Coverage Pointers - Volume IV, No. 13

 

01/08/03:            DALEY v TRAVELERS CAS. & SUR. CO.

New York State Supreme Court, Appellate Division, First Department

Notice Given for No-Fault Purposes Isn't Imputed for Liability Coverage Purposes

In an action against an insurer to recover on a default judgment entered in favor of plaintiff against defendant’s insured in an underlying action for personal injuries sustained when plaintiff was struck by a car driven by defendant’s insured, court held that issues of fact exist as to whether plaintiff gave defendant notice of the action as soon as reasonably possible. Such notice cannot be imputed to defendant on the basis of its knowledge of and eventual acceptance of plaintiff’s no-fault claim.

 

01/02/03:            MATTER OF FARM FAMILY CAS. INS. CO. (TRAPANI)

New York State Supreme Court, Appellate Division, Third Department

Claimant is Entitled to Make Underinsurance Claim When Auto Accident Starts Series of Events that Leads to Injury

Talerico lost control of her car and struck a utility pole. The car’s impact moved the pole, causing its power lines to short out and rain sparks and hot pieces of wire down onto the 75-year-old respondent, who was standing in her garden along the roadway near her home. In attempting to run from this hazard, respondent fell and sustained injuries to her head and left knee. After settling for Talerico's $25,000 policy limit, respondent sought additional compensation under the supplemental underinsured motorist provisions of a policy issued by petitioner. Petitioner denied the claim, deeming respondent’s injuries not to have arisen out of the use, maintenance or operation of a motor vehicle. Court found that impact of Talerico’s car with the utility pole was not a cause so remote in either time or space from respondent’s injuries “as to preclude recovery as a matter of law”, and neither the shorting power lines nor respondent’s flight were so extraordinary or unforeseeable that they should “be viewed as superseding acts which, as a matter of law, break the causal link.”

 

12/30/02:            UNITED STATES FIRE INS. CO. v CNA

New York State Supreme Court, Appellate Division, Fourth Department

Other Insurance Clause Requires Reimbursement to Umbrella Carrier

The issue here was whether policies issued by the parties were co-excess, or whether the coverage of one policy must be exhausted before a claim may be made against the other policy. Having examined “the purpose each policy was intended to serve as evidenced by both its stated coverage and the premium paid for it ***, as well as *** the wording of its provision concerning excess insurance,” the court concluded that the coverage under the policy issued by defendants must be exhausted before a claim could be made against the policy issued by plaintiff. Plaintiff’s policy was an umbrella policy, whereas defendants’ policy afforded primary coverage; plaintiff’s policy was for a premium substantially less than the premium for defendants’ policy; and plaintiff’s policy expressly negated contribution with other insurers, whereas defendants’ policy did not. The Court rejected defendants’ contention that plaintiff voluntarily participated in the settlement of the underlying action and thus no subrogation rights accrued to plaintiff. Pursuant to the terms of the insurance policy issued by plaintiff, plaintiff’s obligation to defend its insured in the underlying action arose when the coverage under the insured’s primary policy and other insurance from defendants was exhausted. The coverage under the policy issued by the primary carrier was exhausted with its $1,000,000 payment toward the settlement and defendants refused to pay into the settlement, thus giving rise to plaintiff’s obligation to pay the remaining $500,000. “Plaintiff did not act as a mere volunteer in providing its insured with a defense and paying the [settlement], for it did so only after defendants refused [to pay].”

 

12/23/02:            GARSON MGT. CO. v TRAVELERS INDEM. CO. OF ILL.

New York State Supreme Court, Appellate Division, Second Department

“Corrosion and Deterioration” Exclusion Applies to Exclude Claim, Even in Light of “Hidden Decay” Exception to Collapse Exclusion

Here, the plain meaning of the exclusion was to relieve the insurer of liability when its insured sought reimbursement for costs incurred in correcting corrosion and deterioration of the subject garage. Thus, the exclusion applied to the loss in the present case and the Supreme Court properly granted summary judgment to the defendants. The court held there was no merit to the plaintiffs’ claim that the hidden decay exception to the collapse exclusion provides coverage. “[P]olicy exclusions are to be read seriatim and, if any one exclusion applies, there is no coverage since no one exclusion can be regarded as inconsistent with another”.

 

12/23/02:            GOTTLIEB v BLUE RIDGE INS. CO.

New York State Supreme Court, Appellate Division, Second Department

Expedited Summary Proceeding Not Proper Method to Enforce Judgment Against Disclaiming Insurer

In an underlying negligence action, the plaintiffs obtained a judgment against the defendant’s insured. When the judgment remained unsatisfied for more than 30 days, the plaintiffs commenced this action pursuant to Insurance Law § 3420(a)(2) to recover the unsatisfied judgment from the defendant. They proceeded by motion for summary judgment in lieu of complaint pursuant to CPLR 3213. That section permits a direct action against an insurer if certain procedural steps are followed.  In the order appealed from, the motion court converted the motion to one for summary judgment pursuant to CPLR 3212, granted the plaintiffs summary judgment, and denied the defendant’s cross motion for summary judgment dismissing the action. Appellate Division modifies. On the facts and circumstances presented, conversion of this motion to one for summary judgment pursuant to CPLR 3212 was not appropriate. Further, the use of a “motion-action” under CPLR 3213 was not appropriate. The defendant is not named in the judgment, a prima facie case against the defendant is not made out by the judgment itself, and the outside evidence needed to demonstrate the liability of the defendant for the judgment requires more than a de minimis deviation from the face of the judgment.

 

12/23/02:         STATE FARM FIRE CAS. & INS. CO. v TRAVELERS PROP. CAS. INS. CO.

New York State Supreme Court, Appellate Division, Second Department

Identical Dueling Excess Clauses Cancel and Umbrella Policies Apply Ratably

The court held that separate personal liability umbrella insurance policies provided by Travelers and State Farm covered the same risk, and both contained excess insurance clauses which negated each other. Therefore, Travelers and State Farm were required to contribute ratably, after the primary insurance coverage was exhausted and over the applicable $500,000 deductible designated in Travelers’ policy, to any award made against their insured in two underlying actions.

 

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.

 

01/09/03:            HOMEDICS, INC. v VALLEY FORGE INS. CO., ET AL

Ninth Circuit (applying California law)

No Duty To Defend Patent Infringement Actions Under CGL Policy

Homedics sought declaratory relief that its insurer, ACE Fire Underwriters, owed it a duty to defend a patent infringement lawsuit under a CGL policy. Homedics was sued in two underlying actions wherein allegations were made that Homedics directly infringed the underlying plaintiff’s patent by offering to sell infringing products through advertising. Under well-settled California law, the court concluded that the patent infringement claims could not fall within the CGL policy’s coverage for either “advertising injury . . . arising out of . . . misappropriation of advertising ideas or style of doing business,” or “personal injury . . . arising out of . . . oral or written publication of material that . . . disparages an organization’s goods, products or services.” Thus ACE had no duty to defend the underlying patent disputes.

Prepared by Bruce Celebrezze and Randall Berden of Celebrezze & Wesley in Los Angeles

 

01/07/03:            RHODE ISLAND INS.  INSOLVENCY FUND v LEVITON MFG. CO.

Rhode Island Supreme Court

When Does Postjudgment Interest Begin To Accrue?

The Rhode Island Insurers’ Insolvency Fund, a nonprofit entity guaranteeing certain payments to an insured if its insurer becomes insolvent, is not entitled to prejudgment interest on an insurer’s reimbursement for the period during which that judgment was appealed. Rhode Island law provides that a final judgment “occurs when the trial court enters judgment on appeal, if the debtor had not filed a timely notice of appeal, or when this Court affirms the judgment on appeal, whichever event first occurs.” Thus, postjudgment interest does not begin to accrue until the date of final judgment, which in this case is the date of the Supreme Court’s partial affirmation of the judgment.

Prepared by Bruce Celebrezze and Randall Berden of Celebrezze & Wesley in Los Angeles

 

AND IN DEFENSE

 

12/30/02:            METLIFE AUTO & HOME v JOE BASIL CHEVROLET

New York Appellate Division, Fourth Department

No Cause of Action in New York Against Third Party for Spoliation of Evidence

The issue before the court, one not yet considered by the Court of Appeal, was whether to recognize a cause of action for a negligent or reckless act of spoliation of evidence committed by one not a party or a potential party to the underlying claim to which the spoliated evidence relates. It was alleged that an insurance carrier had made arrangements to safeguard the integrity of a vehicle and placed it in a storage lot under the supervision and control of its agent; that the parties had arranged for a joint inspection/testing of the vehicle; but that, shortly before the inspection, the vehicle had been sold and removed from the storage lot and substantially altered such that there was no chance to do a detailed, scientific and thorough analysis to determine the cause of fire and resultant damage.  It was further alleged that as a result of the negligence, carelessness and recklessness of the insurance carrier, important evidence had been destroyed, thereby irrevocably impairing plaintiff’s right to pursue the defendants.  Under the circumstances presented, the court declined to recognize a cause of action for “third-party spoliation” of evidence/impairment of claim or defense, either under principles of negligence law or as an independent tort.  The complaint against the insurance carrier was dismissed accordingly.

 

12/30/02:            PAIGE v CITY OF BUFFALO

New York Appellate Division, Fourth Department

When is a Release Really a Release?

Plaintiff commenced this action seeking damages for injuries that he sustained when the vehicle that he was driving collided with a vehicle owned by defendant City of Buffalo and driven by another. Plaintiff sought medical treatment on the date of the accident for pain in his head and left leg, and he returned to the emergency room the following day, complaining of the same symptoms. Approximately one month after the accident and approximately one month prior to the diagnosis of a chronic subdural hematoma, plaintiff signed a full release for, inter alia, “all known and unknown, foreseen and unforeseen bodily and personal injuries and property damage and the consequences thereof” for consideration in the amount of $3,708.64. Supreme Court erred in granting defendants’ cross motion for summary judgment dismissing the complaint based on the release signed by plaintiff. Plaintiff’s neurosurgeon averred that the hematoma was “probably” caused by the accident and that the fluid in the hematoma accumulates gradually as a result of trauma. Thus, plaintiff has raised an issue of fact whether, at the time he signed the release, the parties knew that he was suffering from a subdural hematoma. Where the ultimate injury is a consequence or sequela of the known injury a release will be upheld. Where, however, the presumed injury is “so different from that of the actual injury [that] it is not merely a matter of degree or severity,” the release may be set aside as signed under a mutual mistake of fact. Plaintiff has raised a triable issue of fact whether the release was signed under a mutual mistake of fact.

 

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DALEY v TRAVELERS CAS. AD SUR. CO.

 

Order, Supreme Court, Bronx County (Bertram Katz, J.), entered March 12, 2002, which, in an action against an insurer to recover on a default judgment entered in favor of plaintiff against defendant's insured in an underlying action for personal injuries sustained when plaintiff was struck by a car driven by defendant's insured, insofar as appealed from, denied plaintiff's motion for summary judgment, and order, same court and Justice, entered July 11, 2002, which, insofar as appealable, denied plaintiff's motion to renew, unanimously affirmed, without costs. Issues of fact exist as to whether plaintiff gave defendant notice of the action as soon as reasonably possible (Insurance Law § 3420[a][4]). Such notice cannot be imputed to defendant on the basis of its knowledge of and eventual acceptance of plaintiff's no-fault claim (see Matter of Country-Wide Ins. Co. [Eun Kyu Park], 277 AD2d 175). We have considered and rejected plaintiff's other arguments.

 

THIS CONSTITUTES THE DECISION AND ORDER

 

MATTER OF FARM FAMILY CASUALTY INS. CO. (TRAPANI)

 

Rose, J.

 

Appeal from an order of the Supreme Court (Kavanagh, J.), entered July 22, 2002 in Ulster County, which granted petitioner's application pursuant to CPLR 7503 to permanently stay arbitration between the parties.

 

On September 5, 2000, Diana Talerico lost control of her car and struck a utility pole. The car's impact moved the pole, causing its power lines to short out and rain sparks and hot pieces of wire down onto the 75-year-old respondent, who was standing in her garden along the roadway near her home. In attempting to run from this hazard, respondent fell and sustained [*2]injuries to her head and left knee. After settling for the $25,000 policy limit with Talerico's insurer, respondent sought additional compensation under the supplemental underinsured motorist provisions of an insurance policy issued by petitioner. Petitioner denied the claim, deeming respondent's injuries not to have arisen out of the use, maintenance or operation of a motor vehicle. When respondent demanded arbitration, petitioner sought a permanent stay of arbitration. Supreme Court then found that respondent's "tripping over her own two feet," rather than Talerico's car, was the cause of her injuries, and permanently stayed arbitration. We now reverse, holding that the operation of Talerico's car was a proximate cause of respondent's injuries.

 

Courts may stay arbitration where "the particular claim sought to be arbitrated is outside [the] scope" of the agreement to arbitrate (Matter of County of Rockland [Primiano Constr. Co.], 51 NY2d 1, 7; see CPLR 7503 [b]; Matter of Sisters of St. John the Baptist, Providence Rest Convent v Geraghty Constructor, 67 NY2d 997, 999). Since supplemental underinsured motorist coverage applies only to an insured's injuries "caused by an accident arising out of such [underinsured] motor vehicle's ownership, maintenance or use" (11 NYCRR 60-2.3 [f]; see Insurance Law § 3420 [f] [1]; Matter of Federal Ins. Co. v Watnick, 80 NY2d 539, 545), the determinative issue here is whether Talerico's car was a proximate cause of respondent's injuries (see Walton v Lumbermens Mut. Cas. Co., 88 NY2d 211, 215; Martinelli v Travelers Prop. Cas. Ins. Co., 271 AD2d 890, 891; Eagle Ins. Co. v Butts, 269 AD2d 558, 559, lv denied 95 NY2d 768; Sochinski v Bankers & Shippers Ins. Co., 221 AD2d 889; Matter of New York Cent. Mut. Fire Ins. Co. [Hayden - Allstate Ins. Co.], 209 AD2d 927, 928).

 

Supreme Court decided that respondent's injuries did not arise out of the use or operation of a motor vehicle because not all elements of the following test were satisfied: "'1. The accident must have arisen out of the inherent nature of the automobile, as such; 2. The accident must have arisen within the natural territorial limits of an automobile, and the accidental use, loading, or unloading must not have terminated; 3. The automobile must not merely contribute to cause the condition which produces the injury, but must, itself, produce the injury'" (Matter of Manhattan & Bronx Surface Tr. Operating Auth. [Gholson], 71 AD2d 1004, 1005, quoting Goetz v General Acc. Fire & Life Assur. Corp., 47 Misc 2d 67, 69, affd 26 AD2d 635, affd 19 NY2d 762). This Court, however, has characterized this test as [*3]merely requiring that the use or operation of a motor vehicle be a proximate cause of the injuries for which coverage is sought (see Sochinski v Bankers & Shippers Ins. Co., supra).

 

Upon our review of the record, we find that the impact of Talerico's car with the utility pole was not a cause so remote in either time or space from respondent's injuries "as to preclude recovery as a matter of law" (McMorrow v Trimper, 149 AD2d 971, 972, affd 74 NY2d 830), and neither the shorting power lines nor respondent's flight were so extraordinary or unforeseeable that they should "be viewed as superseding acts which, as a matter of law, break the causal link" (id. at 973; see Gordon v Eastern Ry. Supply, 82 NY2d 555, 562; Cherny v Hurlburt, 150 AD2d 942, 943-944). Nor was there any other record evidence of an intervening cause of respondent's fall (cf. Matter of Nassau Ins. Co. v Jiminez, 116 Misc 2d 908, 912). Since the factual circumstances are undisputed and only one conclusion can be drawn from them, we find, as a matter of law, that Talerico's car proximately caused respondent's injuries (cf. Feeley v. Citizens Telecom. Co. of New York, Inc., ___ AD2d ___, ___, 748 NYS2d 824, 825). Accordingly, Supreme Court erred in granting a stay of arbitration. However, petitioner is entitled to a temporary stay of arbitration until it has an opportunity to conduct a physical examination and an examination under oath of respondent (see Matter of State Farm Mut. Auto. Ins. Co. v Johnson, 287 AD2d 640, 641; cf. Matter of Allstate Ins. Co. v Faulk, 250 AD2d 674).

 

Cardona, P.J., Mercure, Peters and Kane, JJ., concur.

 

ORDERED that the order is reversed, on the law, with costs, petition dismissed and arbitration temporarily stayed pending petitioner's expeditious completion of examinations of respondent.

 

PAIGE v CITY OF BUFFALO

 

It is hereby ORDERED that the order so appealed from be and the same hereby is modified on the law by denying defendants' cross motion and reinstating the complaint and as modified the order is affirmed without costs.

 

Memorandum: Plaintiff commenced this action seeking damages for injuries that he sustained when the vehicle that he was driving collided with a vehicle owned by defendant City of Buffalo and driven by defendant Louise T. Evans. Plaintiff sought medical treatment on the date of the accident for pain in his head and left leg, and he returned to the emergency room the following day, complaining of the same symptoms. Approximately one month after the accident and approximately one month prior to the diagnosis of a chronic subdural hematoma, plaintiff signed a full release for, inter alia, "all known and unknown, foreseen and unforeseen bodily and personal injuries and property damage and the consequences thereof" for consideration in the amount of $3,708.64.

 

Supreme Court erred in granting defendants' cross motion for summary judgment dismissing the complaint based on the release signed by plaintiff. Plaintiff's neurosurgeon averred that the hematoma was [*2]"probably" caused by the accident and that the fluid in the hematoma accumulates gradually as a result of trauma. Thus, plaintiff has raised an issue of fact whether, at the time he signed the release, the parties knew that he was suffering from a subdural hematoma. Where the ultimate injury is a consequence or sequela of the known injury a release will be upheld (see Finklea v Heim, 262 AD2d 1056, 1057; see also Booth v 3669 Delaware, 242 AD2d 921, 922, affd 92 NY2d 934). Where, however, the presumed injury is "so different from that of the actual injury [that] it is not merely a matter of degree or severity," the release may be set aside as signed under a mutual mistake of fact (Gibli v Kadosh, 279 AD2d 35, 39; see Curry v Episcopal Health Servs., 248 AD2d 662; Carola v NKO Contr. Corp., 205 AD2d 931).

 

A release "is a jural act of high significance without which the settlement of disputes would be rendered all but impossible. It should never be converted into a starting point for renewed litigation except under circumstances and under rules which would render any other result a grave injustice. *** Hence, the releasor *** must sustain the burden of persuasion if he is to establish that the general language of the release, valid on its face and properly executed, is to be limited because of a mutual mistake" (Mangini v McClurg, 24 NY2d 556, 563; see also Gibli, 279 AD2d at 38; Carola, 205 AD2d at 932). In this case, we conclude that plaintiff has raised a triable issue of fact whether the release was signed under a mutual mistake of fact. We therefore modify the order by denying defendants' cross motion and reinstating the complaint.

 

All concur except Scudder, J., who dissents in part and votes to affirm in the following Memorandum: I respectfully dissent. In my view, Supreme Court properly granted defendants' cross motion for summary judgment dismissing the complaint based on the release signed by plaintiff. Contrary to the majority's conclusion, plaintiff failed to raise an issue of fact whether the release is void because it is based upon the mutual mistake of the parties that plaintiff did not sustain a serious injury as a result of the accident. Plaintiff sought medical treatment on the date of the accident for pain in his head and left leg, and he returned to the emergency room the following day, complaining of the same symptoms. Plaintiff testified at the General Municipal Law § 50-h hearing that he experienced pain in his head from the date of the accident until the chronic subdural hematoma was diagnosed approximately two months later. Plaintiff's neurosurgeon states in an affidavit submitted in support of plaintiff's cross motion that plaintiff experienced headaches for two months following the accident and that he "experienced at least five [*3]blackouts" before his condition was diagnosed. In my view, therefore, the chronic subdural hematoma "is 'a consequence, or sequela, of the known [head] injury'" (Finklea v Heim, 262 AD2d 1056, 1057) and, "[a]t best, plaintiff[] [has] established a mere unilateral mistake on [his] part *** with respect to the meaning and effect of the release. Such a mistake does not constitute an adequate basis for invalidating a clear, unambiguous and validly executed release" (Booth v 3669 Delaware, 242 AD2d 921, 922, affd 92 NY2d 934). The release clearly states that plaintiff releases defendant from "all known and unknown *** injuries." In my view, the parties had not agreed to the terms of the release based upon a "mutual misapprehension" of plaintiff's injuries (Gibli v Kadosh, 279 AD2d 35, 38), and thus I would affirm.

 

UNITED STATES FIRE INS. CO. v CNA

 

It is hereby ORDERED that the judgment so appealed from be and the same hereby is unanimously affirmed without costs.

 

Memorandum: Defendants appeal from a judgment denying their motion for summary judgment dismissing the complaint and granting plaintiff's cross motion for summary judgment declaring that plaintiff is entitled to indemnification from defendants. We affirm. Kenneth Evanisko, a plaintiff in the underlying action, was injured while employed by Kirkwood Inc., doing business as Cannon Electrical Company (Cannon), at a construction site. Cannon was insured by defendants under a primary comprehensive general liability policy and Chesley Corporation (Chesley), the general contractor at the construction site, was insured by plaintiff under a commercial umbrella policy. Chesley was also an additional insured under the policy issued by defendants to Cannon. The underlying action was commenced against Chesley, and Chesley commenced a third-party action against Cannon for contractual indemnification. Supreme Court granted the motion of the plaintiffs in the underlying action for partial summary judgment on the issue of liability, and Chesley subsequently settled the underlying action for $1,500,000. North River Insurance Company [*2](North River), one of Chesley's insurers, paid $1,000,000 of that amount, and plaintiff herein paid the remaining $500,000. The court granted Cannon's motion for summary judgment dismissing the third-party action for contractual indemnification, and the court granted Chesley leave to amend the third-party complaint to assert a claim for common-law indemnification. The record does not establish whether Chesley ever did so. Plaintiff subsequently commenced this action seeking a declaration that defendants are obligated to indemnify Chesley for the $500,000 paid by plaintiff.

 

The issue before us is whether the policies of plaintiff and defendants are co-excess to each other, or whether the coverage of one policy must be exhausted before a claim may be made against the other policy. Having examined "the purpose each policy was intended to serve as evidenced by both its stated coverage and the premium paid for it ***, as well as *** the wording of its provision concerning excess insurance" (State Farm Fire & Cas. Co. v LiMauro, 65 NY2d 369, 374), we conclude that the coverage under the policy issued by defendants must be exhausted before a claim may be made against the policy issued by plaintiff. Plaintiff's policy is an umbrella policy, whereas defendants' policy affords primary coverage; plaintiff's policy is for a premium substantially less than the premium for defendants' policy; and plaintiff's policy expressly negates contribution with other insurers, whereas defendants' policy does not (see id. at 374-376; see also American Tr. Ins. Co. v Continental Cas. Ins. Co., 215 AD2d 342, 343). We reject defendants' contention that plaintiff voluntarily participated in the settlement of the underlying action and thus no subrogation rights accrued to plaintiff. Pursuant to the terms of the insurance policy issued by plaintiff, plaintiff's obligation to defend Chesley in the underlying action arose when the coverage under Chesley's policy issued by North River and other insurance from defendants was exhausted. The coverage under the policy issued by North River was exhausted with its $1,000,000 payment toward the settlement and defendants refused to pay into the settlement, thus giving rise to plaintiff's obligation to pay the remaining $500,000. "Plaintiff did not act as a mere volunteer in providing its insured with a defense and paying the [settlement], for it did so only after defendants refused [to pay]" (General Acc. Ins. Co. v United States Fid. & Guar. Ins. Co., 193 AD2d 135, 137).

 

METLIFE AUTO & HOME v JOE BASIL CHEVROLET, INC.,

 

It is hereby ORDERED that the order so appealed from be and the same hereby is unanimously affirmed with costs. Opinion by Kehoe, J.: The issue before us, one not yet considered by the Court of Appeals or this Court, is whether to recognize a cause of action for a negligent or reckless act of spoliation of evidence committed by one not a party or a potential party to the underlying claim to which the spoliated evidence relates. Under the circumstances presented, we decline to recognize a cause of action for "third-party spoliation" of evidence/impairment of claim or defense, either under principles of negligence law or as an independent tort. We thus conclude that Supreme Court properly granted the motion of defendant Royal Insurance Company (Royal) to [*2]dismiss the complaint against it.

I

In reviewing the determination of a motion to dismiss pursuant to CPLR 3211, we must accept as true the facts alleged in the complaint and in the submissions in opposition to the motion, accord the plaintiff the benefit of every possible favorable inference, and determine whether the facts alleged fit within any cognizable legal theory (see Sokoloff v Harriman Estates Dev. Corp., 96 NY2d 409, 414; Edmond v International Bus. Machs. Corp., 91 NY2d 949, 951, rearg denied 92 NY2d 871; Tenuto v Lederle Labs., Div. of Am. Cyanamid Co., 90 NY2d 606, 609-610; Leon v Martinez, 84 NY2d 83, 87-88).

 

Plaintiff, MetLife Auto & Home (MetLife), commenced this action as subrogee of Michael Basil, MetLife's insured under a homeowner's policy. The claim to which MetLife is subrogated is for $330,888.64 in fire damage to the residence of Michael Basil and his wife. MetLife's complaint names as defendants Joe Basil Chevrolet, Inc. (Basil Chevrolet), General Motors Corp. (General Motors), Speaker Shop, Inc. (Speaker Shop), and Royal, and asserts four causes of action. The first three causes of action seek recovery from Basil Chevrolet, General Motors and Speaker Shop for the $330,888.64 in fire damage on theories of negligence, breach of warranties, and strict products liability. The basis for the underlying claim is the allegation that the fire started in the dashboard of a 1999 Chevrolet Tahoe that had been parked in the garage attached to the Basil residence. That was the preliminary conclusion reached by fire investigators, who did not perform a "cause and origin investigation" on the vehicle but instead left that for the "insurance company" to perform. The vehicle, which was manufactured by General Motors and owned by Basil Chevrolet, had been made available to Michael Basil and his wife for their use. Speaker Shop had performed "certain after market electrical work and [had] installed a remote starter" in the vehicle.

 

This appeal concerns MetLife's fourth cause of action, which is asserted against only Royal, the insurer of Basil Chevrolet and the Chevrolet Tahoe in question, and likewise seeks recovery of $330,888.64. MetLife alleges that, after the fire, Royal "made arrangements to safeguard the integrity of the subject 1999 Chevrolet Tahoe and [placed it] at a storage lot [or salvage yard] under the direct supervision, control and observation of its duly authorized agent"; that "General Motors [,] Royal *** [and MetLife] arranged for a joint inspection/testing of the subject vehicle on or about the 6th [*3]day of November, 2000 at the storage lot of" Royal's agent; but that, shortly before the inspection, MetLife learned "from the retained expert of [Royal] that the vehicle had been sold and removed from the storage lot and *** substantially altered such that there was no chance to do a detailed, scientific and thorough analysis to determine the cause of the subject fire and resultant damage." MetLife alleges that, "as a result of the negligence, carelessness and recklessness of [Royal], invaluable, necessary and important evidence has been destroyed and lost[,] thereby irrevocably impairing [MetLife's] right to pursue successfully the defendants [Basil Chevrolet, General Motors and Speaker Shop]."

 

According to the averments of Mark D. Hagen, MetLife's subrogation adjustor, Royal "took possession" of the vehicle "as owner" upon indemnifying its insured, Basil Chevrolet, for the fire damage to the vehicle. Hagen subsequently asked both Royal and the salvage yard to preserve the vehicle for examination by MetLife and its experts. He was assured that Royal would "preserve and maintain the integrity of the vehicle so that a detailed cause and origin investigation could be performed." After an inspection had been scheduled by the various parties, Royal's expert notified Hagen that "Royal ***, through [its] agent the salvage yard, had disposed of the vehicle," and that "the new owner of the vehicle had disassembled it, making a scientific cause and origin examination impossible."

 

In lieu of answering, Royal moved to dismiss the complaint against it for failure to state a cause of action (see CPLR 3211 [a] [7]), arguing that spoliation of evidence is not recognized as a cause of action in New York. MetLife opposed Royal's motion and moved for an order dismissing Royal's defense that the complaint fails to state a cause of action. MetLife further sought summary judgment on its cause of action against Royal for spoliation of evidence.

 

II

 

The court granted the motion of Royal to dismiss the complaint against it and denied MetLife's motion ^[FN1]. We conclude that the court [*4]properly dismissed the complaint against Royal because no cause of action for negligent or reckless spoliation of evidence/impairment of claim lies against a nonparty to the underlying claim.

III

 

Cases imposing an obligation to preserve and disclose evidence, and subjecting a party to statutory (see CPLR 3126) or common-law sanctions in the event of its failure to do so, are legion (see e.g. Foncette v LA Express, 295 AD2d 471; Marro v St. Vincent's Hosp. & Med. Ctr. of N.Y., 294 AD2d 341; Sage Realty Corp. v Proskauer Rose, 275 AD2d 11, 17-18, lv dismissed 96 NY2d 937; Yi Min Ren v Professional Steam-Cleaning, 271 AD2d 602, 603; Squitieri v City of New York, 248 AD2d 201, 202-204; Kirkland v New York City Hous. Auth., 236 AD2d 170, 173-176; Mudge, Rose, Guthrie, Alexander & Ferdon v Penguin A.C. Corp., 221 AD2d 243). Such authorities are not directly applicable to the issue now before us, although they may become applicable to the case as it plays out (see n 5, infra). Here, we are concerned with an attempt to impose liability in tort for spoliation of evidence and consequent impairment of the spoliation victim's ability to prevail on an underlying claim to which the lost or destroyed evidence pertained or might have pertained.

 

Traditionally, spoliation has been defined as the "intentional destruction, mutilation, alteration, or concealment of evidence, [usually] a document" (Black's Law Dictionary 1409 [7th ed 1999]). As employed in case law, however, spoliation is a much broader term, one that has been applied to intentional conduct ranging from the deliberate destruction of evidence with fraudulent intent to innocent practices and occurrences in the ordinary course of business or events. Moreover, despite its denotation of intentionality, the term has been applied in case law to unintentional conduct, such as the apparently inadvertent (from Royal's standpoint) destruction of the fire-damaged vehicle in this case.

 

We are not concerned here with allegations of intentional spoliation (see generally Annotation, Intentional Spoliation of Evidence, Interfering with Prospective Civil Action, as Actionable, 70 ALR4th 984), but rather with alleged negligence or recklessness in the loss or destruction of evidence (see generally Annotation, Negligent Spoliation of Evidence, Interfering with Prospective Civil Action, as Actionable, 101 ALR5th 61). Despite the allegations of fault on the part of Royal itself, we are concerned not with Royal's own direct loss or destruction of the evidence, but with Royal's allegedly permitting the evidence to be lost or destroyed by another entity, [*5]i.e., the storage lot or salvage yard allegedly employed as Royal's agent. Moreover, we are concerned with an attempt to impose liability for spoliation not on a party (i.e., a litigant or potential litigant) to the underlying claim (see generally id., § 3 [a]),^[FN2] but on a nonparty to it (see generally id., § 3 [b]),^[FN3] in particular, the insurer of a defendant to the underlying claim (see generally id., § 18 [a], [b]). To put it differently, we are concerned with an act of spoliation allegedly committed by an entity that, if not entirely a stranger to the underlying claim, certainly could not have been held directly liable on that claim.

 

The viability of a cause of action for spoliation of evidence whether alleged under general principles of negligence law or as an independent intentional or non-intentional tort and whether alleged against a first party or third party has been the subject of much case law and commentary. A cause of action for spoliation of evidence appears to have been first recognized in 1973 (see Pirocchi v Liberty Mutual Ins. Co., 365 F Supp 277, 281-282 [applying Pennsylvania law]), although that particular nomenclature apparently was not used until 1984 (see Smith v Superior Ct. of Los Angeles County, 151 Cal App 3d 491). Since then, the few "courts that have found negligent spoliation to be actionable generally require proof of the destruction of evidence, the existence of a duty, damages, and proximate causation" (101 ALR5th at 82). Clearly, a duty to preserve evidence is at the heart of any purported cause of action for negligent spoliation, and the provability of both the fact and extent of harm is the linchpin of any determination whether to recognize such a cause of action.

IV

 

Before addressing the case law in New York concerning this issue, we look to the case law in other jurisdictions. The great weight of authority runs against recognizing a common-law duty to preserve evidence or a cause of action for spoliation of evidence/impairment of claim or defense under almost any circumstances, even when the conduct is alleged to have been intentionally committed by a party to the underlying claim ^[FN4] (see e.g. Caleb v CRST, Inc., 43 Fed Appx 513, 516-[*6]517 [applying Pennsylvania law]; Bass v E.I. Dupont De Nemours & Co., 28 Fed Appx 201, 206 [applying Virginia law], cert denied ___ US ___, 122 S Ct 2693; Goff v Harold Ives Trucking Co., 342 Ark 143, 150-151, 27 SW3d 387, 391; Trevino v Ortega, 969 SW2d 950, 951-953 [Tex]; Cedars-Sinai Med. Ctr. v Superior Ct. of Los Angeles County, 18 Cal 4th 1, 8-18, 954 P2d 511, 515-521; Monsanto Co. v Reed, 950 SW2d 811, 815 [Ky]; Christian v Kenneth Chandler Constr. Co., 658 So 2d 408, 413-414 [Ala]; Brown v Hamid, 856 SW2d 51, 56-57 [Mo]; La Raia v Superior Ct. in & for Maricopa County, 150 Ariz 118, 121, 722 P2d 286, 289; Parker v Thyssen Min. Constr., 428 So 2d 615, 617-618 [Ala]; Richardson v Simmons, 245 Ga App 749, 750, 538 SE2d 830, 832; Miller v Montgomery County, 64 Md App 202, 213-215, 494 A2d 761, 767-768, cert denied 304 Md 299, 498 A2d 1185; see also Torres v El Paso Elec. Co., 127 NM 729, 745-746, 987 P2d 386, 402-403; Coleman v Eddy Potash, Inc., 120 NM 645, 650-651, 905 P2d 185, 190-191 [both cases rejecting causes of action for negligent spoliation by first party]). Especially numerous are those decisions rejecting or refusing to recognize a cause of action for negligent spoliation of evidence by a nonparty to the underlying claim (see e.g. Wilson v Beloit Corp., 921 F2d 765, 767-768 [8th Cir] [applying Arkansas law]; Moore v United States/U.S. Dept. of Agric. Forest Serv., 864 F Supp 163, 164-165 [D Colo] [applying Colorado law]; Edwards v Louisville Ladder Co., 796 F Supp 966, 968-972 [WD La] [applying Louisiana law]; Fletcher v Dorchester Mut. Ins. Co., 437 Mass 544, 547-553, 773 NE2d 420, 424-428; Nichols v State Farm Fire & Cas. Co., 6 P3d 300, 304-305 [Alaska]; Meyn v State, 594 NW2d 31, 33-34 [Iowa]; Austin v Consolidation Coal Co., 256 Va 78, 82-84, 501 SE2d 161, 163-164; Smith v Howard Johnson Co., 67 Ohio St 3d 28, 29, 615 NE2d 1037, 1038; Owens v American Refuse Sys., 244 Ga App 780, 781, 536 SE2d 782, 784; Elias v Lancaster Gen. Hosp., 710 A2d 65, 67-69 [Pa App]).

 

In contrast, those decisions that permit a cause of action for even an intentional act of spoliation by a third party are comparatively few (see e.g. Rickets v Eastern Idaho Equip. Co., 137 Idaho 578, ___, 51 P3d 392, 395-396; Hibbits v Sides, 34 P3d 327, 328-330 [Alaska]; Oliver v Stimson Lumber Co., 297 Mont 336, 352-353, 993 [*7]P2d 11, 21-22; Smith, 67 Ohio St 3d at 29, 615 NE2d at 1038; McCool v Beauregard Mem. Hosp., 814 So 2d 116, 118 [La App]). Cases recognizing a cause of action for negligent or reckless third-party spoliation of evidence are rarer still (see e.g. Smith v Atkinson, 771 So 2d 429, 432-438 [Ala]; Oliver, 297 Mont at 348-352, 993 P2d at 19-21; Boyd v Travelers Ins. Co., 166 Ill 2d 188, 192-198, 652 NE2d 267, 269-272; McCool, 814 So 2d at 118; Guillory v Dillard's Dept. Store, 777 So 2d 1, 3-5 [La App]; Thompson v Owensby, 704 NE2d 134, 136-140 [Ind App]; Holmes v Amerex Rent-A-Car, 710 A2d 846, 847 [DC]; Continental Ins. Co. v Herman, 576 So 2d 313, 315 [Fla App], review denied 598 So 2d 76). Certain courts have held or suggested that, if a cause of action for spoliation exists, it nevertheless would not lie unless and until the underlying claim has been resolved, thereby causing a concrete injury to the spoliation plaintiff (see e.g. Federated Mut. Ins. Co. v Litchfield Precision Components, 456 NW2d 434, 437-439 [Minn]; Mayfield v ACME Barrel Co., 258 Ill App 3d 32, 38-39, 629 NE2d 690, 695-696; Baugher v Gates Rubber Co., 863 SW2d 905, 907-914 [Mo App]; Continental Ins. Co., 576 So 2d at 315-316; Bondu v Gurvich, 473 So 2d 1307, 1311-1313 [Fla App], review denied 484 So 2d 7; Fox v Cohen, 84 Ill App 3d 744, 751, 406 NE2d 178, 183).

V

A handful of New York cases recognize an independent cause of action for third-party spoliation, although all such cases are factually distinguishable from this case. Moreover, most such cases are narrowly confined to the scenario in which an employee sues his employer for its spoliation of evidence and consequent impairment of the employee's claim against a third-party tortfeasor. Even under that line of cases, however, the duty to preserve evidence imposed upon the employer in that situation is rather limited (see Ripepe v Crown Equip. Corp., 293 AD2d 462, 463-464; Curran v Auto Lab Serv. Ctr., 280 AD2d 636, 637-638; DiDomenico v C & S Aeromatik Supplies, 252 AD2d 41, 53-54; Vaughn v City of New York, 201 AD2d 556, 558; Coley v Ogden Mem. Hosp., 107 AD2d 67, 68-70; Weigl v Quincy Specialties Co., 158 Misc 2d 753,756-757; see also Caban v Gottlieb Iron Works, 147 Misc 2d 583, 586-587, affd sub nom. Caban v Bonaco Constr. Corp., 172 AD2d 377). In our view, that line of cases provides no support for recognizing the instant cause of action for negligent spoliation of evidence against a nonparty to the underlying claim, inasmuch as MetLife is in no position to rely on the judicially-formulated duty of an employer not to thwart its employee's right of action against a third-party tortfeasor. [*8]

An appellate decision that appears to reject on the facts an independent claim for intentional spoliation of evidence by a third party (other than by an employer) is that of the First Department in Steinman v Barclays Bank (276 AD2d 436, lv dismissed 96 NY2d 818). Another that appears to reject on the facts an independent cause of action for first-party spoliation is the First Department's decision in Fairclough v Hugo (207 AD2d 707, 708, citing Pharr v Cortese, 147 Misc 2d 1078 [Sup Ct, NY County] [rejecting on the facts a cause of action for intentional first-party spoliation]). A number of trial-level Federal decisions rule out a cause of action for first-party or third-party spoliation, whether intentional or negligent or both, as a matter of New York law (see Sterbenz v Attina, 205 F Supp 2d 65, 71-73; Tiano v Jacobs, 2001 WL 225037, *4, 2001 US Dist LEXIS 2188, *12-14 [SD NY, Mar. 6, 2001]; Black Radio Network v NYNEX Corp., 44 F Supp 2d 565, 585-586; Tietjen v Hamilton-Beach/Proctor-Silex, 1998 WL 865586, *3, 1998 US Dist LEXIS 19404, *7-8 [ND NY, Nov. 25, 1998]; Whittlesey v Espy, 1996 WL 689402, *1, 1996 US Dist LEXIS 17638, *2 [SD NY, Nov. 26, 1996]; Mondello v Dun & Bradstreet Corp., 1996 WL 239890, *3 n 1, 1996 US Dist LEXIS 6189, *7 n 1 [SD NY, May 9, 1996]).

MetLife places much reliance on Fada Indus. v Falchi Bldg. Co. (189 Misc 2d 1), a trial-level decision concerned with allegations of negligent third-party spoliation. There, a tenant sued the owner and manager of its building and a cotenant to recover for property damage caused by the cotenant's leaking water heater. Before commencement of that action, the cotenant's insurer took possession of the water heater, which subsequently was lost or destroyed while in the possession of an agent of the insurer. The cotenant impleaded its own insurer for its negligent loss of the water heater, theorizing that such loss had impaired its ability to defend the action and had prevented it from impleading the entities that negligently manufactured, installed or repaired the water heater. The insurer moved to dismiss the third-party complaint against it, but Supreme Court denied the motion, thereby sustaining the third-party claim for negligent spoliation of evidence/impairment of defense (see id. at 3-13).

Another case of alleged spoliation by a third-party insurer is Sterbenz (205 F Supp 2d 65). In that case, the plaintiff's husband was killed in a single-car accident in which plaintiff was the driver. Following the accident, the car was taken to a salvage yard and inspected by the plaintiff's insurer, which declared the car a total loss. After paying the plaintiff's collision claim, the insurer assumed ownership of the car and, despite the plaintiff's alleged requests to preserve it, sold the car. The plaintiff's expert first [*9]attempted to examine the car some five months after the accident, learning that it had been sold two months earlier, prior to the commencement of any lawsuit. The plaintiff sued the insurer and one of its claims agents, alleging spoliation of evidence and impairment of her products liability claim against the manufacturer of the car. The court for the Eastern District of New York granted the insurer's motion for summary judgment dismissing the action, declaring any claim for spoliation of evidence groundless under New York law and determining the insurer's conduct to have been reasonable in any event (see id. at 71-73).

Here, in contradistinction to the situation in both Fada Indus. and Sterbenz, there is no relationship between Royal, the defendant insurer, and MetLife, the plaintiff (or its subrogor, Michael Basil). MetLife is not the insured of the defendant but rather merely a potential claimant (by subrogation) against Royal's insured, Basil Chevrolet. It is thus impossible here to formulate a duty to preserve evidence running from Royal to MetLife (or to Michael Basil, MetLife's subrogor) by virtue of an insurance contract. MetLife posits a duty to preserve evidence based upon Royal's voluntary promise and undertaking to do so. However, for the reasons discussed infra, we decline to recognize such a duty as a basis for imposing tort liability for a negligent or reckless act of spoliation committed by a nonparty to the underlying claim.

VI

Recognition of a cause of action for third-party spoliation is fraught with pitfalls. Foremost among them is the notion of placing a third party under a duty to preserve evidence for the benefit of strangers and in anticipation of as-yet-uncommenced litigation (see Fletcher, 437 Mass at 548, 773 NE2d at 424-425; Koplin v Rosel Well Perforators, 241 Kan 206, 208-213, 734 P2d 1177, 1179-1182), in the absence of an easily obtainable court order mandating such preservation (see Owens, 244 Ga App at 781, 536 SE2d at 784). In our view, requiring a court order as an essential (but not necessarily sufficient) predicate for imposing liability on a third party places the burden for preserving evidence where it belongs — on the party seeking its preservation. More problematic is the notion of holding a third party liable for destroying or discarding its own property under such circumstances; such liability would in our view constitute an unwarranted infringement on property rights (see Edwards, 796 F Supp at 970; Koplin, 241 Kan at 212-215, 734 P2d at 1181-1183; Baugher, 863 SW2d at 912). In that connection, we note that, prior to the disposal of the fire-damaged vehicle, Royal had assumed ownership of the [*10]vehicle upon indemnifying its insured, Basil Chevrolet.

Another pitfall concerns the societal costs of mandating the preservation of anything that might conceivably be or become evidence (see Temple Community Hosp., 20 Cal 4th at 476, 976 P2d at 232). As noted by one court, the recognition of a cause of action for spoliation would require

"persons or entities to take extraordinary measures to preserve for an indefinite period documents and things of no apparent value solely to avoid the possibility of spoliation liability if years later those items turn out to have some potential relevance to future litigation" (Cedars-Sinai Med. Ctr., 18 Cal 4th at 15, 954 P2d at 519).

In that connection, we note that many vehicles relegated to a salvage yard would ordinarily constitute relevant evidence of at least a potential property damage claim (see Edwards, 796 F Supp at 970 n 9). We further note that

"[a] separate tort remedy would be subject to abuse, for in many cases potentially relevant evidence will no longer exist at the time of trial, not because it was intentionally destroyed but simply because it has been discarded or misplaced in the ordinary course of events. (Comment, Spoliation of Evidence: A Troubling New Tort (1989) 37 U. Kan. L. Rev. 563, 592 ['A new cause of action could accrue each time a plaintiff loses a lawsuit, for in most cases there is likely to be some piece of potential evidence that is not available at the time of trial.']***)" (Cedars-Sinai Med. Ctr., 18 Cal 4th at 15, 954 P2d at 519).

The foregoing considerations lead us to conclude that it would be extremely difficult if not impossible to rationally limit, explicitly define, and coherently articulate the outer limits of any judicially-declared duty on the part of third parties to preserve evidence for the benefit of litigants or potential litigants (see Koplin, 241 Kan at 208-215, 734 P2d at 1179-1183).

There would be even greater potential difficulties with the mechanics of a cause of action for third-party spoliation of evidence, if one were to be recognized. The most obvious of those would be the impossibility in most circumstances of ascertaining the precise nature or substance of the lost or destroyed evidence (see Goff, 342 Ark at 149, 27 SW3d at 390; Cedars-Sinai Med. Ctr., 18 Cal 4th 1, 13-15, 954 [*11]P2d 511, 518-519). Moreover, there would be unfairness and rank speculation inherent in simply assuming that the spoliated evidence would have favored the plaintiff rather than his adversary in the underlying litigation if indeed it would have favored either party (see Fletcher, 437 Mass at 551-552, 773 NE2d at 427; Temple Community Hosp., 20 Cal 4th at 474-475, 976 P2d at 231; Koplin, 241 Kan at 215, 734 P2d at 1183). Indeed, it may be the case that both parties to the underlying claim will have suffered injury as a result of a third party's single act of spoliation, thereby giving rise to competing claims of spoliation and the potential for inconsistent verdicts (see Temple Community Hosp., 20 Cal 4th at 476, 976 P2d at 231-232). For example, there may well be instances in which different parts of a document or different aspects of an item of evidence would favor opposing parties. Courts cannot be expected to adjudicate a claim for damages where it is so difficult to determine who, if anyone, has suffered a loss (see id. at 475, 976 P2d at 231). There is also the consequent unfairness of essentially rendering the inadvertent spoliator the insurer of either the underlying claim or the underlying liability, depending on which underlying party is assumed to have been injured (or more injured) by the loss of the evidence.

Regardless of which underlying party is deemed to have been injured by the loss of the evidence, it would nonetheless be extremely difficult to establish causation, i.e., a link between the unavailability of the evidence and any assumed impairment of the claim or defense (see Fletcher, 437 Mass at 548, 773 NE2d at 424-425; Temple Community Hosp., 20 Cal 4th at 474-475, 976 P2d at 231). Moreover, speculation would be unavoidable in ascertaining what effect the missing evidence might have had on the underlying litigation and whether the claim or defense has been significantly impaired by the loss or destruction of the evidence (see Goff, 342 Ark at 149, 27 SW3d at 390; Cedars-Sinai Med. Ctr., 18 Cal 4th at 13-15, 954 P2d at 518-519; Koplin, 241 Kan at 215, 734 P2d at 1183). Merely because the spoliation victim has lost or stands to lose the underlying lawsuit without the spoliated evidence does not mean that it would have prevailed with the evidence (see Edwards, 796 F Supp at 970; Federated Mut. Ins. Co., 456 NW2d at 437). The uncertainty of the fact of harm

"would create the risk of erroneous determinations of spoliation liability (that is, findings of liability in cases in which availability of the spoliated evidence would not have changed the outcome of the underlying litigation). An erroneous determination of spoliation liability would enable the spoliation victim to recover damages, or avoid liability, for the underlying cause of action when the [*12]spoliation victim would not have done so had the evidence been in existence" (Cedars-Sinai Med. Ctr., 18 Cal 4th at 15, 954 P2d at 519).

At bottom, the insurmountable problem is the intrinsic circularity of any allegation that the underlying claim has been defeated or lost as a result of the spoliation of evidence. As has been noted:

"To establish causation and damages, the plaintiff would have to show that the [actual or hypothetical] jury in the underlying action would have found differently if the original, unaltered item of evidence had been before them. Such a showing requires proof of the very thing that can no longer be proved: the precise nature of the original item. If the contents or salient characteristics of the original item can still be shown, then they can be [or could have been] shown in the underlying action and there is no damage from any 'spoliation.' If they cannot be shown, then the jury in the spoliation action could only surmise whether the item in its original state would in fact have been favorable to the party now claiming to have suffered a loss on account of that spoliation. *** And, it would be the utmost of surmise and speculation for the jury to decide what persuasive effect that item, if still available in its original state, would have had on the [actual or hypothetical] jury in the underlying action. Ultimately, such claims are inherently circular, calling on one jury to revisit what another jury ha[s] already decided [or might have decided] and to determine whether something that still cannot be shown would, had it been available, have changed that original jury's opinion" (Fletcher, 437 Mass at 551, 773 NE2d at 426-427).

Even if the fact of harm can be ascertained or assumed, it would be virtually impossible to measure the degree of harm and the precise extent of damages, and any attempt to do so would involve inherent and irreducible speculation (see Trevino, 969 SW2d at 952; Cedars-Sinai Med. Ctr., 18 Cal 4th at 14-15, 954 P2d at 519). Moreover, there is the ancillary problem of appropriately adjusting the damages to take into account the estimated (or assumed) likelihood of success of the underlying claim or defense (see generally Holmes, 710 A2d at 853-854). There is also the undeniable fact that, whatever its factual merits might be, the claim of spoliation is patently premature unless and until the victim has failed to prevail on the underlying claim or [*13]defense; until then, the spoliation victim has not suffered any concrete harm (see Federated Mut. Ins. Co., 456 NW2d at 439; Baugher, 863 SW2d at 914; see also Continental Ins. Co., 576 So 2d at 315-316; cf. Goff, 342 Ark at 149-150, 27 SW3d at 391).

Finally, there is the risk of generating a spiral of contemporaneous or subsequent collateral or satellite litigation based on allegations of spoliating conduct committed not only in advance of, but also throughout, the prosecution of the underlying claim (see Temple Community Hosp., 20 Cal 4th at 472, 976 P2d at 229, citing Cedars-Sinai Med. Ctr., 18 Cal 4th at 9-11, 954 P2d at 515-516; Meyn, 594 NW2d at 34; Koplin, 241 Kan at 215, 734 P2d at 1183). In such collateral or satellite litigation, all of the evidence in the underlying action would have to be precisely re-presented so that the jury in the spoliation action could accurately determine what impact the missing evidence would have had in light of all the other evidence (see Temple Community Hosp., 20 Cal 4th at 475, 976 P2d at 231). That retrial-within-a-trial scenario would be especially likely to result in jury confusion, in our view. Perhaps just as confusing would be the scenario contemplated herein, whereby a single jury would hear both the underlying claim and the spoliation claim, yet would be expected to refrain from considering the substance of the missing evidence in deciding the underlying claim against the primary defendants while nevertheless determining the impact (on the underlying claim) of the loss or destruction of that evidence and deciding the spoliation claim against the third party accordingly.

"In sum, we conclude that the benefits of recognizing a tort cause of action, in order to deter third party spoliation of evidence and compensate victims of such misconduct, are outweighed by the burden to litigants, witnesses, and the judicial system that would be imposed by potentially endless litigation over a speculative loss, and by the cost to society of promoting onerous record and evidence retention policies" (Temple Community Hosp., 20 Cal 4th at 478, 976 P2d at 233). We thus decline to recognize an inherently speculative and hopelessly circular cause of action for spoliation of evidence where, as here, the act of spoliation was allegedly inadvertent, occurred prior to commencement of the underlying claim, and was committed by one not a party to the underlying claim and with no relationship, and hence no duty, to MetLife, the plaintiff. Instead, we join the majority of courts that have recognized the comparative advantages of remedying any injury through the imposition of carefully chosen and specifically tailored sanctions within the context of the
underlying action5 (see generally Fletcher, 437 Mass at 547-553, 773 NE2d at 424-428; Goff, 342 Ark at 146-151, 27 SW3d at 389-391; [*14]Nichols, 6 P3d at 304; Temple Community Hosp., 20 Cal 4th at 469-478, 976 P2d at 227-233; Trevino, 969 SW2d at 952-953; Cedars-Sinai Med. Ctr., 18 Cal 4th at 8-17, 954 P2d at 515-521; Federated Mut. Ins. Co., 456 NW2d at 437-439; Koplin, 241 Kan at 208-213, 734 P2d at 1179-1182). To the extent that remedies against an alleged third-party spoliator appear to be "limited, that may well be because third party spoliation has not [been] a significant problem in our courts" (Temple Community Hosp., 20 Cal 4th at 477, 976 P2d at 233).

Accordingly, the order should be affirmed.

5We have no occasion here to address whether Royal might be deemed to have been acting as the agent of its insured, Basil Chevrolet, when it lost the critical evidence, thereby potentially subjecting Basil Chevrolet to the typical range of statutory and common-law sanctions available against a litigant responsible for spoliation of evidence.
Entered: December 30, 2002JoAnn M. Wahl
Clerk of the Court

Footnotes

Footnote 1:The order also dismissed or otherwise refused to permit cross claims against Royal for spoliation of evidence/impairment of defense. Absent cross appeals by the codefendants, we will not address the viability of such cross claims, nor will we address the other provisions of the order. Further, in view of our decision, we need not address the contention of MetLife that it is entitled to summary judgment on its cause of action for spoliation of evidence.

Footnote 2:This has been called "first-party spoliation."

Footnote 3:This has been called "third-party spoliation."

Footnote 4:We catalog holdings such as this because those courts that do not recognize a cause of action for intentional spoliation certainly would not recognize one for negligent spoliation, and because it stands to reason that those courts that do not recognize such a cause of action against a first party likewise would not recognize one against a third party. As stated by one court, it would be anomalous "a strange outcome indeed" "for a nonparty to be liable in damages *** for conduct that would not give rise to tort liability if committed by a party" (Temple Community Hosp. v Superior Ct., 20 Cal 4th 464, 466, 477, 976 P2d 223, 225, 233).

 

STATE FARM FIRE CAS. AND INS. CO. v TRAVELERS PROPERTY CAS. INS. CO.

 

In an action for a judgment declaring the rights and responsibilities of the plaintiff and the defendant Travelers Property Casualty Insurance Company under their respective personal liability umbrella policies, the defendant Travelers Property Casualty Insurance Company appeals from an order of the Supreme Court, Nassau County (Burke, J.), dated January 7, 2002, which granted the plaintiff's motion for summary judgment declaring that it must contribute ratably with the plaintiffs to any award made against their insured, Richard Gresio, in excess of both the coverage contained in a separate primary liability insurance policy, and the applicable deductible designated in the policy it issued, in two underlying actions pending in the Supreme Court, Nassau County, entitled Colton v Gresio, and Harris v Gresio, and denied its cross motion for summary judgment declaring that its policy is excess to the plaintiff's policy.

 

ORDERED that the order is affirmed, with costs, and the matter is remitted to the Supreme Court, Nassau County, for the entry of a judgment declaring that the plaintiff and the defendant Travelers Property Casualty Insurance Company must contribute ratably to any award made against their insured Richard Gresio in excess of both the coverage contained in a separate primary liability insurance policy and the applicable deductible designated in the policy issued by the defendant Travelers Property Casualty Insurance Company, in two underlying actions pending in the Supreme Court, Nassau County, entitled Colton v Gresio and Harris v Gresio.

 

The Supreme Court properly determined that the separate personal liability umbrella insurance policies provided by the defendant Travelers Property Casualty Insurance Company (hereinafter Travelers) and the plaintiff State Farm Fire Casualty and Insurance Company (hereinafter State Farm) covered the same risk, and both contain excess insurance clauses which negate each other (see Jefferson Ins. Co. of N.Y. v Travelers Indem. Co., 92 NY2d 363; Kansas City Fire & Mar. Ins. Co. v Hartford Ins. Group, 57 NY2d 920, 922; Lumbermens Mut. Cas. Co. v Allstate Ins. Co., 51 NY2d 651, 655; Federal Ins. Co. v Atlantic Nat. Ins. Co., 25 NY2d 71; Macari v Nationwide Mut. Ins. Co., 296 AD2d 384; American Tr. Ins. Co. v Continental Cas. Ins. Co., 215 AD2d 342). Therefore, Travelers and State Farm must contribute ratably, after the primary insurance coverage is exhausted and over the applicable $500,000 deductible designated in Travelers' policy, to any award made against their insured Richard Gresio in the two underlying actions (see Lumbermens Mut. Cas. Co. v Allstate Ins. Co., supra; Macari v Nationwide Mut. Ins. Co., supra; cf. American Tr. Ins. Co. v Continental Cas. Ins. Co., supra).

 

Since this is a declaratory judgment action, the Supreme Court should have directed the entry of a judgment and declaration in favor of State Farm (see Lanza v Wagner, 11 NY2d 317, 334, appeal dismissed 371 US 74, cert denied 372 US 901). [*3]
ALTMAN, J.P., S. MILLER, LUCIANO and RIVERA, JJ., concur.

 

GOTTLIEB v BLUE RIDGE INS. CO.

 

In an action pursuant to Insurance Law § 3420(a)(2) to recover an unsatisfied judgment against the defendant's insured, brought by motion for summary judgment in lieu of complaint pursuant to CPLR 3213, the defendant appeals from an order of the Supreme Court, Kings County (Vaughan, J.), dated December 12, 2001, which, inter alia, converted the motion to one for summary judgment pursuant to CPLR 3212, and, upon converting the [*2]motion, granted summary judgment to the plaintiffs and denied the defendant's cross motion for summary judgment dismissing the action.

 

ORDERED that the order is modified, on the law, by deleting the provision thereof which converted the motion to one for summary judgment pursuant to CPLR 3212 and, upon converting the motion, granted summary judgment to the plaintiffs, and substituting therefor a provision denying the plaintiffs' motion for summary judgment in lieu of complaint; as so modified, the order is affirmed, without costs or disbursements.

 

In an underlying negligence action, the plaintiffs obtained a judgment against the defendant's insured. When the judgment remained unsatisfied for more than 30 days, the plaintiffs commenced this action pursuant to Insurance Law § 3420(a)(2) to recover the unsatisfied judgment from the defendant. They proceeded by motion for summary judgment in lieu of complaint pursuant to CPLR 3213. In the order appealed from, the Supreme Court converted the motion to one for summary judgment pursuant to CPLR 3212, granted the plaintiffs summary judgment, and denied the defendant's cross motion for summary judgment dismissing the action. We modify.

 

On the facts and circumstances presented, conversion of this motion to one for summary judgment pursuant to CPLR 3212 was not appropriate (compare Big K Kosher Dairy Rest. v Gross, 198 AD2d 205; see also Schulz v Barrows, 94 NY2d 624; Weissman v Sinorm Deli, 88 NY2d 437). Further, the use of a "motion-action" pursuant to CPLR 3213 was not appropriate (see Schulz v Barrows, supra; Weissman v Sinorm Deli, supra; Grinblat v Taubenblat, 107 AD2d 735; Holmes v Allstate Ins. Co., 33 AD2d 96). The defendant is not named in the judgment, a prima facie case against the defendant is not made out by the judgment itself, and the outside evidence needed to demonstrate the liability of the defendant for the judgment requires more than a de minimis deviation from the face of the judgment (see Weissman v Sinorm Deli, supra; Grinblat v Taubenblat, supra). Thus, the plaintiffs' motion for summary judgment in lieu of complaint is denied.

 

RITTER, J.P., FRIEDMANN, H. MILLER and COZIER, JJ., concur.

 

GARSON MGT. CO. v TRAVELERS INDEMNITY CO. OF ILL.

 

In an action, inter alia, to recover damages for breach of contract, the plaintiffs appeal from an order of the Supreme Court, Westchester County (Colabella, J.), entered September 5, 2001, which denied their motion for summary judgment on the issue of liability, and, in effect, granted that branch of the defendant's cross motion which was for summary judgment dismissing the complaint.

 

ORDERED that the order is affirmed, with costs.

 

The defendant issued a commercial property insurance policy to the plaintiff Garson Management Company, LLC (hereinafter Garson), which contained exclusions for the costs of correcting deterioration and corrosion of covered property. A chunk of concrete fell from a portion of the garage owned by the plaintiff 1180 Midland Avenue, LLC, which was managed by Garson and was a covered property under the subject insurance policy. The plaintiffs then removed the concrete encasing the garage's structural steel beams, and discovered that they were severely corroded. Thereafter, the plaintiffs repaired the damage, and sought reimbursement from the defendant under the insurance policy. The defendant denied coverage pursuant to the policy provision excluding the cost of correcting, or reimbursing the insured for moneys expended to correct, deterioration or corrosion. The plaintiffs commenced this action seeking, inter alia, damages for breach of the insurance policy. They eventually moved for partial summary judgment, essentially claiming that coverage is afforded under a separate policy provision that excludes losses caused by building or structure collapse unless the collapse is caused by "hidden decay." The Supreme Court denied the plaintiffs' motion for partial summary judgment, and, in effect, granted the defendant's cross motion for summary judgment dismissing the complaint.

 

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 sought reimbursement for costs incurred in correcting corrosion and deterioration of the subject garage. Thus, the exclusion applied to the loss in the present case and the Supreme Court properly granted summary judgment to the defendants. There is no merit to the plaintiffs' claim that the hidden decay exception to the collapse exclusion provides coverage in this matter (see Zandri Constr. Co. v Stanley H. Calkins, Inc., 54 NY2d 999, 1001; Manorcare Health Servs. v Travelers Indem. Co. of Illinois, 210 F3d 358). "[P]olicy exclusions are to be read seriatim and, if any one exclusion applies, there is no coverage since no one exclusion can be regarded as inconsistent with another" (Sampson v Johnston, 272 AD2d 956, quoting Hartford Acc. & Indem. Co. v Reale & Sons, 228 AD2d 935, 936).

 

The plaintiffs' remaining contentions are without merit.