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06/13/02:         SMITH v. GENERAL ACC. INS. CO.

New York Supreme Court, Appellate Division, Third Department

Property Damage Disclaimer Need Not Be as Specific as Liability Disclaimer

Defendant received prompt notice of the accident and initiated an investigation of the incident. On September 12, 1997, defendant sent a reservation of rights letter to plaintiff and, on October 9, 1997, defendant disclaimed coverage upon the ground that the accident fell within a policy exclusion for loss caused “by any operation that stresses the machine beyond the manufacturer’s suggested operational limits”. After being notified that defendant had disclaimed coverage, plaintiff commenced this action and, following disclosure, defendant successfully moved for summary judgment. This appeal by plaintiff ensued. Plaintiff contends that defendant’s disclaimer letter was inaccurate and lacked specificity. Because this action involves a property insurance claim, it is not controlled by the high degree of specificity required by Insurance Law §3420(d) for a disclaimer of liability for death or bodily injury. Defendant’s disclaimer letter stated that “on or about 09-03-97 you drove the truck crane backwards, while the boom was extended approximately * * * ninety to ninety seven feet resulting in damage” and further referred plaintiff to the exclusion for losses caused by “any operation that stresses the machine beyond the manufacturer’s suggested operational limits”. In the court’s view, defendant’s disclaimer letter provided ample notice of the reason for the denial of coverage of plaintiff’s property loss claim.

06/13/02:         BECK v. EASTERN MUT. INS. CO.

New York State Supreme Court, Appellate Division, Third Department

Where Insured Was Denied Coverage in Earlier Declaratory Judgment Action, Before Trial of Underlying Action, Insured Cannot Re-litigate Coverage Issue AFTER Verdict

A patron of a bar owned and operated by plaintiffs was injured when he was assaulted by plaintiffs’ off-duty employee. The patron sued plaintiffs in 1993, alleging causes of action for assault, dram shop liability and negligent hiring and/or supervision. When defendant refused plaintiffs’ demand to defend and indemnify them in the underlying tort action, a declaratory judgment action was commenced. In 1998, Supreme Court granted defendant’s cross motion for summary judgment concluding that it was bound by the holding of the Court of Appeals in U.S. Underwriters Ins. Co. v Val-Blue Corp. (85 NY2d 821) and finding that there was “no coverage under the intentional tort exclusion of the policy even when the underlying complaint also contains causes of action for negligent hiring”. At the trial of the patron’s tort action seven years after the action was commenced, the jury returned a verdict against plaintiffs on the negligence claim. Appellate court found that principles of res judicata precluded a second declaratory judgment action.

 

 06/10/02:        ALL WASTE SYS. v. GULF INS. CO.

New York State Supreme Court, Appellate Division, Second Department

Coverage Opinions and Draft Disclaimer Letters are Not Discoverable

Generally, the party asserting a privilege has the burden of establishing the right to such privilege and must show that the information sought to be protected from disclosure was a confidential communication from an attorney to a client for the purpose of obtaining legal advice or services. Further, as long as the communication is primarily or predominately of a legal character, the privilege is not lost because it contains or refers to some nonlegal concerns.  The court held that coverage opinion reports and draft disclaimer letters prepared by outside legal counsel were primarily and predominately legal in nature and, in their full content and context, were made to render legal advice or services to Gulf.  Accordingly, the documents were privileged and the lower court erred in compelling their disclosure.

 

06/10/02:         NEWMAN – BACHHUBER v. HU

New York State Supreme Court, Appellate Division, Second Department

Plaintiff Raises Sufficient Triable Issue of Fact to Preclude the Granting of Defendant’s Motion for Summary Judgment on Serious Injury Threshold

After defendant established entitlement to summary judgment dismissing the plaintiff’s complaint, the plaintiff came forward with evidence to demonstrate that she may have sustained a serious injury. The proof submitted by the plaintiff consisted of certified medical reports from her treating physician, as well as an affidavit from a radiologist that stated that she had bulging and herniated cervical discs. The Court held that since a bulging or herniated disc may constitute evidence of serious injury, the defendant was not entitled to summary judgment.

 

06/06/02:         MCKAY v. HEALTHCARE UNDERWRITERS MUT. INS. CO.

New York Supreme Court, Appellate Division, Third Department

Claims Arising out of Drug Counselor's Sexual Relationship with Client Fall Outside of His Scope of Employment and Thus Outside of Policy Coverage

Court held that the policy was issued to the County, not its employee, and therefore the coverage sought by plaintiff must be based on the employee’s status as a County employee. Although the claims covered provision cited by defendant contained no reference to scope of employment, the policy defined a “claim” as “an allegation of injury or death to a person because of Professional Services which you, or a person for whose conduct you were responsible, provided”. Accordingly, the court was of the view that the coverage afforded by the policy with regard to professional services rendered by County employees is coextensive with the scope of the County’s responsibility, or vicarious liability, for the acts of those employees. This conclusion is consistent with the business purpose and expectations of defendant and the County when the policy was issued, which is “[a]n important guidepost” in the interpretation of the policy. Court found that sexual relationship entered into by drug counselor with client was for personal gratification, outside of course of employment and thus no coverage available for that claim.

 

06/03/02:         BEDFORD CENT. SCHOOL DIST. v. COMMERCIAL UNION INS. CO.

New York Appellate Division, Second Department

What are "Your Operations" Under Additional Insured Provisions?

The Supreme Court properly determined that Commercial Union was obligated to defend and indemnify the District and New York Insurance Foundation, as attorney-in-fact, for New York Schools Insurance Reciprocal (plaintiffs), on a 50/50 basis pursuant to an insurance policy issued by Commercial Union to Iona, which named the District as an “additional insured,” but only with respect to “liability arising out of [Iona’s] operations or premises owned by or rented to you.” The subject insurance policy contained provisions that were ambiguous and therefore must be construed against the insurer, the drafter of the document. Moreover, although the Challenge course was owned by the District when the infant plaintiff in the underlying action sustained his injuries, and was supervised by a District employee, the infant plaintiff's injuries arose out of Iona’s “operations.” The students were on a class field trip organized by Iona, an educational institution which arranged for the high school students to use the District’s Challenge course, transported the students therefore that purpose, and provided faculty to supervise the students while at the District’s facility Under the circumstances, the plaintiffs are entitled to coverage pursuant to the additional insured endorsement in the policy since the underlying action arose out of Iona’s “operations.”

 

05/30/02:         ARROWOOD v. LOWINGER

New York Appellate Division, First Department

"Exquisite Tenderness" Does Not a Serious Injury Make (in NY)

The findings of two doctors, who examined plaintiff in September and October 2000, respectively, that plaintiff had “exquisite tenderness” of his left Achilles heel and “extreme sensitivity on the back of the left ankle” do not demonstrate a “permanent consequential limitation of a body organ or a member” or a “significant consequential limitation of a use of a body function or system”. Moreover, the findings were based on plaintiff's subjective complaints of pain are thus insufficient to raise a triable issue under Insurance Law § 5102 (d). Notably, plaintiff did not seek treatment for over four years and returned to his employment within 11 weeks of the accident. In these circumstances, the doctors’ conclusory assertions that plaintiff had suffered a permanent injury is insufficient to defeat defendants' entitlement to summary judgment. A finding that plaintiff suffered a “2-4% impairment of the whole person, a 5-10% of the lower limb and 7-14% impairment of the ankle” is not supported by any objective medical tests performed by the doctor and appears to be tailored to meet statutory requirements. In any event, the claimed limitations are not of sufficient magnitude to qualify as a “significant” or “important limitation of use”. An MRI report that allegedly showed a tendon rupture of plaintiff's right ankle was taken three and one-half years after the accident and the injury was not shown to be causally related to the accident. Notably, none of plaintiff's treating physicians diagnosed a ruptured tendon following the accident and the doctors who examined plaintiff in 2000 made no findings of injury to his right ankle. Plaintiff's affidavit, in which he claimed to have been unable to give golf lessons for three to five months following the accident is contradicted by his deposition testimony and is, in any event, unsupported by a physician's affidavit substantiating his impairment and relating it to the accident. Plaintiff's unsubstantiated claim that he was unable to do household chores is insufficient to show that he “suffered, a medically determined injury or impairment of a non-permanent nature” which prevented him from “performing substantially all of the material acts which constitute ... [his] ususal and customary daily activities” for at least 90 days of the 180 days following the accident.

 

05/28/02:         MATTER OF NATIONWIDE MUT. INS. CO. v. DIGREGORIO

New York State Supreme Court, Appellate Division, Second Department

Claim for Underinsured Benefits Denied Because of Late Notice -- Once Claimant Knew She Had Herniated Disc, She Had Obligation to Determine Whether Tortfeasor Was Uninsured

On May 15, 1999, the appellant, while a passenger in a friend’s vehicle, suffered personal injuries in a two-vehicle collision. In addition to injuries that she noticed immediately, her lower back started hurting about a week after the collision. She went for an MRI, and learned that she had a herniated disc and a pinched nerve. At a doctor’s suggestion, she went for physical therapy for about six weeks, but that did not help. By June 1999, the appellant's back “was getting worse and worse and [she] couldn't walk.” Finally, one day in February 2000, she “had to call 911 because [she] just couldn't move and [she] was taken to the hospital.” Eventually, she was told that she would need surgery on her back to correct the herniated disc. In March 2000, after she consulted an attorney, the appellant sued the owner and driver of the other vehicle involved in the collision (hereinafter the tortfeasors). On April 28, 2000, the tortfeasor’s insurer informed the appellant’s attorney that the policy limits were $25,000. Thereafter, by letter dated May 4, 2000, the appellant’s attorney informed Nationwide of the appellant's friend, that the appellant intended to make an underinsured motorist claim. Nationwide disclaimed coverage because, among other grounds, the appellant failed to provide it with notice of her claim for underinsurance benefits “as soon as practicable”, as required by the policy. Where there is a question as to whether an insured has given an insurer notice of a claim for underinsurance benefits “as soon as practicable,” the court must determine whether the insured gave notice “with reasonable promptness after the insured knew or should reasonably have known that the tortfeasor was underinsured”. The insured must demonstrate that he or she “acted with due diligence in attempting to determine the insurance status of the other vehicle involved in” the subject accident. Under the particular facts of this case, the appellant’s notice to Nationwide was untimely. The appellant claims that she did not know of the seriousness of her injury until February or March 2000, when she was informed that her herniated disc required surgery, and that she thereafter promptly sued the tortfeasor and notified Nationwide of her underinsurance claim. However, her own testimony at the hearing established that by June 1999 the appellant knew that she had a herniated disc and a pinched nerve with pain radiating down to a leg. The Court concludes that the appellant’s time in which to determine whether the tortfeasor was underinsured should be measured from that date. Thus, she waited more than 10 months before notifying Nationwide of her claim for underinsurance benefits. Under the circumstances, the appellant failed to demonstrate that she acted with due diligence in attempting to ascertain the insurance status of the tortfeasor's vehicle, and her notice to Nationwide was untimely.

 

ACROSS BORDERS

 

Visit the HOT CASES section of the Federation of Defense and Corporate Counsel website for cases covering a broad range of legal issues from other jurisdictions:  www.thefederation.org.

 

06/12/02:         FARMINGTON CASUALTY CO. v. UNITED EDUCATORS INSURANCE RISK RETENTION GROUP INC

Tenth Circuit (applying Colorado law)

Contribution of Defense Costs Among Carriers Determined by Contractual Provisions Despite the Fact that No Direct Contractual Relationship Exists

In a dispute between University of Colorado's insurance carriers regarding defense of a wrongful termination and defamation claim, dismissal of primary carriers’ claim for equal contribution of defense costs from excess carrier affirmed, based upon the policy language and applying Colorado law.

 

Prepared by Rebecca Levy Sachs of Podvey, Sachs, Meanor, Catenacci, Hilder & Cocoziello in Newark, New Jersey.

 

06/12/02:         RICH PROD. CORP. v. ZURICH AM. INS. CO.

Seventh Circuit (applying Wisconsin law)

Direct Action Statute Prohibits Direct Negligence Action Against Carrier Where Underlying Negligence Action Dismissed

Wisconsin statutes allowing a direct action against insurers for damages caused by negligence, will not allow a direct negligence action to proceed where formal negligence claims have been dismissed, but remaining warranty claims are based on that negligence, and the insurer is not required to plead these limitations as an affirmative defense.

 

06/11/02:         TUCKER v. STATE FARM AUTOMOBILE INSURANCE

Utah Supreme Court

Three year Suit Limitations Period for First Party Claims Cannot be Circumvented by Attempt to Assert Non-contractual Tort Claims Against Carrier

After an accident State Farm declined coverage for injuries that did not result from the accident. Almost four years later, insureds filed suit claiming fraud and tolling of stature of limitations. Dismissal was affirmed since a first party policy is controlled by the three year statute of limitations and nothing in State Farm's actions either tolled the limitations period or justified fraud claims to bring it with in the four year tort limitations statute.

 

Prepared by Rebecca Levy Sachs of Podvey, Sachs, Meanor, Catenacci, Hilder & Cocoziello in Newark, New Jersey.

 

06/10/02:         LOW v. GOLDEN EAGLE

California Court of Appeal

No Duty to Defend Class Action Complaint Against Product Manufacturer Just Because Pleadings Could be Amended to Include Bodily Injury Claim

The complaint is not only couched overwhelmingly in class action terms, but the named plaintiff expressly disclaims any interest in seeking recovery of damages for her alleged personal injuries, despite that fact that such an allegation is required to trigger coverage and a related duty to defend under the policy. The claims are only for economic loss. True, the complaint is subject to amendment, if leave to do so is granted by the trial court. However, given the nature of the Perez action as gleaned from the unamended complaint, revisions to that pleading to eliminate the class action allegations and revoke the plaintiff’s disclaimer of any interest in seeking damages for personal injury would in effect substitute one cause of action for another. Court thinks that amounts to speculating about unpled causes of action.

 

06/06/02:         IGF INS. CO. v. HAT CREEK PARTNERSHIP

Arkansas Supreme Court

Federal Crop Insurance Act Preempts State Insurance Act Which Disfavors Mandatory Arbitration Clauses

Because the Federal Crop Insurance Act specifically relates to the business of insurance, the McCarran-Ferguson Act is inapplicable, and the federal insurance statute preempts the Arkansas arbitration statute. The Arkansas statute purporting to prevent the enforceability of arbitration clauses in insurance contracts “directly or indirectly affect[s] or govern[s]” the crop insurance contract authorized by the FCIC, and it is therefore inconsistent with, and preempted by, the federal statute. The trial court erred in concluding otherwise, and we reverse its denial of IGF's motion to compel arbitration.

 

06/06/02:         DUPRE v. ALLSTATE INS. CO.

Colorado Court of Appeal

“Replacement Cost Policy” Requires Rebuilding Of Home To Modern Standards

Shortly after plaintiff Dupre purchased a ninety-one-year-old house, a fire caused smoke and fire damage to portions of her home. Dupre had insured the home for about $100,000 and suffered about $60,000 in damages. After she submitted a proof of claim in that amount, Dupre learned that she could not merely restore the damaged parts of her house to their former specifications, she would have to comply with the new building codes. Defendant Allstate informed Dupre that the policy specifically excluded such upgrades. The Court of Appeal disagreed. Reversing the lower court, it found that the exclusion applied only to “physical loss” actually caused by enforcement of building codes as opposed to a loss caused by a fire resulting in required compliance with higher standards. The court also found that the plain language of this “replacement cost policy” required Allstate to replace the structure, up to the policy limits, not just pay for a “reproduction” of the home as it was before the newer more demanding building codes were effected.

 

Prepared by Bruce Celebrezze of Celebrezze & Wesley in Los Angeles.

 

AND IN DEFENSE

 

06/13/02:         CHIANESE v. MEIER

New York Court of Appeals

Apportionment Allowed Between Negligent Landlord and Criminal Assailant

The major issue on this appeal is whether apportionment of damages for personal injuries is permissible between a negligent landlord and the nonparty assailant who attacked the plaintiff-tenant (see CPLR 1602[5]). High Court concludes that it is. In resolving a split among the Appellate Division Departments, court finds that under Article 16 of the CPLR, negligent defendant is entitled to apportionment against defendant who was found to have committed intentional acts.

 

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ALL WASTE SYSTEMS, INC. v. GULF INS. CO.

 

In an action for a judgment declaring that the defendant Gulf Insurance Company is obligated to provide insurance coverage to and indemnify the plaintiff in an action entitled Mann v All Waste Systems, Inc., pending in the Supreme Court, Orange County, under Index No. 7848/97, the defendant Gulf Insurance Company appeals from (1) an order of the Supreme Court, Orange County (Peter C. Patsalos, J.), dated October 31, 2001, which, in effect, held the plaintiff's motion to compel disclosure in abeyance, pending a sua sponte in-camera review of the subject documents, and (2) an order of the same court, dated January 4, 2002, which granted the plaintiff's motion to compel disclosure of the subject documents.

 

ORDERED that the appeal from the order dated October 31, 2001, is dismissed; and it is further,

 

ORDERED that the order dated January 4, 2002, is reversed, and the motion is denied; and it is further,

 

ORDERED that one bill of costs is awarded to the defendant.

 

The order dated January 9, 2002, did not decide the plaintiff's motion. Accordingly, the appeal must be dismissed because the plaintiff's motion was pending and undecided at that time (see Katz v Katz, 68 AD2d 536). In any event, the order dated October 31, 2001, was superseded by the order dated January 4, 2002.

 

Gulf Insurance Company (hereinafter Gulf) asserted a claim of privilege in denying disclosure of coverage opinion reports and attached draft disclaimer letters which outside legal counsel prepared for it. The plaintiff All Waste Systems, Inc. (hereinafter All Waste), sought to compel disclosure of the subject documents because, inter alia, the reports and draft disclaimer letters were prepared in the regular course of business and were not shielded by privilege.

 

Generally, the party asserting a privilege has the burden of establishing the right to such privilege and must show that the information sought to be protected from disclosure was a confidential communication from an attorney to a client for the purpose of obtaining legal advice or services (see Spectrum Sys. Intl. Corp. v Chemical Bank, 78 NY2d 371; Matter of Priest v Hennessy, 51 NY2d 62; Cross Bay Contr. Corp. v Town of Islip Resource Recovery Agency, 238 AD2d 461). Further, as long as the communication is primarily or predominately of a legal character, the privilege is not lost because it [*3]contains or refers to some nonlegal concerns (see Rossi v Blue Cross & Blue Shield of Greater N.Y., 73 NY2d 588; Bertalo's Rest., Inc. v Exchange Ins. Co., 240 AD2d 452).

 

The documents that All Waste seeks to obtain are primarily and predominately legal in nature and, in their full content and context, were made to render legal advice or services to Gulf (see Spectrum Sys. Intl. Corp. v Chemical Bank, supra; Rossi v Blue Cross & Blue Shield of Greater N.Y., supra). Accordingly, the documents are privileged and the Supreme Court erred in compelling their disclosure.

 

The plaintiff's remaining contention is without merit.

 

PRUDENTI, P.J., SMITH, FRIEDMANN and ADAMS, JJ., concur.

 

McKAY v. HEALTHCARE UNDERWRITERS MUT. INS. CO.

 

Carpinello, J.

 

Appeal from an order of the Supreme Court (Reilly Jr., J.), entered April 6, 2001 in Schenectady County, which, inter alia, granted defendant's motion for summary judgment dismissing the complaint.

 

In 1997, plaintiff commenced an action against Joseph Ciani and her employer, Schenectady County, for emotional injuries arising out of a sexual relationship with Ciani which developed after she sought assistance for her alcohol and drug abuse from the County's employee assistance program. Ciani was the director of that program. Plaintiff's complaint against the County was [*2]ultimately dismissed and, after trial, she was awarded substantial damages based upon Ciani's negligence in the course of his therapist-client relationship with her (see, McKay v Ciani, 288 AD2d 587). When the judgment remained unsatisfied, plaintiff commenced this declaratory judgment action against defendant, claiming that defendant was obligated to satisfy the judgment under its professional liability policy issued to the County. In lieu of an answer, defendant moved to dismiss the complaint or for summary judgment.  Supreme Court granted the motion and this appeal ensued.

 

Defendant sought dismissal on two grounds. First, that because Ciani's acts were outside the scope of his employment, the policy did not cover the claim against Ciani and, second, that Ciani's acts fell within the policy's sexual abuse exclusion. For the first ground, defendant relied on the provision in the claims covered section of the policy which provides coverage for "claims which are made against you because of professional services which you provided". Plaintiff contends that her claim is covered because it arose out of Ciani's negligence in rendering professional services.

 

The policy was issued to the County, not to Ciani, and therefore the coverage sought by plaintiff must be based on Ciani's status as the County employee who provided the professional services. Although the claims covered provision cited by defendant contains no reference to scope of employment, the policy defines a "claim" as "an allegation of injury or death to a person because of Professional Services which you, or a person for whose conduct you were responsible, provided" (emphasis supplied). Accordingly, we are of the view that the coverage afforded by the policy with regard to professional services rendered by County employees is coextensive with the scope of the County's responsibility, or vicarious liability, for the acts of those employees. This conclusion is consistent with the business purpose and expectations of defendant and the County when the policy was issued, which is "[a]n important guidepost" in the interpretation of the policy (Baughman v Merchants Mut. Ins. Co., 87 NY2d 589, 593). Support for our conclusion can also be found in the policy's definition of additional protected or insured persons, which includes employees "while working, or when they did work, for you within the scope of their duties" (emphasis supplied).

 

It is the general rule that an employer will be held vicariously liable only for acts within the scope of the [*3]employment and, therefore, acts which are not part of the conduct of the employer's enterprise will not be the responsibility of the employer (see, Adams v New York City Tr. Auth., 88 NY2d 116, 119). In applying this principle, courts have ruled that hospitals are not vicariously liable for the sexual abuse of patients by health care workers (see, N.X. v Cabrini Med. Ctr., 97 NY2d 247; Judith M. v Sisters of Charity Hosp., 93 NY2d 932; Mataxas v North Shore Univ. Hosp., 211 AD2d 762). Such acts are viewed as clear departures from the scope of employment, having been committed for wholly personal purposes unrelated to the furtherance of a hospital's business (see, Judith M. v Sisters of Charity Hosp., supra, at 933). We see no reason to reach a different conclusion in this case.

 

Although Ciani's relationship with plaintiff certainly arose in the course of Ciani's employment with the County, nonetheless, his abuse of plaintiff's trust for the purpose of engaging in a sexual relationship with her constituted a clear departure from the normal duties of his employment and was solely for the purpose of self-gratification. The fact that Ciani's therapist/client relationship with plaintiff may have continued is irrelevant to the question of whether his tortious conduct was outside the scope of his employment with the County. The sexual relationship had no valid treatment purpose and no legitimate County business purpose. Our conclusion that Ciani's acts were outside the scope of his employment is supported by consideration of such relevant factors as "whether the act is one commonly done by such an employee; the extent of departure from normal methods of performance; and whether the specific act was one that the employer could reasonably have anticipated" (Riviello v Waldron, 47 NY2d 297, 303). It is also significant that although Ciani did not employ physical force or coercion, plaintiff's claim that Ciani misused or exploited the phenomenon of transference to develop a sexual relationship with her (see, McKay v Ciani, 288 AD2d 587, 589, supra) nevertheless constitutes a recognized form of patient or client abuse (see, Matter of Barad v State Bd. for Professional Med. Conduct, 282 AD2d 893, 895; Matter of De Paula v Sobol, 191 AD2d 822, 824). Accordingly, we are compelled to conclude that Ciani's acts, which formed the basis of his liability to plaintiff, were outside the scope of his employment with the County and, therefore, were not covered by defendant's professional liability policy issued to the County (see, Town of Somers v Titan Indem. Co., 289 AD2d 563).

 

With regard to plaintiff's reliance on defendant's failure to serve Ciani with a notice of disclaimer that included the [*4]scope of his employment as a ground for denying coverage, we note that the Insurance Law § 3420 notice of disclaimer requirement is not applicable to plaintiff's claim against Ciani (see, Legion Ins. Co. v Singh, 272 AD2d 809, 811, lv denied 95 NY2d 768). In any event, "the failure to disclaim coverage does not create coverage which the policy was not written to provide" (Zappone v Home Ins. Co., 55 NY2d 131, 134). Despite the absence of coverage under the terms of the policy, however, an insurer may be equitably estopped from denying coverage where, "without asserting policy defenses or reserving the privilege to do so, [the insurer] undertakes the defense of the case, in reliance on which the insured suffers the detriment of losing the right to control its own defense" (Schiff Assocs. v Flack, 51 NY2d 692, 699). Although defendant undertook the defense of Ciani in plaintiff's action against him, it did so under a letter reserving its rights with regard to indemnification, which was issued several months after the commencement of the action and long before the action went to trial. The letter advised Ciani that the policy did not appear to cover plaintiff's claim against him and that "you may wish to engage in separate counsel, at your own expense, to protect your uninsured interests". Despite the absence of a specific reference to the scope of employment issue in the reservation of rights, we see no detrimental reliance in Ciani's election to proceed to trial with the defense provided by defendant while fully aware that defendant might not indemnify him and that he could retain separate counsel to protect his interests. Accordingly, the doctrine of equitable estoppel is inapplicable.

 

Having concluded that plaintiff's claim against Ciani fell outside the scope of the coverage afforded by defendant's policy, we need not reach defendant's additional argument that the claim falls within the ambit of the policy's sexual abuse exclusion. Supreme Court's order is, therefore, affirmed.

 

Mercure, J.P., Spain, Mugglin and Lahtinen, JJ., concur.

 

ORDERED that the order is affirmed, without costs.

 

BEDFORD CENTRAL SCHOOL DISTRICT v. COMMERCIAL UNION INS. CO.

 

In an action for a judgment declaring, inter alia, that the defendant Commercial Union Insurance Company is obligated to defend and indemnify the plaintiffs in an underlying personal injury action entitled Sanchez v Project Adventure, Inc., pending in the Supreme Court, Bronx County, under Index No. 15380/95, the defendant Commercial Union Insurance Company appeals from an order and judgment (one paper) of the Supreme Court, Nassau County (Skelos, J.), entered August 9, 2001, which granted the plaintiffs' motion for summary judgment and declared that (1) the plaintiff Bedford Central School District is an additional insured on the policy of insurance issued by it to the defendant Iona Preparatory School, (2) it is obligated to defend and indemnify Bedford Central School District in the underlying action on a 50/50 basis with the plaintiff New York Schools Insurance Reciprocal, and (3) it is obligated to reimburse New York Schools Insurance Reciprocal for 50% of the costs incurred by New York Schools Insurance Reciprocal in defending the Bedford Central School District in the underlying action from August 1999 to date.

 

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

 

Bedford Central School District (hereinafter the District) permitted Iona Preparatory School (hereinafter Iona) to use the Fox Lane Middle School in Bedford for the purpose of Iona students' participation in an obstacle course known as the Challenge course. The infant plaintiff in the underlying personal injury action sustained injuries when a bungee cord snapped and hit him in the eye. The Supreme Court properly determined that Commercial
Union Insurance Company (hereinafter Commercial Union) was obligated to defend and indemnify the District and New York Insurance Foundation, as attorney-in-fact, for New York Schools Insurance Reciprocal, (collectively the plaintiffs) in the underlying action, on a 50/50 basis pursuant to an insurance policy issued by Commercial Union to Iona, which named the District as an "additional insured," but only with respect to "liability arising out of your [Iona's] operations or premises owned by or rented to you."

 

The subject insurance policy contains provisions which are ambiguous and therefore must be construed against the insurer, the drafter of the document (see Matter of Mostow v State Farm Ins. Co., 88 NY2d 321; Custom Weld Indus. v Chabina Co., 272 AD2d 364; Scalia v Equitable Life Assur. Socy. of U.S., 263 AD2d 537; Horowitz v Threadneedle Ins. Co., 194 AD2d 589). Moreover, although the Challenge course was owned by the District when the infant plaintiff in the underlying action sustained his injuries, and was supervised by a District employee, the infant plaintiff's injuries arose out of Iona's "operations." The students were on a class field trip organized by Iona, an educational institution which arranged for the high school students to use the District's Challenge course, transported the students there [*3]for that purpose, and provided faculty to supervise the students while at the District's facility (see Daily News v OCS Sec., 280 AD2d 576, 577). Under the circumstances, the plaintiffs are entitled to coverage pursuant to the additional insured endorsement in the policy since the underlying action arose out of Iona's "operations."

 

PRUDENTI, P.J., SMITH, FRIEDMANN and ADAMS, JJ., concur.

 

ARROWOOD v. LOWINGER

 

Order, Supreme Court, New York County (Richard Lowe, III, J.), entered December 5, 2000, which granted defendants' motion for summary judgment dismissing the complaint, unanimously affirmed, without costs.

 

Defendants met their initial burden of establishing that plaintiff has not sustained a "serious injury" within the meaning of Insurance Law § 5102(d) (see, Gaddy v Eyler, 79 NY2d 955, 956; Licari v Elliot, 57 NY2d 230), and plaintiff's submissions failed to raise an issue of fact. The findings of two doctors, who examined plaintiff in September and October 2000, respectively, that plaintiff had "exquisite tenderness" of his left Achilles heel and "extreme sensitivity on the back of the left ankle" do not demonstrate a "permanent consequential limitation of a body organ or a member" or a "significant consequential limitation of a use of a body function or system" (Gaddy v Eyler, 79 NY2d, supra, at 957; Licari v Elliott, 57 NY2d, supra, at 236). Moreover, the findings were based on plaintiff's subjective complaints of pain are thus insufficient to raise a triable issue under Insurance Law § 5102(d) (see, Toure v Avis Rent A Car Sys., Inc., 284 AD2d 271, 273; Charlton v Almaraz, 278 AD2d 145, 146). Notably, plaintiff did not seek treatment for over four years and returned to his employment within 11 weeks of the accident. In these circumstances, the doctors' conclusory assertions that plaintiff had suffered a permanent injury is insufficient to defeat defendants' entitlement to summary judgment (see, Toure, 284 AD2d, supra, at 272; Bandoian v Bernstein, 254 AD2d 205). A finding that plaintiff suffered a "2-4% impairment of the whole person, a 5-10% of the lower limb and 7-14% impairment of the ankle" is not supported by any objective medical tests performed by the doctor and appears to be tailored to meet statutory requirements (see, Lopez v Senatore, 65 NY2d 1017, 1019; Castano v Synergy Gas Corp., 250 AD2d 640). In any event, the claimed limitations are not of sufficient magnitude to qualify as a "significant" or "important limitation of use" (Bandoian v Bernstein, supra; Licari v Elliott, supra). An MRI report which allegedly showed a tendon rupture of plaintiff's right ankle was taken three and one-half years after the accident and the injury was not shown to be causally related to the accident (see, Caccacio v Martin, 235 AD2d 384). Notably, none of plaintiff's treating physicians diagnosed a ruptured tendon [*2]following the accident and the doctors who examined plaintiff in 2000 made no findings of injury to his right ankle. Plaintiff's affidavit, in which he claimed to have been unable to give golf lessons for three to five months following the accident is contradicted by his deposition testimony and is, in any event, unsupported by a physician's affidavit substantiating his impairment and relating it to the accident (see, Sigona v New York City Tr. Auth., 255 AD2d 231). Plaintiff's unsubstantiated claim that he was unable to do household chores is insufficient to show that he "suffered, a medically determined injury or impairment of a non-permanent nature" which prevented him from "performing substantially all of the material acts which constitute ... [his] ususal and customary daily activities" for at least 90 days of the 180 days following the accident (Insurance Law § 5102[d]; see also, Eisen v Walter Samuels, Inc., 215 AD2d 149; Hutchinson v Beth Cab Corp., 204 AD2d 151).

 

MATTER OF NATIONWIDE v. DiGREGORIO

 

In a proceeding pursuant to CPLR article 75 to stay arbitration of an underinsured motorist claim, the appeal is from an order of the Supreme Court, Westchester County (Wood, J.H.O.), dated June 26, 2001, which granted the petition.

 

ORDERED that the order is affirmed, with costs.

 

On May 15, 1999, the appellant, while a passenger in a friend's vehicle, suffered personal injuries in a two-vehicle collision. In addition to injuries that she noticed immediately, her lower back started hurting about a week after the collision. She went for an MRI, and learned that she had a herniated disc and a pinched nerve. At a doctor's suggestion, she went for physical therapy for about six weeks, but that did not help. By June 1999, the appellant's back "was getting worse and worse and [she] couldn't walk." Finally, one day in February 2000, she "had to call 911 because [she] just couldn't move and [she] was taken to the hospital." Eventually, she was told that she would need surgery on her back to correct the herniated disc.

 

In March 2000, after she consulted an attorney, the appellant sued the owner and driver of the other vehicle involved in the collision (hereinafter the tortfeasors). On April 28, 2000, the tortfeasor's insurer informed the appellant's attorney that the policy limits were $25,000. Thereafter, by letter dated May 4, 2000, the appellant's attorney informed the petitioner Nationwide Insurance Company (hereinafter Nationwide), insurer of the appellant's friend, that the appellant intended to make an underinsured motorist claim.

 

Nationwide disclaimed coverage because, among other grounds, the appellant failed to provide it with notice of her claim for underinsurance benefits "as soon as practicable", as required by the policy. After the appellant filed a demand for arbitration of her claim for underinsured motorist benefits against Nationwide, Nationwide commenced the instant proceeding, inter alia, to permanently stay arbitration of the appellant's claim. After a hearing, the Supreme Court granted the petition. We affirm.

 

Where there is a question as to whether an insured has given an insurer notice of a claim for underinsurance benefits "as soon as practicable," the court must determine whether the insured gave notice "with reasonable promptness after the insured knew or should reasonably have known that the tortfeasor was underinsured" (Matter of Metropolitan Prop. & Cas. Ins. Co. v Mancuso, 93 NY2d 487, 495). The insured must demonstrate that he or she "acted with due diligence in attempting to determine the insurance status of the other vehicle involved in" the subject accident (Matter of Nationwide Mut. Ins. Co. v Wexler, 276 AD2d 490, 491; see Matter of State Farm Mut. Auto. Ins. Co. v Bennett, 289 AD2d 496; Witterschein v State Farm Ins. Co., 278 AD2d 317; Matter of Eagle Ins. Co. v Bernadine, 266 AD2d 543).

 

Under the particular facts of this case, we agree that the appellant's notice to [*3]Nationwide was untimely. The appellant claims that she did not know of the seriousness of her injury until February or March 2000, when she was informed that her herniated disc required surgery, and that she thereafter promptly sued the tortfeasor and notified Nationwide of her underinsurance claim. However, her own testimony at the hearing established that by June 1999 the appellant knew that she had a herniated disc and a pinched nerve with pain radiating down to a leg. We conclude that the appellant's time in which to determine whether the tortfeasor was underinsured should be measured from that date. Thus, she waited more than 10 months before notifying Nationwide of her claim for underinsurance benefits. Under the circumstances, the appellant failed to demonstrate that she acted with due diligence in attempting to ascertain the insurance status of the tortfeasor's vehicle, and her notice to Nationwide was untimely (see Elkowitz v Farm Family Mut. Ins. Co., 180 AD2d 711; Schiebel v Nationwide Mut. Ins. Co., 166 AD2d 520).

 

O'BRIEN, J.P., FRIEDMANN, SCHMIDT and TOWNES, JJ., concur.

 

SMITH v. CLARENCE’S CRANE RENTAL

 

Lahtinen, J.

 

Appeal from an order of the Supreme Court (McNamara, J.), entered March 20, 2001 in Albany County, which, inter alia, granted defendant's motion for summary judgment dismissing the complaint.

 

On September 3, 1997, a crane owned by plaintiff and insured by defendant allegedly sustained significant damage when [*2]it toppled over while at a construction site. Following an investigation, defendant disclaimed coverage and the current action by plaintiff ensued.

 

The essential facts are not disputed. On the date of the accident, plaintiff intended to use the crane to lift construction materials onto the roof of a six-story building in the Town of Colonie, Albany County. The job entailed lifting a gravel hopper and placing it on the roof of the building. Plaintiff initially followed proper set up procedures to ensure the stability of the crane, including lowering the outriggers, putting blocking underneath the outriggers and leveling the crane. The crane consisted of a boom beam attached to the truck and a jib, which extended from the boom. After setting up the crane, plaintiff hooked the jib to the gravel hopper and raised the hopper to the roof. The hopper hung from a cable about five feet from the end of the jib. Before plaintiff put the hopper on the roof, the roofing company supervisor informed plaintiff that he wanted the hopper in a position about 14 feet from where plaintiff had intended to place it. Plaintiff determined that he could not maneuver the hopper to the new position without moving the truck back approximately two feet. He thus raised the outriggers a few inches off the ground and drove the truck backward about two feet with the hopper still dangling from the extended boom and jib. While he was repositioning the wood planks, he observed the hopper swinging and, shortly after, the crane and truck toppled over.

 

Defendant received prompt notice of the accident and initiated an investigation of the incident. On September 12, 1997, defendant sent a reservation of rights letter to plaintiff and, on October 9, 1997, defendant disclaimed coverage upon the ground that the accident fell within a policy exclusion for a loss caused "by any operation that stresses the machine beyond the manufacturer's suggested operational limits". The owner's manual directed that the truck should never be driven when the boom was extended or a load was suspended from the load line hook. Indeed, plaintiff, an experienced crane operator, stated that he was aware that the truck should not be moved with boom extended. After being notified that defendant had disclaimed coverage, plaintiff commenced this action and, following disclosure, defendant successfully moved for summary judgment. This appeal by plaintiff ensued.

 

Plaintiff contends that defendant's disclaimer letter was inaccurate and lacked specificity. Because this action involves [*3]a property insurance claim, it is not controlled by the high degree of specificity required by Insurance Law § 3420 (d) for a disclaimer of liability for death or bodily injury (see, Fairmont Funding v Utica Mut. Ins. Co., 264 AD2d 581; Brown v State Farm Ins. Co., 237 AD2d 476). Defendant's disclaimer letter stated that "on or about 09-03-97 you drove the truck crane backwards, while the boom was extended approximately * * * ninety to ninety seven feet resulting in damage" and further referred plaintiff to the exclusion for losses caused by "any operation that stresses the machine beyond the manufacturer's suggested operational limits". In our view, defendant's disclaimer letter provided ample notice of the reason for the denial of coverage of plaintiff's property loss claim.

 

The argument that the exclusion from coverage upon which defendant relied was ambiguous is similarly unpersuasive. Exclusions from coverage must be clearly set forth and any ambiguity is construed against the insurer (see, e.g., Westview Assocs. v Guaranty Natl. Ins. Co., 95 NY2d 334, 340; Town of Harrison v National Union Fire Ins. Co., 89 NY2d 308). The policy excluded operations that stressed the crane beyond the manufacturer's suggested operational limits. The manufacturer's guidelines, as set forth in the owner's manual that plaintiff acknowledged receiving and reading, unequivocally prohibited moving the truck with the boom extended or when a load was suspended from the load line hook

 

Plaintiff also argues that the notice of disclaimer was untimely. A notice of disclaimer for a property loss claim provided 36 days after the accident, unsupported by any showing of prejudice to plaintiff caused by the delay, does not constitute an untimely disclaimer (see, Sirignano v Chicago Ins. Co., 192 F Supp 2d 199; Fairmont Funding v Utica Mut. Ins. Co., supra).

 

Mercure, J.P., Spain, Carpinello and Mugglin, JJ., concur.

 

ORDERED that the order is affirmed, with costs.

 

BECK v. EASTERN MUT. INS. CO.

 

Lahtinen, J.

 

Cross appeals from an order of the Supreme Court (Bradley, J.), entered April 12, 2001 in Ulster County, which denied defendant's motion for summary judgment dismissing the complaint and partially granted plaintiffs' cross motion for summary judgment.

 

A patron of a bar owned and operated by plaintiffs [FN1] was injured when he was assaulted by plaintiffs' off-duty employee. The patron sued plaintiffs in 1993, alleging causes of action for assault, dram shop liability and negligent hiring and/or supervision. When defendant refused plaintiffs' demand to defend and indemnify them in the underlying tort action, a declaratory judgment action was commenced. In 1998, Supreme Court granted defendant's cross motion for summary judgment concluding that it was bound by the holding of the Court of Appeals in U.S. Underwriters Ins. Co. v Val-Blue Corp. (85 NY2d 821) and finding that there was "no coverage under the intentional tort exclusion of the policy even when the underlying complaint also contains causes of action for negligent hiring". No appeal was ever taken from Supreme Court's 1998 judgment, nor was there any attempt to reopen the judgment (see, CPLR 5015 [a]).

 

At the trial of the patron's tort action seven years after the action was commenced, the jury returned a verdict against plaintiffs on the negligence claim. This second declaratory judgment action was commenced by plaintiffs seeking indemnification and counsel fees incurred in the defense of the underlying tort action. After issue was joined, both parties moved for summary judgment. Supreme Court granted plaintiffs summary judgment for the amount of the judgment filed against them, claiming that it "clearly erred in its previous decision" and finding that the insurance policy in question provided coverage for plaintiffs' negligent acts. Defendant appeals claiming, inter alia, that the doctrine of res judicata bars plaintiffs' second identical declaratory judgment action. Plaintiffs cross-appeal arguing, inter alia, that the counsel fees they incurred in defense of the underlying claim should have been included in Supreme Court's order.

 

Since we find the doctrine of res judicata applicable to the facts presented here, we reverse that portion of Supreme Court's order that partially granted plaintiffs' cross motion for summary judgment. It is beyond cavil that the doctrine of res [*3]judicata operates to bar future litigation between the same parties of a cause of action based on the same transaction where the cause of action was raised or could have been raised in a prior proceeding (see, O'Brien v City of Syracuse, 54 NY2d 353, 357; Evergreen Bank v Dashnaw, 246 AD2d 814, 815). Notwithstanding Supreme Court's conclusion to the contrary, we find that plaintiffs' second declaratory judgment action is precluded because plaintiffs' claim that defendant should indemnify them in the underlying action was the subject matter of the first declaratory judgment action (see, Matter of Schulz v New York State Legislature, 278 AD2d 710, 712).

 

In light of the above, the remaining issues raised on this appeal are rendered academic.

 

Cardona, P.J., Peters, Carpinello and Mugglin, JJ., concur.

 

ORDERED that the order is modified, on the law, without costs, by reversing so much thereof as partially granted plaintiffs' cross motion for summary judgment; cross motion denied in its entirety, motion granted, summary judgment awarded to defendant and it is declared that defendant does not have a duty to defend and indemnify plaintiffs in the underlying action; and, as so modified, affirmed.

Footnotes

 

Footnote 1:Michael Beck, individually and doing business as P & G's Restaurant, P & G's Restaurant, its servants, employees and agents were sued in the underlying tort action. M.C. & E.D. Beck Inc. was the plaintiff in the first declaratory judgment action. In this second declaratory judgment action, plaintiff Michael Beck is identified as the owner of the building where P & G's Restaurant, which was owned and operated by plaintiff M.C. & E.D. Beck Inc., is located. Both plaintiffs are apparently named insureds under defendant's policy.

 

NEWMAN-BACHHUBER v. HU

 

In an action to recover damages for personal injuries, the plaintiff appeals from (1) an order of the Supreme Court, Queens County (LaTorella, J.), dated February 8, 2001, which granted the [*2]defendant's motion for summary judgment dismissing the complaint on the ground that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d), and (2) an order of the same court, dated October 3, 2001, which denied her motion, in effect, for leave to reargue.

 

ORDERED that the appeal from the order dated October 3, 2001, is dismissed, as no appeal lies from an order denying leave to reargue (see Holmes v Hanson, 286 AD2d 750); and it is further,

 

ORDERED that the order dated February 8, 2001, is reversed, on the law, the motion is denied, and the complaint is reinstated; and it is further,

 

ORDERED that one bill of costs is awarded to the plaintiff.

 

The defendant established his prima facie entitlement to summary judgment dismissing the complaint by submitting affirmations of his examining orthopedist and neurologist which indicated, through sufficient objective evidence, that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) (see Gaddy v Eyler, 79 NY2d 955; Espinal v Galicia, 290 AD2d 528; Fisher v Cho Pyung Choi, 289 AD2d 523).

 

However, the plaintiff successfully opposed the motion by presenting evidence that she may have sustained a serious injury. The plaintiff submitted, inter alia, affirmed medical reports from her treating physician and an affidavit from a radiologist which, among other things, indicated that magnetic resonance imaging tests performed on her cervical and lumber spine revealed findings of posterior bulging discs at C2-C3, C4-C-5, and L4-L5, and a herniated disc at C4-C5. Since a bulging or herniated disc may constitute evidence of a serious injury within the meaning of the Insurance Law (see Lewis v White, 274 AD2d 455; Chaplin v Taylor, 273 AD2d 188; Flanagan v Hoeg, 212 AD2d 756), the grant of summary judgment was improper.

 

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