Coverage Pointers - Volume IV, No. 2
07/25/02: AMERICAN TRANSIT INS. CO. v. WILFRED
New York State Supreme Court, Appellate Division, First Department
“Midnight” Deemed Ambiguous
This declaratory judgment action arose out of motor vehicle accident that occurred on February 28, 1998 and 9:50 pm when a taxi owned by McMaroro Transit, Inc. and operated by Wilfred, rear-ended a second vehicle. The driver and passenger in the second vehicle commenced a personal injury action against McMaroro Transit and Wilfred, and the passengers in the taxi commenced a second personal injury action against the same defendants. Empire Mutual had issued an auto insurance policy to McMaroro “EFFECTIVE FROM MIDNIGHT: 02/28/97 TO MIDNIGHT: 02/28/98.” American Transit Insurance Co. had issued a policy to McMaroro that was effective “FROM 02/28/1998 MIDNIGHT-02/28/1999 MIDNIGHT.” American Transit and Empire both claimed in this action that their policies were not in effect at the time of the accidents. The court held that use of the term “midnight” by both insurers was ambiguous and, as such, that the policies overlap and that both must defend and indemnify McMaroro and Wilfred. In reaching this conclusion, the court observed that General Construction Law § 19 defines a calendar day as “the time from midnight to midnight,” and that a number of courts, as well as other sources, have noted that the definition of a day is commonly considered to be the 24-hour period running from midnight to midnight. Furthermore, in Mumuni v Eagle Insurance Company (247 AD2d 315, lv dismissed in part, denied in part 92 NY2d 940), the court held that the term “midnight” was ambiguous, that the ambiguity should be construed against the insurance company, and that a policy effective “from 12/31/88 midnight to 12/31/89 midnight” covered the insured from 12:01 A.M. on December 31, 1988, when the insured’s prior policy lapsed. Finally, the court held that American Transit was obligated to defend and indemnify McMaroro and Wilfred in any event because it represented the insureds in the two underlying personal injury actions for more than two years before disclaiming coverage.
07/25/02: CLAVERACK COOP. INS. CO. v. NIELSEN
New York State Supreme Court, Appellate Division, Third Department
Party Resisting Disclosure of Reports Filed by Defendant With Own Liability Carrier Must Provide More Than Conclusory Affidavits as to Nature of Reports
Defendant claimed that reports it filed with his own liability insurance carrier were immune from disclosure as material prepared in contemplation of litigation unless it could be shown that the reports served a mixed purpose and result at least in part from the internal operations of the defendant's business. The court held that this was essentially correct, but that defendant overlooked the fact that the burden is on the party resisting disclosure to show that the materials sought were prepared solely for litigation, and this burden could not be satisfied with wholly conclusory allegations. Defendant asserted that he satisfied this burden by presenting his own affidavit, and that of his insurance company’s claims representative, indicating that defendant does not make accident reports as a usual and customary part of his business, but only to satisfy contractual obligations under his insurance policies. Defendant further stated that his liability carrier has at all times handled this third-party claims in anticipation of litigation, and that all of its investigations, including damage estimates, were done in anticipation of litigation. Although individuals with firsthand knowledge provided the statements, the affidavits were deemed wholly conclusory. The court held that “statements . . . given to a liability insurer’s claims department as part of an internal investigation or for internal business purposes, as well as for defense purposes . . . are not immune from discovery as material prepared solely in anticipation of litigation”. To satisfy his burden, it was incumbent on defendant to set forth the particulars concerning the demanded reports, including the number and the types of reports prepared, the authors, recipients and dates on which they were prepared and the impetus for their preparation.
07/15/02: BETTA v. GEICO GENERAL INS. CO.
New York State Supreme Court, Appellate Division, Second Department
Bad Faith Claims Against Insurer Dismissed
Court held that plaintiff's allegations of “insurance bad faith” based on defendant’s alleged failure to adequately investigate his claim, and the defendant’s alleged “intentional and malicious” delay of payment of his claim, failed to state a cause of action. The plaintiff's claim “amounts to nothing more than a claim based on the alleged breach of the implied covenant of good faith and fair dealing, and the use of familiar tort language in the pleading does not change the cause of action to a tort claim in the absence of an underlying tort duty sufficient to support a claim for punitive damages”. A similar a cause of action charging “violation of insurance law” was essentially the same claim and was also dismissed. The court also dismissed claims for unfair claim settlement practices, concluding there is no private cause of action for such claims. Finally, the court dismissed plaintiff’s cause of action to recover damages for the infliction of pain and suffering on the public. The court held that “absent a duty upon which liability can be based, there is no right of recovery for mental distress resulting from the breach of a contract-related duty.”
New York State Supreme Court, Appellate Division, Second Department
SUM (Underinsured) Endorsement’s Expanded Definition of Uninsured Motor Vehicle Includes Vehicle Whose Carrier is Insolvent
Court held that, under SUM endorsement’s expanded definition of uninsured motor vehicle, one whose insurer becomes insolvent is considered uninsured, even though that very same motorist would not be considered uninsured for purposes of the compulsory uninsured motorist provisions of Insurance Law § 3420(f)(1). As such, the court concluded it was not inconsistent with, nor contrary to, the holding in State-Wide Ins. Co. v Curry to include within the sweep of SUM coverage the uninsured motorist claim asserted in this case.
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07/29/02: AMERICAN FAMILY MUT. INS. CO. v. HADLEY
Nebraska Supreme Court
No Coverage Under Homeowners Policy for Child Abuse Because of Criminal Act Exclusion
The language of the homeowner’s policy did not make a distinction between criminal acts requiring a specific intent and those which do not; it simply stated that coverage is excluded for harm arising out of “[v]iolation of any criminal law for which any insured is convicted . . . .” Affording this language its plain and ordinary meaning, it applies to any criminal conviction, whether or not the underlying offense includes an element of intent to cause injury. Other courts have reached the same conclusion with respect to similar policy language
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Appeal from an order of the Supreme Court
(Cannizzaro, J.), entered November 13, 2001 in Columbia County, which granted
plaintiff's motion to compel discovery. Plaintiff paid its insured, M.A.H. LLC,
for a fire loss to its real property and, claiming that defendant negligently
caused the fire, brought this action to recover the amount paid. Following
joinder of issue, plaintiff served a discovery demand
[*2]seeking, as relevant to this appeal, "all written reports concerning
the incident which is the subject of this litigation made in the usual course of
business by any person or entity" (paragraph 4), "[a]ll accident or incident
reports" (paragraph 7) and "[a]ll real estate or personal property evaluations
made with respect to property referred to in the complaint" (paragraph 8).
Defendant took no action on the demands for a period of over six months and
ultimately issued a response refusing to permit discovery of the demanded
material upon the ground that it constitutes material prepared for litigation.
Plaintiff thereafter moved to compel discovery. Supreme Court granted the
motion, and defendant appeals. We affirm.
In essence, defendant's claim is that
reports filed by a defendant with his or her own liability insurance carrier are
immune from disclosure as material prepared in contemplation of litigation
unless it can be shown that the reports served a mixed purpose and result at
least in part from the internal operations of the defendant's business (see,
CPLR 3101 [d] ; [g]; Recant v Harwood, 222 AD2d 372). That claim is
correct, but defendant's analysis tends to overlook the fact that the burden is
on the party resisting disclosure to show that the materials sought were
prepared solely for litigation (see, Martino v Kalbacher, 225 AD2d 862, 863) and
this burden cannot be satisfied with wholly conclusory allegations (see, id., at
863; James v Metro N. Commuter R.R., 166 AD2d 266, 268; Crazytown Furniture v
Brooklyn Union Gas Co., 145 AD2d 402, 403).
In this case, defendant asserts that he
satisfied his burden by presenting his own affidavit and that of his insurance
company's claims representative indicating that defendant does not make accident
reports as a usual and customary part of his business, but only to satisfy
contractual obligations under his insurance policies. Defendant further avers
that his liability carrier has at all times handled this third-party claim in
anticipation of litigation and that all of its investigations, including damage
estimates, were done in anticipation of litigation. Although provided by
individuals with firsthand knowledge (compare, Martino v
Kalbacher, supra, at 863), the assertions set forth in those affidavits are
nonetheless wholly conclusory. Notably, self-serving statements that the party
seeking to avoid disclosure is not in the business of filing insurance reports
and that all reports prepared were inanticipation of litigation are insufficient
to establish that the material qualifies for the privilege of CPLR 3101 (d) (2)
(see, James v Metro N. Commuter R.R., supra, at 268; Chakmakjian v
NYRAC Inc., 154 AD2d 644, 645). Furthermore, "statements * * * given to a
liability insurer's claims department as part of an internal investigation or
for internal business purposes, as well as for defense purposes * * * are not
immune from discovery as
material prepared solely in anticipation of litigation" (Agovino v Taco Bell
5083, 225 AD2d 569, 571; see, McKie v Taylor, 146 AD2d 921). In order to satisfy
his burden, it was incumbent on defendant to set forth the particulars
concerning the demanded reports, including the number and the types of reports
prepared, the authors, recipients and dates on which they were prepared and the
impetus for their preparation (see, Chakmakjian v
NYRAC Inc., supra, at 645; Crazytown Furniture v Brooklyn Union Gas Co., supra,
at 403). This he did not do. Under the circumstances, we perceive no clear abuse
of Supreme Court's broad discretionary power in controlling discovery and
Getman v Petro, 266 AD2d 688, 690).
Peters, Carpinello, Mugglin and Lahtinen,
ORDERED that the order is affirmed, with
BETTAN v. GEICO GENERAL INS. CO.
In an action, inter alia, to recover damages for breach of an insurance policy, the plaintiff appeals, as limited by his brief, from stated portions of an order of the Supreme Court, Queens County (Lisa, J.), dated May 21, 2001, which, inter alia, denied that branch of his motion which was to strike the answer for failure to comply with discovery demands, granted those branches of the defendant's cross motion which were (a) pursuant to CPLR 3211(a)(7) to dismiss the second through seventh causes of action, and (b) for a protective order vacating his notice for discovery and inspection, and his interrogatories, and denied his separate motion for class action certification.
ORDERED that the order is affirmed insofar as appealed from, with costs.
Accepting the allegations of the complaint as true and giving the plaintiff the benefit of every favorable inference, as we must on a motion pursuant to CPLR 3211(a) (see Leon v Martinez, 84 NY2d 83, 87-88), we agree with the Supreme Court that causes of action two through seven in the complaint failed to state a cause of action.
The second cause of action, alleging unjust enrichment, is duplicative of the first cause of action, alleging breach of contract, because both causes of action seek damages for events arising from the same subject matter that is governed by an enforceable contract. As such, the cause of action to recover for unjust enrichment should be dismissed (see Walter H. Poppe Gen. Contr. v Town of Ramapo, 280 AD2d 667, 668; see generally Clark-Fitzpatrick, Inc. v Long Is. R.R. Co., 70 NY2d 382, 388). To the extent that the plaintiff's third cause of action alleges "insurance bad faith" based upon the defendant's alleged failure to adequately investigate his claim, and in the defendant's alleged "intentional and malicious" delay of payment of his claim, he failed to state a cause of action. The plaintiff's claim "amounts to nothing more than a claim based on the alleged breach of the implied covenant of good faith and fair dealing, and the use of familiar tort language in the pleading does not change the cause of action to a tort claim in the absence of an underlying tort duty sufficient to support a claim for punitive damages" (New York Univ. v Continental Ins. Co., 87 NY2d 308, 319-320; see Rocanova v Equitable Life Assur. Socy. of U.S., 83 NY2d 603, 615). Similarly, the fourth cause of action, charging "a violation of insurance law" is essentially the same claim. Further, there is currently no private cause of action for unfair claim settlement practices, which is what the plaintiff seeks to assert in this cause of action (see Insurance Law § 2601; Rocanova v Equitable Life Assur. Socy. of U.S., supra at 614).
The plaintiff also failed to state a cause of action in his request for a declaration that the defendant is a "bad faith insurer." This cause of action does not allege what rights or legal relationship between the parties need clarification. Therefore, a declaratory judgment is inappropriate (see CPLR 3001; cf. Klostermann v Cuomo, 61 NY2d 525, 538). The plaintiff's sixth cause of action is to recover damages for the infliction of pain and suffering on the public. The Supreme Court properly dismissed this cause of action because "absent a duty upon which liability can be based, there is no right of recovery for mental distress resulting from the breach of a contract-related duty" (Wehringer v Standard Security Life Ins. Co. of N.Y., 57 NY2d 757). The Supreme Court also properly dismissed the seventh cause of action seeking an accounting. The equitable relief of an accounting is not available since no fiduciary relationship existed between the parties (see Weisman v Awnair Corp. of America, 3 NY2d 444, 450; Berke v Hamby, 279 AD2d 491, 492).
The Supreme Court properly found that the plaintiff failed to meet his "burden of establishing * * * that the prerequisites" under CPLR 901 for the maintenance of a class action were met (Canavan v Chase Manhattan Bank, 234 AD2d 493; 494; see CPLR 902; see also Chimenti v American Express Co., 97 AD2d 351, 352).
The Supreme Court properly vacated the plaintiff's discovery notice, as most of the demands contained therein were palpably improper, in that they either sought irrelevant information, were vague, or were of an overbroad and burdensome nature (see Gonzalez v International Bus. Machs. Corp., 236 AD2d 363; Holness v Chrysler Corp., 220 AD2d 721, 722; see also Aeron Aviation Corp. v Chemco Intl Leasing, 117 AD2d 573, 574). The Supreme Court also properly vacated the plaintiff's interrogatories, as most of the interrogatories were palpably improper (see Curran v Upjohn Co., 122 AD2d 929, 930). Under these circumstances, the Supreme Court properly refused to strike the answer as a sanction for the defendant's failure to respond to the discovery notice or the interrogatories (see Faith v Boston Old Colony Ins. Co., 76 AD2d 900).
The plaintiff's remaining contentions are without merit.
SMITH, J.P., O'BRIEN, McGINITY and CRANE, JJ., concur.