10/31/02:            IN RE APPLICATION OF PEERLESS INS. CO. v. YOUNG

New York State Supreme Court, Appellate Division, First Department

Assigned Risk Policy Not Effective Simply by Broker Issuing Temporary Insurance Card; Insurance Broker is Insured’s Agent, Not Carrier’s

Respondent applied for insurance with the Assigned Risk Plan on April 29, 2000 through an insurance broker, paid the broker $507, and was given a temporary insurance card which stated that coverage would become effective upon vehicle registration or at such earlier date as the Assigned Risk Plan might designate. Respondent demanded arbitration for an alleged May 1, 2000, car accident, and this action to enjoin such arbitration ensued. The vehicle was not registered on the date of the accident, and the assignment card from the Assigned Risk Plan designated the effective date of coverage as May 15, 2000. As respondent conceded, under Assigned Risk Plan rules, the issuance of a temporary insurance card does not trigger coverage; coverage is only effective from the date of receipt of the request in the Plan office and then only if the vehicle has already been registered. Based on the temporary card and the rules, which delineate the inception of coverage, then, respondent’s demand for arbitration should have been enjoined since, as a matter of law, the accident happened prior to coverage. Respondent’s argument that oral representations made by the insurance broker bound petitioner to provide coverage from the date of application was rejected. Generally, the broker is the agent of the insured and thus unable to bind the insurer. There was no evidence that petitioner did anything to hold the broker out as its agent; the insurer was unknown to respondent until after the accident. Respondent was not induced to rely on statements made by petitioner; she relied on the unwarranted representation of her own agent, which provides no conceivable basis on which to hold petitioner liable.

 

10/30/02:            ASSOCIATES COMMERCIAL CORP. v. NATIONWIDE MUT. INS. CO.

New York State Supreme Court, Appellate Division, Second Department

Property Insurer’s Failure to Pay Loss Payee Gives Rise to Liability

Plaintiff was a “loss payee” under an insurance policy issued to Scoca Construction Corp. Scoca purchased certain construction equipment pursuant to an installment contract, which was assigned by the seller to the plaintiff. After Scoca made only one payment under the installment contract, the equipment was allegedly stolen. Scoca filed a stolen property claim with its insurer and falsely stated that any liens on the equipment had been satisfied. Although the policy of insurance required the appellant to issue a check to its insured and to the plaintiff, as “loss payee” as its interest appears, the insurer issued a check to Scoca. The plaintiff commenced this action for breach of the policy.  The court held that the insurer had notice that plaintiff had an interest in the equipment, that it was a “loss payee,” and that the insurance policy required the insurer to issue a check to the insured and the “loss payee” as their interests appeared. As such, the insurer paid its insured at its peril and assumed the hazard of resisting the loss payee’s claim. The court also held that a “loss payee” stands in the shoes of its insured, and may only recover if the insured can. Here, the evidence established that the equipment was stolen and, therefore, the insurer was obligated to pay the insured and the loss payee. The fact that Scoca made a misrepresentation regarding the satisfaction of all liens, as opposed to the proof of the loss, does not vitiate the insurer’s obligation to pay.

 

10/28/02:            MATTER OF NEW YORK CENT. MUT. FIRE INS. CO. v. JULIEN

New York Supreme Court, Appellate Division, Second Department

To Establish a Vehicle Isn't Insured for Purposes of Uninsured Motorist Coverage, Carrier Must Demonstrate Non-Permissive Use And Valid Disclaimer

The uninsured motorist endorsement of an insurance policy does not operate unless and until it has been established that there was no insurance coverage on the offending vehicle on the date of the accident. Thus, respondent was required to produce a copy of its insurance policy in order to establish that the alleged non-permissive use of the rental vehicle either fell under an exclusion to its policy for which it issued a timely disclaimer, or that the non-permissive use was not within the ambit of its policy. It is insufficient to establish the uninsured status of the offending vehicle simply by alleging that the unauthorized use of the rental vehicle violated the terms of the rental agreement. Only after it is determined that the policy contained a provision stating that coverage is not afforded for use of the vehicle without permission of the owner should the court confront the question of whether the restrictions in the rental agreement are enforceable such that use of the vehicle can be considered non-permissive, and the question of whether the additional respondents have submitted substantial evidence that the use of the rental car was without the permission of the lessee.

 

10/28/02:            MERCURIO v. NORTHWESTERN MUT. INS. CO.

New York State Supreme Court, Appellate Division, Second Department

Late Notice of Claim to Disability Carrier Leads to Loss of Benefits

It is well settled that compliance with a notice of claim provision in an insurance policy is a condition precedent to an insurer’s liability under the policy. Moreover, “absent a valid excuse, a failure to satisfy the notice requirement vitiates the policy.” Here, plaintiff’s disability policy required “[w]ritten notice of claim . . . within 60 days after the occurrence or commencement of any loss covered [under the] policy.” In support of its motion for summary judgment, the insurer demonstrated that plaintiff did not provide notice of claim until more than five years after the occurrence of his disability. In opposition, the plaintiff failed to demonstrate any valid excuse for the delay, or to otherwise raise a material issue of fact that would require a trial of the action.

 

10/24/02:         ALEXANDER & ALEXANDER SERVICES, INC. v. CERTAIN UNDERWRITERS AT LLOYD'S LONDON, ENGLAND

New York State Supreme Court, Appellate Division, First Department

"Mismanagement" Exclusion Precludes Obligation to Defend Under E&O Policy

The underlying action, brought by an Insurance Rehabilitator, alleged that Mutual Life sustained losses because plaintiffs, closely related insurance brokers who had contracted with Mutual Fire to provide underwriting and basic management services, wrote policies for Mutual Fire that maximized profits for themselves, while exposing Mutual Fire to unacceptably high risks. Plaintiffs settled the action with the Rehabilitator and now seek to recover their settlement and defense costs under primary and excess professional errors and omissions policies issued by defendants. The motion court correctly held that defendants have no obligation to indemnify plaintiffs by reason of Exclusion F in the primary policy, applicable to all excess coverage policies, excluding “any claim by any insurance company or insurance syndicate, alleging mismanagement of its affairs or based on underwriting results.” Plaintiffs conceded that Exclusion F would apply if Mutual Life had brought the underlying action, but argued that Exclusion F did not apply because the underlying action was brought by the Rehabilitator, and asserted claims not just on behalf of Mutual Fire, but also on behalf of Mutual Fire's policyholders and creditors. The court held that the claims were entirely dependent on the claim that plaintiffs, in writing policies for Mutual Fire, mismanaged its affairs, causing or worsening its insolvency, and rendering it unable to pay its obligations to policyholders and creditors. Furthermore, the thrust of the Rehabilitator’s action was Mutual Life's claim that plaintiffs mismanaged its affairs.

 

10/24/02:            CENTENNIAL INS. CO. v. CASILLA

New York State Supreme Court, Appellate Division, First Department

In Uninsured Motorists Provisions, State DMV Records Constitute Prima Facie Evidence of Coverage; Carrier's Response Insufficient to Overcome Proof

In this action to permanently stay arbitration of an uninsured motorist claim, insurer’s introduction into evidence of two Department of Motor Vehicle Registration Record Expansions indicating that American insured Faucett on the date of the accident was sufficient to establish its prima facie case. The testimony of American’s underwriter, who did not search under reverse names for Faucett or the vehicle identification number or plate number of his vehicle, and did not introduce the records of her underlying searches into evidence, was insufficient to overcome petitioner’s showing.

 

10/24/02:            LONG ISLAND LIGHTING CO. v. ALLIANZ UNDERWRITERS INS. CO.

New York State Supreme Court, Appellate Division, First Department

Ongoing Migration of Preexisting Contaminants Does Not Trigger Coverage Where Event that Caused Damage Preceded Policy Period

Plaintiff operated seven plants at which gas for lighting and heating was manufactured. Six of the plants had ceased operating by the late 1950s, and the seventh plant closed in 1973. While the plants were operational, they produced solid and liquid waste residues that contaminated soil and groundwater at the sites. Plaintiff commenced this action seeking a declaration that defendants, various excess CGL carriers, were obligated to provide plaintiff with defense and indemnification in connection with plaintiff’s potential liability to remediate the environmental damage at the sites. At issue on this appeal was a policy in effect from 1970 - 1972. Plaintiff argued that although no new contaminants were discharged during the policy period, coverage existed because preexisting contaminants continued to migrate during the policy period. The insurance carriers argued that the loss was not covered because there was no causal “occurrence” within the meaning of the policy during the policy period. The court agreed with the insurers. The policy unambiguously required that a causative “occurrence” take place during the policy period in order to trigger coverage. Although the “Coverage” provision made no mention of an “occurrence”, it was subject to the “Limit of Liability” clause, which provided that the insurers’ liability was limited to “the ultimate net loss as a result of any occurrence . . .” The court also held that ongoing migration or leaching of preexisting contaminants through the soil was not an occurrence. The policy defined “occurrence” as “one happening or series of happenings arising out of or caused by one event taking place during the term of this contract.” Under similar policies, it has been held that damage existing during the policy period does not trigger coverage where the event that caused the damage preceded the policy period. The contractual definition of “occurrence” expressly required that the loss be occasioned by “one event taking place during the term of this contract.” The event that caused the damage in this case was the operation of the plants, which, at six of the sites, ceased many years prior to the term of the 1970-1972 policy. Once the plants were closed, no additional contaminants were discharged. Accordingly, the policy did not afford coverage for liability relating to these sites.

 

ACROSS BORDERS

 

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10/30/02:            PEKIN INSURANCE CO. V. ADAMS

Illinois Appellate Court

Maybe a Dog Just Isn’t an “Animal”?

The insurer’s agent sent the proposed insured an application where he had checked the form indicating that Amanda did not have an animal. Amanda did have a dog. Amanda never verified the accuracy of the application directly to Pekin, and Pekin never asked her to do so. The agent highlighted only the uncompleted parts of the application. Court holds that Amanda could reasonably have assumed that only the highlighted parts of the application needed her attention, and she could have ignored the rest of the application in the belief that Pekin's agent had done a competent job filling in the answers. Pekin “ought not to be allowed to take advantage of its own mistake” in preparing the application. Even if, during the five days she had the application, Amanda noticed the inaccuracy, Pekin still would be estopped from relying on it. Because Pekin’s agent, on its own initiative, answered “no” to the question of whether Amanda had any “animals,” she had a right to follow that suggestion. She could assume that her dog was not the type of “animal” that concerned Pekin. The trial court erred in granting Pekin's motion for summary judgment.

 

10/29/02:            SINTROS v. HAMON

New Hampshire Supreme Court

Insurance Agent Has No Duty To Advise Regarding Adequacy Of Coverage

An insurance agent does not have a general duty to advise an insured as to the sufficiency of coverage absent a special relationship.

Prepared by James K. Horstman of Iwan Cray Huber Horstman & VanAusdal LLC in Chicago

 

10/29/02:            HARRIS v. PROVIDENT LIFE

Second Circuit (applying NY and CA Law)

Breach Of Implied Covenant Of Good Faith Is Not A Separate Cause Of Action

In dispute between claimant and disability insurer, breach of implied covenant of good faith is duplicative of breach of contract claim. Once decision to deny disability benefits is made, there is no duty to disclose new medical information regarding claimant's condition. Applying NY and California law.

Prepared by James K. Horstman of Iwan Cray Huber Horstman & VanAusdal LLC in Chicago

 

10/28/02:            PROGRESSIVE CASUALTY v. HOOVER

Pennsylvania Supreme Court

Extensive Analysis of Applicability of MCS-90 Endorsement

Court considers applicability of interstate commerce endorsement to shipment within state when two shippers are involved and shipment ultimately will cross state lines.

 

10/28/02:            FEDERAL INS. v. TRAVELERS

Eleventh Circuit (applying Alabama law)

Primary Carrier Has No Duty Of Good Faith To Excess Carrier Per Alabama Law

Applying law as determined by Alabama Supreme Court in response to two certified questions, judgment in favor of Travelers was affirmed with respect to primary carriers lack of duty of good faith absent contractual obligation to excess carrier and lack of subrogated interest of excess carrier. Alabama decision found at Federal Ins. Co. v. Travelers Cas. & Sur. Co., 2002 WL 1998282 Ala. (Aug. 30, 2002).

Prepared by James K. Horstman of Iwan Cray Huber Horstman & VanAusdal LLC in Chicago

 

10/25/02:            NORTHSHIRE COMMUNICATIONS, INC. v. AIU INSURANCE CO.

Vermont Supreme Court

Late is Late: Insurer Can Assert Late Notice With Other Grounds For Denial Of Coverage

An insurer can defend denial of coverage based on a breach of a prompt-notice provision in the insurance contract notwithstanding its reliance on other, independent grounds for denial of coverage. Plaintiff/insured argued an insurer cannot be substantially prejudiced by a five-year delay in notice of a claim when that insurer would have denied coverage for reasons independent of that late notice if given proper notice of that claim.

Prepared by James K. Horstman of Iwan Cray Huber Horstman & VanAusdal LLC in Chicago

 

10/25/02:            O'BRIAN v. COLUMBIA INS. GROUP

Kansas Supreme Court

Successive Fire Losses Within Policy Period Provide for Successive Policy Limits

Carrier is not entitled to offset amount paid for first fire loss to property from second claim. Columbia had the ability to contractually limit coverage under the policy to $40,000 for the entire policy period, as long as it did so clearly and unambiguously. Here, however, because the policy does not specifically provide whether the $40,000 is the limit of liability for the entire policy period or per loss and the insurer's interpretations create an ambiguity, we find the policy to be ambiguous. Where an insurance policy is ambiguous, the construction most favorable to the insured must prevail.

 

10/24/02:            ACCEPTANCE INS. CO. v. LIFECARE CORP.

Texas Court of Appeals

Allegations Of Negligent Representation By Former Employer To New Employer Regarding Employee Is Covered Occurrence Under Policy

Citing a litany of nationwide decisions discussing the broad interpretation of “occurrence” in liability policies, the Court of Appeals held that the alleged negligent failure of a former employer, Lifecare, to provide information to a subsequent employer regarding an employee who committed sexual assault while working for the new employer, was a covered “occurrence.” The court also found that plaintiff’s policy’s “employment-related exclusion” did not preclude coverage because the employment relationship between Lifecare and the employee had terminated, there were no allegations of coercion, demotion, evaluation, or discrimination, but rather the underlying action asserted claims for negligent representation.

Prepared by Bruce Celebrezze of Celebrezze & Wesley in Los Angeles

 

10/24/02:            VANSTEEN MARINE SUPPLY, INC. v. TWIN CITY FIRE INS. CO.

Texas Court of Appeals

Insured May Bring Suit Against Insurer For Attorneys’ Fees Reasonably Incurred But Not Yet Paid

Vansteen sought recoupment of its attorneys’ fees incurred in the underlying action from its insurer, Twin City. Twin City initially denied the claim on the ground that the expenses sought were incurred only in pursuing affirmative counterclaims and were thus not covered by the policies. Twin City argued in the coverage action, inter alia, that an insured cannot recover from an insurer for attorneys’ fees and expenses incurred by it in defense of suit against it in the absence of showing that those items have actually been paid. The Court of Appeals, reversing summary judgment in favor of Twin City, found that physical payment of attorneys’ fees is not required. When the insured establishes an obligation to pay, and that the fee is reasonable, its cause of action against the insurer accrues.

Prepared by Bruce Celebrezze of Celebrezze & Wesley in Los Angeles

 

AND IN DEFENSE

 

10/28/02:            TANCREDI v. A.C.& S., INC.

New York State Supreme Court, New York County

The Culpability of a Bankrupt, Non-Party Tortfeasor Included when Calculating Defendants' Exposure under New York's Article 16

In consolidated motions for declaratory relief affecting thousands of cases pending in the New York City Asbestos Litigation, Justice Freedman considered whether, under Article 16 of the CPLR, a solvent tortfeasor in a personal-injury or wrongful dearth case, whose percentage of fault is less than 50%, must absorb the liability for non-economic losses of a tortfeasor that has filed for bankruptcy. The statute partially abrogates the common-law rule of joint and several liability by limiting a tortfeasor’s liability for noneconomic losses to its proportionate share when it is found to be 50% or less at fault. The statute does not apply, however, if the plaintiff can prove that it could not with diligence obtain jurisdiction over a tortfeasor, in which case the non-party tortfeasor’s share of fault is not considered when calculating the defendants’ percentages of fault under Article 16. The court held that for purposes of Article 16, “jurisdiction” means “personal jurisdiction,” which is unaffected by a bankruptcy filing and the automatic stay. Thus, the culpability of a bankrupt, non-party tortfeasor will be included when calculating the defendants’ exposure under Article 16, unless exceptions elsewhere in the statute are found to apply.

 

10/21/02:            FALK v. INZINNA

New York State Supreme Court, Appellate Division, Second Department

Surveillance Tapes of Plaintiff Must be Disclosed Before Depositions

On this appeal, the Court considers whether a defendant in a personal injury action is entitled to insist upon a plaintiff’s deposition prior to disclosure to the plaintiff of surveillance videotapes, in light of the 1993 enactment of CPLR 3101(i). There is a conflict between the approaches adopted in the other Appellate Divisions based upon the recent ruling by the Appellate Division, First Department (see Tai Tran v New Rochelle Hosp. Med. Ctr., 291 AD2d 121). However, the issue was one of first impression for this court. This court found that plaintiff is entitled to immediate production of all surveillance videotapes prior to being deposed by the appellants.

 

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ASSOCIATES COMMERCIAL CORP. v. NATIONWIDE MUT. INS. CO.

 

In an action, inter alia, to recover damages for breach of an insurance policy, the defendant Nationwide Mutual Insurance Company appeals from an order and judgment (one paper) of the Supreme Court, Westchester County (Lefkowitz, J.), dated August 14, 2001, which, upon granting the plaintiff's motion for summary judgment and denying its cross motion for summary judgment, is in favor of the plaintiff and against it.

 

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

 

The plaintiff was a "loss payee" under a policy of insurance issued by the appellant to Scoca Construction Corp. (hereinafter Scoca). Scocca purchased certain construction equipment pursuant to an installment contract, which was assigned by the seller to the plaintiff. After Scoca made only one payment pursuant to the installment contract, the equipment was allegedly stolen. Scoca filed a stolen property claim with the appellant and falsely stated that any liens on the equipment had been satisfied. Although the policy of insurance required the appellant to issue a check to its insured and to the plaintiff, as "loss payee" as its interest appears, the appellant issued a check to Scoca only. The plaintiff commenced this action alleging, inter alia, breach of the policy of insurance. Both parties moved for summary judgment and the Supreme Court granted the plaintiff's motion and denied the appellant's cross motion.

 

A party moving for summary judgment must make a prima facie showing of entitlement to judgment as a matter of law, offering sufficient evidence to demonstrate the absence of a triable issue of fact (see Alvarez v Prospect Hosp., 68 NY2d 320; Zuckerman v City of New York, 49 NY2d 557). Here, the plaintiff demonstrated the absence of a triable issue of fact with respect to its claim for breach of the insurance policy. Therefore, the motion papers were sufficient to make out a prima facie case for summary judgment (see Winegrad v New York Univ. Med. Ctr., 64 NY2d 851; Zuckerman v City of New York, supra). The appellant did not raise a triable issue of fact in opposition to the motion or in support of its cross motion.

 

The appellant had notice that the plaintiff had an interest in the equipment, that it was a "loss payee," and that the policy of insurance required the appellant to issue a check to the insured and the "loss payee" as their interests appeared. As such, once the appellant had notice of the claim, it paid the insured at its peril and assumed the hazard of resisting the claim of the plaintiff (see Rosario-Paolo, Inc. v C & M Pizza Rest., 84 NY2d 379).

 

Moreover, it is well settled that a "loss payee" stands in the shoes of its insured and may only recover if the insured can (see Wometco Home Theatre v Lumbermens Mut. Cas. Co., 97 AD2d 715, affd 62 NY2d 614). Here, the evidence establishes that the equipment was stolen and, therefore, the [*3]appellant was obligated to pay the insured and the loss payee. The fact that Scoca made a misrepresentation regarding the satisfaction of all liens, as opposed to the proof of the loss, does not vitiate the appellant's obligation to pay.

 

Contrary to the appellant's contention, summary judgment was not granted prematurely. It is well settled that a party "may not rely upon mere hope that evidence sufficient to defeat [summary judgment] may be uncovered during the discovery process" (Drug Guild Distribs. v 3-9 Drugs, 277 AD2d 197). Furthermore, the appellant itself sought summary judgment.

 

The appellant's remaining contentions are without merit.
SANTUCCI, J.P., SCHMIDT, TOWNES and MASTRO, JJ., concur.

 

MATTER OF NEW YORK CENTRAL MUT. FIRE INS. CO. v. JULIEN

 

In a proceeding pursuant to CPLR article 75 to stay arbitration of an uninsured motorist claim, the petitioner appeals from an order of the Supreme Court, Kings County (Schneier, J.), dated November 1, 2001, which denied the petition and dismissed the proceeding.

 

ORDERED that the order is reversed, on the law, without costs or disbursements, the petition is reinstated, the matter is remitted to the Supreme Court, Kings County, for a hearing on the issue of whether the offending vehicle was insured at the time of the accident, and the arbitration is stayed pending a new determination in accordance herewith.

 

The uninsured motorist indorsement of an insurance policy does not operate unless and until it has been established that there was no insurance coverage on the offending vehicle on the date of the accident (see Matter of Nationwide Ins. Co. v Sillman, 266 AD2d 551, 552; Matter of State Farm Mut. Ins. Co. v Vazquez, 249 AD2d 312; Matter of Eagle Ins. Co. v Sadiq, 237 AD2d 605). Thus, the additional respondent Chrysler Insurance Company must produce a copy of its insurance policy in order to establish that the alleged nonpermissive use of the rental vehicle either fell under an exclusion to its policy for which it issued a timely disclaimer, or that the nonpermissive use is not within the ambit of its policy. It is insufficient to establish the uninsured status of the offending vehicle in this CPLR article 75 proceeding simply by alleging that the unauthorized use of the rental vehicle violated the terms of the rental agreement. Only after it is determined that the policy contained a provision stating that coverage is not afforded for use of the vehicle without permission of the owner, Adir One, Inc., should the court confront the question of whether the restrictions in the rental agreement are enforceable such that Dovber Lipskier's use of the vehicle can be considered nonpermissive (see e.g. Motor Vehicle Acc. Ind. Corp. v Continental Nat. Amer. Group Co., 35 NY2d 260, 264; Matter of Allstate Indem. Co. v Nelson, 285 AD2d 545; Faller v A. Drive Auto Leasing System, 47 AD2d 530; Cooperman v Ferrentino, 37 AD2d 474, 476-478), and the question of whether the additional respondents have submitted substantial evidence that the use of the rental car was without the permission of the lessee (see e.g. Matter of Allstate Indem. Co. v Nelson, supra; Naidu v Harwin, 281 AD2d 525; Headley v Tessler, 267 AD2d 428; Matter of Utica Mut. Ins. Co. (Lahey), 95 AD2d 150, 153; Hardeman v Mendon Leasing Corp., 87 AD2d 232, 236-238, affd 58 NY2d 892; Aetna Ins. Co v Johnson, 84 AD2d 505; Speller v Ryder Truck Rental, 47 AD2d 608).

 

Accordingly, the petition is reinstated and the matter is remitted to the Supreme Court, Kings County, for a hearing on the issue of whether the offending vehicle was insured at the time of the accident. In the interim, the arbitration is temporarily stayed.
FLORIO, J.P., FRIEDMANN, ADAMS and CRANE, JJ., concur.

 

MERCURIO v. NORTHWESTERN MUT. INS. CO.

 

In an action to recover damages for breach of contract, the plaintiff appeals from an [*2]order of the Supreme Court, Richmond County (Minardo, J.), dated November 30, 2001, which granted the defendant's motion for summary judgment dismissing the complaint.

 

ORDERED that the order is affirmed, with costs.

 

It is well settled that compliance with a notice of claim provision in an insurance policy is a condition precedent to an insurer's liability under the policy (see Security Mut. Ins. Co. of N.Y. v Acker-Fitzsimons Corp., 31 NY2d 436; see also Roche v G.E. Capital Life Assur. Co. of N.Y., 281 AD2d 932; Sayed v Macari, 296 AD2d 396). Moreover, "absent a valid excuse, a failure to satisfy the notice requirement vitiates the policy" (Security Mut. Ins. Co. of N.Y. v Acker-Fitzsimons Corp., supra at 440).

 

Here, the disability policy which the plaintiff purchased from the defendant required "[w]ritten notice of claim * * * within 60 days after the occurrence or commencement of any loss covered [under the] policy." In support of its motion for summary judgment, the defendant demonstrated that the plaintiff did not provide notice of claim until more than five years after the occurrence of his disability. In opposition, the plaintiff failed to demonstrate any valid excuse for the delay or to otherwise raise a material issue of fact that would require a trial of the action.

 

Accordingly, under these circumstances, the Supreme Court properly granted the defendant's motion for summary judgment dismissing the complaint (see Gresham v American Gen. Life Ins. Co. of N.Y., 135 AD2d 1121; see generally Alvarez v Prospect Hosp., 68 NY2d 320).
SANTUCCI, J.P., SCHMIDT, TOWNES and MASTRO, JJ., concur.

 

ALEXANDER & ALEXANDER SERVICES, INC. v. CERTAIN UNDERWRITERS AT LLOYD’S LONDON, ENGLAND

 

Order, Supreme Court, New York County (Herman Cahn, J.), entered June 20, 2001, which, upon the parties' respective motions for summary judgment, declared that defendants insurers are not obligated to indemnify plaintiffs insureds for their settlement and defense costs in an underlying action, unanimously affirmed, without costs.

 

The underlying action was brought by the Pennsylvania Rehabilitator of an insolvent insurance company, The Mutual Fire and Inland Insurance Company, and essentially alleged that Mutual Life sustained losses because plaintiffs, closely related insurance brokers who had contracted with Mutual Fire to provide underwriting and basic management services, wrote policies for Mutual Fire that maximized profits for themselves while exposing Mutual Fire to unacceptably high risks. Plaintiffs settled the action with the Rehabilitator and now seek to recover their settlement and defense costs under primary and excess professional errors and omissions policies issued by defendants. The motion court correctly held that defendants have no such obligation to indemnify plaintiffs by reason of Exclusion F in the primary policy, applicable to all excess coverage policies, excluding "any claim by any insurance company or insurance syndicate, alleging mismanagement of its affairs or based on underwriting results." Indeed plaintiffs, who concede that Exclusion F would apply if Mutual Life had brought the underlying [*2]action, appear to acknowledge that the claims made by the Rehabilitator are the sort contemplated by Exclusion F, but argue that Exclusion F does not apply because the underlying action was brought not by Mutual Life but by the Rehabilitator, and asserted claims not just on behalf of Mutual Fire but also on behalf of Mutual Fire's policyholders and creditors. However, to the extent that the Rehabilitator made claims on behalf of particular policyholders or creditors that Mutual Life could not have made itself, those claims were entirely dependent on the claim that plaintiffs, in writing policies for Mutual Fire, mismanaged its affairs, causing or worsening its insolvency, and rendering it unable to pay its obligations to policyholders and creditors. Furthermore, the thrust of the Rehabilitator's action was Mutual Life's "claim" that plaintiffs mismanaged its affairs. In view of the foregoing, we do not reach the alternative grounds urged by defendants for affirmance.

 

CENTENNIAL INS. CO. v. CASILLA

 

Order and judgment (one paper), Supreme Court, New York County (Thomas Flaherty, J.), entered June 22, 2001, which granted the petition of Centennial Insurance Company to permanently stay arbitration and adjudged that respondent American Home Assurance Company insured respondent Richard Faucett on the accident date, unanimously affirmed, without costs.

 

Centennial's introduction into evidence of two Department of Motor Vehicle Registration Record Expansions indicating that American insured Faucett on the date of the accident was sufficient to establish its prima facie case (see Am. Tr. Ins. Co. v Glaude, 208 AD2d 376). The testimony of American's underwriter, who did not search under reverse names for Faucett or the vehicle identification number or plate number of his vehicle, and did not introduce the records of her underlying searches into evidence, was insufficient to overcome petitioner's showing (compare New York Cent. Mut. Fire Ins. Co. v Banks, 241 AD2d 368).

 

LONG ISLAND LIGHTING CO. v. ALLIANZ UNDERWRITERS INS. CO.

 

Plaintiffs appeal from an order of the Supreme Court, New York County (Ira Gammerman, J.), entered October 24, 2000, which, insofar as appealed from as limited by the briefs, granted the London defendants partial summary judgment declaring that plaintiffs are not covered for the claims relating to the Glen Cove, Patchogue, Rockaway Park and Sag Harbor properties by the policy issued by the London defendants in effect from March 1, 1970 through December 31, 1972, and denied plaintiffs' cross motion for a protective order; and order, same court and Justice, entered on or about October 31, 2001, to the extent it provided, as an advance sanction for the withholding by plaintiffs of any purportedly privileged document which the court determined to be non-privileged on a "spot check" basis, that plaintiffs would be [*2]directed to produce all documents withheld from production on grounds of privilege.

 

FRIEDMAN, J.

 

This appeal requires us to determine whether one of the many excess liability insurance policies at issue in this action affords coverage for the cost of remediating soil and groundwater contamination that was caused by the operation of plants that closed years before the inception of the policy period. The insured argues that coverage exists, notwithstanding that no new contaminants were discharged during the policy period, because preexisting contaminants continued to migrate during the policy period. The insurers argue that the loss is not covered because there was no causal "occurrence" within the meaning of the policy during the policy period. We agree with the insurers, and therefore affirm the grant of partial summary judgment to them on this issue.

 

This appeal also presents the question of whether the insured waived any attorney-client privilege attaching to an internal report coauthored by its in-house counsel by inadvertently producing it in a prior related action, or by placing the subject matter of the report in issue in this action. We hold that, on this record, there was no waiver of privilege, and the insured's motion for a protective order should therefore have been granted. Finally, we vacate Supreme Court's imposition on the insured of an unduly punitive mechanism to deal with the privilege issues created by the erroneous finding of waiver.

 

FACTS

 

General Background

 

Plaintiff Long Island Lighting Company (LILCO) and its [*3]predecessors in interest formerly operated seven plants at which gas for lighting and heating was manufactured from a derivative of coal. Six of these plants, known as "manufactured gas plants" (MGPs), had ceased operating by the late 1950s; the seventh plant, located at Bay Shore, New York, closed in 1973. While the plants were operational, the gas manufacturing process produced solid and liquid waste residues that contaminated soil and groundwater at the sites.

 

Defendants are several insurance carriers that sold LILCO excess commercial general liability policies. LILCO commenced this action for the purpose of obtaining a declaration that defendants are obligated to provide LILCO with defense and indemnification in connection with LILCO's potential liability to remediate the environmental damage at the MGP sites. Defendants have raised defenses of late notice. LILCO denies that it gave late notice of the claims, and further avers that defendants waived any defense of late notice by failing to disclaim coverage on that ground in timely fashion. The merits of the parties' respective contentions as to late notice and untimely disclaimer are not at issue on this appeal.

 

The 1970-1972 Policy

 

This appeal does raise the issue of whether LILCO is afforded coverage for the six MGP sites that were closed as of the late 1950s under the terms of one of the policies issued by one group of defendants, Certain Underwriters at Lloyd's, London, and Certain London Market Insurance Companies (collectively, the London Defendants). This policy (the 1970-1972 Policy) provided coverage for the period from March 1, 1970 through December 31, 1972,^[FN1] and provided in pertinent part as follows (emphases added):

 

INSURING AGREEMENTS

I. II.

COVERAGE [*4]This policy is to indemnify:

(a) (b)

the named Assured and/or the Assureds as defined in the definitions for any and all sums which they shall be legally obligated to pay and shall pay or by final judgment be adjudged to pay (subject to the limitations hereinafter mentioned) to any person or persons . . . by reason of damage to or destruction of property, by reason of or resulting from any trade or business of the named Assured including the performance of services by or on behalf of such Assured in connection with said trade or business.

* * *

II. LIMIT OF LIABILITY

It is expressly agreed that the Underwriters shall only be liable hereunder for the ultimate net loss as a result of any occurrence covered under Insuring Agreement I(a)

. . . .

Elsewhere, the 1970-1972 Policy defined the term "occurrence" to mean "one happening or series of happenings arising out of or caused by one event taking place during the term of this contract" (emphasis added).

 

In May 1999, the London Defendants moved for, among other relief, partial summary judgment declaring that the 1970-1972 Policy did not cover claims relating to the six MGPs that closed prior to 1970. The London Defendants argued that LILCO was not entitled to coverage for these sites under the 1970-1972 Policy because coverage under the Policy, pursuant to their "Limit of Liability" provision (paragraph II of the "Insuring Agreements"), was triggered only by an "occurrence" during the policy period that caused the damage giving rise to the liability. According to the London Defendants, the "occurrence" that caused the damage at issue was the operation of the plants, which, in the case of the six MGPs that had closed by the late 1950s, came to an end many years prior to the inception of the policy period on March 1, 1970.

 

In response, LILCO argued that the London Defendants overlooked the fact that the Policy's "Coverage" provision (paragraph I[a] of the "Insuring Agreements") did not utilize the word "occurrence," but provided that coverage would be triggered by "damage to or destruction of property." From this, LILCO drew the conclusion that the Policy was susceptible to the interpretation that ongoing property damage during the policy period, such as continued leaching of contaminants through the soil, was sufficient to trigger coverage, and that no causative "occurrence" during the policy period was required. Therefore, LILCO argued, the 1970-1972 Policy was ambiguous as to whether a causative "occurrence" during the policy period was required to trigger coverage, and the issue could only be resolved after trial.

 

The December 1993 Report

 

In response to the same motion by the London Defendants, LILCO cross-moved for a protective order as to a December 1993 internal report coauthored by LILCO's Environmental Engineering Department and Legal Department, entitled "Manufactured Gas Plant Sites: Hempstead Gas Plant, Bay Shore Gas Plant Investigation Summary and Remediation Strategy Recommendations" (hereinafter, together with its transmittal memorandum, the December 1993 Report). The December 1993 Report, which was marked "Privileged and Confidential Attorney Work Product Attorney-Client Communication," analyzed the federal and state statutory and regulatory framework relevant to MGP sites in New York, discussed the anticipated action of the regulatory agencies concerned, summarized the results of LILCO's investigation of the environmental damage at the two sites, set forth several remediation options for each site and the estimated cost of each option, and offered recommendations for the option to be implemented for each site and the strategy to be pursued in negotiations with the regulators. The recommendations made in the December 1993 Report were based on a combination of factors, legal as well as scientific and economic.

 

In a prior federal court action seeking substantially the same relief as this action (the Federal Action), LILCO had [*6]inadvertently turned the December 1993 Report over to defendants as part of a production comprising hundreds of thousands of documents. After LILCO produced the December 1993 Report, and before any proceedings addressed to the merits of the action were conducted, the Federal Action was dismissed for lack of diversity jurisdiction. LILCO then commenced this action.

In a branch of their May 1999 motion that is not at issue on this appeal, the London Defendants sought summary judgment based on the contention that LILCO failed to give timely notice of any of the claims for which coverage was sought. In support of this contention, the London Defendants relied on the December 1993 Report, among other documents. Promptly after this motion was served, LILCO notified opposing counsel that the December 1993 Report had been produced inadvertently in the Federal Action, asserted that the Report was protected by the attorney-client privilege, and demanded that all copies of the Report be returned. When defendants did not honor this request, LILCO made its cross motion for a protective order. The request for a protective order was supported by an affirmation of the in-house attorney who coauthored the Report, attesting that a primary purpose of the document had been to provide legal advice, and an affirmation of LILCO's litigation counsel, attesting that the Report had been inadvertently produced in the Federal Action in spite of measures that had been taken to screen for privileged material.

 

The October 2000 Order

 

In its order entered on or about October 24, 2000, Supreme Court granted the branch of the London Defendants' motion seeking partial summary judgment declaring that the 1970-1972 Policy did not afford coverage for the six MGP sites at which operations ceased prior to 1970. The court agreed with the London Defendants that the terms of the 1970-1972 Policy unambiguously required that a "causative event . . . take place during the policy period" to trigger coverage. In this case, the court concluded, "[t]he causative event occurred when the initial pollution was released or discharged during the plant operations" (citation omitted), so as to exclude coverage as to the six MGP sites that were closed prior to the policy period. [*7]

Also by the October 2000 order, Supreme Court denied LILCO's cross motion for a protective order. The court found that, although the discussion of "legal and business considerations . . . [were] intertwined" in the December 1993 Report so as to render the document privileged as a whole, LILCO had waived any privilege attaching to the Report by producing it in the Federal Action, and by placing the subject matter of the Report "in issue" in this action. Although defendants, in opposing LILCO's cross motion, had not argued that LILCO failed to demonstrate that its screening measures in the Federal Action were reasonable, the court noted in support of its finding of waiver that LILCO's representation that it had screened for privileged documents was not supported by "specifics as to [the screening] measures taken . . . ."

 

The October 2001 Order

 

In November 2000, LILCO moved for, inter alia, renewal of the October 2000 Order insofar as it denied LILCO's cross motion for a protective order as to the December 1993 Report. In support of its motion for renewal on this issue, LILCO submitted an additional affirmation of counsel setting forth in greater detail the steps it had taken to screen for privileged documents in preparing its document production in the Federal Action.

 

By order entered on or about October 31, 2001, Supreme Court, as here pertinent, denied LILCO's motion for renewal insofar as addressed to the request for a protective order. The court found that LILCO was not entitled to renewal under CPLR 2221 because the details of screening measures set forth in the supporting affirmation of counsel had been available to LILCO at the time of its initial cross motion.

The October 2001 order also established a mechanism to resolve the privilege issues generated by the earlier determination in the October 2000 order that LILCO had placed the subject matter of the December 1993 Report at issue. That ruling put in question the viability of LILCO's assertion of privilege as to each document potentially relevant to the notice issue. To resolve such issues, the October 2001 order put in place a "Spot Check System," under which LILCO was required to turn over to the court all documents that it continued to withhold on grounds of [*8]privilege. Supreme Court would conduct an in camera "spot check" of an unspecified number of the documents turned over, and, if any document reviewed in the spot check were found to have been erroneously withheld in light of the earlier ruling on the December 1993 Report, LILCO would be ordered to produce all withheld documents to defendants.

 

ANALYSIS

 

For the reasons discussed below, we affirm the grant of partial summary judgment to the London Defendants as to the extent of coverage under the 1970-1972 Policy. We find that Supreme Court erred, however, in ruling that LILCO had waived any privilege as to the December 1993 Report, and in imposing the Spot Check System on LILCO.

 

Extent of Coverage Under the 1970-1972 Policy

 

There are two questions to be answered in connection with the coverage issue under the 1970-1972 Policy. The first question is whether an "occurrence" taking place during the policy period that caused the relevant property damage was required to trigger coverage under the Policy. The second question, which arises only if the first question is answered in the affirmative, is whether any such "occurrence" took place during the policy period in this case. We answer "yes" to the first question, and "no" to the second.

 

Turning to the first question, we agree with Supreme Court's conclusion that the 1970-1972 Policy unambiguously required that a causative "occurrence" take place during the policy period in order to trigger coverage. In this regard, we note that each provision of the Policy must be read in the context of the entire agreement, not in isolation, in order to determine the intent of the parties (see Bijan Designer for Men v Firemen's Fund Ins. Co., 264 AD2d 48, 51-52). Here, the "Coverage" provision of the Policy (paragraph I[a] of the "Insuring Agreements"), although not containing the word "occurrence," provided that the insurers' duty to provide coverage thereunder is "subject to the limitations hereinafter mentioned." The reference to the "limitations hereinafter mentioned" must mean the immediately following portion of the Policy entitled "Limit of Liability" (paragraph II of the "Insuring Agreements"), which provided that [*9]the insurers' liability is limited to "the ultimate net loss as a result of any occurrence . . ." (emphasis added). Thus, the "Coverage" provision of the Policy incorporates by reference the "Limit of Liability" provision's limitation of the insurer's liability to losses resulting from an "occurrence."

 

Even if the "Coverage" provision did not expressly incorporate by reference the limitations of the "Limit of Liability" provision, we would construe the limitation of liability provision to similarly limit coverage. Plainly, there can be no "coverage" for a loss if any liability for that loss would exceed the "limit of liability" under the policy, which requires an "occurrence." "[W]here two seemingly conflicting contract provisions reasonably can be reconciled, a court is required to do so and to give both effect" (Proyecfin de Venezuela v Banco Indus. de Venezuela, 760 F2d 390, 395-396 [2d Cir]).

 

Since we hold that coverage under the 1970-1972 Policy is triggered by an "occurrence," the question that emerges is whether the ongoing migration or leaching of preexisting contaminants through the soil, which for our purposes we will assume continued during the policy period, can be deemed to constitute an "occurrence" under the contractual definition of that term ("one happening or series of happenings arising out of or caused by one event taking place during the term of this contract"). In prior decisions construing an identical, or nearly identical, definition of the word "occurrence" in liability policies in which, as we have demonstrated to be the case here, coverage was triggered by an "occurrence," courts have concluded that the definition was satisfied where an event during the policy period caused the damage or injury for which indemnity was sought (see Public Serv. Elec. & Gas Co. v Certain Underwriters at Lloyd's of London, C.A. No. 88-4811, 1994 U.S. Dist. LEXIS 21072, at *13-*16 [DNJ Sept. 30, 1994]; see also Indiana Gas Co. v Aetna Cas. & Sur. Co., 951 F Supp 780, 787-789 [ND Ind.], revd on other grounds, reh denied 141 F3d 314, cert denied 525 US 931; Pacific Resources v Oswego Shipping Corp., No. 79 Civ. 1606, 1984 WL 928, at *4, 1984 U.S. Dist. LEXIS 23253, at *10-*11 [SDNY Sept. 27, 1984]). Under policies providing [*10]occurrence-triggered coverage that contain such a definition of "occurrence," it has been held that the fact that the damage itself existed during the policy period does not afford coverage where the event that caused the damage preceded the policy period (see Public Serv. Elec. & Gas [the policy did not provide coverage for soil contamination caused by gas manufacturing that ended prior to the policy period, notwithstanding that contaminants may have continued to migrate during the policy period]; Indiana Gas. Co. [same]).

 

We concur with the results reached in the cited decisions. The contractual definition of "occurrence" expressly requires that the loss be occasioned by "one event taking place during the term of this contract." To accept LILCO's argument that the continuing leaching or migration of preexisting contaminants after the closing of the plants should be deemed to constitute the "event taking place during the term of this contract" (under the definition of "occurrence"), we would have to ignore the fact that the definition requires that the "event during the term of this contract" be the cause of the "happening or series of happenings" immediately giving rise to the loss. It would be illogical to deem the continuing migration of preexisting contaminants to be both the damage itself and the cause of the damage (cf. Matter of Midland Ins. Co., 269 AD2d 50, 59, 61 [where policy was triggered by "continuous or repeated exposure" to conditions which result in personal injury, "the trigger event in the policy . . . is an occurrence which results in injury, not the injury itself"]). Plainly, the event that caused the damage in this case was the operation of the plants, which, at six of the sites, ceased many years prior to the term of the 1970-1972 Policy. Once the plants were closed, no additional contaminants were discharged. Accordingly, the 1970-1972 Policy does not afford LILCO coverage for liability relating to these sites.^[FN2]

 

Whether Privilege Was Waived as to the December 1993 Report

 

Turning to the issues relating to the December 1993 Report, we find, contrary to Supreme Court's view, that LILCO established in its initial cross motion for a protective order that it did not waive any privilege attaching to the December 1993 Report by inadvertently disclosing it in the Federal Action. The affirmations of LILCO's attorneys attested that LILCO had always regarded the December 1993 Report as a privileged attorney-client communication, that LILCO had used a screening process in preparing its document production in the Federal Action, and that the production of the Report among hundreds of thousands of other documents had been an inadvertent error. Significantly, although LILCO's initial cross motion papers did not elaborate on the nature of the screening measures it had used, defendants did not argue that LILCO failed to establish that such screening measures had been reasonable. LILCO further established that, upon learning of the inadvertent disclosure of the Report from London's summary judgment motion in this action, it had promptly invoked the privilege, demanded the return of the document, and sought a protective order when its demand was refused. Moreover, a protective order will not unfairly prejudice defendants, as it is undisputed that defendants ultimately sought summary judgment on the late-notice issue in Supreme Court based on more than 200 documents other than the December 1993 Report. For all these reasons, we conclude that LILCO's initial showing in support of its cross motion for a protective order was sufficient, under applicable standards, to negate any inference of waiver of privilege that might otherwise arise from the disclosure in the Federal Action (see John Blair Communications v Reliance Capital Group, 182 AD2d 578, 579, citing Manufacturers & Traders Trust Co. v Servotronics, Inc., 132 AD2d 392, 398-400).

We also disagree with Supreme Court's view that LILCO has placed the subject matter of the December 1993 Report at issue in this action. That the Report may contain information relevant to the issue of timeliness of notice does not mean that the Report [*12]itself is at issue so as to waive any attorney-client privilege attaching thereto. In this regard, we observe that information concerning LILCO's knowledge of its potential liability for environmental damage at MGP sites is apparently available from numerous non-privileged sources (see Manufacturer & Traders Trust Co. v Servotronics, Inc., 132 AD2d at 396; Jakobleff v Cerrato, Sweeney & Cohn, 97 AD2d 834, 835-836; see also North River Ins. Co. v Columbia Cas. Co., No. 90 Civ. 2518, 1995 U.S. Dist. LEXIS 53, at *16-*17 [SDNY]). Moreover, LILCO does not seek to justify any delay in its giving notice to defendants as based upon the
advice of counsel (cf. Orco Bank v Proteinas Del Pacifico, 179 AD2d 390).

 

Since LILCO's initial cross motion for a protective order should have been granted, the question of whether such relief should have been granted on LILCO's motion for renewal becomes academic. We further note that defendants have not requested that this Court determine whether the December 1993 Report is privileged in the event of a finding of non-waiver. Since we understand Supreme Court to have made a finding in its October 2000 decision that the Report would be privileged in its entirety absent any waiver, and we are not asked to review that finding, LILCO should simply be granted the protective order it sought. Thus, there is no occasion to remand the privilege issue to Supreme Court for further consideration.

 

The Spot Check System

 

Finally, for two independent reasons, we vacate the October 2001 Order to the extent it imposed the Spot Check System on LILCO. First, the Spot Check System was devised to avoid the potential for interminable litigation on privilege issues that had been created by the court's ruling that LILCO had put "in issue" the subject matter of the December 1993 Report. Since we now hold that the court's ruling on the December 1993 Report was erroneous, the problem created by that ruling is obviated, and there is no longer any reason to impose the Spot Check System on LILCO as a means of dealing with that problem. Even if the court's ruling on the December 1993 Report were not in error, however, we would vacate the Spot Check System on the ground that [*13]the advance sanction involved deeming the erroneous withholding of even a single document to waive privilege as to all withheld documents, without regard to the circumstances of the erroneous withholding is so unduly punitive as to constitute an abuse of the court's discretion in the supervision of discovery (cf. Corner Realty 30/7, Inc. v Bernstein Mgt. Corp., 249 AD2d 191; Commerce & Industry Ins. Co. v Lib-Com, Ltd. 266 AD2d 142; Kaplan v KCK Studios, 238 AD2d 264).

Accordingly, the order of the Supreme Court, New York County (Ira Gammerman, J.), entered on or about October 24, 2000, which, insofar as appealed from, as limited by the briefs, granted the London Defendants partial summary judgment declaring that plaintiffs are not covered for the claims relating to the Glen Cove, Patchogue, Rockaway Park and Sag Harbor properties by the policy issued by the London Defendants in effect from March 1, 1970 through December 31, 1972, and denied plaintiffs' cross motion for a protective order, should be modified, on the law, to grant the cross motion for a protective order to the extent of prohibiting defendants from making any use of the December 1993 Report and directing defendants to return all copies of said document to plaintiffs, and otherwise affirmed, without costs; and the order of the same court and Justice, entered on or about October 31, 2001, to the extent it provided, as an advance sanction for the withholding by plaintiffs of any purportedly privileged document which the court determined to be non-privileged on a "spot check" basis, that plaintiffs would be directed to produce all documents withheld from production on grounds of privilege (the Spot Check System), should be reversed, on the law, the facts and in the exercise of discretion, without costs, to vacate all portions of the order that imposed the Spot Check System.

 

All concur.

 

Footnotes

 

Footnote 1:This appeal does not raise any issue as to the scope of coverage under the other policies issued by the London Defendants, or as to the scope of coverage under any policy issued by the other defendants. Nor does the appeal raise any issue as to whether the 1970-1972 Policy provides coverage for liability arising from the MGP that closed in 1973.

 

Footnote 2:We find unpersuasive LILCO's argument that different meanings should be ascribed to the terms "arising out of" and "caused by" in the contractual definition of "occurrence." We also note that whether or not a contract is ambiguous is a question of law for the court, as to which expert testimony is not cognizable. Thus, we have no occasion to consider the affidavit of a purported expert, submitted by LILCO, which characterizes the 1970-1972 Policy as ambiguous.

 

FALK v. INZINNA

 

APPEAL by the defendants Richard A. Inzinna and Big Geyser, Inc., in an action to recover damages for personal injuries, from an order of the Supreme Court (Jerald Carter, J.), entered June 4, 2001, in Nassau County, which granted the plaintiff's motion pursuant to CPLR 3101(i) to compel disclosure of all surveillance tapes of the plaintiff prior to her deposition.

 

COZIER, J.

 

On this appeal, we consider whether a defendant in a personal injury action is entitled to insist upon a plaintiff's deposition prior to disclosure to the plaintiff of surveillance videotapes, in light of the 1993 enactment of CPLR 3101(i). There is a conflict between the approaches adopted in the other Appellate Divisions based upon the recent ruling by the Appellate Division, First Department (see Tai Tran v New Rochelle Hosp. Med. Ctr., 291 AD2d 121). However, the issue is one of first impression for this court. For the reasons stated herein, this court finds, pursuant to CPLR 3101(i), that the plaintiff is entitled to immediate production of all surveillance videotapes prior to being deposed by the appellants.

 

The plaintiff allegedly was injured in an automobile accident and subsequently commenced this personal injury action against the appellants and another defendant. In her notice for discovery and inspection, the plaintiff requested, inter alia, production of any and all surveillance tapes. The appellants, in response, advised that they were not required to disclose the surveillance tapes until after the plaintiff submitted to a deposition.

 

The plaintiff then moved pursuant to CPLR 3101(i) to compel disclosure of all surveillance tapes prior to depositions, arguing that the statute and case law mandated disclosure of such materials upon demand. The appellants argued in opposition to the motion that disclosure prior to the plaintiff's deposition would allow the plaintiff to tailor her testimony. Although the appellants acknowledged that CPLR 3101(i) requires full disclosure of surveillance materials, they noted that the statute does not specifically address the timing of disclosure. In reply, the plaintiff noted that CPLR 3101(i) does not include any provision limiting disclosure until after depositions have been held.

 

The Supreme Court granted the plaintiff's motion, finding that CPLR 3101(i) requires disclosure of surveillance tapes upon demand. In reaching its decision, the Supreme Court relied upon the legislative history of CPLR 3101(i) and the decisions of the Appellate Division, Third and Fourth Departments, respectively, in Rotundi v Massachusetts Mut. Life Ins Co. (263 AD2d 84, 87), and DiNardo v Koronowski (252 AD2d 69, 71), which hold that CPLR 3101(i) requires immediate disclosure.

 

In DiMichel v South Buffalo Ry. Co. (80 NY2d 184, cert denied sub nom. Poole v Consolidated Rail Corp., 510 US 816), the Court of Appeals confronted the issue of whether films prepared by a defendant in a personal injury action were discoverable by a plaintiff before trial. The plaintiff in DiMichel sought the production of all videotapes and/or surveillance films taken by the defendant. The Court of Appeals held that surveillance films which a defendant intended to use at trial were discoverable by a plaintiff before trial as material prepared in anticipation of litigation subject to a qualified privilege (see CPLR 3101[d][2]). Moreover, the Court of Appeals ruled that the qualified privilege could be overcome [*3]only by the plaintiff's factual showing of substantial need and undue hardship (id. at 196).

 

The Court of Appeals in DiMichel noted that New York's open disclosure policy favors open and far reaching pretrial discovery. The Court of Appeals found that the plaintiff had a substantial need to view surveillance films before trial because films are so easily altered that there is a real danger that deceptive tapes, inadequately authenticated, could contaminate the trial process (id. at 196). With respect to the danger that the plaintiff may tailor his trial testimony, the court held that it could largely be eliminated by providing that surveilance materials be turned over only after a plaintiff has been deposed (id. at 197).

 

In 1993 the Legislature enacted a new subdivision (i) of CPLR 3101 which provides, in relevant part, that:"In addition to any other matter which may be subject to disclosure, there shall be full disclosure of any films, photographs, video tapes or audio tapes, including transcripts or memoranda thereof, involving a person referred to in paragraph one of subdivision (a) of this section. There shall be disclosure of all portions of such material, including out-takes, rather than only those portions a party intends to use."

 

(L 1993, ch 574, § 1) (emphasis added).

 

This new statutory provision created an additional disclosure device under CPLR article 31 which broadened the scope of disclosure of surveillance materials by providing that all such materials, including those that a defendant chose not to use at trial, were discoverable.

 

Both the Third Department and Fourth Department subsequently addressed the issue of whether the pronouncement by the Court of Appeals in DiMichel that a plaintiff must submit to a deposition in advance of obtaining requested surveillance materials survives the enactment of CPLR 3101(i) (see Rotundi v Massachusetts Mut. Life Ins. Co., supra; DiNardo v Koronowski, supra).

 

Rotundi and DiNardo both held that materials covered by CPLR 3101(i) are discoverable upon demand, pursuant to CPLR 3101(i). The Third and Fourth Departments referred to the unambigious language of CPLR 3101(i), which provides for full disclosure of such materials. The Appellate Division, Third and Fourth Departments also reviewed the statute's legislative history, which indicated that the addition of subdivision (i) was intended to codify and expand the DiMichel holding to require disclosure of all surveillance tapes, not limited to those relied upon or those introduced as evidence at trial. In addition, in electing not to amend or expand subdivision (d)(2) of CPLR 3101, "the Legislature created a new discovery rule governing disclosure of surveillance tapes which was not dependent upon the analysis and statutory showing required for materials prepared in anticipation of litigation which enjoy a qualified privilege against disclosure" (Rotundi, supra at 87 [citation omitted]).

 

In DiNardo, supra at 71, the Appellate Division, Fourth Department, held that:

 

"had the Legislature wanted to limit the disclosure of surveillance tapes until after depositions, as did the Court in DiMichel, it would have included language to that effect. As written, CPLR 3101(i) requires disclosure of surveillance tapes upon demand. Being mindful of the fact that 'we are judges and not legislators, and must not assume to make exceptions or to insert qualifications [into the wording of a statute], however justice may seem to require it' * * * we decline to insert into the statute a qualification concerning the timing of disclosure" [citations omitted].

 

Similarly, in Rotundi, supra at 87, the Appellate Division, Third Department concluded that surveillance tapes were "no longer cloaked with the qualified privilege attaching to materials prepared in anticipation of litigation under CPLR 3101(d)(2)" and that CPLR 3101(i) "supplant[ed] and replace[d] CPLR 3101(d)(2)."

 

However, contrary to the conclusions reached by the Third and Fourth Departments, the Appellate Division, First Department, recently held in Tai Tran v New Rochelle Hosp. Med. Ctr., supra at 124, that "surveillance materials created by defendants must be disclosed only after the plaintiff has been deposed" (citation omitted).

 

The defendants in a medical malpractice action in Tai Tran had conducted video surveillance of the injured plaintiff after his initial deposition, and the plaintiffs moved to compel disclosure of the video surveillance tapes. The defendants argued in opposition that they were not required to produce the tapes until after the injured plaintiff submitted to a further deposition with respect to his physical condition and the circumstances surrounding his return to work. The Supreme Court granted the plaintiffs' motion for disclosure of the surveillance tapes prior to the second deposition, finding that CPLR 3101(i) required immediate production of the surveillance tapes.

The Appellate Division, First Department, reversed the order of the Supreme Court, and directed that the injured plaintiff submit to a second deposition prior to the defendants' disclosure of the surveillance materials. Particularly, the First Department found that while the 1993 enactment of CPLR 3101(i) vitiated the portion of the DiMichel holding that surveillance tapes were materials prepared in anticipation of litigation, that portion of the DiMichel decision indicating that such materials were discoverable only after the plaintiff had been deposed was still viable.

Referring to the conclusions reached by the Third and Fourth Departments, the First Department stated in Tai Tran, supra at 125, that:

 

"There, priority was given to discovery on demand, vis-a-vis a defendant's [*5]right to depose the plaintiff before turning over surveillance materials. Such abolition of the preliminary deposition requirement is based on a misconception of the scope of CPLR 3101(i), which is silent on the priority issue presented here, and ignores the application of CPLR 3106(a), which accords the normal priority in discovery to defendants. In our view, those decisions needlessly upset the desirable balance of competing interests in personal injury litigation, and improperly restrict the judicial exercise of discretion in discovery matters."

 

We are not persuaded that the result in Tai Tran is the correct one. First, CPLR 3101(i) created a separate and distinct disclosure device pertaining to a party's right to obtain surveillance materials - unrelated to the priority of depositions set forth in CPLR 3106(a). This court has consistently held that CPLR 3101 does not set forth any specific order of priority as to the use of the various disclosure devices. Rather, "[a] party is generally free to choose both the discovery devices it wishes to use and the order in which to use them" (Edwards-Pitt v Doe, 294 AD2d 395, 396 [citations omitted]; see Barouh Eaton Allen Corp. v International Bus. Machs. Corp., 76 AD2d 873; Siegel, Practice Commentaries, McKinney's Cons Laws of NY, Book 7B, CPLR C3101:2). Moreover, a party's freedom of choice is subject to judicial intervention via a protective order if the process is abused (see CPLR 3103[a]; Barouh Eaton Allen Corp. v International Bus. Machs. Corp., supra at 874-875).

 

Second, we find the conclusion reached in Tai Tran at odds with the legislative history of CPLR 3101(i). A review of the statute's legislative history indicates that the Legislature intended to codify and to expand the ruling in DiMichel. However, prior to the enactment of CPLR 3101(i), the Advisory Committee on Civil Practice Law and Rules and the Division of State Police opposed the bill, in part, because it did not codify that portion of the DiMichel holding which limited disclosure until after a plaintiff had been deposed (see Mem of Assembly Rules Committee on Civil Practice Law, Rules Bill Jacket, L 1993, ch 574; see also Dinardo, supra at 71; Rotundi, supra at 86).

 

Accordingly, as noted by the Appellate Divisions, Third and Fourth Departments, the Legislature was well aware of the holding in DiMichel, and if the Legislature intended to limit or qualify disclosure under CPLR 3101(i), as did the Court of Appeals in DiMichel, it would have added language to that effect.

 

Third, we note, as did the Appellate Division, Third Department, in Rotundi, supra at 86, that CPLR 3101(i) makes no mention of the timing of the "full disclosure" in relation to the conduct of depositions. Furthermore, subdivision (i) fails to incorporate, by express language, or by implication, the provisions of CPLR 3106(a). While the First Department correctly states that CPLR 3101(i) "is silent on the priority issue," its conclusion that the statute "ignores the application of CPLR 3106(a), which accords the normal priority in discovery to defendants," is flawed (see Tai Tran, supra at 125 [emphasis added]). Inasmuch as CPLR 3106 is entitled "Priority of Depositions" and subdivision (a) is entitled "Normal [*6]priority," the section has no relationship to determining any priority between separate disclosure devices, nor to the timing of disclosure under CPLR 3101(i) (emphasis added). To the extent that no issue regarding the priority of depositions was before the First Department in Tai Tran and is not raised in the instant appeal, the provisions of CPLR 3106 are not properly invoked.

 

Although the Appellate Division, First Department, stated that DiMichel addressed the order of priority in disclosing video surveillance materials (see Tai Tran, supra at 123), the Court of Appeals in DiMichel only addressed the limited issue of whether defendants are required to turn over only those surveillance tapes that they intend to use at trial during pretrial discovery. The rule that was fashioned by the Court of Appeals in DiMichel, supra at 190, "respect[ed] a defendant's qualified right to keep videotapes prepared in anticipation of litigation private, [and] * * * at the same time advance[d] the policy of liberal disclosure underlying CPLR article 31." However, the portion of the decision in DiMichel regarding the timing of disclosure of surveillance materials did not survive the enactment of CPLR 3101(i), as the statute did not codify that aspect of the decision (see Rotundi, supra; DiNardo, supra).

 

Finally, we find that requiring a defendant to turn over surveillance materials upon a plaintiff's demand and prior to depositions need not result in any undue prejudice, such as tailored testimony by the plaintiff, since a defendant may seek an appropriate protective order pursuant to CPLR 3103(a).

 

We agree with the Third and Fourth Departments that the liberal disclosure policy of CPLR article 31 is best served by interpreting CPLR 3101(i) to require full disclosure of surveillance materials upon demand (see Rotundi, supra at 87; DiNardo, supra at 72). Accordingly, we hold that the plaintiff is entitled to surveillance materials upon demand, pursuant to CPLR 3101(i), regardless of whether the plaintiff has been deposed.

 

To the extent that our decision in Hawkins v Lucier (255 AD2d 553) suggests otherwise, we note that the decision in that case is limited to its facts.

 

In light of the foregoing, the order is affirmed.

 

H. MILLER, J.P., TOWNES and CRANE, JJ., concur.

 

IN RE APPLICATION OF PEERLESS INS. CO. v. YOUNG

 

Order, Supreme Court, Bronx County (Kenneth Thompson, Jr., J.), entered October 19, 2001, which denied petitioner's application to permanently stay arbitration, unanimously reversed, on the law, without costs, the application granted and arbitration permanently stayed.

 

Respondent applied for insurance with the Assigned Risk Plan on April 29, 2000 through an insurance broker, paid the broker $507 and was given a temporary insurance card which stated that coverage would become effective upon vehicle registration or at such earlier date as the Assigned Risk Plan might designate. Respondent demanded arbitration for an alleged May 1, 2000 car accident, and this action to enjoin such arbitration ensued. The motor vehicle was not registered on the date of the accident and the assignment card from the Assigned Risk Plan designated the effective date of coverage as May 15, 2000. As respondent has conceded, under Assigned Risk Plan rules, the issuance of a temporary insurance card does not trigger coverage; coverage is only effective from the date of receipt of the request in the Plan office and then only if the vehicle has already been registered (Allstate v Liberty Mutual Ins. Co., 110 AD2d 736; see Salvatore Collision & Towing, Inc. v Maryland Casualty Co., 248 AD2d 702). Based on the temporary card and the rules which delineate the inception of coverage, then, respondent's demand for arbitration should have been enjoined since, as a matter of law, the accident happened prior to coverage. Respondent has nonetheless argued that oral representations made by the insurance broker bound petitioner to provide coverage from the date of application. Generally, however, the broker is the agent of the insured and thus unable to bind the insurer (see 2540 Associates, Inc. v Assicurazioni Generali, S.p.A., 271 AD2d 282, [*2]284).

 

There is no evidence that petitioner did anything to hold the broker out as its agent; the insurer was unknown to respondent until after the accident. Respondent was not induced to rely on statements made by petitioner; she relied on the unwarranted representation of her own agent which provides no conceivable basis on which to hold petitioner liable (see U.S. Delivery Systems, Inc. v National Union Fire Insurance Co. of Pittsburgh, 265 AD2d 402; Bennion v Allstate Insurance Co., 284 AD2d 924, 925). Respondent has failed to demonstrate any exceptional circumstance and the stay should be granted.