vehicle driven by Kentrianakis.  Claimant filed claims for both underinsured and uninsured motorist benefits. The insurer denied underinsured benefits on the ground that the claimant did not exhaust the benefits payable under the policy issued to Kentrianakis. The court held that the insurer was estopped from denying coverage based on the exhaustion clause after it was determined that the claimant received no response from the insurer to numerous letters concerning the settlement of the claim against Kentrianakis.

 

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REPORTED DECISIONS

 

CHUBB & SON, INC. v. CONSOLI

 

Order, Supreme Court, New York County (Marilyn Shafer, J.), entered October 19, 2000, which denied plaintiffs' motion for partial summary judgment on their first cause of action for fraud, unanimously reversed, on the law, with costs, and the motion granted. The Clerk is directed to enter judgment in favor of plaintiff Chubb & Son, Inc., against defendants Melvin and Marsha Steinberg in the amount of $148,314.25 plus interest from July 29, 1988, and against defendants Sidney and Elsie Stein in the amount of $46,086.48 plus interest from February 26, 1988, and $20,925 plus interest from August 12, 1988.

 

This action is the aftermath of the conviction of Seymour B. Benson, a public adjuster, in Federal court on charges of mail and tax fraud in connection with a scheme in which he would fraudulently inflate insurance claims to increase his fee, ordinarily a percentage of the payment received by the insured. As part of this fraud, Benson had an arrangement with Nicholas Addesa, a former claim representative of plaintiff-appellant Chubb & Son, Inc., an insurance company that controls Sea Insurance Company of America and Vigilant Insurance Company (collectively "Chubb"), by which Berson would pay Addesa to approve fraudulent claims. Addesa was convicted of defrauding Chubb.

 

Defendants Melvin and Marsha Steinberg (the "Steinbergs") and Sidney and Elsie Stein (the "Steins") held homeowner insurance policies issued by Chubb, and hired Benson, who worked through Jack DuBoff Associates, Inc., a company he owned and controlled, to prepare their claims for damages. Among other things, the policies contained the following "Concealment or Fraud" provision:

 

We do not provide coverage for any insured who has intentionally concealed or misrepresented any material fact or circumstance relating to this insurance.

 

On July 27, 1988, the Steinbergs signed two sworn statements in proof of loss prepared by Benson, claiming a total of $148,564.25 in losses due to a fire at their house on June 13, 1988. On July 29, 1988, Chubb issued two checks totaling $148,314.25 to the Steinbergs, which checks they endorsed and deposited into their joint bank account. On February 3, 1988, the Steins also signed two sworn statements in proof of loss prepared by Benson, claiming losses due to damage from a broken water pipe, in the total amount of $46,086.48. In addition, on August 4, 1988, the Steins signed a sworn statement in proof of loss, claiming damages from a windstorm in the amount of $21,925. Chubb issued two checks totaling $46,086.48, on February 26, 1988, and a check for $20,925, on August 12, 1988, which checks the Steins endorsed and deposited into their joint bank account.

 

Benson admitted that the claims for both the Steinbergs and the Steins were deliberately inflated. Addesa admitted that based on the time frame, the claims for the Steinbergs and the Steins were "probably inflated," although he could not remember them specifically.

 

As a result of the Berson frauds, Chubb brought this action on July 12, 1994 against 22 insureds to recover amounts paid pursuant to their policies. After all the claims except those against the Steins and the Steinbergs were settled, Chubb moved for partial summary judgment on its common-law fraud claim on November 19, 1999. The IAS court denied the motion, finding "no law in New York that imposes absolute liability on an insured for the fraudulent acts of its adjuster." Chubb's motion should have been granted.

 

Defendants do not dispute the well-settled rule that a principal, even if innocent, is liable for acts of fraud that are within the scope of an agent's actual or apparent authority (see, 2A NY Jur.2d, Agency, §§ 290, 291). Nor do defendants dispute that this general principle is the same in the insurance context so that:

 

[A] principal who has expressly or impliedly appointed another person to make proof of loss under an insurance policy is barred from recovery, under a policy which provides that it shall be void for fraud or false swearing of the insured after the loss, where the agent is guilty of fraud or false swearing in or in connection with the proof of loss; and this is so even though the insured is ignorant of the misrepresentation and innocent of any intent to deceive or defraud, and [even when] the act of the agent is to the detriment rather than the benefit of the insured.

(70A NY Jur.2d, Insurance § 1887, citing Kantor Silk Mills v Century Ins., Co., 223 AD 387). In addition, defendants do not dispute that Berson was their agent, whom they hired as their public adjuster to prepare, submit, negotiate and settle their insurance claims (see, Insurance Law § 2101[g][2]). Instead, defendants argue that public adjusters should be exempt from general agency principles. Defendants, however, offer no reason, and we find none, to justify such an exemption. Thus, since Benson was acting within the scope of his authority when he submitted the fraudulently inflated claims, along with the sworn proofs of loss defendants signed (see, Hatton v Quad Reality Corp, 100 AD2d 609, 610, lv denied, 63 NY2d 608), and defendants were the primary beneficiaries of his fraud (see, Center v Hampton Affiliates, Inc., 66 NY2d 782, 784-785), defendants are liable for his actions.

 

The adverse agent rule, which relieves a principal of liability when the agent totally abandons the principal's interests and acts entirely for his or another's purposes, does not help defendants. Since Benson fraudulently inflated defendants' claims, he did not abandon their interests. In contrast, Addesa did abandon Chubb's interests since his actions caused Chubb to pay more than was reasonable for the claims (see, City of NY v Corwen, 164 AD2d 212, 218). That Addesa could not remember defendants' claims specifically raises no triable issue of fact, given Benson unrefuted testimony that he bribed Addesa in exchange for Addesa's approval of the fraudulently inflated claims, and Addesa's admission that he participated in the ongoing scheme. In addition, the Steinbergs themselves admitted that an inventory prepared by Benson's office was inflated.

Finally, the "Concealment or Fraud" provision precludes defendants from obtaining any recovery under their policies as the claims submitted by Benson, in his capacity as their agent, were fraudulent (see, Astoria Quality Drugs, Inc. v United Pacific Ins. Co. of NY, 163 AD2d 82 [fraud provision applied to misrepresentation made after loss]). Chubb, therefore, is entitled to full recovery of the claims paid.

 

We have considered defendants' other arguments and rejected them.

 

MATTER OF STATE FARM MUTUAL AUTOMOBILE

 

In the Matter of State Farm Mutual Automobile Insurance Company, petitioner-respondent, v James McGovern, respondent-respondent; American Transit Insurance Company, additional respondent-appellant. Marjorie E. Bornes, New York, N.Y., for additional respondent-appellant.

Scalzi & Nofi, Melville, N.Y. (Vincent J. Nofi of counsel), for petitioner-respondent.

In a proceeding pursuant to CPLR article 75 to permanently stay arbitration, American Transit Insurance Company appeals from an order of the Supreme Court, Nassau County (Trainor, R.), dated August 29, 2000, which granted the petition.

ORDERED that the order is affirmed, with costs.

 

The appellant, American Transit Insurance Company, sought to disclaim coverage of the injured party on the ground that the injured party failed to timely forward the "suit papers". However, the Supreme Court properly determined that the disclaimer was invalid as to the injured party, as the letter sent to the insured disclaimed coverage based on the insured's failure to timely forward the "suit papers", not the injured party's failure to timely forward those papers (see, General Accident Ins. Group v Cirucci, 46 NY2d 862; Eagle Ins. Co. v Ortega, 251 AD2d 282). Thus, the Supreme Court properly granted the petition.

 

BRACKEN, P.J., O'BRIEN, SMITH and COZIER, JJ., concur.

 

CEGLIAN v. CHAN

 

In an action to recover damages for personal injuries, etc., the defendant William T. Chan appeals from an order of the Supreme Court, Queens County (Polizzi, J.), dated February 14, 2000, which denied his motion for summary judgment dismissing the complaint on the ground that the plaintiff Nick Ceglian did not sustain a serious injury within the meaning of Insurance Law § 5102(d).

 

ORDERED that the order is reversed, on the law, with costs, the motion is granted, and the complaint is dismissed.

 

In support of his motion for summary judgment, the appellant submitted evidence in admissible form establishing that the plaintiff Nick Ceglian did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject motor vehicle accident (see, Gaddy v Eyler, 79 NY2d 955). In opposition to the motion, the plaintiffs submitted an affidavit of the treating physician indicating that Ceglian suffered from disc herniations and bulging discs. However, "such injuries alone do not constitute serious injury" (Descovitch v Blieka, AD2d [2d Dept., Jan. 16, 2001). In the absence of sufficient objective proof of the extent or degree of the alleged physical limitations resulting from the disc injuries, and that the subject motor vehicle accident was the cause of these disc injuries, the plaintiffs failed to raise an issue of fact to defeat summary judgment (see, Descovitch v Blieka, supra; Sainte-Aime v Ho, 274 AD2d 569; Greene v Miranda, 272 AD2d 441; Grossman v Wright, 268 AD2d 79).

 

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

 

INTERESTED UNDERWRITERS AT LLOYDS v MIDGE RESTAURANT CORP.

 

In an action, inter alia, for a judgment declaring that the plaintiff is not obligated to defend and indemnify its insured, the defendant Midge Restaurant Corp., d/b/a Enigma Night Club, in an action entitled Sacco v Midge Restaurant Corp., filed in the Supreme Court, Kings County, under Index No. 19218/97, the plaintiff appeals from an order of the Supreme Court, Kings County (Dowd, J.), dated June 29, 2000, which, inter alia, denied its motion for summary judgment.

ORDERED that the order is affirmed, with costs, and the matter is remitted to the Supreme Court, Kings County, for the entry of a judgment granting declaratory relief in favor of the defendant Midge Restaurant Corp., d/b/a Enigma Night Club.

 

The defendant John Battista Sacco allegedly was assaulted by another patron in a nightclub owned by the defendant Midge Restaurant Corp., d/b/a Enigma Night Club (hereinafter Midge). Thereafter, Sacco commenced a negligence action against Midge. Midge notified the plaintiff, its insurance carrier, of the lawsuit, and approximately five months later, the plaintiff disclaimed coverage based on a policy exclusion for claims arising out of an assault and battery. The plaintiff then commenced this action seeking a judgment declaring that it had no obligation to defend and indemnify Midge in the underlying action based on the exclusion. The Supreme Court denied the plaintiff's motion for summary judgment, concluding that its disclaimer was ineffective. The plaintiff had a duty to timely disclaim coverage because the underlying occurrence in this case is governed by Insurance Law - 3420(d) and the disclaimer was based on an exclusion contained in the policy it issued to Midge (see, Sphere Drake Ins. Co. v Block 7206 Corp., 265 AD2d 78). Since the plaintiff failed to provide a satisfactory explanation for its five-month delay in disclaiming coverage, the Supreme Court properly concluded that the disclaimer was untimely and, therefore, ineffective (see, Hartford Ins. Co. v County of Nassau, 46 NY2d 1028, 1029-1030; American Ref-Fuel Co. of Hempstead v Employers Ins. Co. of Wausau, 265 AD2d 49, 54; Dependible Janitorial Servs. v Transcontinental Ins. Co., 212 AD2d 946).

 

There is no merit to the plaintiff's contention that coverage was forfeited by Midge's noncooperation. Its contention that it is entitled to summary judgment because it did not receive timely notice of the occurrence is unpreserved for appellate review and, in any event, is without merit.

 

We note that since this is a declaratory judgment action, a judgment should be entered granting declaratory relief in favor of Midge (see, Lanza v Wagner, 11 NY2d 317, 334, appeal dismissed 371 US 74, cert denied 371 US 901).

 

ALTMAN, J.P., KRAUSMAN, LUCIANO and COZIER, JJ., concur.

 

DeSIMONE v MEJIA

 

In an action to recover damages for personal injuries, the plaintiff appeals, as limited by her brief, from so much of an order of the Supreme Court, Queens County (Schmidt, J.), dated August 22, 2000, as granted the defendants' motion for summary judgment dismissing the complaint on the ground that she did not sustain a serious injury within the meaning of Insurance Law § 5102(d).

 

ORDERED that the order is reversed insofar as appealed from, on the law, with costs, the motion is denied, and the complaint is reinstated.

 

In support of their motion for summary judgment, the defendants submitted, inter alia, the plaintiff's verified bill of particulars wherein she claimed that she sustained a medically-determined injury or impairment of a nonpermanent nature which prevented her from performing substantially all of the material acts which constituted her usual and customary daily activities for a period of not less than 90 days during the 180-day period immediately following the accident (see, Insurance Law § 5102[d]). The defendants also submitted an affirmed report prepared by their orthopedist, wherein he indicated that the plaintiff advised him that she missed seven months of work as a result of the accident-related injuries. The defendants' papers failed to make out a prima facie case that the plaintiff did not sustain a serious injury (see, Insurance Law § 5102[d]; Polizzi v Won Jun Choi, 264 AD2d 830).

 

CHOUNG v ALLSTATE INS. CO.

 

In an action for a judgment declaring that the limit of liability coverage available under the defendant's insurance policy for the infant plaintiff's injuries is $350,000, the defendant appeals from an order of the Supreme Court, Suffolk County (Dunn, J.), dated April 20, 2000, which granted the plaintiffs' motion for summary judgment and denied its cross motion for summary judgment declaring that the limit of liability coverage available is only $250,000.

 

ORDERED that the order is reversed, on the law, with costs, the motion is denied, the cross motion is granted, and the matter is remitted to the Supreme Court, Suffolk County, for the entry of a judgment declaring that the limit of liability coverage available under the defendant's insurance policy for the infant plaintiff's injuries is $250,000.

 

A party who executes a contract is presumed to know its contents and to assent to them (see, Metzger v Aetna Ins. Co., 227 NY 411; Renee Knitwear Corp. v ADT Security Sys., 277 AD2d 215; Ciaramella v State Farm Ins. Co., 273 AD2d 831). The defendant established, prima facie, that the second insurance policy submitted during the course of litigation was in effect at the time of the accident, and that the provision addressing the limit of liability coverage unambiguously set forth a limit of $250,000 per individual per incident (see, Matter of Mostow v State Farm Ins. Cos., 88 NY2d 321). The plaintiff Moon Choung failed to raise a triable issue of fact as to whether he assented to that provision (see, Metzger v Aetna Ins. Co., supra). Therefore, the Supreme Court should have granted the defendant's cross motion for summary judgment declaring that the limit of liability coverage available under its insurance policy for the infant plaintiff's injuries is $250,000 (see, Matter of Mostow v State Farm Ins. Cos., supra). The matter is remitted to the Supreme Court, Suffolk County, for the entry of a judgment making that declaration (see, Lanza v Wagner, 11 NY2d 317, 334, appeal dismissed 371 US 74, cert denied 371 US 901).

 

RITTER, J.P., KRAUSMAN, H. MILLER and SMITH, JJ., concur.

 

MILBIN PRINTING, INC. v LUMBERMEN'S MUT. CASUALTY INS. CO.

 

In an action for a judgment declaring that the defendants have a duty to defend and indemnify the plaintiff Milbin Printing, Inc., in an underlying personal injury action entitled Sully v Lever Manufacturing, pending in the Supreme Court, Nassau County, under Index No. 12681/93, the plaintiffs appeal from an order and judgment (one paper) of the Supreme Court, Nassau County (Roberto, J.), dated January 31, 2000, which denied their motion for summary judgment, granted the defendants' cross motion for summary judgment, and declared that the defendants have no duty to defend and indemnify the plaintiff Milbin Printing, Inc., in the underlying personal injury action.

 

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

 

The defendants issued a general liability insurance policy to the plaintiff Milbin Printing, Inc. (hereinafter Milbin), which contained an exclusion for bodily injuries to "[a]n employee of the insured arising out of and in the course of employment of the insured". An employee of Milbin was injured in the course of his employment and sued the manufacturer of the machine on which he was injured. The manufacturer in turn impleaded Milbin, which was defended in the lawsuit by the plaintiff New York State Insurance Fund. The plaintiffs commenced this action seeking a declaration that the defendants are obligated to defend and indemnify Milbin. The Supreme Court determined that the defendants have no duty to defend or indemnify Milbin based upon dual employment.

 

An exclusion from coverage "must be specific and clear in order to be enforced" (Seaboard Sur. Co. v Gillette Co., 64 NY2d 304, 311), and an ambiguity in an exclusionary clause must be construed most strongly against the insurer (see, Ace Wire & Cable Co. v Aetna Cas. & Sur. Co., 60 NY2d 390, 398; Lipton, Inc. v Liberty Mut. Ins. Co., 34 NY2d 356, 361). However, an unambiguous policy provision must be accorded its plain and ordinary meaning (see, Sanabria v American Home Assur. Co., 68 NY2d 866, 868), and the plain meaning of the policy's language may not be disregarded in order to find an ambiguity where none exists (see, Acorn Ponds v Hartford Ins. Co., 105 AD2d 723, 724).

 

Here, the plain meaning of the exclusion was to relieve the insurer of liability when its insured was sued or contribution was requested for damages arising out of bodily injury to its employee sustained in the course of employment. Thus, the exclusion applied to the injury in the present case and the Supreme Court properly granted summary judgment in favor of the defendants.

The plaintiffs' remaining contentions are without merit.

 

WESTCHESTER COUNTY MEDICAL CENTER v ALLSTATE INS. CO.

 

In an action, inter alia, to recover no-fault insurance benefits, the defendant appeals from so much of an order of the Supreme Court, Nassau County (Martin, J.), dated June 30, 2000, as denied its motion to vacate that part of a clerk's judgment entered July 9, 1999, upon its failure to appear or answer, as awarded the plaintiff Westchester County Medical Center, as assignee of Adrian Olliviere, the principal sum of $2,687.57.

 

ORDERED that the order is affirmed, with costs.

 

The plaintiff Westchester County Medical Center (hereinafter WCMC), as assignee of non-party Adrian Olliviere, commenced this action against the defendant Allstate Insurance Company (hereinafter Allstate) to recover no-fault insurance benefits. After Allstate failed to timely appear or answer, WCMC, as assignee of Olliviere, obtained a judgment against Allstate in the principal sum of $2,687.57. However, Allstate failed to pay the judgment, despite due demand, and WCMC served an information subpoena on Allstate seeking information to aid the enforcement of the judgment. When Allstate failed to respond to the subpoena, WCMC successfully moved to have Allstate found in contempt. Thereafter, Allstate moved to vacate its default in the action pursuant to CPLR 5015(a)(1). Allstate asserted that it defaulted in the matter because inquiries revealed that it did not provide coverage to Olliviere on the date in question. Thus, it argued, because the failure to timely disclaim coverage that did not exist did not operate to create coverage, it had both a reasonable excuse for its default and a meritorious defense to the action. The Supreme Court denied the motion, and we affirm.

 

A party seeking to vacate a default pursuant to CPLR 5015(a)(1) must proffer both a reasonable excuse for the default and a meritorious defense to the action (see, Gray v B.R. Trucking Co., 59 NY2d 649; Matter of AIU Ins. Co. v Fernandez, AD2d [2d Dept., Mar. 19, 2001]; Phillips, Nizer, Benjamin, Krim & Ballon v Matteo, 271 AD2d 422; Roussodimou v Zafiriadis, 238 AD2d 568). Although Allstate proffered a potentially meritorious defense to the action, it gave no excuse for its default, which it admitted was intentional (see, Roussodimou v Zafiriadis, supra; Perellie v Crimson's Rest., 108 AD2d 903). Allstate would not be precluded from defending against this action based on an alleged lack of coverage, despite its failure to have timely denied benefits on such ground pursuant to the relevant no-fault regulations (see, Central Gen. Hosp. v Chubb Group of Ins. Cos., 90 NY2d 195; Westchester County Med. Ctr. v New York Cent. Mut. Fire Ins. Co., 262 AD2d 553; 11 NYCRR part 65). However, that did not provide it with a reasonable excuse to default and not take any action to vacate that default until judgment was entered and a finding of contempt was made related to the enforcement of the judgment (see, Roussodimou v Zafiriadis, supra). In sum, in light of Allstate's intentional default in this matter, the Supreme Court providently exercised its discretion in denying Allstate's motion.

 

RITTER, J.P., McGINITY, H. MILLER and TOWNES, JJ., concur.

 

TOBIOLO v. FRIEDMAN

 

In an action to recover damages for personal injuries, the plaintiff appeals from an order of the Supreme Court, Nassau County (Phelan, J.), dated July 19, 2000, which granted the defendant's motion for summary judgment dismissing the complaint on the ground that she did not sustain a serious injury within the meaning of Insurance Law - 5102(d).

 

ORDERED that the order is affirmed, with costs.

 

The defendant met her initial burden of establishing, as a matter of law, that the plaintiff did not sustain a serious injury within the meaning of Insurance Law - 5102(d) by submitting, inter alia, the affirmed medical reports of an orthopedist and neurologist, based upon recent examinations of the plaintiff (see, Gaddy v Eyler, 79 NY2d 955; Licari v Elliott, 57 NY2d 230, 236).

In opposition to the defendant's motion, the plaintiff submitted, inter alia, numerous reports that were not in admissible form (see, Grasso v Angerami, 79 NY2d 813, 814; Gleason v Huber, 188 AD2d 581). Furthermore, the two affirmations of the plaintiff's physicians were based on examinations of the plaintiff conducted over one year before the motion for summary judgment. Those projections of permanent limitations have no probative value in the absence of a recent examination (see, Bidetto v Williams, 276 AD2d 516; Mohamed v Dhanasar, 273 AD2d 451; Kauderer v Penta, 261 AD2d 365; Evans v Mohammad, 243 AD2d 604). Moreover, those affirmations failed to state what, if any, objective tests were performed to determine the range of motion of the plaintiff's spine and shoulder (see, Monaco v Davenport, 277 AD2d 209; Grossman v Wright, 268 AD2d 79, 85; Smith v Askew, 264 AD2d 834; Kauderer v Penta, supra; Lobo v Singh, 259 AD2d 523).

 

RITTER, J.P., ALTMAN, McGINITY, SMITH and COZIER, JJ., concur.

 

MATTER OF VALLEY FORGE INS. CO. v. SCHOFIELD

 

In a proceeding, inter alia, to stay arbitration of a claim for supplemental underinsured motorist benefits, the petitioner, Valley Forge Insurance Company, appeals, as limited by its brief, from stated portions of an order of the Supreme Court, Suffolk County (Hall, J.), dated March 2, 2000, which, among other things, denied those branches of its application which were to permanently stay arbitration on the grounds that its insured, Marlene Schofield, failed to provide timely notice of her underlying action against the tortfeasor, and timely notice of her claim for supplemental underinsured motorist benefits, and did not address that branch of its application which was for discovery in the event a stay of arbitration was denied.

 

ORDERED that the order is modified by (1) deleting the provision thereof denying that branch of the petitioner's application which was to permanently stay arbitration on the ground that the insured failed to provide timely notice of her underlying action against the tortfeasor, and substituting therefor a provision granting that branch of the motion to the extent of directing a hearing on the issue of whether the petitioner's disclaimer of coverage on that ground was timely, and (2) adding thereto a provision directing a hearing on that branch of the petitioner's application which was to permanently stay arbitration on the ground that the insured failed to provide timely notice of her claim for supplemental underinsured motorist benefits; as so modified, the order is affirmed insofar as appealed from, with costs to the petitioner.

 

The Supreme Court granted the application of the petitioner, Valley Forge Insurance Company (hereinafter Valley Forge), for a permanent stay of arbitration of the claim for supplemental underinsured motorist (hereinafter SUM) benefits by its insured, Marlene Schofield, to the extent of directing a hearing on certain issues. However, the Supreme Court concluded that Schofield was not required to timely provide Valley Forge with a copy of the summons and complaint in her underlying action against the tortfeasor, and the Supreme Court rejected the contention of Valley Forge that it was entitled to a permanent stay of arbitration on that ground.

Schofield failed to timely forward to Valley Forge a copy of the summons and complaint in her action against the tortfeasor, thus violating one of the conditions precedent to her SUM claim, and potentially entitling Valley Forge to a permanent stay of arbitration (see, Matter of Nationwide Mut. Ins. Co. v Charles, 275 AD2d 324; Matter of Nationwide Ins. Co. v Shedlick, 274 AD2d 519; Matter of Allstate Ins. Co. v Kruger, 264 AD2d 443). However, since the record presents a question as to whether the appellant's disclaimer of coverage on this ground was timely (see, Firemen's Fund Ins. Co. of Newark v Hopkins, 88 NY2d 836; Ward v Corbally, Gartland & Rappleyea, 207 AD2d 342), we direct the Supreme Court to resolve this issue in the hearing.

 

In addition, Schofield correctly concedes on appeal that the Supreme Court erred in determining that Valley Forge had withdrawn its claim that she failed to provide timely notice of her claim for SUM benefits. Whether Schofield's claim for SUM benefits was timely should therefore be determined at a hearing (see, Matter of Metropolitan Prop. & Cas. Ins. Co. v Mancuso, 93 NY2d 487).

 

We do not to consider any issue concerning that branch of Valley Forge's application which sought discovery in the event a stay of arbitration was denied, as the Supreme Court failed to determine that branch of its motion, and it remains pending and undecided (see, Katz v Katz, 68 AD2d 536; Louis Savarese Gen. Constr. v Mychalczak, 272 AD2d 300).

 

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

 

MATTER OF BRASCO v NATIONWIDE MUTUAL INS. CO.

 

In a proceeding pursuant to CPLR article 75 to compel arbitration of claims for uninsured and underinsured motorist benefits, the petitioner appeals from so much of an order of the Supreme Court, Kings County (Vaughan, J.), dated September 28, 1999, as denied that branch of his application which was to compel arbitration with respect to his claim for underinsured motorist benefits under Policy Nos. 66-31-P404026 and 66-31-P097386 issued by Nationwide Mutual Insurance Company, and Nationwide Mutual Insurance Company cross-appeals from so much of the order as granted that branch of the petitioner's application which was to compel arbitration of his claim for uninsured motorist benefits under Policy No. 66-31-P404026.

 

ORDERED that the order is modified, on the law, by deleting the provision thereof denying that branch of the petitioner's application which was to compel arbitration of his claim for underinsured motorist benefits under Policy No. 66-31-P404026 and substituting therefor a provision granting that branch of the application; as so modified, the order is affirmed insofar as appealed and cross-appealed from, without costs or disbursements.

 

The petitioner, Arthur Brasco, was a passenger in a motor vehicle driven by Michael J. Kentrianakis which collided with a bus owned by Hausman Bus Sales, Inc. (hereinafter Hausman), in Atlantic City, New Jersey. The bodily injury limit in the Kentrianakis policy was $15,000. The company that issued the Hausman policy became insolvent, and Hausman is therefore considered uninsured under New Jersey law.

 

The petitioner filed claims for underinsured and uninsured motorist benefits under insurance policies issued by the respondent, Nationwide Mutual Insurance Company, to him and his parents. The respondent denied underinsured benefits on the ground that the petitioner did not exhaust the benefits payable under the policy issued to Kentrianakis. It denied uninsured benefits on the ground that the petitioner did not inform it of the potential claim for uninsured benefits. However, the petitioner received no response from the respondent to numerous letters concerning the settlement of the underinsured motorist claims against Kentrianakis. The respondent is therefore estopped from denying coverage on the failure to exhaust this claim (see, Matter of Atlantic Mut. Ins. Co. v Cooper, 247 AD2d 209; Matter of Allstate Ins. Co. v Sullivan, 230 AD2d 732; Matter of Tri-State Consumer Ins. Co. v Hundley, 208 AD2d 754). Moreover, it is clear that the respondent had notice of the uninsured claim (cf., Matter of Eagle Ins. Co. v Bernardine, 266 AD2d 543).

 

The Supreme Court correctly found that the petitioner is limited, under the terms of his policy's priority of coverage provision, to the limits of his own policy where the limits of his parents' policy did not exceed those of his own. "The unambiguous language of each policy precludes the stacking of SUM coverage" (Matter of State Farm Mut. Auto. Ins. Co., 213 A.D.2d 976, 977). Accordingly, the petitioner may not proceed against his parents' policy for the uninsured motorist claim (see, 11 NYCRR 60-2.3; Matter of Metropolitan Prop. & Cas. Ins. Co. v Mancuso, 93 NY2d 487).

 

CHAPMAN v. CAPOCCIA

 

Mugglin, J.

 

Appeal from an order of the Supreme Court (Viscardi, J.), entered December 27, 1999 in Washington County, upon a dismissal of the complaint at the close of evidence.

 

Defendants do not dispute that they were retained by plaintiff to institute an action for injuries that he sustained in an automobile accident which occurred March 26, 1987. Likewise, defendants do not dispute that they failed to institute that action before it was barred by the applicable Statute of Limitations. The sole defense pursued in this legal malpractice action for defendants' failure to commence a lawsuit with respect to said accident was that plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102 (d), thus barring the personal injury action. At the close of proof, defendants moved to dismiss for plaintiff's failure to establish the existence of a serious injury and for failure to establish a causal connection between the 1987 accident and plaintiff's claimed injury of posttraumatic stress disorder (hereinafter PTSD). Supreme Court reserved on the motion and submitted the case to the jury. By a vote of 5 to 1, the jury determined that (1) plaintiff suffered a permanent loss of use of a body function or system in the accident, (2) the accident was a substantial factor in causing this permanent loss, (3) plaintiff sustained a significant limitation of use of a body function or system as a result of this accident, (4) the accident was a substantial factor in causing this limitation, and (5) total damages both preverdict and postverdict for pain and suffering were $255,000. Defendants thereafter moved to set aside the verdict pursuant to CPLR 4404 (a). Supreme Court granted defendants' trial motion, upon which it had reserved decision, and dismissed the complaint, prompting this appeal by plaintiff.

 

As a preliminary matter, although Supreme Court made reference to the posttrial motion in its decision, it is evident from reading the decision that the court did not set aside the jury verdict as against the weight of the evidence but, rather, granted defendants' trial motion to dismiss plaintiff's complaint for failure to establish a prima facie case on the issues of serious injury and proximate causation. The decision focuses entirely on the latter issues (see, Quinn v Licausi, 263 AD2d 820, 820) and not on the former (see, Rosabella v Finelli, 225 AD2d 1007, 1008). For the reasons that follow, we conclude that Supreme Court incorrectly granted this motion and we therefore reverse.

 

Our analysis begins by recognizing, as did Supreme Court, that absent a serious injury, there could be no recovery in a personal injury action arising out of a motor vehicle accident (see, Licari v Elliot, 57 NY2d 230). Moreover, as Supreme Court correctly noted, "serious injury must be established through 'competent medical evidence based upon objective medical findings and diagnostic tests'" (Uhl v Sofia, 245 AD2d 988, 990, quoting Eisen v Walter & Samuels, 215 AD2d 149, 150), and "it is incumbent upon the court to decide in the first instance whether plaintiff has a cause of action to assert within the meaning of the statute" (Licari v Elliot, supra, at 237). While the physical injuries sustained by plaintiff in this accident undoubtedly would not qualify as serious within the meaning of Insurance Law § 5102 (d), this Court (see, Sellitto v Casey, 268 AD2d 753; Spinrad v Gasser, 235 AD2d 687), and the other Appellate Divisions of this State (see, Wyman v Giarnela & Son, 170 AD2d 229; Quaglio v Tomaselli, 99 AD2d 487; Arno v Kennedy, 88 AD2d 754), have all recognized that an emotional injury, causally related to an automobile accident, can constitute a serious injury sufficient to maintain a cause of action to recover damages for noneconomic loss. Thus, this record must be examined to determine if there is objective medical evidence of PTSD within the guidelines of these cases.

 

This record contains the testimony of plaintiff's treating orthopedist, his treating psychiatrist and the psychiatrist who examined plaintiff twice, once in 1988 concerning no-fault benefits and once in 1999 for his independent medical examination relative to this trial. Plaintiff established a prima facie case, sufficient to permit the issue to be submitted to the jury, by the testimony of his treating psychiatrist who based his opinion on a review of plaintiff's full history and on the fact that he suffered such symptoms as anxiety, nightmares, sleep disturbance, hyperarousal, hypervigilance, fear, depression, anger, preoccupation with his physical condition and impotence.

 

Moreover, it was his orthopedist's observation of plaintiff's emotional overlay that prompted the original reference to his treating psychiatrist in 1987, resulting in the original working diagnosis of PTSD and his continuous treatment from that day to the present for this condition. Some of plaintiff's symptoms were capable of being objectively observed by his treating physicians and some were objectively established by his testimony and that of his wife, especially with respect to hyperarousal (collapsing in a theater while viewing a car chase scene), hypervigilance (constantly talking to drivers of other automobiles when he is driving), and withdrawal (sleeping in, and otherwise spending much of his day in, a "therapeutic" chair). In our view, this evidence sufficiently established both a permanent loss of use of a body function or system (given the chronic nature of the problem) and a significant limitation of use of a body function or system and provided a medical foundation for plaintiff's complaints of psychological trauma for the jury's consideration (see, Quinn v Licausi, 263 AD2d 820, 820, supra; Spinrad v Gasser, 235 AD2d 687, 688, supra), and was not based simply on his subjective complaints.

 

Lastly, on this issue, since the motion to dismiss was not made until both sides had rested, we note that the psychiatrist who testified for defendants also diagnosed plaintiff as suffering from PTSD. Both psychiatrists testified to the four elements that must exist to support this diagnosis. Notably, neither psychiatrist testified to either the existence of diagnostic tests to objectively demonstrate the existence of PTSD or the need to rely on such tests in order to diagnose plaintiff's condition. Consequently, on this record, we hold that Supreme Court erred by dismissing plaintiff's complaint based on an absence of testimony concerning diagnostic testing and by finding that plaintiff's proof of PTSD was solely subjective.

 

The remaining issue is whether plaintiff established by competent evidence that his PTSD was causally related to the 1987 accident. In this regard, his treating psychiatrist attributed 75% of the disorder to the 1987 accident and 25% to a prior accident. We note that he was not asked on direct examination whether he could so state within a reasonable degree of medical certainty, but when pressed on cross-examination as to whether that was possible, he stated, "It is my best medical opinion, yes." In our view, the treating psychiatrist's testimony sufficiently established the prima facie case. The fact that defendants' psychiatrist testified that plaintiff's PTSD was partially caused by the 1987 accident (although it could not be caused solely by that accident), partially by a previous accident, partially by plaintiff's experiences in the Army in the mid-1940s, and partially by an episode when a deer ran into the side of his car in 1988, but that it was impossible to assign percentages to these episodes, merely raised an issue of credibility and weight of the evidence for the jury to resolve. In sum, by the end of the trial, there was no dispute that plaintiff suffers from PTSD and that it was at least partially attributable to the 1987 accident. Under these circumstances, the case was properly submitted to the jury and its verdict should not have been disturbed by the subsequent granting of defendants' trial motion.

 

Peters, J.P., Spain, Carpinello and Lahtinen, JJ., concur.

 

ORDERED that the order is reversed, on the law, with costs, motion denied and verdict reinstated.