Coverage Pointers - Volume IX, No. 11

Dear Coverage Pointers Subscribers:

 

We welcome 25 new subscribers to the Coverage Pointers family.  Of our new readers, many enrolled after having the pleasure of listening to Audrey Seeley's presentation at the Westchester CPCU Seminar Day.  She surely enjoyed the visit.  Thanks to our subscriber Jerry Trupin for inviting her.

 

We do a good deal of training and enjoy it.  Over the last three months and in the next couple, we have either completed or have scheduled training programs at six different insurers on topics ranging from crafting disclaimers, to Insurance Law Section 3420, to No Fault, to Notice, and many other related areas.  We'll be in Western New York, Central New York , Westchester, the North Country, and Long Island for carrier training.  There's no cost (we forget to tell you that) for the programs, except we do insist on the occasional cup of coffee, particularly after a long drive!  Here are a few of the programs at which I'll be speaking, and which are open to the public (for a fee, charged by the sponsoring organization):

 

Upcoming Education Programs

 

December 13 - 14      New York City           DRI Insurance Coverage and Practice Symposium
Topic: The Duty to Cooperate under a CGL Policy and also presenting on the Insurance Company - Defense Counsel Relationship.

 

January 17                  Syracuse                     NBI Insurance Coverage Litigation

January 18                  Buffalo                        NBI Insurance Coverage Litigation

Topic: Interpreting Coverage Under the Insurance Contract with a focus on crafting denial letters.

 

April 13-16                  Boston                                    PLRB Claims Conference

Topic:  Complex Liability Coverage Issues

 

I think there was a full moon this week.  Since today is Stay At Home Because You're Well Day, I know that many of you will be reading this issue with your feet up, perhaps hoping to taste a pint of Guinness.  Be happy you're not in Dublin where the national drink of that lovely nation is more scarce than usual.  There, an investigation has been launched following Wednesday's theft of 450 kegs from the Guinness Brewery on Victoria Quay in Dublin.  The take included 180 kegs of Guinness, 180 kegs of Budweiser and 90 kegs of Carlsberg.  Why would anyone ever steal Budweiser?  Sheesh.

 

I thought the moon was full when I watched the Republican Presidential candidates' debate on You Tube on Wednesday evening.  If you did as well, you would have seen a cartoon-animated version of Vice President Dick Cheney asking the candidates questions about Vice Presidential power, a pro-Mars groups demanding a commitment of the assembled suits to send astronauts to the red planet and Rudy Giuliani being excoriated for supporting the Red Sox in the World Series.

 

If that wasn't enough, Leona Helmsley's dog Trouble, who inherited $12 million through the Queen of Mean's Last Will and Testament, is receiving death threats.  That dog should stop answering the phone.  And to wrap up a perfect week, we were reminded that back in 2005, in Niagara Falls, a City Court judge had 46 people incarcerated when a cell-phone went off in his courtroom and nobody would claim responsibility.  He ordered everyone in the courtroom to be jailed.  This week, the New York State Commission on Judicial Conduct recommended that the jurist be removed from the bench for conduct described as "bizarre."

 

On the legal beat, it's been an extremely busy week in the New York courts, with a particular nod to our highest court, the Court of Appeals.  There are some fascinating decisions this week, including one which permits defense counsel to demand and secure authorizations to allow private conversations with personal injury plaintiff's medical providers.

 

From Audrey, the Queen of No Fault, I bring you her melodic words for the week:  

 

The buzz for this edition is the Court of Appeals decision in Hospital for Joint Diseases v. Travelers.  Please take a close read through the entire case - opinion AND dissent.  I think you will find that even this high court vociferously debates (well at least the lone dissenter, Judge Pigott) the no-fault law just as much as we do.  In fact, the decision raises the arguments and positions I routinely hear.  One side advocates that the no-fault law must be strictly applied.  If an insurer fails to comply with the tight time frames for denial and requests for verification it is precluded from raising most of its defenses in litigation or arbitration.  The other side, one that I subscribe to, advocates that certain fundamental issues - coverage and standing cannot be waived even if the insurer fails to comply with the time requirements imposed by the no-fault law.
 

The Travelers decision held that an insurer who fails to timely request verification on a questionable assignment of benefits (AOB) or timely issue a denial on the claim is precluded from arguing that the assignment of benefits is invalid.  Put a different way, the insurer is precluded from arguing lack of standing if it failed to comply with the time restraints under the no-fault law. 

 

What do we take away from this decision?  My view is that this decision only reaffirms many of the prior decisions which essentially tell insurers that they must dot their I's and cross their T's.  If you receive an AOB review it immediately and issue a request for verification if the AOB says "signature on file" from the patient.  If you failed to issue the verification request and are nearing the 30 day time frame consider issuing a timely denial on the AOB being invalid just to preserve your defense.  I am not sure, but would not be surprised, if this decision would be used to preclude an insurer's counsel, who found a problem with the AOB that the insurer missed, from arguing lack of standing.

 

At the end of the day I don't think this get us any closer to the no-fault law's goal, as the high court states, to provide a "tightly timed process of claim, disputation and payment."  Even if the insurer had timely requested verification, sent the timely second request, then patiently waited for the response to the verification, the chances are great that before and instead of the response being provided the insurer is sued.  We see a number of those cases.  Now the parties will wait six months to over a year and incur costs for an appellate court to affirm the special term's decision to dismiss the action as premature due to outstanding verification.  Judge Pigott made a valid point in his dissent that the arbitration forum provides the vehicle for attaining the goal of the no-fault law. 

 

For those who claim that the arbitration forum is too insurer friendly, I encourage you to walk a month in my shoes where you will find that the arbitrators provide a pretty level playing field (well for the most part).  Moreover, while the arbitrators are certainly interested in procedural issues, i.e., whether a timely denial was issued they are more interested in hearing the heart of the issue in medical claims - was the treatment medically necessary.  Obviously the arbitrators are not hindered by strict adherence to evidence rules under the no-fault regulations which greatly assists in getting to the real issue in the case.  However, perhaps the reason for dispensing with strict adherence to evidence rules in arbitration is, as Judge Pigott points out, to provide the fastest and most economical resolution to these disputes which is in line with the goals of the no-fault law.

 

Audrey A. Seeley

[email protected]

From Mark Starosielec, our Serious Injury guru, we offer Mark's Mark, a special focus on the No Fault threshold:

 

Just like with holiday shopping, don't procrastinate when filing summary judgment motions. This week's edition includes two cases (Madison v. Tahir) and (McNally v. Beva Cab Corp.) that serve as friendly reminders to timely file motions.

 

Remember CPLR Rule 3212 (a) - which states: "Any party may move for summary judgment in any action, after issue has been joined; provided however, that the court may set a date after which no such motion may be made, such date being no earlier than thirty days after the filing of the note of issue. If no such date is set by the court, such motion shall be made no later than one hundred twenty days after the filing of the note of issue, except with leave of court on good cause shown."

 

As the rule states, courts can limit the time frame but no earlier than thirty days after the note of issue. For example, Rule 13 of the Civil Trial Rules of the Supreme Court, Kings County , requires that motions for summary judgment be made within 60 days of the filing of the note of issue. (McNally) For information on court rules in other trial courts in the state, visit www.courts.state.ny.us.

 

Mark A. Starosielec.
[email protected]

 

This week's 61 page edition (20 pages of summary, 41 pages of reported decisions) is significant for the number of Court of Appeals decision included.  The highlights are as follows:

 

New York State Court of Appeals:

 

·        If a Plaintiff Puts His or Her Medical Condition in Controversy, Defense Counsel May Compel Authorizations Allowing  that Defense Counsel to Interview, Privately, the Plaintiff's Treating Physician, Subject to Health Insurance Portability and Accountability Act of 1996 (HIPPA) Procedural Safeguards

·        Orthopedic Surgeon, Unable to Perform Surgery, but Able to Conduct IME's is Not Occupationally Disabled

·        New York State Motor Vehicle Inspection Station has No Duty to Plaintiff Injured by Allegedly Faulty Inspection

·        Court Appeals Denies Leave to Appeal in Reyes Reported in Vol. VIII, No. 13 (12/29/06 Edition) of Coverage Pointers:

• Excess Carrier has Duty to Disclaim After Learning of Reasons to Deny Coverage and Not After Primary Policy Exhausted (as Previously Held) 

Appellate Division of the State Supreme Court:

 

·        Insurance Agency Liable for Breach of Contract for Failure to Provide Promised Coverage; If an Agent of the Carrier, Insurer May be Liable as Well

·        Uninsured Motorists Claim Stayed Where Cancellation of Policy Not Established

·        Bonus Case:  Fourth Department Takes Another Step in Labor Law Section 240(1) Trend - Deny Motion Based on Sole Proximate Cause

·        Notice Given to SUM Carrier Six Months After Accident but Two Weeks After Learning of Amount of Tortfeasor's Coverage is as "Soon as Reasonably Possible"

·        Denying Ownership of a Car Requires More Proof than a Conclusory Affidavit

·        Three Month, Unexcused Delay in Giving Notice by Insured Leads to Loss of Coverage

·        Late Notice by Insured Sinks Coverage Under Lawyer E&O Policy

·        Insured's Seven Month Delay in Giving Notice of Accident was Inexcusable

·        Questions of Fact Preclude Determination on Both Coverage and Timeliness of Disclaimer

·        Non-Waiver Agreement Not Enough to Justify Late Disclaimer

·        For an Indemnity Agreement to be Enforced, it Must Demonstrate the "Unmistakable Intent of the Parties"

 

STAROSIELEC'S SERIOUS (INJURY) SIDE OF NEW YORK NO FAULT
Mark Starosielec
[email protected]

 

·        Defendant Law Firm on the Hook for Failure to Seek SUM Carrier's Consent to Settle

·        Deadlines, Deadlines, Deadlines: Failure to Adhere to Them Cost Defendants SJ

·        What's Normal? SJ Denied as Defendants' Doctor Fails to Compare Findings Proof (Or Lack Thereof) is in the Pudding: Plaintiffs' Failure to Produce Leads to SJ

·        Injury Causation Concerns Seal Plaintiff's Fate as SJ is Affirmed

·        Too Little, Too Late: Court Denies Plaintiff's Motion for Leave to Reargue for Failure To Show New Facts & Reasonable Justification for Delay

·        Plaintiff's Mild Disc Bulge not Enough to Survive Motion for Summary Judgment

·        Plain and Simple: Mere Existence of Herniated Disc is Not Evidence of Serious Injury  

 

AUDREY'S ANGLES ON NO-FAULT

Audrey Seeley

[email protected]

 

Arbitration

·        It Took You Over a Month and a Half to Determine that Your Injury Arose Out of Use and Operation of the Vehicle?  Yeah, Right

·        Going Through the Motions for Vocational Rehabilitation While Admittedly Capable of  Employment Not Enough.

·        17 Month Gap in Treatment Insufficient to Invoke One Year Rule

·        Applicant's Lost Wage Claim Denied - Evidence of Termination Unrelated to Accident

·        Insurer Prevails on Late Proof of Claim Defense

 

Litigation  

 

·        Insurer's Failure to Request Verification on Assignment of Benefits and Deny Claim Leads to Preclusion of Standing Argument

·        Evidence of Violation of 45 Day Rule Permits Insurer to Survive Summary Judgment.

·        Notice to Admit on Receipt of Claim Form Without Testimony Laying Foundation for Business Record Fatal to Plaintiff  

 

PEIPER ON PROPERTY

Steven E. Peiper

[email protected]

 

·        Cracked, Crumbling Foundations are Plainly Excluded from Coverage

·        When the Heat is On, Coverage for Burst Pipes is Triggered

·        Heads Up? Not Really, as the Court of Appeals Rules that a Stadium Operator has No Duty to Warn of the Dangers in Chasing Foul Balls

 

I think that's enough for this week; it surely is for me!  Hope to see many of you in New York City for the DRI Insurance Symposium. Best personal regards and keep providing that helpful and wonderful feedback.

 

Dan

Hurwitz & Fine, P.C. is a full-service law firm
providing legal services throughout the State of New York.

 

Newsletter Editor

Dan D. Kohane
[email protected]

 

Insurance Coverage Team

Dan D. Kohane, Team Leader
[email protected]

Michael F. Perley
Audrey A. Seeley
Steven E. Peiper

Fire, First-Party and Subrogation Team
Andrea Schillaci, Team Leader
[email protected]
Jody E. Briandi
Steven E. Peiper

NO-FAULT/UM/SUM TEAM
Audrey A. Seeley, Team Leader
[email protected]
Tasha Dandridge
Mark Starosielec

APPELLATE TEAM
Jody E. Briandi, Team Leader
[email protected]
Dan D. Kohane
Scott M. Duquin

Index to Special Columns

 

Starosielec’s Serious Side of “Serious Injury”

 Audrey’s Angles on No Fault

Peiper on Property
Earl’s Pearls

Across Borders

 

New York State Court of Appeals:

 

11/27/07          Arons v. Jutkowitz
New York State Court of Appeals

If a Plaintiff Puts His or Her Medical Condition in Controversy, Defense Counsel May Compel Authorizations Allowing  that Defense Counsel to Interview, Privately, the Plaintiff’s Treating Physician, Subject to Health Insurance Portability and Accountability Act of 1996 (HIPPA) Procedural Safeguards

This is a very significant decision.  The Court of Appeals, review conflicting decisions from Appellate Departments, has determined that defendants have the right to demand and receive authorizations to privately interview a plaintiff’s treating doctors when a personal injury case is pending.  The Court recognized that under HIPAA, defense counsel would have the right to compel the production of authorizations that would allow these private communications to take place, without the necessity of a formal deposition and without plaintiff’s counsel present and that state procedural rules do not prevent this “informal discovery” from being undertaken.

 

Editor’s Note: In next issue’s Earl’s Pearls column, Earl Cantwell will provide an in depth analysis of this landmark decision. We can also expect some legislative attempts to overturn this decision in the legislative session to come.  In the meantime, defense counsel everywhere should be drafting authorizations and sending them along.

 

11/27/07          White v. Continental Casualty Company

New York State Court of Appeals
Orthopedic Surgeon, Unable to Perform Surgery, but Able to Conduct IME’s is Not Occupationally Disabled
Dr. James White, a Buffalo-based orthopedic surgeon, became disable and no longer able to perform surgeries.  He was however able, and did conduct, independent medical examination, primarily for defense firms and insurers.  He applied for benefits under a disability policy. In order to receive disability income benefits under the policy, he was required to establish that he is "unable to perform the substantial and material duties" of an orthopedic surgeon and not be "performing the duties of any gainful occupation for which [he is] reasonably fitted by education, training, or experience."

 

The Court of Appeals held that this definition is "reasonably susceptible of only one meaning."  While Dr. White satisfied the first provision of the definition inasmuch as he stopped performing orthopedic surgeries due to medical problems prior to filing a claim under the policy. The evidence in the record demonstrated that plaintiff renders second medical opinions on spinal surgery, performs independent medical examinations and serves as an expert medical witness. Therefore, the courts held that, as a matter of law, plaintiff is "performing the duties of [a] gainful occupation for which [he is] reasonably fitted by [his] education, training, or experience," and thus, he is not disabled under the policy.

 

11/19/07          Stiver v. Good & Fair Carting & Moving, Inc.

New York State Court of Appeals
New York State Motor Vehicle Inspection Station has No Duty to Plaintiff Injured by Allegedly Faulty Inspection
Just as the New York high court had determined that a snow plow contractor has no liability to injured party, stranger to the contract, who claims to have fallen as result of the contractual breach, so too a New York State motor vehicle inspector has no duty to injured stranger to the contract.  While there are a few very limited exceptions, none of which are applicable here, lack of contractual privity with the injured party leads to a finding of no tort liability for an allegedly faulty inspection.

 

11/19/07          Reyes v. Diamond State Insurance Company
New York State Court of Appeals

Court Appeals Denies Leave to Appeal in Reyes Reported in Vol. VIII, No. 13 (12/29/06 Edition) of Coverage Pointers:

 

12/26/06          Reyes v. Diamond State Insurance Company
Appellate Division, Second Department
Excess Carrier has Duty to Disclaim After Learning of Reasons to Deny Coverage and Not After Primary Policy Exhausted (as Previously Held)
Excess carrier has same obligation primary carrier does, to disclaim promptly after being placed on notice and completing investigation.  Failure of excess carrier to do so will render it unable to rely on policy exclusions or conditions as grounds to deny coverage.  Court specifically overturns one of its previous decisions, a 1999 opinion, which held that “an excess liability insurer, duty to disclaim arises a reasonable time after the primary insurance coverage has been exhausted, or the retained limit met.”

Appellate Division of the State Supreme Court:

11/27/07          Bedessee Imports, Inc., v.  Cook, Hall & Hyde, Inc., and Kemper Ins. Co. Appellate Division, Second Department
Insurance Agency Liable for Breach of Contract for Failure to Provide Promised Coverage; If an Agent of the Carrier, Insurer May be Liable as Well
An insurance agent or broker such as CHH may be held liable under theories of breach of contract or negligence for failing to procure insurance either by proof that it breached the agreement or because it failed to exercise due care in the transaction.   Here, such proof was established and CCH, the agent, failed to offer contrary proof.   CCH claimed that it was acting as an agent for Kemper, a disclosed principal but that doesn’t free the agent of liability.  CCH argued that it issued a binder pursuant to authority but such a temporary policy terminates when the insurer issues a policy or decides not to do so.  Here there was proof that Kemper refused to issue the policy. Issues of fact exist, however, as to whether Kemper is liable for the agent’s conduct .

 

11/27/07          In the Mtr. of State Farm Mutual Automobile Insurance Company v. Noble
Appellate Division, Second Department
Uninsured Motorists Claim Stayed Where Cancellation of Policy Not Established
Just a procedural reminder offered by this case.  Uninsured Motorist claim filed against State Farm.  It was claimed that Empire Fire and Marine, carrier for other vehicle involved in accident, that it has properly non-renewed owner’s policy.  State Farm followed the right procedures to free itself from UM obligation.  A claim was made by its insured, Noble,  that Empire denied coverage based on non-renewal of other car’s policy.  When UM arbitration demand filed, State Farm moved, within 20 days, for permanent stay of arbitration.  It named Empire as a proposed respondent in the proceeding..  At a hearing, State Farm presented evidence that Empire had issued policy to other owner.  Empire failed to establish proper non-renewal and court held that coverage was in place for other vehicle through Empire so that UM arbitration proceeding was permanently stayed.

11/23/07          Mulcaire v. Buffalo Structural Steel Corp.
Appellate Division, Fourth Department
Bonus Case:  Fourth Department Takes Another Step in Labor Law Section 240(1) Trend – Deny Motion Based on Sole Proximate Cause
This is not a coverage case, but one of which to take note.  It reflects a trend, particularly in the Fourth Department, to less frequently grant motions in scaffolding cases.  Plaintiff, a construction worker, fell through an opening, some 18 feet, and was injured.  There can be little doubt that five years ago, such a lawsuit would have resulted in the plaintiff moving for summary judgment and the motion being granted as an owner and general contractor are absolutely liable for injuries caused by falls from elevated heights where safety devices would have prevented the accident.  In this case, the lower court granted the plaintiff’s motion, but the Appellate Division reversed. 

Although plaintiffs met their initial burden with respect to Labor Law § 240 (1) by establishing that "the absence of or defect in a safety device was the proximate cause of [plaintiff's] injuries," the court concluded that the defendants raised an issue of fact as to whether the plaintiff’s conduct was the sole proximate cause of his injuries. The issue revolved around extra sheets of decking available to plaintiff for safety purposes and, if plaintiff, based on his training, prior practice, and common sense, knew or should have known to cover the opening, and similar openings, which were created by the act of laying down the decking according to the project plan.

11/21/07          Matter of New York Municipal Ins. Reciprocal (NYMIR) v. McGuirk
Appellate Division, Third Department
Notice Given to SUM Carrier Six Months After Accident but Two Weeks After Learning of Amount of Tortfeasor’s Coverage is as “Soon as Reasonably Possible”
On January 24, 2005, McGuirk, an employee of the Warren County Sheriff's Department, was injured in a patrol car a vehicle owned by Warren County and for which supplementary uninsured/underinsured motorist (SUM) insurance coverage was in place with NYMIR.  The car had been struck by a vehicle driven by Rachael McCrea.  At the end of July 2005 McGuirk learned from McCrea’s insurer that their policy had a $100,000 liability limit. Less than two weeks later, at the beginning of August 2005, respondent notified NYMIR of a possible SUM claim.  NYMIR claimed that it was not notified of the claim "as soon as practicable" as required under the policy disclaimed coverage. Respondent served a demand for SUM arbitration in November 2005 and, in response, petitioner commenced this proceeding in Supreme Court to stay the arbitration. 

The Appellate Division held that in the underinsured motorists context, the phrase “as soon as practicable” means that the insured must give notice with reasonable promptness after the insured knew or should reasonably have known that the tortfeasor was underinsured. There was no claim that McGuirk should have discovered this information earlier only  that McGuirk should have suspected that the McCreas' coverage may be insufficient.

11/20/07          Allstate Insurance Company, as subrogee v. Persampire

Appellate Division, Second Department
Denying Ownership of a Car Requires More Proof than a Conclusory Affidavit
Allstate paid off a collision claim and then brought a subrogation action against the driver of the other vehicle.  He claimed he wasn’t the owner of the car but failed to present sufficient proof that he had transferred possession and ownership of the car as he claimed.  Persampire's conclusory affidavit claiming that he had transferred ownership of the 1972 Buick to McMahon on June 25, 2005, was supported only by a handwritten, undated, and unnotarized statement purportedly from McMahon, was insufficient to demonstrate a prima facie entitlement to judgment as a matter of law.

 

11/20/07          Evangelos Car Wash, Inc v. Utica First Insurance Company

Appellate Division, Second Department
Three Month, Unexcused Delay in Giving Notice by Insured Leads to Loss of Coverage
The insured knew of the accident on December 2, 2003 but delayed notifying the carrier until March 16, 2004.  Why?  No good excuse offered.  The disclaimer letter specifically advised the insured that its notice of claim was untimely.  Disclaimer upheld motion for summary judgment.

 

11/20/07          Reznick v. Zurich North America Specialties
Appellate Division, Second Department
Late Notice by Insured Sinks Coverage Under Lawyer E&O Policy
Did Zurich have an obligation to defend and indemnify Reznick under a policy providing legal malpractice coverage?  Reznick was retained to represent the Sapirs in a personal injury lawsuit and in 1998, Reznick was directed to file a note of issue to place the case on the calendar within 90 days or the action could be dismissed in accordance with CPLR statute 3216 (for failure to prosecute). He didn’t file it and in 1999, the action was dismissed.  Four years later, Reznick moved to vacate the default alleging that he could not prosecute the Sapir action because of a bankruptcy stay. It became clear, however that the bankruptcy stay was not put in place until June 2000, two years after the order directing the filing of the note of issue.  Not surprisingly, the July 2003, the court denied the application to vacate the default and in 2004, the Appellate Division affirmed the order denying the application to vacate the default.

 

Only then did the Reznicks’s notify Zurich of a potential legal malpractice claim against them. Zurich disclaimed on late notice, and this court agrees. A minimum, the plaintiffs knew or should have known of a potential malpractice claim no later than July 2003.

 

11/20/07          St. Nicholas Cathedral v. Travelers Property Casualty Insurance Company

Appellate Division, First Department
Insured’s Seven Month Delay in Giving Notice of Accident was Inexcusable
Accident occurred on October 14, 2003 and the insured gave its first notice to its liability carrier on May 10, 2004, after being sued.  A hearing was held before a special referee who determined that the insured learned of the accident immediately after it occurred during a construction project ongoing.  The injured party had been taken away by ambulance, the insured discussed the accident internally with others and the insured knew that the policy obligated it to provide notice of an occurrence "as soon as practicable." The insured failed to establish the reasonableness of its belief that no claim would be asserted against it and hence of its seven-month delay in providing notice to Travelers.  The insurer need not establish prejudice.

 

11/20/07          The City of New York v. General Star Indemnity Company
Appellate Division, First Department
Questions of Fact Preclude Determination on Both Coverage and Timeliness of Disclaimer
The additional insured endorsement on which plaintiff relies is part of the policy under which plaintiff claims coverage, an issue of fact as to coverage is raised by ambiguities in the endorsement and the post-accident dating of the certificate of insurance issued to plaintiff.  Also, if there is coverage, there is an issue of act as to the timeliness of the disclaimer,  The carrier claims it received the claim letter in a fax sent 23 days before it issued its disclaimer even though the named insured received it earlier..

 

11/13/07          Quincy Mutual Fire Insurance Company v. Uribe

Appellate Division, Second Department
Non-Waiver Agreement Not Enough to Justify Late Disclaimer

This is an awful decision. 

 

We all know that Insurance Law § 3420(d) requires an insurance carrier to give its insured and the injured party written notice of a disclaimer of coverage as soon as is reasonably possible. Where there is a delay in providing the written notice of disclaimer, the burden rests on the insurance company to explain the delay.  When the explanation offered for the delay is an assertion that there was a need to investigate issues that will affect the decision on whether to disclaim, the burden is on the insurance company to establish that the delay was reasonably related to the completion of a necessary, thorough, and diligent investigation.

 

Here, the insured established, as a matter of law, that the disclaimer was late. The insurer failed to prove that an investigation was necessary, and that if it were necessary, it was diligently pursued and completed.

 

The insurer’s assistant litigation manager noted the late notice issue as soon as she reviewed the notice of claim on August 26, 2005, that she directed an investigator to obtain a signed nonwaiver agreement from the insured, and after the nonwaiver agreement was obtained on September 13, 2005 – 21 DAYS LATER -- she retained counsel who commenced the declaratory judgment action.

 

The court did not accept the non-waiver agreement as enough to justify any further delay.  Without an affidavit of the assistant manager, an affidavit from the investigator, a copy of any investigative report, or a copy of a statement obtained from its insured, the plaintiff failed to support its claimed explanation with proof the investigation was necessary and diligently performed.

 

Editor’s Note:  Why wouldn’t a non-waiver agreement be effective?  Here, the non-waiver was signed very shortly after notice was given.  Isn’t the purpose of a non-waiver to allow an insurer to conduct an investigation without worry as to the time to disclaim?  Perhaps the court was saying that an investigation was unnecessary and therefore the non-waiver did not justify additional time to conduct an investigation that was not warranted in the first place.  This is one of the first decisions we’ve seen, and certainly the first in many years, where a court rejects the effectiveness of a non-waiver agreement. 

 

11/13/07          Sumba, v. Clermont Park Associates, LLC

Appellate Division, Second Department

For an Indemnity Agreement to be Enforced, it Must Demonstrate the “Unmistakable Intent of the Parties”

Sumba was an employee of M.R.I.  He was injured while doing sheetrock work a property owned by Clermont Park Associates (Associates) and leased to Clermont Park Residence (Residence).  Associates had retained M.R.I. to help construct a workspace for Residence.  Plaintiff sued Associates who then brought a third-party action against Residence seeking contractual indemnity for any liability Associates incurred under a provision of the lease.

The lower court found that the lease did not have a clear indemnity agreement because it was not applicable to a claim asserted by an employee of a contractor.  It limited the Associate’s damages to the out-of-pocket cost caused by Residence’s failure to procure the required amount of insurance.. The Appellate Division affirmed.  The indemnification clause at issue did not specifically include the claims of M.R.I.'s employees and there is no proof, therefore that indemnity was "the unmistakable intent of the parties."

 

STAROSIELEC’S SERIOUS (INJURY) SIDE OF NEW YORK NO FAULT
Mark Starosielec
[email protected]

 

11/27/07          Mavroudes v. Cronin & Byczek, LLP

Appellate Division, Second Department

Defendant Law Firm on the Hook for Failure to Seek SUM Carrier’s Consent to Settle

In a legal malpractice, action, the Appellate Division affirmed a lower court order which denied defendant-law firm’s motion for summary judgment dismissing the complaint. Here, plaintiff was injured in a collision and hired defendant-law firm (hereinafter “defendant). The plaintiffs were required to establish that the injured plaintiff sustained a “serious injury,” but the tortfeasors’ insurance carrier ultimately settled the action for the policy limits. The defendant failed to notify the plaintiffs’ insurance carrier, Nationwide, of the settlement and obtain its consent to the settlement, as required under the supplemental underinsured motorist (hereinafter SUM) endorsement to the plaintiffs’ policy. After the settlement, the plaintiffs sought benefits under that endorsement, but Nationwide disclaimed coverage. Eventually, the plaintiffs commenced this action against the defendant to recover damages for legal malpractice. The defendant sought summary judgment on the ground that the injured plaintiff did not sustain a serious injury and thus, he could not have obtained SUM benefits under his endorsement, which required proof of a serious injury.

To prevail on a claim alleging legal malpractice, a plaintiff must establish that the attorney “failed to exercise that degree of care, skill, and diligence commonly possessed and exercised by an ordinary member of the legal community, and that the attorney’s breach of this duty proximately caused the plaintiff to sustain actual and ascertainable damages.” The defendant’s motion was based on its contention that, because the injured plaintiff did not sustain a serious injury under Insurance Law § 5102(d), he could not have recovered under his SUM endorsement. Consequently, the defendant argues that failure to notify Nationwide didn’t damage plaintiffs.

The defendant failed to establish, that the injured plaintiff did not sustain a serious injury. (see Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853; Bentivegna v Stein, 42 AD3d 555; Perrotta v Bambury, 41 AD3d 572, 572 573; Mariaca-Olmos v Mizrhy, 226 AD2d 437, 438; cf. Raffellini v State Farm Mut. Auto. Ins. Co.,NY3d, 2007 NY Slip Op 08777 [2007]). The reports upon which the defendant relied to establish the injured plaintiff's lack of a serious injury predated by a year the defendant's commencement of the action on the plaintiffs’ behalf against the tortfeasors, which action was predicated on the existence of a serious injury. Such reports predated the defendant’s settlement of the action against the tortfeasors for the tortfeasors’ policy limits by a period of two years.

11/27/07          McNally v. Beva Cab Corp.

Appellate Division, Second Department

Deadlines, Deadlines, Deadlines: Failure to Adhere to Them Cost Defendants SJ

The Appellate Division reversed a lower court order granting defendants’ motion for summary judgment because it was filed too late. The defendants failed to establish good cause for the delay in making their motion. see CPLR 2004. Rule 13 of the Civil Trial Rules of the Supreme Court, Kings County, requires that motions for summary judgment be made within 60 days of the filing of the note of issue. While the defendants explained that their post-note-of-issue delay was due to the plaintiff’s failure to supply authorizations and submit to an IME, they failed to account for the 79 days between the date of the defense medical report and the date of the motion. If the date of that report is to be deemed the functional equivalent of the note-of-issue date, the defendants exceeded by almost three weeks the 60 days allotted for moving for summary judgment. Without an explanation for this delay, the record is bereft of a basis for finding good cause.

 

11/27/07          Page v. Belmonte

Appellate Division, Second Department

What’s Normal? SJ Denied as Defendants’ Doctor Fails to Compare Findings

A lower court order which had granted defendants’ summary judgment motion dismissing the complaint was reversed by the Appellate Division. Here, the plaintiff allegedly sustained injuries to her cervical and lumbar spines and both knees. Defendant failed to establish, prima facie, that the plaintiff did not sustain a serious injury. In his affirmed medical report following thoracic and lumbar range of motion testing, defendant’s examining orthopedic surgeon merely stated that forward bending was carried out to 80 degrees, right to left lateral bending was “symmetrical at 20 degrees” and “[t]hese ranges of motion are considered excellent for a patient of the same age.” Nowhere were these findings compared against what is normal range of motion.

 

 

11/27/07          McComb v. Bender

Appellate Division, Second Department

Proof (Or Lack Thereof) is in the Pudding: Plaintiffs’ Failure to Produce Leads to SJ
 Defendants were successful on their appeal of an order which had denied its motion for summary judgment dismissing the complaint. While the defendants met their prima facie burden, the plaintiffs, in opposition, failed to raise a triable issue of fact. The plaintiffs relied on the affirmed medical reports of the plaintiff’s treating neurologist. However, the reports were not based on a recent examination.

 

11/23/07          Anania v Verdgeline

Appellate Division, Fourth Department

Injury Causation Concerns Seal Plaintiff’s Fate as SJ is Affirmed

Plaintiff’s two workplace accidents besides subject MVA led the appellate division to affirm the lower court’s order granting defendant’s motion for summary judgment. Here, plaintiff was rear-ended by a vehicle driven by defendant. Defendant met his initial burden by submitting records and reports of plaintiff’s treating physicians indicating that his alleged injuries were related to injuries suffered in two workplace accidents, one before and one that occurred after the accident. As such, plaintiff had the burden to come forward with evidence addressing defendant’s claimed lack of causation. Plaintiff’s submissions in opposition to the motion did not adequately address how plaintiff’s current medical problems, in light of plaintiff’s past medical history, are causally related to the subject accident.

 

11/20/07          Madison v. Tahir

Appellate Division, Second Department

Too Little, Too Late: Court Denies Plaintiff’s Motion for Leave to Reargue for Failure

To Show New Facts & Reasonable Justification for Delay

“Don’t wait” is the message the Appellate Division sent this plaintiff in affirming a lower court order which had denied her motion for leave to renew her opposition to the defendants’ prior motion for summary judgment. (Plaintiff’s initial appeal was dismissed for failure to prosecute.) The plaintiff also moved for leave to renew her opposition to the defendants’ motion. When its all said and done, the plaintiff needed to proffer both new facts not presented on the prior motion that would warrant denial of the defendants’ motion for summary judgment, and a reasonable justification for the failure to have presented such facts on the prior motion (see CPLR 2221[e][2], [3]; St. Claire v Gaskin, 295 AD2d 336, 337). The plaintiff has not demonstrated any basis for the exercise of such discretion. Given this limited review, we need not consider the issue raised on the instant appeal, as that issue could have been raised on the appeal from the prior order. In any event, the plaintiff failed to demonstrate a reasonable justification for her failure to have proffered, in opposition to the defendant’s motion, the alleged new facts presented on her motion for leave to renew.
 

11/13/07          Cooper v LI Constr., Inc.
Appellate Division, Second Department

Plaintiff’s Mild Disc Bulge not Enough to Survive Motion for Summary Judgment
An order granting defendants’ summary judgment motion was affirmed by the Appellate Division. The Court held that the lower court properly determined that the defendants made a prima facie showing. In his affirmed medical report, the defendants’ orthopedist found that the plaintiff’s range of motion was normal. Moreover, an MRI report prepared by the plaintiff’s physician, upon which the defendants also relied, indicated that, while there existed a “[m]ild, diffuse disc bulge at C5-C6,” it “does not appear to be impinging on the cord or nerve roots and should not be causing symptoms.” In opposition, the plaintiff failed to raise a triable issue of fact.

 

11/13/07          Patterson v NY Alarm Response Corp.

Appellate Division, Second Department

Plain and Simple: Mere Existence of Herniated Disc is Not Evidence of Serious Injury
Giving the same reasons as it has in many other decisions, the Appellate Division affirmed a lower court’s order granting defendants’ motion for summary judgment as plaintiffs failed to raise a triable issue of fact. The defendants met their prima facie burden of showing that the plaintiff did not sustain a serious injury. In opposition, most of the plaintiff’s submissions, were without probative value since those submissions consisted of either uncertified records or unaffirmed medical reports. The others merely showed the plaintiff had disc herniations at C3-4, C5-6, L5-S1, disc protrusions at L4-5 and C2-3, disc bulges at C6-7 and L3-4, and cervical radiculitis at C5-6. The mere existence of a herniated or bulging disc is not evidence of a serious injury in the absence of objective evidence of the extent of the alleged physical limitations resulting from the disc injury and its duration.

 

 

AUDREY’S ANGLES ON NO-FAULT

Audrey Seeley

[email protected]

 

The reporting of No-Fault arbitration awards is not at the same level of reported case law, meaning there is no one source to turn to for comprehensive research of arbitration awards.  We encourage you to submit to us, in a PDF format, at [email protected], any recent no-fault arbitration awards, especially Master Arbitration awards, that address interesting no-fault issues. 

 

Arbitration

 

11/26/07          In the Matter of the Arbitration Between Applicant and Respondnet

Arbitrator Mary Anne Theiss (Onondaga County)

It Took You Over a Month and a Half to Determine that Your Injury Arose Out of Use and Operation of the Vehicle?  Yeah, Right.

On June 2, 2007, the Applicant, eligible injured person, slipped and fell while loading a snowmobile onto his truck.  The Applicant was pushing a snowblower forward into the truck bed to make room for the snowmobile (now that’s a big truck!) and walked back to the tailgate to exit the truck.  The Applicant testified:

 

As I stepped on to a portion of the tailgate that is closest to the truck, I felt the tailgate slip, and my foot slipped as I stepped on it.  My foot went completely out from under me, causing me to spin and to land on the edge of the tailgate, with my right hand side, while my right hand was extended, in an effort to prevent the upper part of my body from striking the pickup.  As I hit my right side of the tailgate, my hand struck the tailgate, as well, in a twisting fashion, causing my right wrist to break.  I continued to fall, due to the pain incurred, eventually hitting the ground.

 

(Wow, pretty detailed description).  Despite testifying that he fractured his right wrist, the Applicant did not seek medical treatment until a day or two after this incident.

 

The Applicant contended that the reason why he fell was due to the tailgate’s hinge being rusted out and needing to be replaced.  The tailgate dropped down an inch and a half which caused him to fall.  Here is the best part, the Applicant did not determine this until over a month and a half after the incident.

 

The Applicant told the insurer’s adjuster that he fell because he slipped on his own feet.  Then the Applicant amended his no-fault application to rusted out tailgate version.

 

Arbitrator Theiss went through a well reasoned analysis of the Gholson and Walton cases pertaining to use and operation.  As the tests indicate, the vehicle must be the proximate cause of the injury.  Applying that rule to the first story Applicant provided indicates that the injury does not arise out of the use and operation since he slipped on his own feet.  Yet, the second story Applicant provided could provide a basis, IF the Arbitrator found his story credible.  Arbitrator Theiss did not and stated:

 

I find it hard to believe that it took the Claimant a month and a half to figure out that the vehicle was defective, and that was what caused his fall.  One would assume that the tail gate would have been raised after the accident and this would have been discovered immediately. 

 

11/26/07          In the Matter of the Arbitration Between Applicant and Respondnet

Arbitrator Mary Anne Theiss (Onandaga County)

Going Through the Motions for Vocational Rehabilitation While Admittedly Capable of Employment Not Enough.

On September 5, 2004, the Applicant, eligible injured person, was loading and unloading his truck.  Arbitrator Theiss commented that his policy apparently had a provision for coverage for loading and unloading as well as OBEL and APIP.  The insurer had already paid over $74,000.00 in lost wages.

 

The insurer sent the Applicant to vocational rehabilitation.  The Applicant was able to perform light work.  The Applicant admitted that he did everything the rehabilitation specialist requested but he did nothing further to find a job.  He left resumes at employers but did not follow up on any leads.  He was never offered a job and never went on an interview.  Instead, the Applicant contended that he was working with VESID to reopen a business he currently owned which rebuilt small engines.  The Applicant apparently would be provided with the ability to have his business at his home instead of where it currently was – 10 miles from his home.  The Applicant testified that if he could do his job from home he would be able to rest.

 

Arbitrator Theiss held that Applicant did not cooperate with vocational rehabilitation efforts as, in spite of his ability to work, he only went through the motions of finding employment.

 

11/26/07          In the Matter of the Arbitration Between Applicant and Respondnet

Arbitrator Thomas J. McCorry (Erie County)

17 Month Gap in Treatment Insufficient to Invoke One Year Rule.

On February 15, 2005, the Applicant, eligible injured person, was involved in an accident where after she treated until May 19, 2005.  The Applicant had a 17 month gap in treatment and began a course of chiropractic care.

 

The insurer denied the chiropractic care on the basis that there was no record on file indicating treatment would extend beyond one year from the date of loss.

 

Arbitrator McCorry declined to uphold the denial as the early medical records indicate a diagnosis of probable cervical and lumbar spine disc herniation.

 

11/21/07          In the Matter of the Arbitration Between Applicant and Respondnet

Arbitrator Veronica K. O’Connor (Erie County)

Applicant’s Lost Wage Claim Denied – Evidence of Termination Unrelated to Accident.

On September 25, 2006, the Applicant, eligible injured person, was involved in an accident.  She treated at the emergency room and followed up with her primary care physician.  She was referred to other medical specialties for treatment.

 

At the time of the accident, the Applicant was employed by Greater Buffalo Savings Bank, where she had held this position for two years.  On September 29, 2006, Applicant was terminated from her job.

 

In response to an employer verification request, Greater Buffalo Savings Bank advised that the Applicant was terminated due to absenteeism and tardiness before the accident date.

 

The issue in this case was whether the Applicant’s termination was the result of her car accident or for an unrelated reason. 

 

By the way, I represented the insurer in this arbitration.  To lay a bit of background, I called one witness to testify and had a court stenographer on hand.  In a case such as this which is factually driven, I would highly recommend it as it permitted the Arbitrator to sit back and listen to the testimony instead of feverishly taking notes.  Also, it provided a record in the event that the case would be appealed.  My opponent brought three witnesses who were never disclosed and attempted on two occasions to submit documents (at least 20 pages) that were not part of his initial submission.  While the witnesses were permitted to testify the entire documents were not admitted. 

 

The employer provided testimony that the Applicant was terminated due to excessive absenteeism and tardiness.  The employer, prior to this arbitration, issued letter to Applicant’s counsel advising that his client’s termination was due to excessive absenteeism and tardiness before this accident occurred.  In other words, her termination had nothing to do with the September accident.

 

11/20/07          In the Matter of the Arbitration Between Applicant and Respondnet

Arbitrator Veronica K. O’Connor (Erie County)

Insurer Prevails on Late Proof of Claim Defense.

 

The Applicant, eligible injured person, sought reimbursement for excess lost wages as a result of a work related pedestrian accident.  The Applicant was involved in a November 9, 2005, accident.  On November 15, 2005, the insurer mailed the application for no-fault benefits and cover letter.  A second letter and application was mailed on December 21, 2005.  It is noted that the first mailing was not returned to the insurer.  On December 28, 2005, the Applicant faxed the completed application.  On December 29, 2005, the insurer denied the claim based upon failure to provide proof of claim within 30 days from the date of the accident.

 

On February 8, 2006, the insurer issued a second denial on the basis that the Applicant was in the course of his employment at the time of the accident and Workers’ Compensation is primary for coverage.  In May 2006, the Workers’ Compensation Boarded issued an award in Applicant’s favor but he sought payment in excess of the lost wage benefits from the no-fault insurer.

 

Arbitrator O’Connor upheld the insurer’s denial as the Applicant failed to submit proof of claim within 30 days from the date of the accident and failed to present written documentation providing clear and reasonable justification for failing to comply with the time limitation.

 

Litigation

 

THE FOLLOWING IS AN IMPORTANT AND RARE DECISION ON NO-FAULT FROM THE COURT OF APPEALS.  THIS IS A MUST READ!!         

11/20/07          Hospital for Joint Diseases v. Travelers Prop. Cas. Ins. Co.,

New York Court of Appeals

Insurer’s Failure to Request Verification on Assignment of Benefits and Deny Claim Leads to Preclusion of Standing Argument.

The hospital sought to recover medical services it rendered to an eligible injured person arising out of a motor vehicle accident.  The hospital used a third party contract billing agent who send the insurer a UB-92 form, a NF-5 – hospital facility form, and an NF-AOB – assignment of benefits form.  The NF-AOB and the assignment portion of the NF-5 indicated that the eligible injured person’s signature was “on file” with the provider.  Neither form contained an actual signature.

 

The insurer, upon receipt of these verification forms, did not request additional verification seeking the actual signature on file; reject the form as being insufficient due to lack of an actual signature; or issue a denial within 30 days from receipt of the verification forms.

 

When the 30 days lapsed the hospital commenced this action seeking a judgment of $24,344.96 plus interest and attorney’s fees.  The insurer answered the Complaint and alleged as an affirmative defense lack of standing based upon the invalid assignment of benefits.

 

The Court of Appeals affirmed the Appellate Division’s decision that the insurer’s failure to timely request verification on the assignment of benefits the hospital provided precluded the insurer from contesting the assignment’s validity.

 

The Court rejected the insurer’s argument that its failure to timely request the assignment or issue a denial does not preclude what truly is a standing defense.  In essence, the failure to provide a proper assignment goes to the issue of whether there is insurance coverage in the first instance, which cannot be precluded by an untimely denial under Central Gen. Hosp. v. Chubb Group of Ins. Cos., 90 NY2d 195 (1997).  The Court recognized that Chubb carves out exceptions to the preclusion rule but declined to apply Chubb’s exception to this case.  Instead, the Court relied upon Presbyterian Hospital in City of NY v. Maryland Cas. Co., 90 NY2d 274 (1997) and multiple Appellate Division cases which held that an insurer’s failure to seek verification or object to a verification form’s adequacy precludes the insurer from asserting as a defense upon the form’s inadequacy.

 

The Court further reasoned that to come to any other conclusion would frustrate the purpose of the no-fault law which is to provide a “tightly timed process of claim, disputation and payment.”

 

The Court also rejected the insurer’s argument that the hospital must provide an assignment of benefits as part of its prima facie case.  Here, irrespective of the lack of a denial, the insurer can argue that the furnished assignment of benefits is invalid therefore the hospital failed to establish a prima facie case entitlement to the no-fault benefit.  The Court held that even if the insurer’s argument were true, the assignment as it stood would satisfy the hospital’s burden since the insurer failed to verify the validity of the assignment.

 

We usually do not report on dissents, but the dissent here is too important to skip (plus it comes from Judge Pigott, who comes from Buffalo).  Judge Pigott aptly dissents stating that the insurer should not be deprived of the ability to argue lack of standing due to failure to obtain verification within a prescribed time limitation.  Judge Pigott reasoned that:

 

Further, contrary to the majority’s position, in my view, standing cannot be artificially created by a carrier’s failure to object within the time periods set forth in the no-fault insurance regulations.  Put another way, a medical services provider cannot establish standing by merely relying upon a carrier’s pre-litigation inaction.  By allowing a plaintiff to do so, the majority, in essence, creates a rule whereby a plaintiff can establish its standing by estoppel, as a result not only of a defendant’s inaction, but by its simple neglect, oversight or clerical error.

 

Judge Pigott further notes that the Court’s decision encourages the use of the courts instead of arbitration by eliminating an essential element to a lawsuit – standing.

 

11/29/07          New York & Presbyterian Hosp. a/a/o Alanis Omar v.

American Transit Ins. Co., Second Department

Evidence of Violation of 45 Day Rule Permits Insurer to Survive Summary Judgment.

 

The Court reversed the judgment in the plaintiff’s favor and entered a bill of costs in the insurer’s favor.  The plaintiff establish its prima facie case entitlement to summary judgment through admission of the mailing of claim forms to the insurer, which were received by same, and that the payment of the no-fault benefit was overdue.  However, the insurer raised an issue of fact, precluding summary judgment, by demonstrating that the claim forms were untimely submitted in violation of the 45 day rule.

 

11/20/07          Dr. Deepika Bajaj a/a/o Chivan Truong v.

General Assurance, Appellate Term, Second Department

Notice to Admit on Receipt of Claim Form Without Testimony Laying Foundation for Business Record Fatal to Plaintiff

The Appellate Term reversed the judgment against the insurer without costs and directed a judgment in the insurer’s favor dismissing the plaintiff’s complaint.  The plaintiff offered into evidence at trial a notice to admit which was not responded to and rested without calling any witnesses.  The notice to admit attached a copy of the insurer’s denial which acknowledged the insurer’s receipt of the claim form and denied the medical bill based upon a peer review finding lack of medical necessity.  At trial, the court deemed the matters admitted due to the defendant’s failure to respond to the notice to admit.  Also, the court took judicial notice of plaintiff’s responses to defendant’s first set of interrogatories which attached a copy of the claim form and an assignment of benefits.  Accordingly, the trial court held that plaintiff established its prima facie case.  Moreover, since the insurer had no witness the trial court determined that the insurer failed to establish that the treatment was not medically necessary.

 

The Appellate Term provided a reminder as to the purpose of a notice to admit – a party can admit facts or the genuineness of a document and the matters are within that party’s knowledge or can be ascertained by reasonable inquiry.  If a party fails to respond to a notice to admit within 20 days those matters are deemed admitted.  HOWEVER, the matters are still subject to objections to admissibility at the time of trial.  The notice to admit does not relieve a party of establishing its right to relief at the time of trial. 

 

The Court held that even if an insurer admits that it received a claim form or issued a denial of claim form it does not mean that the insurer admits to the facts asserted within the claim forms.  The plaintiff bears the burden of offering evidence in admissible form – i.e., the claim form is a business record exception to the hearsay rule.

 

In this case, the Court held that the plaintiff’s failure to call a witness to lay the proper foundation for the business record exception failed to establish its prima facie case.

 

PEIPER ON PROPERTY

Steven E. Peiper

[email protected]

 

11/27/07          Labate v. Liberty Mutual Ins. Co.

Appellate Division, Second Department

Cracked, Crumbling Foundations are Plainly Excluded from Coverage

Plaintiff/insured commenced the above-captioned lawsuit seeking coverage for damage to the foundation of the insured residence.  Carrier denied the request by relying upon the plain language of the Earth Movement exclusion found within the insured’ s policy.  This exclusion precluded coverage for damages resulting from “settling, shrinking, bulging or expansion, of pavements, patios, walls, floors, roofs or ceilings.”

 

Holding that the policy provisions must be afforded their “plain and ordinary” meaning, the Second Department ruled that plaintiff’s claim was excluded under his policy with defendant/carrier.  In support of this ruling, the Court noted that experts retained by both plaintiff and defendant opined that the damage for which coverage was sought resulted from earth movement/settlement.

 

 

11/23/07          Gallo v. Midstate Mutual Ins. Co.

Appellate Division, Fourth Department

When the Heat is On, Coverage for Burst Pipes is Triggered

Plaintiff/insured commenced this action seeking a declaration that he was entitled to damages caused by a burst water pipe at the insured’s apartment complex.  The policy unambiguously covered damages caused by frozen pipes, provided, of course, that the insured took “reasonable care” to ensure that premises was heated.  Because plaintiff/insured was able to establish that the heat was on and operational in the building at the time the pipe burst, the Fourth Department ruled that the policy had been triggered. In so holding, the Fourth Department noted that an exclusion in the policy which removed coverage for the “Discharge or Overflow of Liquids” did not apply the factual scenario presented in this matter. 

 

11/20/07          Haymon v. Pettit

Court of Appeals

Heads Up? Not Really, as the Court of Appeals Rules that a Stadium Operator has No Duty to Warn of the Dangers in Chasing Foul Balls

Initially, we must advise that the following has nothing to do with insurance coverage.  However, it does concern baseball, and as a result we felt compelled to bring it to your attention.  After all, who doesn’t like a good baseball opinion?

 

Plaintiff commenced the above-captioned lawsuit on behalf of her minor son who was struck while retrieving a foul ball at a community park baseball field. Initially, we note that evidence revealed that the baseball club operating the stadium where the boy was injured had instituted a rule that anyone retrieving a foul ball and returning it back to the box office would be given free tickets to enter the game. The boy was injured as he ran into oncoming traffic in pursuit of said foul ball.  Further, evidence also established that the boy was wearing headphones at the time he was struck, and that he failed to look both ways before entering the street. 

 

The baseball club moved for summary judgment against the plaintiff by arguing that it did not owe a duty.  Plaintiff argued that because the promotion to return foul balls was sanctioned by the baseball club, it created a duty to warn participants from the foreseeable dangers of chasing errant balls into the adjacent street.  

 

In finding for the baseball club, the Court of Appeals noted that the dangers of crossing the street existed independent of the “returned ball for ticket” promotion.  Moreover, the Court also noted that the baseball club had no means of controlling a public street or the citizens who use it. 

 

In addition, even if the baseball club’s encouragement for people to retrieve foul balls created or contributed to a dangerous condition, the Court noted that the baseball team did not have sufficient authority to control the actions of third-parties outside of the stadium.  Accordingly, no duty was found and plaintiff’s claim was dismissed.

 

 

EARL’S PEARLS

Earl K. Cantwell, II

[email protected]

 

On hiatus this week.

ACROSS BORDERS

 

Visit the Hot Cases section of the Federation of Defense & Corporate Counsel website, www.thefederation.org. Dan Kohane serves as the FDCC’s Immediate Past President and Board Chair and past Website Editor

 

11/21/07          Allstate Insurance Company v. Hunter
Texas Court of Appeals, Second District

First-Party Claimants Under Homeowner’s Policy Could Not Utilize Two Different Manifestation Theories to Obtain Coverage for Mold Damage
In the summer of 2002, the Hunters noticed a strange smell in their home. The smell persisted but a December 2002 air sample test obtained by the insured revealed no elevated mold content. On February 4, 2003, a general contractor entered the crawl space and saw water damage and mold. The Hunters had an HO-B homeowner’s insurance policy with Allstate Insurance Company (“Allstate”) that expired on October 6, 2002. They replaced it with an HO-A homeowner’s policy from Allstate effective October 7, 2002. On February 6, 2003, two days after the contractor’s discovery, the Hunters notified Allstate of their claim for mold damage. Allstate hired a plumber who determined there was an ongoing water leak. Since the HO-A policy covered damage arising from only “sudden and accidental” plumbing leaks and the mold in and of itself was not covered, Allstate denied the claim. The Hunters requested that Allstate treat the claim as one under the prior HO-B policy that expired October 6, 2002. Allstate denied that claim reasoning that if the claim occurred under the prior HO-B policy, the Hunters’ February 2003 notice was not timely. The Hunters sued, alleging breach of contract and a jury returned a verdict in their favor. Allstate appealed on the basis that the trial court incorrectly charged the jury on the manifestation trigger of coverage theory applicable to a first-party claim under a homeowner’s insurance policy. Special question number one asked the jury: “Do you find from a preponderance of the evidence that on or before October 6, 2002 there was rot, mold, or other fungi which was capable of being perceived, recognized and understood?” The jury answered “yes.” The court held that, pursuant to case law, this question should have contained the word “easily” prior to the phrase “capable of being perceived, recognized and understood.” The court also held that the Hunters could not utilize two different manifestation theories or dates, one to trigger coverage under the HO-B policy (when the mold was capable of perception) and one to determine when the Hunters’ duty to give notice arose (when they actually learned of the mold). The court found there was no evidence that the mold damage was easily perceived, recognized and understood prior to October 6, 2002. It found that, even if damage manifested on the date the Hunters’ smelled the odor, then that date also triggered the duty to notify Allstate of a claim. If so, the Hunters’ February 2003 notice was not timely. Therefore, since the court determined no evidence existed of property damage manifestation during the HO-B policy period, it rendered judgment that the Hunters take nothing.

Submitted by: Bruce D. Celebrezze and Andrew J. King (Sedgwick, Detert, Moran & Arnold LLP)

11/21/07          Bjork v. State Farm Fire and Casualty Company
California Court of Appeal, Fourth District

Summary Judgment in Insurer’s Favor Affirmed Where Resident Relative Exclusion in Homeowner’s Insurance Policies Excluded Coverage for Mother’s Negligence in Failing to Prevent Sexual Molestation
Darcie Bjork (“Bjork”) sued State Farm Fire and Casualty Company (“State Farm”) to recover under the terms of homeowner’s insurance policies issued to her mother, Carol Ferguson (“Carol”), against whom Bjork obtained a stipulated judgment of $4.5 million for negligence in failing to prevent sexual molestation by Bjork’s father, Melvin Ferguson (“Melvin”). State Farm issued a series of homeowner’s insurance policies to Melvin and Carol from 1987 to 2000 for successive homes in California. Bjork was born in 1977 and resided with Carol and Melvin until 1997 and alleged that she was sexually molested by Melvin from the age of two until 1994. After Bjork filed the underlying lawsuit, Carol requested that State Farm provide her with a defense and indemnify her from liability pursuant to personal liability coverage in the homeowner’s policies. State Farm denied coverage based on a resident relative exclusion in the applicable policies. The exclusion stated that personal liability coverage did not apply to “bodily injury to you or any insured within the meaning of part a. or b. of the definition of insured.” “Insured” was defined as “you and, if residents of your household: a. your relatives; and b. any other person under the age of 21 who is in the care of a person described above.” In the stipulated judgment, Carol assigned to Bjork any claims against State Farm for failing to provide indemnity. The trial court ruled that the resident relative exclusion applied and entered judgment in favor of State Farm. The California Court of Appeal affirmed the summary judgment, finding that, because Bjork was a resident of her mother Carol’s home at the time she was injured by the alleged molestation, the resident relative exclusion barred coverage for Carol’s personal liability. The court rejected all of Bjork’s arguments for the inapplicability of the exclusion. First, the court held that the plain language of the policies did not limit the exclusion to instances in which collusion between family members is present. Second, it found that because the resident relative exclusion applied, it was irrelevant that the policies lacked an express exclusion for sexual molestation. Third, the court ruled there was no public policy against the application of the exclusion in this case. Fourth, it rejected Bjork’s severability argument because, when the exclusion was viewed only from Carol’s standpoint, Bjork satisfied the definition of an insured under the policy. Finally, the court concluded there was no coverage under the post-1997 policies because Carol’s liability to Bjork was not based on any bodily injury to Bjork in the post-1997 period resulting from failure to stop the molestation. In addition, Bjork had not identified any such continuous injury in that period attributable to the molestation.

Submitted by: Bruce D. Celebrezze and Andrew J. King (Sedgwick, Detert, Moran & Arnold LLP)

 

 

Reported Decisions

 

Quincy Mutual Fire Insurance Company v. Uribe

Harvey Gladstein & Partners, LLC, New York, N.Y. (Jan B.
Rothman of counsel), for appellant.
Edward H. Rosenthal, Kew Gardens, N.Y. (Everett N. Nimetz
of counsel), for respondent Dorothy
Augustine.


DECISION & ORDER

In an action for a judgment declaring that the plaintiff was not obligated to defend and indemnify its insureds, Luis Alberto Uribe and Alan Uribe, in an action entitled Augustine v Uribe, pending in the Supreme Court, Queens County, under Index No. 14708/05, the plaintiff appeals from so much of an order and judgment (one paper) of the Supreme Court, Queens County (Nelson, J.), dated May 4, 2007, as denied its motion for summary judgment, granted the cross motion of the defendant Dorothy Augustine for summary judgment, and declared that the plaintiff was obligated to defend and indemnify its insureds in the underlying action.

ORDERED that the order and judgment is affirmed insofar as appealed from, with costs.

Insurance Law § 3420(d) requires an insurance carrier to give its insured and the injured party written notice of a disclaimer of coverage as soon as is reasonably possible. "An insurer's failure to provide notice as soon as is reasonably possible precludes effective disclaimer, even [where] the policy holder's own notice of the incident to its insurer is untimely' (First Fin. Ins. Co. v Jetco Contr. Corp., 1 NY3d 64, 67[2003])" (Matter of New York Cent. Mut. Fire Ins. Co. v Aguirre, 7 NY3d 772,774). Where there is a delay in providing the written notice of disclaimer, the burden rests on the insurance company to explain the delay (see First Fin. Ins. Co. v Jetco Contr. Corp. 1 NY3d 64; Matter of Allstate Ins. Co. v Cruz, 30 AD3d 511; Pennsylvania Lumbermans Mut. Ins. Co. v D & Sons Constr. Corp., 18 AD3d 843). When the explanation offered for the delay is an assertion that there was a need to investigate issues that will affect the decision on whether to disclaim, the burden is on the insurance company to establish that the delay was reasonably related to the completion of a necessary, thorough, and diligent investigation (see Schulman v Indian Harbor Ins. Co., 40 AD3d 957).

Here, the defendant Dorothy Augustine established her prima facie entitlement to judgment as a matter of law, and the plaintiff failed to raise a triable issue of fact. The plaintiff failed to submit evidence demonstrating that an investigation was necessary and that it diligently pursued and completed any investigation that was undertaken. The deposition testimony of its assistant manager of litigation established only that the assistant manager noted the late notice issue as soon as she reviewed the notice of claim on August 26, 2005, that she directed an investigator to obtain a signed nonwaiver agreement from the insured, and after the nonwaiver agreement was obtained on September 13, 2005, she retained counsel who commenced the declaratory judgment action. Without an affidavit of the assistant manager, an affidavit from the investigator, a copy of any investigative report, or a copy of a statement obtained from its insured, the plaintiff failed to support its claimed explanation with proof the investigation was necessary and diligently performed (see Matter of Temple Constr. Corp. v Sirius Am. Ins. Co., 40 AD3d 1109; see also Allstate Ins. Co. v Swinton, 27 AD3d 462; Republic Franklin Ins. Co. v Pistilli, 16 AD3d 477).

Sumba v. Clermont Park Associates, LLC

 

Newman Fitch Altheim Myers, P.C., New York, N.Y. (Stephen N.
Shapiro and Adrienne Scholz of counsel), for defendant third-party
plaintiff-appellant.
Melito & Adolfsen, P.C., New York, N.Y. (Robert Ely and
Ignatius John Melito of counsel), for
third-party defendant-respondent.


DECISION & ORDER

In an action, inter alia, to recover damages for personal injuries, the defendant third-party plaintiff appeals, as limited by its brief, from so much of an order of the Supreme Court, Kings County (Schmidt, J.), dated July 18, 2006, as granted that branch of the third-party defendant's motion which was for summary judgment dismissing the cause of action in the third-party complaint for contractual indemnification, and denied those branches of its cross motion which were for summary judgment against the third-party defendant on that cause of action and on its cause of action to recover damages for breach of contract except as to its claim for out-of-pocket expenses incurred as a result of the third-party defendant's failure to procure insurance.

ORDERED that the order is affirmed insofar as appealed from, with costs.

The plaintiff, an employee of M.R.I. Developers Corp. (hereinafter M.R.I.), was injured while performing sheetrocking work at premises owned by the defendant third-party plaintiff, Clermont Park Associates, LLC (hereinafter Associates), and leased to the third-party defendant, Clermont Park Residence, LLC (hereinafter Residence). Associates retained M.R.I. to perform the work in order to construct a workspace for Residence. The plaintiff commenced this action against Associates, which thereafter commenced a third-party action against Residence, seeking, inter alia, contractual indemnification for any liability which Associates incurred in connection with the plaintiff's causes of action based upon a provision in the lease.

The Supreme Court, inter alia, granted Residence's motion for summary judgment dismissing Associates' cause of action for contractual indemnification, and denied that branch of Associates' motion which was for summary judgment on its cause of action to recover damages for breach of contract except as to its claim for out-of-pocket expenses incurred as a result of Residence's failure to procure the required amount of insurance. On appeal, Associates contends that the Supreme Court erred in finding that the indemnification clause in the lease was not applicable to a claim asserted by an employee of the contractor, and by limiting its damages on the breach of contract cause of action to out-of-pocket expenses.

"When a party is under no legal duty to indemnify . . . [t]he promise should not be found unless it can be clearly implied from the language and purpose of the entire agreement and the surrounding facts and circumstances" (Hooper Associates, Ltd. v AGS Computers, Inc., 74 NY2d 487, 491-492). "[A] contract assuming that obligation must be strictly construed to avoid reading into it a duty which the parties did not intend to be assumed" (id. at 491). The indemnification clause at issue did not specifically include the claims of M.R.I.'s employees. Since it cannot be said that indemnification for claims by employees of M.R.I. was "the unmistakable intent of the parties" (Solomon v City of New York, 111 AD2d 383, 388), Residence is not required to indemnify Associates under the circumstances herein (see Vigliarolo v Sea Crest Constr. Corp., 16 AD3d 409).

Accordingly, the Supreme Court properly denied that branch of Associates' motion which was for summary judgment on its cause of action for contractual indemnification against Residence and properly granted that branch of Residence's cross motion which was for summary judgment dismissing that cause of action.

Associates' remaining contention is without merit.

Mavroudes v. Cronin & Byczek, LLP

Cronin & Byczek, LLP, Lake Success, N.Y. (Howard Greenwald of counsel), appellant pro se.
Chiariello & Chiariello, Forest Hills, N.Y. (Gerald Chiariello II of counsel), for respondents.


DECISION & ORDER

In an action to recover damages for legal malpractice, the defendant appeals from an order of the Supreme Court, Queens County (O'Donoghue, J.), dated November 20, 2006, which denied its motion for summary judgment dismissing the complaint.

ORDERED that the order is affirmed, with costs.

Ioanis Mavroudes (hereinafter the injured plaintiff) was injured in a collision on the Brooklyn-Queens Expressway on February 22, 2000. Thereafter, the defendant law firm, Cronin & Byczek, LLP, represented the injured plaintiff and his wife, suing derivatively, in an action against the tortfeasors. In that action, which was commenced more than a year after the accident, the plaintiffs were required to establish that the injured plaintiff sustained a "serious injury" as defined by Insurance Law § 5102(d). An attorney from the defendant law firm verified the complaint. In 2002, approximately one year after the action was commenced, the tortfeasors' insurance carrier settled the action for the limits of their policy. The defendant failed to notify the plaintiffs' insurance carrier, Nationwide Insurance Company (hereinafter Nationwide), of the settlement and obtain its consent to the settlement, as required under the supplemental underinsured motorist (hereinafter SUM) endorsement to the plaintiffs' policy. After the settlement, the plaintiffs sought benefits under that endorsement, but Nationwide disclaimed coverage because it had not been notified of the settlement and it had not consented to it. After Nationwide successfully sought a permanent stay of arbitration based on the lack of notice or consent, the plaintiffs commenced this action against the defendant to recover damages for legal malpractice. The defendant sought summary judgment dismissing the complaint on the ground that the injured plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d), and thus, he could not have obtained SUM benefits under his endorsement, which required proof of a serious injury. The Supreme Court denied the defendant's motion. We affirm.

To prevail on a claim alleging legal malpractice, a plaintiff must establish that the attorney "failed to exercise that degree of care, skill, and diligence commonly possessed and exercised by an ordinary member of the legal community, and that the attorney's breach of this duty proximately caused the plaintiff to sustain actual and ascertainable damages" (Lamanna v Pearson & Shapiro, 43 AD3d 1111, 1112; see Rudolf v Shayne, Dachs, Stanisci, Corker & Sauer, 8 NY3d 438, 442). The defendant's motion for summary judgment was based on its contention that, because the injured plaintiff did not sustain a serious injury under Insurance Law § 5102(d), he could not have recovered under his SUM endorsement. Consequently, the defendant argues that its admitted failure to notify Nationwide of the settlement against the tortfeasors and obtain its consent did not proximately cause the plaintiffs to suffer any damages, namely, lost benefits under that endorsement.

The defendant failed to establish, prima facie, that the injured plaintiff did not sustain a serious injury as a result of the accident and, consequently, its motion for summary judgment was properly denied (see Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853; Bentivegna v Stein, 42 AD3d 555; Perrotta v Bambury, 41 AD3d 572, 572 573; Mariaca-Olmos v Mizrhy, 226 AD2d 437, 438; cf. Raffellini v State Farm Mut. Auto. Ins. Co.,NY3d, 2007 NY Slip Op 08777 [2007]). We note that the reports upon which the defendant relied to establish the injured plaintiff's lack of a serious injury predated by a year the defendant's commencement of the action on the plaintiffs' behalf against the tortfeasors, which action was predicated on the existence of a serious injury. Such reports predated the defendant's settlement of the action against the tortfeasors for the tortfeasors' policy limits by a period of two years (see 22 NYCRR §§ 130-1.1[c]; 130-1.1a[b]).

Since the defendant failed to establish its prima facie entitlement to judgment as a matter of law, denial of the motion was required without regard to the sufficiency of the papers submitted in opposition (see Alvarez v Prospect Hosp., 68 NY2d 320, 324; Winegrad v New York Univ. Med. Ctr., 64 NY2d at 853; Perrotta v Bambury, 41 AD3d 572, 572 573; Hanna v Alverado, 16 AD3d 624; Mariaca-Olmos v Mizrhy, 226 AD2d at 438).

The defendant's remaining contention was raised for the first time in its reply brief on appeal and therefore we do not consider it (see Katchalova v Perchikov, 43 AD3d 873, 875; Huron St. Realty Corp. v Lorenzo, 19 AD3d 450, 452).
CRANE, J.P., GOLDSTEIN, FLORIO and DILLON, JJ., concur.

McNally v. Beva Cab Corp.

Baker, McEvoy, Morrissey & Moskovits, P.C., New York, N.Y.
(Stacey R. Seldin of counsel), for respondents.

DECISION & ORDER

In an action to recover damages for personal injuries, the plaintiff appeals from an order of the Supreme Court, Kings County (Schmidt, J.), dated September 14, 2006, which granted the defendants' motion for summary judgment dismissing the complaint on the ground that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d).

ORDERED that the order is reversed on the law, with costs, and the defendants' motion for summary judgment dismissing the complaint is denied.

The defendants failed to establish good cause for the delay in making their motion for summary judgment (see CPLR 2004; Miceli v State Farm Mut. Auto. Ins. Co., 3 NY3d 725, 726; Brill v City of New York, 2 NY3d 648, 652; Kunz v Gleeson, 9 AD3d 480). Rule 13 of the Civil Trial Rules of the Supreme Court, Kings County, requires that motions for summary judgment be made within 60 days of the filing of the note of issue. While the defendants explained that their post-note-of-issue delay was due to the plaintiff's failure to supply authorizations and submit to a medical examination by a defense-designated doctor, they failed to account for the 79 days between the date of the defense medical report and the date of the motion. If we deem the date of that report to be the functional equivalent of the note-of-issue date, the defendants exceeded by almost three weeks the 60 days allotted for moving for summary judgment. Without an explanation for this delay, the record is bereft of a basis for finding good cause.

Accordingly, the Supreme Court erred in reaching the merits of the motion (see Brill v City of New York, 2 NY3d at 650; First Union Auto Fin., Inc. v Donat, 16 AD3d 372, 373).
CRANE, J.P., RITTER, FISHER, COVELLO and DICKERSON, JJ., concur.

Page v. Belmonte

Thomas J. Bailey & Associates, P.C., Westbury, N.Y. (Nancy Pavlovic of counsel),                        for appellant.
Wollerstein & Futoran (Sweetbaum & Sweetbaum, Lake Success, N.Y.                                                    [Marshall D. Sweetbaum] of counsel), for respondents.


DECISION & ORDER

In an action to recover damages for personal injuries, the plaintiff appeals from an order of the Supreme Court, Suffolk County (Doyle, J.), dated May 16, 2006, which granted the motion of the defendant Robert Perry for summary judgment dismissing the complaint insofar as asserted against him on the ground that she did not sustain a serious injury within the meaning of Insurance Law § 5102(d), and upon, in effect, searching the record, granted summary judgment dismissing the complaint insofar as asserted against the defendant Heather Belmonte on that ground.

ORDERED that the order is reversed, on the law, with costs, and the motion for summary judgment dismissing the complaint insofar as asserted against the defendant Robert Perry is denied, and so much of the order as upon, in effect, searching the record, granted summary judgment dismissing the complaint insofar as asserted against the defendant Heather Belmonte is vacated.

The plaintiff allegedly sustained injuries to her cervical and lumbar spines and both knees when, as a pedestrian, she was struck by a motor vehicle owned by the defendant Robert Perry and operated by the defendant Heather Belmonte. After the plaintiff commenced this action to recover damages for the personal injuries she allegedly sustained in the accident, Perry moved for summary judgment dismissing the complaint insofar as asserted against him on the ground that the plaintiff failed to satisfy the serious injury threshold set forth in Insurance Law § 5102(d).

Perry failed to establish, prima facie, that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident (see Gaddy v Eyler, 79 NY2d 955, 956-957; Tchjevskaia v Chase, 15 AD3d 389). In his affirmed medical report following thoracic and lumbar range of motion testing, Perry's examining orthopedic surgeon merely stated that forward bending was carried out to 80°;, right to left lateral bending was "symmetrical at 20 degrees" and "[t]hese ranges of motion are considered excellent for a patient of the same age and body habitus." Nowhere were these findings compared against what is normal range of motion (see Spektor v Dichy, 34 AD3d 557, 558). The physician's failure to set forth such a comparison requires denial of the motion (id.). Since Perry failed to satisfy his initial burden on his motion, it is not necessary to consider whether the plaintiff's papers in opposition were sufficient to raise a triable issue of fact (see Tchjevskaia v Chase, 15 AD3d 389).
SPOLZINO, J.P., SANTUCCI, SKELOS and DICKERSON, JJ., concur.

McComb v. Bender

Richard P. Lau, Jericho, N.Y. (Linda Meisler of counsel), for appellants.
Levine & Grossman, Mineola, N.Y. (Michael B. Grossman of counsel), for respondents.

DECISION & ORDER

In an action to recover damages for personal injuries, etc., the defendants appeal from an order of the Supreme Court, Nassau County (Cozzens, J.), entered October 11, 2006, which denied their motion for summary judgment dismissing the complaint on the ground that the plaintiff Joan McComb did not sustain a serious injury within the meaning of Insurance Law § 5102(d).

ORDERED that the order is reversed, on the law, with costs, and the defendants' motion for summary judgment dismissing the complaint is granted.

Although the Supreme Court correctly concluded that the defendants met their prima facie burden by showing that the plaintiff Joan McComb (hereinafter the injured plaintiff) did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident (see Toure v Avis Rent A Car Sys., 98 NY2d 345; Gaddy v Eyler, 79 NY2d 955, 956-957; see also Meyers v Bobower Yeshiva Bnei Zion, 20 AD3d 456), the court incorrectly concluded that the plaintiffs, in opposition, raised a triable issue of fact. The plaintiffs relied principally on the affirmed medical reports of the injured plaintiff's treating neurologist. A review of those reports fails to indicate that they were based on a recent examination of the injured plaintiff (see Mejia v DeRose, 35 AD3d 407; Laruffa v Yui Ming Lau, 32 AD3d 996; Elgendy v Nieradko, 307 AD2d 251). Furthermore, the plaintiffs failed to proffer any competent medical evidence that the injured plaintiff sustained a medically-determined injury of a nonpermanent nature which prevented her, for 90 of the 180 days following the subject accident, from performing her usual and customary activities (see Sainte-Aime v Ho, 274 AD2d 569, 570).

Accordingly, the defendants' motion for summary judgment dismissing the complaint should have been granted.
RIVERA, J.P., KRAUSMAN, FLORIO, CARNI and BALKIN, JJ., concur.

 

Anania v. Verdgeline
 

FINKELSTEIN & PARTNERS, LLP, NEWBURGH (KRISTINE M. CAHILL OF COUNSEL), FOR PLAINTIFF-APPELLANT.
SUGARMAN LAW FIRM, LLP, SYRACUSE (REBECCA A. CRANCE OF COUNSEL), FOR DEFENDANT-RESPONDENT.

Appeal from an order of the Supreme Court, Oneida County (Norman I. Siegel, A.J.), entered May 24, 2006 in a personal injury action. The order granted defendant's motion for summary judgment dismissing the complaint.

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

Memorandum: Plaintiff commenced this action seeking damages for injuries he sustained when the vehicle he was driving was rear-ended by a vehicle driven by defendant. Supreme Court properly granted defendant's motion for summary judgment dismissing the complaint on the ground that plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102 (d). Defendant met his initial burden by submitting numerous records and reports of plaintiff's treating physicians indicating that plaintiff's alleged injuries were related to injuries suffered in two workplace accidents, one that occurred before and one that occurred after the accident at issue herein. "Because defendant submitted persuasive evidence that plaintiff's alleged pain and injuries were related to a preexisting condition [and an intervening medical problem], plaintiff had the burden to come forward with evidence addressing defendant's claimed lack of causation' " (Clark v Perry, 21 AD3d 1373, 1374, quoting Carrasco v Mendez, 4 NY3d 566, 580; see also McCarthy v Bellamy, 39 AD3d 1166), and plaintiff failed to meet that burden. Plaintiff's submissions in opposition to the motion did not "adequately address how plaintiff's current medical problems, in light of [plaintiff's] past medical history, are causally related to the subject accident" (Style v Joseph, 32 AD3d 212, 214). Although plaintiff's orthopedic surgeon stated that plaintiff's right carpal tunnel syndrome and resulting surgery approximately four years after the accident at issue herein were causally related to the accident, that surgeon's opinion was not supported by the requisite " competent medical evidence based upon objective medical findings and diagnostic tests' " (Yoonessi v Givens, 39 AD3d 1164, 1165).

 

Madison v. Tahir

Winkler, Kurtz, Winkler & Kuhn, LLP, Port Jefferson Station, N.Y.
(Richard D. Winkler of counsel), for appellant.
Zaklukiewicz, Puzo & Morrissey, LLP, Islip Terrace, N.Y.
(Candace M. Batrone of counsel), for respondents.

DECISION & ORDER

In an action to recover damages for personal injuries, the plaintiff appeals from an order of the Supreme Court, Suffolk County (Baisley, J.), dated June 28, 2006, which denied her motion for leave to renew her opposition to the defendants' prior motion for summary judgment dismissing the complaint on the ground that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d), which had been granted in an order dated December 16, 2005.

ORDERED that the order is affirmed, with costs.

In an order dated December 16, 2005, the Supreme Court granted the defendants' motion for summary judgment dismissing the complaint on the ground that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d). The plaintiff appealed from that order. That appeal, however, was dismissed for failure to prosecute by decision and order on motion of this Court dated September 11, 2006.

The plaintiff also moved for leave to renew her opposition to the defendants' motion. The Supreme Court denied her motion, and we affirm.

In support of her motion for leave to renew, the plaintiff needed to proffer both new facts not presented on the prior motion that would warrant denial of the defendants' motion for summary judgment dismissing the complaint, and a reasonable justification for the failure to have presented such facts on the prior motion (see CPLR 2221[e][2], [3]; St. Claire v Gaskin, 295 AD2d 336, 337). In addition, review in this Court is further limited by the dismissal of the plaintiff's appeal from the order dated December 16, 2005.

As a general rule, we do not consider an issue on a subsequent appeal which was raised or could have been raised in an earlier appeal which was dismissed for lack of prosecution, although we have inherent jurisdiction to do so (see Rubeo v National Grange Mut. Ins. Co., 93 NY2d 750; Bray v Cox, 38 NY2d 350; St. Claire v Gaskin, 295 AD2d 336, 337).

The plaintiff has not demonstrated any basis for the exercise of such discretion. Given this limited review, we need not consider the issue raised on the instant appeal, as that issue could have been raised on the appeal from the order dated December 16, 2005 (see Gihon, LLC v 501 Second St., LLC, 29 AD3d 630; Hepner v New York City Tr. Auth., 27 AD3d 418, 419). In any event, the plaintiff failed to demonstrate a reasonable justification for her failure to have proffered, in opposition to the defendant's motion for summary judgment dismissing the complaint, the alleged new facts presented on her motion for leave to renew.
MILLER, J.P., RITTER, GOLDSTEIN and DICKERSON, JJ., concur.

Cooper v. LI Constr., Inc.

Andrew Molbert, New York, N.Y., for appellant.
Richard T. Lau, Jericho, N.Y. (Kathleen E. Fioretti of counsel),
for respondents LI Construction, Inc., and Hernan E. Zelaya.
Lewis Johs Avallone Aviles, LLP, Melville, N.Y. (Mara E. Cella and Michael G. Kruzynski of
counsel), for respondent Bruce I. Vanacour.


DECISION & ORDER

In an action to recover damages for personal injuries, the plaintiff appeals from an order of the Supreme Court, Nassau County (Martin, J.), dated March 13, 2006, which granted the respective motions of the defendants L I Construction, Inc., and Hernan E. Zelaya, and the defendant Bruce I. Vanacour for summary judgment dismissing the complaint insofar as asserted against them on the ground that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d).

ORDERED that the order is affirmed, with one bill of costs to the defendants appearing separately and filing separate briefs.

The Supreme Court properly determined that the defendants made a prima facie showing that the plaintiff did not sustain either a serious injury within the meaning of Insurance Law § 5102 (d) as a result of the subject motor vehicle accident or the exacerbation of a preexisting injury (see Toure v Avis Rent A Car Sys., 98 NY2d 345, 350; Gaddy v Eyler, 79 NY2d 955, 956-957; Kearse v New York City Tr. Auth., 16 AD3d 45, 46). In his affirmed medical report, the orthopedist retained by the defendants LI Construction, Inc., and Hernan E. Zelaya found that the plaintiff's range of motion was normal in his cervical and lumbosacral spines, as well as in his left knee, right shoulder, and right wrist. Moreover, an MRI report prepared by the plaintiff's own physician, upon which the defendants also relied in support of their motion, indicated that, while there existed a "[m]ild, diffuse disc bulge at C5-C6," it "does not appear to be impinging on the cord or nerve roots and should not be causing symptoms." In opposition, the medical evidence submitted by the plaintiff failed to raise a triable issue of fact (see Parente v Kang, 37 AD3d 687).

Accordingly, the defendants' motions for summary judgment were properly granted.
SPOLZINO, J.P., KRAUSMAN, CARNI and DICKERSON, JJ., concur.

Patterson v. NY Alarm Response Corp.

Kahn Gordon Timko & Rodriques, P.C., New York, N.Y. (Subrata Sengupta of counsel),                 for appellant.
Cheven, Keely & Hatzis, New York, N.Y. (Mayu Miyashita of counsel), for respondents.

DECISION & ORDER

In an action to recover damages for personal injuries, the plaintiff appeals, as limited by her brief, from so much of an order of the Supreme Court, Queens County (Price, J.), dated June 14, 2006, as granted that branch of the defendants' motion which was for summary judgment dismissing the complaint on the ground that she did not sustain a serious injury within the meaning of Insurance Law § 5102(d).

ORDERED that the order is affirmed insofar as appealed from, with costs.

The defendants met their prima facie burden of showing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident (see Toure v Avis Rent A Car Sys., 98 NY2d 345; Gaddy v Eyler, 79 NY2d 955; see also Meyers v Bobower Yeshiva Bnei Zion, 20 AD3d 456).

In opposition, the plaintiff failed to raise a triable issue of fact. Initially, all of the plaintiff's submissions, with the exception of the Riverside Health System records, the plaintiff's magnetic resonance imaging (hereinafter MRI) reports, and the medical report of Dr. Alice Chen dated April 16, 2003, were without probative value since those submissions consisted of either uncertified records or unaffirmed medical reports (see Rodriguez v Cesar, 40 AD3d 731; Meija v DeRose, 35 AD3d 407).

The plaintiff's MRI reports, and Dr. Chen's report of April 16, 2003, merely showed that as of those dates, the plaintiff had disc herniations at C3-4, C5-6, L5-S1, disc protrusions at L4-5 and C2-3, disc bulges at C6-7 and L3-4, and cervical radiculitis at C5-6. The mere existence of a herniated or bulging disc, and even radiculopathy, is not evidence of a serious injury in the absence of objective evidence of the extent of the alleged physical limitations resulting from the disc injury and its duration (see Mejia v DeRose, 35 AD3d 407; Yakubov v CG Trans. Corp., 30 AD3d 509; Cerisier v Thibiu, 29 AD3d 507; Bravo v Rehman, 28 AD3d 694; Kearse v New York City Tr. Auth., 16 AD3d 45; Diaz v Turner, 306 AD2d 241; see also Furrs v Griffith, 43 AD3d 389).
SCHMIDT, J.P., SPOLZINO, SKELOS, LIFSON and McCARTHY, JJ., concur.

Stiver v. Good & Fair Carting & Moving, Inc.

Edward C. Cosgrove, for appellants.
Erin Mead, for respondent.
Defense Association of New York, Inc., amicus curiae.

READ, J.:

In the dusk of the evening of August 8, 2001, plaintiff Gregory G. Stiver was driving his automobile in the eastbound center lane of a divided highway in Tonawanda. The weather was fine; traffic was moderately heavy. Without warning, the vehicle immediately ahead of him shifted abruptly into the righthand lane. When plaintiff "looked to see what [this driver] was swerving to miss and started to apply the brakes," he saw a car stopped in the center lane, dead ahead of him. Unable to slow down or pull over into another lane in time to avoid a collision, plaintiff rear-ended the disabled car, which was owned and driven by Stephen Corbett. Plaintiff was wearing a seat belt and his automobile's airbag deployed upon impact. Nonetheless, his head struck the steering wheel with sufficient force to impair his right eye permanently.

On June 27, 2002, plaintiff, with his wife suing derivatively, commenced a lawsuit against Corbett for damages caused by the automobile accident, alleging that he had suffered a serious injury within the meaning of the No-Fault Law (see Insurance Law § 5102[d]). During the course of discovery, Corbett testified at an examination before trial that, just before his car slid to a standstill, he heard a rumbling noise and experienced difficulty steering; he observed pieces of the vehicle's transmission rolling down the road. When he inspected his car just after the accident, he saw that the front right wheel was "sideways with the inside of it facing forward," and a half shaft, the driveshaft linking this wheel to the transmission, was disconnected and dangling from the vehicle's undercarriage.

Plaintiffs subsequently learned that on June 13, 2001, about two months before the accident, a mechanic employed by defendant Good & Fair Carting & Moving, Inc., had performed the required annual New York State motor vehicle inspection of Corbett's car, and had issued the certificate denoting that the car was in proper and safe working condition. On June 10, 2004, plaintiffs commenced this action against Good & Fair, alleging that the collision was caused by its negligent inspection of the Corbett vehicle.

On August 2, 2005, Good & Fair moved for summary judgment to dismiss the complaint on the ground that it owed no contractual or common law duty to plaintiffs or, alternatively, breached no such duty. Plaintiffs opposed the motion. While acknowledging that Good & Fair would ordinarily owe no duty to third parties lacking contractual privity with Corbett, they claimed that this case was an exception to the general rule because Good & Fair launched an instrument of harm, and they detrimentally and reasonably relied on Good & Fair's inspection.

On November 10, 2005, Supreme Court denied Good & Fair's motion, citing the Appellate Division's decision in Wood v Neff (250 AD2d 225 [3rd Dept 1998]) as controlling authority for the proposition that "an inspector's duties under the Vehicle and Traffic Law . . . extend to third parties as it is reasonably foreseeable that someone, other than [the] owner, may be injured in an accident because of a defect in a motor vehicle." Importantly, however, Wood was handed down before our decisions in Espinal v Melville Snow Contrs. (98 NY2d 136 [2002]) and Church v Callanan Indus. (99 NY2d 104 [2002]). Nonetheless, the trial court opined that it "ha[d] no alternative but to apply [Wood] . . . and conclude that there is a duty under the law, the breach of which may be the basis for a finding of negligence against" Good & Fair.

On September 22, 2006, the Appellate Division unanimously reversed Supreme Court's order on the law, granted the motion for summary judgment and dismissed the complaint. ]Citing several of our cases, most notably Espinal and Church, the court found no basis for deviating from the general rule that "recovery for negligent performance of a contractual duty is limited to an action for breach of contract, and a party to a contract is not liable in tort to noncontracting third parties" (Stiver v Good & Fair Carting & Moving, Inc., 32 AD3d 1209, 1210 [4th Dept 2006]). We granted plaintiffs' motion for leave to appeal, and now affirm.

"[A] contractual obligation, standing alone, will generally not give rise to tort liability in favor of a third party" (Espinal, 98 NY2d at 138; see also Church, 99 NY2d at 111 ["(O)rdinarily, breach of a contractual obligation will not be sufficient in and of itself to impose tort liability to noncontracting third parties upon the promisor"]). We have identified only three exceptions to this general rule, which we summarized in Espinal. These are
"(1) where the contracting party, in failing to exercise reasonable care in the performance of his duties, 'launches a force or instrument of harm' [quoting Moch Co., Inc. v Rensselaer Water Co., 247 NY 160, 168 (1928)]; (2) where the plaintiff detrimentally relies on the continued performance of the contracting party's duties [citing Eaves Brooks Costume Co. v Y.B.H. Realty Corp., 76 NY2d 220, 226 (1990)] and (3) where the contracting party has entirely displaced the other party's duty to maintain the premises safely [citing Palka v Servicemaster Mgt. Servs. Corp., 83 NY2d 579, 589 (1994)]"  (Espinal, 98 NY2d at 140; see also Church, 99 NY2d at 112-113). Good & Fair's allegedly negligent inspection does not match any of these exceptions.

First, Good & Fair cannot be said to have launched an instrument of harm since there is no reason to believe that the inspection made Corbett's vehicle less safe than it was beforehand (see Church, 99 NY2d at 112). Inspecting the car did not create or exacerbate a dangerous condition (see Espinal, 98 NY2d at 142-143). Second, there was no detrimental reliance. The plaintiff driver did not know whether or when the Corbett vehicle had been inspected. He had never seen the vehicle before the accident, and had no relationship to its owner. Moreover, as Good & Fair observes, there are vehicles on the road, including many vehicles registered in other states, which have not passed a New York State motor vehicle safety inspection. As for the third exception, we cannot reach it in this case. The Appellate Division correctly determined that it was unpreserved for review.

Finally, as a matter of public policy, we are unwilling to force inspection stations to insure against risks "the amount of which they may not know and cannot control, and as to which contractual limitations of liability [might] be ineffective" (Eaves Brooks, 76 NY2d at 227). If New York State motor vehicle inspection stations become subject to liability for failure to detect safety-related problems in inspected cars, they would be turned into insurers. This transformation would increase their liability insurance premiums, and the modest cost of a State-mandated safety and emission inspection ($12 at the time of the inspection in this case) would inevitably increase.

St. Nicholas Cathedral v. Travelers Property Casualty Insurance Company

Harvey Gladstein & Partners, LLC, New York (Ronald Yang
of counsel), for appellant.
Putney, Twombly, Hall & Hirson LLP, New York (James M.
Strauss of counsel), for respondent.

Order, Supreme Court, New York County (Herman Cahn, J.), entered June 26, 2006, which granted the motion of defendant Travelers Property Casualty Insurance Company (Travelers) to confirm the report of the Special Referee, and denied plaintiff's cross motion to vacate the report, unanimously affirmed, without costs.

Plaintiff seeks a declaration that Travelers is obligated to defend and indemnify it in connection with a pending action arising out of an accident that occurred on the sidewalk adjacent to its property on October 14, 2003. Despite a notice of occurrence provision in its insurance policy, plaintiff did not notify Travelers about the accident until May 10, 2004, after receiving notice of a lawsuit from the injured person.

The evidence adduced before the Special Referee established that plaintiff was immediately aware of the accident, which occurred in front of its property while its contractor was performing work on its behalf, and that it was aware that a person was injured and was removed from the scene in an ambulance. Moreover, plaintiff discussed the accident internally and with others, and was familiar with the insurance policy's requirement to provide notice of an occurrence "as soon as practicable." Under the circumstances, plaintiff failed to establish the reasonableness of its belief that no claim would be asserted against it and hence of its seven-month delay in providing notice to Travelers (see SSBSS Realty Corp. v Public Serv. Mut. Ins. Co., 253 AD2d 583, 584 [1998]). We are bound by the holding in Great Canal Realty Corp. v Seneca Ins. Co., Inc., 5 NY3d 742 (2005) that the insurer need not demonstrate prejudice in a question of late notice, and therefore, the claim is barred by the terms of the policy.

We have considered plaintiff's remaining arguments and find them unavailing.

The City of New York v. General Star Indemnity Company

Marshall, Conway, Wright & Bradley, P.C., New York
(Christopher T. Bradley of counsel), for appellant.
Michael A. Cardozo, Corporation Counsel, New York (Julian L.
Kalkstein of counsel), for respondent.

Order and judgment (one paper), Supreme Court, New York County (Michael D. Stallman, J.), entered on or about July 19, 2006, granting plaintiff insured's motion for summary judgment, and declaring that defendant insurer is obligated to defend and indemnify plaintiff in a certain underlying action, unanimously reversed, on the law, without costs, the judgment vacated, and the motion for summary judgment denied.

While the motion court correctly held that the additional insured endorsement on which plaintiff relies is part of the policy under which plaintiff claims coverage, an issue of fact as to coverage is raised by ambiguities in the endorsement and the post-accident dating of the certificate of insurance issued to plaintiff (see Travelers Ins. Co. v Utica Mut. Ins. Co., 27 AD3d 456, 457 [2006]). Assuming coverage, an issue of fact also exists as to the timeliness of defendant's disclaimer of coverage (see Dumet v TIG Ins. Co., 272 AD2d 111, 112 [2000]). Proof of the named insured's earlier receipt of plaintiff's claim letter does not establish concurrent receipt by defendant, who claims to have first received the claim letter in a fax sent 23 days before it issued its disclaimer.

Allstate Insurance Company, as subrogee v. Persampire

Martin, Fallon & Mulle;, Huntington, N.Y. (Richard C. MullÉ; of
counsel), for appellant.
Panteris & Panteris, LLP, Whitestone, N.Y. (George Panteris of
counsel), for respondent.


DECISION & ORDER

In a subrogation action to recover insurance benefits paid to the plaintiff's insured, the defendant Joseph Persampire appeals from an order of the Supreme Court, Suffolk County (Baisley, J.), dated April 3, 2007, which denied his motion for summary judgment dismissing the complaint insofar as asserted against him.

ORDERED that the order is affirmed, with costs.

Allstate Insurance Company (hereinafter Allstate) insured Doris Martinson under an automobile insurance policy. On July 8, 2005, Martinson was involved in a two-vehicle automobile accident in which her vehicle sustained damage. On the date of the accident, the other vehicle, a 1972 Buick, was allegedly owned by the defendant Joseph Persampire and operated by the defendant Jesse McMahon. Pursuant to the policy, Allstate paid Martinson the sum of $15,105.66. Allstate, as Martinson's subrogee, commenced this action against Persampire and McMahon seeking to recover from them the money it paid to Martinson under the policy. Persampire moved for summary judgment dismissing the complaint insofar as asserted against him on the ground that he was not the owner of the 1972 Buick on the date of the accident, and thus not subject to vicarious liability.

Contrary to Persampire's contentions, the Supreme Court properly denied his motion [*2]for summary judgment dismissing the complaint insofar as asserted him. He failed to tender evidence demonstrating, prima facie, that he was not the owner of the 1972 Buick within the meaning of Vehicle and Traffic Law §§ 128 and 388(1) (see Litvak v Fabi, 8 AD3d 631, 632; cf. Estate of Zimmerman v Mitsubishi Motors Credit of Am., Inc., 34 AD3d 628; Spratt v Sloan, 280 AD2d 465, 466). Persampire's conclusory affidavit claiming that he had transferred ownership of the 1972 Buick to McMahon on June 25, 2005, supported only by a handwritten, undated, and unnotarized statement purportedly from McMahon, was insufficient to demonstrate a prima facie entitlement to judgment as a matter of law (see Goldberger v Village of Kiryas Joel, 31 AD3d 496, 497; Rupp v City of Port Jervis, 10 AD3d 391, 392; Spodek v Feibusch, 267 AD2d 299, 300).

The failure of Persampire to make a prima facie showing of entitlement to judgment as a matter of law requires denial of the motion regardless of the sufficiency of the opposing papers (see Lesocovich v 180 Madison Ave. Corp., 81 NY2d 982, 985; Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853; Fabish v Garden Bay Manor Condominium,AD3d [2d Dept, Oct. 16, 2007]).

Evangelos Car Wash, Inc v. Utica First Insurance Company

Faust Goetz Schenker & Blee, New York, N.Y. (Erika C. Aljens
of counsel), for appellant.
John Z. Marangos, Staten Island, N.Y., for respondent.


DECISION & ORDER

In an action for a judgment declaring that the defendant is obligated to defend and indemnify the plaintiff in an underlying personal injury action entitled Reyes v Evangelos Car Wash, Inc., commenced in the Supreme Court, Richmond County, under Index No. 11635/2003, the defendant appeals from an order and judgment (one paper) of the Supreme Court, Richmond County (J. McMahon, J.), entered August 7, 2006, which denied its motion for summary judgment, granted the plaintiff's cross motion for summary judgment, and declared that the defendant is obligated to defend and indemnify the plaintiff in the underlying personal injury action.

ORDERED that the order and judgment is reversed, on the law, with costs, the motion is granted, the cross motion is denied, and it is declared that the defendant is not obligated to defend and indemnify the plaintiff in the underlying personal injury action.

When an insurance policy requires that notice of an occurrence or action be given promptly, notice must be given within a reasonable time in view of all the circumstances (see Gershow Recycling Corp. v Transcontinental Ins. Co., 22 AD3d 460, 461). In the instant case, the plaintiff knew of the accident, at the latest, on December 2, 2003. The plaintiff's delay until March 16, 2004, in giving notice of the underlying action to the defendant insurance company, in the absence of an excuse or mitigating factors, was unreasonable as a matter of law (see Gershow Recycling Corp. v Transcontinental Ins. Co., 22 AD3d at 462; Pile Found. Constr. Co. v Investors Ins. Co. of Am., 2 AD3d 611, 612-613; Serravillo v Sterling Ins. Co., 261 AD2d 384, 385; SSBSS Realty Corp. v Public Serv. Mut. Ins. Co., 253 AD2d 583, 585). Furthermore, contrary to the plaintiff's contention, the defendant specifically advised the plaintiff in its disclaimer letter that its notice of claim was untimely (see Maldonado v C.L.-M.I. Props., Inc., 39 AD3d 822, 823; Matter of State Farm Mut. Auto. Ins. Co. v Cooper, 303 AD2d 414; Abreu v Huang, 300 AD2d 420, 420-421). Accordingly, the defendant properly disclaimed coverage, and the Supreme Court erred in denying the defendant's motion for summary judgment and granting the plaintiff's cross motion for summary judgment.

Reznick v. Zurich North America Specialties

 

Steinberg & Cavaliere, LLP, White Plains, N.Y. (Kevin F.
Cavaliere of counsel), for appellants.
Thomas Torto, New York, N.Y. (Nicholas Hurzeler of counsel),
for respondents.


DECISION & ORDER

In an action for a judgment declaring that the defendants are obligated to defend and indemnify the plaintiffs in an underlying legal malpractice action entitled Sapir v Reznick, pending in the Supreme Court, Nassau County, under Index No. 1324/04, the defendants appeal from an order of the Supreme Court, Kings County (Schmidt, J.), dated December 19, 2006, which denied their motion for summary judgment declaring that they are not obligated to so defend or indemnify the plaintiffs.

ORDERED that the order is reversed, on the law, with costs, the defendants' motion for summary judgment is granted, and the matter is remitted for the entry of a judgment declaring that the defendants are not obligated to defend or indemnify the plaintiffs in the underlying legal malpractice action entitled Sapir v Reznick, pending in the Supreme Court, Nassau County, under Index No. 1324/04.

At all relevant times, the plaintiffs were insured for professional malpractice under a policy issued by the defendants. One condition precedent to coverage was a timely notice of claim. The plaintiffs commenced this action to challenge a disclaimer of coverage by the defendants based on a failure of that condition precedent, and for a judgment declaring that the defendants are obligated to defend and indemnify them in an underlying legal malpractice action entitled Sapir v Reznick, pending in the Supreme Court, Nassau County, under Index No. 1324/04. The Supreme Court should have granted the defendants' motion for summary judgment declaring that they are not obligated to defend or indemnify the plaintiffs in the underlying legal malpractice action.

In 1995 the plaintiffs were retained by Mark Sapir and Zoya Sapir to prosecute a personal injury action on their behalf (hereinafter the Sapir action). In 1998 the plaintiffs were directed to file a note of issue within 90 days or the action could be dismissed pursuant to CPLR 3216. The plaintiffs never filed a note of issue nor sought an extension of time within which to do so. Consequently, in January 1999, the action was dismissed. In May 2003 the plaintiffs moved to vacate that default and to restore the Sapir action to the trial calendar. The plaintiffs averred that they had been prevented from serving and filing a note of issue by a stay issued in a bankruptcy proceeding filed by one of the defendants in the Sapir action. However, in opposition to the motion, it was revealed that, in fact, the bankruptcy proceeding was not filed until June 2000, more than two years after the order directing the service and filing of a note of issue, and approximately a year-and-a-half after the Sapir action had been dismissed. In July 2003 the Supreme Court denied the plaintiffs' motion to vacate the default and to restore the Sapir action to the calendar. In June 2004 that denial was affirmed by this court on appeal (see Sapir v Krause, Inc., 8 AD3d 356). Shortly thereafter, the plaintiffs first provided notice to the defendants of a potential legal malpractice claim against them. The defendants disclaimed coverage based on the plaintiffs' failure to have provided timely notice. The defendants contended that the plaintiffs were or should have been aware of a potential malpractice claim no later than July 2003, when their motion to vacate the default in serving and filing a note of issue in the Sapir action and to restore the case to the calendar was denied, and that the notice provided a year later was untimely. The plaintiffs thereafter commenced this action.

In support of their motion for summary judgment, the defendants demonstrated, prima facie, that the plaintiffs failed to provide notice of a potential legal malpractice claim within a reasonable time in view of all of the circumstances (see Great Canal Realty Corp. v Seneca Ins. Co., Inc., 5 NY3d 742; 120 Whitehall Realty Assoc., LLC v Hermitage Ins. Co., 40 AD3d 719; Genova v Regal Mar. Indus., 309 AD2d 733; Zadrima v PSM Ins. Cos., 208 AD2d 529). We agree that, at a minimum, the plaintiffs knew or should have known of a potential malpractice claim no later than July 2003. The notice provided a year later was unreasonable as a matter of law (see e.g. Deso v London & Lancashire Indem. Co. of Am., 3 NY2d 127; Steinberg v Hermitage Ins. Co., 26 AD3d 426; Modern Cont. Constr. Co., Inc. v Giarola, 27 AD3d 431; Zadrima v PSM Ins. Cos., 208 AD2d at 529). In light of this conclusion, we need not and do not address whether or not the plaintiffs' obligation to provide notice was triggered at any earlier point.

In opposition, the plaintiffs failed to raise a triable issue of fact. Even construing all inferences in their favor, there was no basis for a reasonable, good faith belief in nonliability excusing their delay in providing notice (see Bowman v Kusnick, 35 AD3d 643).

Since this is an action for a declaratory judgment, we remit the matter to the Supreme Court, Kings County, for the entry of a judgment declaring that the defendants are not obligated to defend or indemnify the plaintiffs in the underlying legal malpractice action (see Lanza v Wagner, 11 NY2d 317, 334, appeal dismissed 371 US 74, cert denied 371 US 901).

Mulcaire v. Buffalo Structural Steel Corp.

Memorandum: Plaintiffs commenced this Labor Law and common-law negligence action to recover damages for injuries sustained by Paul Mulcaire (plaintiff) while installing floor decking in a building under construction. Plaintiff slipped and fell through an uncovered opening approximately 18 feet to the floor. Plaintiffs moved for partial summary judgment on liability under Labor Law § 240 (1) and § 241 (6), and defendants cross-moved for summary judgment dismissing the complaint. Supreme Court granted that part of defendants' cross motion with respect to defendant Buffalo Structural Steel Construction Corp. and dismissed the complaint against it, and the court granted those parts of plaintiffs' motion with respect to Ciminelli-Cowper Co., Inc. (Ciminelli) and Hauptman-Woodward Medical Research Institute, Inc. (hereafter, defendants). We conclude that the court should have denied plaintiffs' motion in its entirety, and we therefore modify the order accordingly.

Although plaintiffs met their initial burden with respect to Labor Law § 240 (1) by establishing that "the absence of or defect in a safety device was the proximate cause of [plaintiff's] injuries" (Felker v Corning Inc., 90 NY2d 219, 224; see Tronolone v Praxair, Inc., 22 AD3d 1031, 1033), we conclude that defendants raised an issue of fact whether the actions of plaintiff were the sole proximate cause of his injuries (see Montgomery v Federal Express Corp., 4 NY3d 805, 806). Specifically, defendants raised an issue of fact whether there were extra sheets of decking available to plaintiff for safety purposes and, if so, whether plaintiff, based on his training, prior practice, and common sense, knew or should have known to cover the opening, and similar openings, which were created by the act of laying down the decking according to the project plan (see id.). For the same reason, the court should have denied that part of plaintiffs' motion with respect to Labor Law § 241 (6) and properly denied that part of the cross motion as well (see Plass v Solotoff, 5 AD3d 365, 367, lv denied 2 NY3d 705). We note in any event that, even if defendants admitted that they had violated the Industrial Code regulation at issue here, plaintiffs nevertheless would not be entitled to partial summary judgment on liability as a matter of law because "[v]iolation of the Industrial Code, even if admitted by defendants, does not establish negligence as a matter of law but is merely some evidence to be considered on the question of a defendant's negligence" (Puckett v County of Erie, 262 AD2d 964, 965 [internal quotation marks omitted]).

The court also erred in denying those parts of the cross motion seeking summary judgment dismissing the Labor Law § 200 claim and common-law negligence cause of action against defendants, and we therefore further modify the order accordingly. Defendants established that they exercised no control over the manner or method of plaintiff's work (see Comes v New York State Elec. & Gas Corp., 82 NY2d 876, 877-878) and that they had no control over the premises, i.e., the floor decking (see Scarupa v Lockport Energy Assoc., 245 AD2d 1038), and plaintiffs failed to raise an issue of fact. Finally, we reject the contention of Ciminelli that it was a construction manager without supervision or control of the work and thus that it was not an owner, contractor, or an agent for purposes of liability under Labor Law § 240 (1) and § 241 (6). "An entity is a contractor within the meaning of Labor Law § 240 (1) and § 241 (6) if it had the power to enforce safety standards and choose responsible subcontractors" (Outwater v Ballister, 253 AD2d 902, 904), and an entity is a general contractor if, in addition thereto, " it was responsible for coordinating and supervising the . . . project' " (Bagshaw v Network Serv. Mgt., 4 AD3d 831, 833). In addition, "[t]he entity's right to exercise control over the work denotes its status as a contractor, regardless of whether it actually exercised that right" (Milanese v Kellerman, 41 AD3d 1058, 1061). In accordance with the well-established principles of contract construction (see generally Village of Hamburg v American Ref-Fuel Co. of Niagara, 284 AD2d 85, 89, lv denied 97 NY2d 603), we conclude as a matter of law that Ciminelli had the contractual authority to enforce safety standards and to hire responsible contractors, and that Ciminelli was also responsible for coordinating and supervising the project. We thus conclude as a matter of law that Ciminelli is an entity subject to liability under Labor Law § 240 (1) and § 241 (6).

In the Matter of NEW YORK MUNICIPAL INSURANCE RECIPROCAL,  v. McGUIRK

Calendar Date: October 19, 2007
Before: Mercure, J.P., Peters, Carpinello, Lahtinen and Kane, JJ.


Congdon, Flaherty, O'Callaghan, Reid, Donlon, Travis
& Fishlinger, Colonie (Avis Spencer Decaire of counsel), for
appellant.
E. Stewart Jones, P.L.L.C., Troy (Meghan Reilly
Keenholts of counsel), for respondent.

MEMORANDUM AND ORDER


Lahtinen, J.

Appeal from an order of the Supreme Court (Hard, J.), entered April 10, 2007 in Albany County, which denied petitioner's application pursuant to CPLR 7503 to stay arbitration between the parties.

On January 24, 2005, respondent, an employee of the Warren County Sheriff's Department, was injured in a patrol car a vehicle owned by Warren County and for which supplementary uninsured/underinsured motorist (hereinafter SUM) insurance coverage had been obtained with petitioner that was struck by a vehicle driven by Rachael McCrea and owned by Michael McCrea and Victoria McCrea. As is relevant here, at the end of July 2005 respondent was informed by the McCreas' insurer that their policy had a $100,000 liability limit. Less than two weeks later, at the beginning of August 2005, respondent notified petitioner of a possible SUM claim and petitioner asserting that it was not notified of the claim "as soon as practicable" as required under the policy disclaimed coverage. Respondent served a demand for SUM arbitration in November 2005 and, in response, petitioner commenced this proceeding in Supreme Court to stay the arbitration. Finding that respondent notified petitioner as soon as was practicable under the circumstances, Supreme Court denied the petition, prompting this appeal by petitioner.

We affirm. Notice provisions of insurance contracts establish conditions precedent to the imposition of liability (see Matter of Progressive Ins. Cos. [House], 34 AD3d 889, 890 [2006]). "In the SUM context, the phrase 'as soon as practicable' means that 'the insured must give notice with reasonable promptness after the insured knew or should reasonably have known that the tortfeasor was underinsured'" (Rekemeyer v State Farm Mut. Auto. Ins. Co., 4 NY3d 468, 474 [2005], quoting Matter of Metropolitan Prop. & Cas. Ins. Co. v Mancuso, 93 NY2d 487, 495 [1999]; see Matter of Progressive Ins. Cos. [House], 34 AD3d at 890). Here, there is no dispute that respondent first discovered that the McCreas were underinsured at the end of July 2005 when he received a letter from their insurer detailing their policy's liability limit. In addition, there is no allegation on the part of petitioner that, through diligent efforts, respondent should reasonably have discovered this information at an earlier time. Petitioner's assertion that respondent was aware at an earlier time that the McCreas' coverage may be insufficient ^[FN1] is of no moment, as the timeliness of notice in the SUM context does not turn upon the suspicions of the insured, but upon when the insured actually knew that the tortfeasor's coverage was inadequate or when such information should reasonably have been discovered (see Matter of Assurance Co. of Am. v Delgrosso, 38 AD3d 649, 650 [2007]; Matter of Continental Ins. Co. v Marshall, 12 AD3d 508, 508 [2004], lv denied 4 NY3d 708 [2005]; Rekemeyer v State Farm Mut. Auto. Ins. Co., 7 AD3d 955, 957 [2004], mod on other grounds 4 NY3d 468 [2005]; Brown v Travelers Ins. Co., 4 AD3d 835, 836 [2004]). Thus, Supreme Court correctly concluded that respondent's notice to petitioner of the SUM claim two weeks after his discovery that the McCreas were underinsured was prompt (see Matter of Progressive Ins. Cos. [House], 34 AD3d at 890-891) and, accordingly, we affirm Supreme Court's denial of petitioner's request for a permanent stay of arbitration.

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

ORDERED that the order is affirmed, with costs.

Footnotes

Footnote 1: Respondent did notify other possibly liable insurance carriers at the end of April 2005 that there may be a SUM claim arising from the accident. However, there is no evidence in the record that respondent knew that such a claim would be made until the end of July 2005 when he was informed of the liability limits of the McCreas' insurance policy.

White v. Continental Casualty Company

 

Joanneke K. M. Brentjens, for appellant.
James M. Appler, III, for respondent.

PIGOTT, J.:

The principal issue presented in this appeal is whether the definition of "total disability" in a disability income policy is ambiguous and, if not, whether plaintiff satisfies the requirements of that definition. We conclude that the definition is not ambiguous and plaintiff failed to establish his entitlement to benefits under the policy as a matter of law.

In 1992, plaintiff James J. White, Jr., a physician who specialized in orthopedic spinal surgery, purchased a disability income policy from First UNUM Life Insurance Company. In 1996, the policy was transferred to defendant Continental Casualty Company (CNA), and again, in 2001, to defendant Life Insurance Company of Boston & New York (LICOBNY). Prior to the 2001 transfer, the policy provided that plaintiff would be considered totally disabled if he was "unable to perform the substantial and material duties of [his] Occupation due to an Injury or Sickness." After the policy transfer, the definition of total disability was changed by adding a second provision which required that plaintiff not be able to "[perform] the duties of any gainful occupation for which [he is] reasonably fitted by education, training, or experience." Plaintiff does not dispute that he was notified of the change in the language of the policy.

In December 2001, plaintiff informed defendant LICOBNY (defendant)^[FN1] that he was unable to pursue his occupation as an orthopedic surgeon due to a hip condition and sought disability benefits under the policy. After defendant denied the claim, plaintiff commenced this breach of contract action. Supreme Court granted defendant's motion for summary judgment dismissing the complaint and the Appellate Division, with two Justices dissenting, affirmed, holding that plaintiff failed, as a matter of law, to meet the policy definition of total disability. Plaintiff appealed to this Court as of right, based on the two-justice dissent on a question of law, arguing that the definition of total disability, particularly the definition's second provision, is ambiguous and renders coverage illusory. Plaintiff argues that, absent the second provision, he satisfied the definition of total disability as a matter of law. In the alternative, plaintiff contends that a triable question of fact exists on this issue. We conclude that these arguments lack merit and therefore affirm the order of the Appellate Division.

As with any contract, unambiguous provisions of an insurance contract must be given their plain and ordinary meaning (see Teichman v Community Hosp., 87 NY2d 514, 520 [1996]), and the interpretation of such provisions is a question of law for the court (see Bailey v Fish & Neave, 8 NY3d 523, 528 [2007]; Chimart Assoc. v Paul, 66 NY2d 570, 572-573 [1986]). It is well settled that "[a] contract is unambiguous if the language it uses has 'a definite and precise meaning, unattended by danger of misconception in the purport of the [agreement] itself, and concerning which there is no reasonable basis for a difference of opinion'" (Greenfield v Philles Records, 98 NY2d 562, 569 [2002] [brackets in original], quoting Breed v Insurance Co. of N. Am., 46 NY2d 351, 355 [1978], rearg denied 46 NY2d 940 [1979]). "Thus, if the agreement on its face is reasonably susceptible of only one meaning, a court is not free to alter the contract to reflect its personal notions of fairness and equity" (Greenfield, 98 NY2d at 569-570 [internal citations omitted]). If the terms of a policy are ambiguous, however, any ambiguity must be construed in favor of the insured and against the insurer (see United States Fid. & Guar. Co. v Annunziata, 67 NY2d 229, 232 [1986]).

Here, in order to receive disability income benefits under the policy, plaintiff is required to establish that he is "unable to perform the substantial and material duties" of an orthopedic surgeon and not be "performing the duties of any gainful occupation for which [he is] reasonably fitted by education, training, or experience." Contrary to plaintiff's assertion, this definition is "reasonably susceptible of only one meaning," and thus, is clear and unambiguous (Greenfield, 98 NY2d at 570; see Michelson v Massachusetts Casualty Ins. Co., 102 AD2d 1003, 1004 [3d Dept 1984] [holding that similar policy language defining total disability was "clear and unambiguous"]).

In addition, although the question of whether a policyholder's condition falls within the policy's definition of total disability is typically one for a jury (see McGrail v Equitable Life Assur. Socy., 292 NY 419, 425 [1944]), here, plaintiff failed to present any evidence demonstrating the existence of a triable issue of fact concerning whether he is totally disabled under the policy. Clearly, plaintiff satisfied the first provision of the definition inasmuch as he stopped performing orthopedic surgeries due to medical problems prior to filing a claim under the policy. However, as to the second provision, the evidence in the record demonstrates that plaintiff renders second medical opinions on spinal surgery, performs independent medical examinations and serves as an expert medical witness. Therefore, the courts below correctly determined that, as a matter of law, plaintiff is "performing the duties of [a] gainful occupation for which [he is] reasonably fitted by [his] education, training, or experience," and thus, he is not totally disabled within the meaning of the policy.

Plaintiff's remaining contentions lack merit.

Accordingly, the order of the Appellate Division should be affirmed, with costs.

Arons v. Jutkowitz


 

Barbara DeCrow Goldberg, for appellants. Richard Valentine, for respondent. New York State Trial Lawyers' Association, amicus curiae.

READ, J.:

These appeals call upon us to decide whether an attorney may interview an adverse party's treating physician privately when the adverse party has affirmatively placed his or her medical condition in controversy. We conclude that an attorney may do so, although the Health Insurance Portability and Accountability Act of 1996 (HIPAA) (Public L 104-191, 110 Stat 1936 [1996] [codified as amended in scattered sections of 18, 26, 29 and 42 USC]) through its Privacy Rule (45 CFR parts 160, 164) imposes procedural prerequisites unique to the informal discovery of health care professionals.

I.
A. Arons v Jutkowitz

In Arons, plaintiff husband, individually and as executor of his late wife's estate, brought a medical malpractice and wrongful death action against several physicians, other medical professionals and two hospitals. He alleged that two of the physician defendants failed to tell decedent that her MRI revealed hydrocephalus, thus delaying proper medical care for fourteen months as her health deteriorated. Decedent, who was hospitalized repeatedly for unavailing treatments in the roughly six months after her diagnosis, lapsed into a coma and died some weeks later.

Once plaintiff filed a note of issue, one of the physician defendants requested HIPAA-compliant authorizations so that his attorneys might seek to interview decedent's treating physician. Plaintiff refused, prompting defendants to ask Supreme Court for an order pursuant to HIPAA regulations (45 CFR 164.512[e][1][i] and 45 CFR 164.508) "directing plaintiff to provide authorizations permitting defense counsel to speak with certain physicians who rendered care to . . . plaintiff related to claims being made in [the] action, if the physicians voluntarily agree to such interviews."

Supreme Court granted the motion. The court reasoned that by commencing the medical malpractice action, plaintiff put his late wife's medical condition into play, thus waiving her physician-patient privilege; that defendants were permitted to interview a plaintiff's treating physicians, "but only after the note of issue [had] been filed"; and, citing several lower court decisions, that "HIPAA regulations require authorizations from the plaintiff in order for the defendants to conduct post-discovery interviews with treating physicians." Consequently, Supreme Court directed plaintiff to provide authorizations to defense counsel within seven days, subject to several conditions; specifically,

"the authorization[s] must, on [their] face state in BOLD letters that the purpose of the interview is to assist the defendants in defense of a lawsuit and it is not at the request of the plaintiff. The authorization[s] must contain the name and address of the person to whom the health care provider may give an interview if he or she wishes and must identify the persons or entities the interviewer is representing and must conform in all respects to 45 CFR § 164.508(c). The authorizations may not be combined with a subpoena and there must be a separate authorization for each interview.

"Within 72 hours after the interview, the defendant must provide the plaintiff with any and all written statements, materials or notations and any document obtained from the interviewed health care provider, as well as copies of any memoranda, notes, audio or video recordings of any oral statements made by the health care provider. The defendant's counsel need not disclose their conclusions, impressions or analysis of any of the statements."

Plaintiff appealed, and the Appellate Division, Second Department, reversed. The court opined that although plaintiff had waived the physician-patient privilege by bringing the lawsuit, defendants were entitled only to disclosure via the discovery devices enumerated in CPLR article 31 and the Uniform Rules for the New York State Trial Courts, which do not mention ex parte interviews, or mandate that a plaintiff execute authorizations permitting them. Further, "[i]n the absence of" explicit authority in article 31 or the Uniform Rules or plaintiff's consent, defense counsel had long been prohibited from privately interviewing a plaintiff's treating physicians during discovery, a "limit[] on disclosure . . . imposed not because of the physician-patient privilege, which is generally waived by bringing a malpractice action, but by the very design of the specific disclosure devices available in CPLR article 31" (Arons v Jutkowitz, 37 AD3d 94, 97 [2d Dept 2006] [internal quotation marks omitted]).

Next, the court conceded that while it had previously decided that a treating physician's testimony could not be precluded at trial on the basis of ex parte interviews conducted after the filing of the note of issue, those decisions neither "declare[d] that defense counsel [had] a right to such informal, post-note of issue interviews," nor "require[d] plaintiffs to consent to them" (id.). Further, although HIPAA did not alter state law regarding these private interviews, it had created a "practical dilemma" for defense counsel seeking to conduct them because physicians refused to talk with them absent a HIPAA-compliant authorization or court order (id. at 99).

Finally, the court remarked that after the filing of a note of issue, an order for additional pretrial discovery called for the requesting party to demonstrate "unusual or unanticipated circumstances," citing 22 NYCRR 202.21(d); and that, in this case, the note of issue had been filed before HIPAA's privacy regulations became effective. "[I]n light of the unsettled nature of the law prior to [its] decision," the Appellate Division therefore modified Supreme Court's order by "deny[ing] . . . defendants' motion with leave to move pursuant to 22 NYCRR 202.21(d) for permission to conduct additional pretrial discovery relating to . . . decedent's treating physicians as limited by article 31" (id. at 101 [emphasis added]). The Appellate Division subsequently granted defendants' motion for leave to appeal, asking us whether its opinion and order were properly made.

B. Webb v New York Methodist Hospital
In this medical malpractice action, plaintiff alleged that she suffered constant nausea, intractable vomiting and malnutrition as a result of a botched gastric stapling operation. Plaintiff, who weighed 450 pounds at the time of her surgery, lost 200 pounds afterwards.

Once the note of issue was filed, defendant physician and defendant hospital sought HIPAA-compliant authorizations for ex parte interviews with the gastroenterologist who treated plaintiff after her weight-loss operation, and the surgeon who operated on her to reverse the procedure. When plaintiff refused to supply authorizations, defendants moved to compel her to do so.

Supreme Court granted the motion and directed plaintiff to furnish authorizations for the interviews, subject to conditions that he had worked out in earlier litigation where the same issue had arisen. As was the case in Arons, these conditions included a direction for defense counsel to hand over to his adversary copies of all written statements and notations obtained from the physicians during the private interviews, as well as any audio or video recordings or transcripts, and interview memoranda or notes (excluding the attorneys' observations, impressions or analyses).

The Appellate Division, Second Department, reversed Supreme Court's order for the reasons stated in Arons, and denied defendants' motions "without prejudice to making a motion in Supreme Court . . . pursuant to 22 NYCRR 202.21(d) for permission to conduct additional pretrial discovery relating to" plaintiff's treatment by the treating physicians (Webb v New York Methodist Hosp., 35 AD3d 457, 457-458 [2d Dept 2006]). The Appellate Division subsequently granted defendants' motion for leave to appeal, asking us whether its decision and order were properly made.

C. Kish v Graham

In Kish, plaintiff, as administrator of decedent's estate, alleged that defendant physicians did not properly diagnose and treat decedent for perineal necrotizing faciitis, resulting in his death. After discovery was complete, defendants served plaintiff with a demand for HIPAA-compliant authorizations permitting defense counsel to interview decedent's treating physicians. When plaintiff refused to sign the authorizations, defendants moved to compel her to do so or, alternatively, to prohibit her from offering these physicians' records at trial, or speaking with them before trial.

Supreme Court granted the motion and directed plaintiff to provide the authorizations, subject to the following conditions:

"(a) With respect to any of the subsequent treating physicians which defense counsel seeks to interview in private, defense counsel shall serve a trial subpoena upon such physician prior to, or contemporaneously with, defense counsel's delivery to the physician of the executed HIPAA-compliant authorization by plaintiff . . . ;

"(b) Such authorization shall be limited by the same temporal and subject matter limitations, if any, as on the plaintiff's pre-note of issue authorization providing the defendants with access to records of the subsequent treating physician, it being the intention of the Court not to require or allow such physician to provide defense counsel with additional records;

"(c) The authorization shall be accompanied by a cover letter from defense counsel to the subsequent treating physician stating:

"(1) While the subpoena requires such physician's testimony at trial, the physician is not obligated to speak with defense counsel prior to trial;

"(2) The purpose of the requested interview with the physician is solely to assist defense counsel at trial;

"(3) If the physician grants the requested interview with defense counsel, a copy of such physician's records, if any, previously provided to defense counsel will be available to assist the physician during the interview;

"(4) The physician is not required to provide defense counsel with any written material or records prior to trial; and

"(d) Provided that defense counsel complies with the conditions prescribed in this Order, no notice of the date or time of the interview need be given to plaintiff's counsel."

The Appellate Division, Fourth Department, reversed on the basis of Arons, with two Justices dissenting. The court subsequently granted defendants' motion for leave to appeal, asking us whether its order was properly made.

II.
A. Informal Discovery of Nonparty Treating Physicians

We have written before about the importance of informal discovery practices in litigation - in particular, private interviews of fact witnesses. In Niesig v Team I (76 NY2d 363 [1990]), the plaintiff in a personal injury action under Labor Law § 240 moved for permission for his counsel to conduct ex parte interviews of the corporate defendant's employees who were on the job site at the time of his accident. The particular question put to us was whether these employees were considered "parties" under Disciplinary Rule 7-104(A)(1) of the Code of Professional Responsibility, which prohibits an attorney from communicating directly with a "party" known to have counsel in the matter.

The trial court denied the plaintiff's request; the Appellate Division modified by limiting the ban on ex parte interviews to the corporation's current employees, concluding that they were "presumptively within the scope of the representation afforded" by the corporation's attorneys in the litigation (Niesig v Team I, 149 AD2d 94, 95 [2d Dept 1989]). The Appellate Division further observed that "it [had] not been suggested, much less proved, that the witnesses sought to be interviewed ex parte could not be compelled to testify at regular pretrial depositions" (id. at 160). Further, the Court commented that it was "obvious that the plaintiff's personal interests in achieving a financial and a tactical advantage in the litigation [were] the real policies which would be advanced by acceptance of his argument" (id.).

We pointed out that the Appellate Division's blanket ban was undesirable because it would

"close[] off avenues of informal discovery of information that [might] serve both the litigants and the entire justice system by uncovering relevant facts, thus promoting the expeditious resolution of disputes. Foreclosing all direct, informal interviews of employees of the corporate party unnecessarily sacrifices the long-recognized potential value of such sessions. . . . Costly formal depositions that may deter litigants with limited resources, or even somewhat less formal and costly interviews attended by adversary counsel, are no substitute for such off-the-record private efforts to learn and assemble, rather than perpetuate, information"

(76 NY2d at 372).

While the Appellate Division's blanket ban was easy to understand and apply, we concluded that the many benefits of informal discovery "require[d] that an effort be made" to create a workable, narrower test (id. at 373). Accordingly, we restricted the ban on private interviews to those "corporate employees whose acts or omissions in the matter under inquiry are binding on the corporation . . . or imputed to the corporation for purposes of its liability, or employees implementing the advice of counsel" (Niesig, 76 NY2d at 374). In response to defendants' "assertions that ex parte interviews should not be permitted because of the dangers of overreaching," we added the "cautionary note" that "it is of course assumed that attorneys would make their identity and interest known to interviewees and comport themselves ethically" (id. at 376).

Earlier this year, we had occasion to revisit Niesig when we decided Siebert v Intuit (8 NY3d 506 [2007]). Siebert, a discount brokerage firm, commenced an action against Intuit for breach of contract and fiduciary duty. Unbeknownst to Siebert, Intuit's lawyers arranged a private interview with a former executive who had been an important participant in the events contested in the litigation as well as a member of Siebert's "litigation team." The lawyers quizzed the executive about the underlying facts of the case in advance of his previously scheduled deposition.

Before commencing the interview, Intuit's lawyers cautioned the executive not to reveal privileged or confidential matter, specifically including any conversations with Siebert's attorneys, or information about Siebert's litigation strategy. He was further advised that if he was asked a question that might threaten such disclosures, he should decline to answer for that reason. The executive stated that he understood the admonitions; the record did not indicate that any privileged information had, in fact, been disclosed.

Upon learning about the interview, Siebert moved to disqualify Intuit's attorneys from the case, enjoin them from using any information provided by the executive, and stay his deposition. Supreme Court granted the motion, holding that the disqualification was warranted regardless of whether Intuit actually received any privileged information. Recognizing that Disciplinary Rule 7-104(a)(1) could not apply to a former corporate employee, the trial court grounded its decision on the "'appearance of impropriety' based upon the possibility that privileged information had been disclosed during the interview" (id. at 510). Citing Niesig, the Appellate Division reversed, and subsequently granted Siebert's motion for leave to appeal, asking us whether its order was properly made.

First, we noted that in Niesig we had "made clear" that there was no across-the-board ban on ex parte communications with an adversary's current employees (id. at 511). As a result, opposing counsel were afforded "the opportunity to unearth relevant facts through informal discovery devices, like ex parte interviews, that have the potential to streamline discovery and foster the prompt resolution of claims" (id.). For the same "policy reasons articulated in Niesig concerning the importance of informal discovery," we held that "so long as measures are taken to steer clear of privileged or confidential information, adversary counsel may conduct ex parte interviews of an opposing party's former employee" (id.). Since the record indicated that protective steps had been taken and adhered to, we affirmed the Appellate Division and answered the certified question in the affirmative.

We see no reason why a nonparty treating physician should be less available for an off-the-record interview than the corporate employees in Niesig or the former corporate executive in Siebert. As an initial matter, a litigant is "deemed to have waived the [physician-patient] privilege when, in bringing or defending a personal injury action, that person has affirmatively placed his or her mental or physical condition in issue" (Dillenbeck v Hess, 73 NY2d 278, 287 [1989], citing Koump v Smith, 25 NY2d 287, 294 [1969]; see also Hoenig v Westphal, 52 NY2d 605 [1981] [physician-patient privilege waived by commencement of personal injury lawsuit]). This waiver is called for as a matter of basic fairness: "[A] party should not be permitted to affirmatively assert a medical condition in seeking damages or in defending against liability while simultaneously relying on the confidential physician-patient relationship as a sword to thwart the opposition in its efforts to uncover facts critical to disputing the party's claim" (Dillenbeck, supra).

Plaintiffs counter that informal interviews of treating physicians are nonetheless impermissible because article 31 of the CPLR and part 202 of the Uniform Rules do not identify them as a disclosure tool. But there are no statutes and no rules expressly authorizing — or forbidding — ex parte discussions with any nonparty, including the corporate employees in Niesig and the former corporate executive in Siebert ^[FN1]. Attorneys have always sought to talk with nonparties who are potential witnesses as part of their trial preparation. Article 31 does not "close off" these "avenues of informal discovery," and relegate litigants to the costlier and more cumbersome formal discovery devices (Niesig, 76 NY2d at 372). As the dissenting Justices pointed out in Kish, choking off informal contacts between attorneys and treating physicians invites the further unwelcome consequence of "significantly interfering with the practice of medicine": "[i]nstead of communicating with an attorney during a 10-minute telephone call, a physician could be required to attend a four-hour deposition or to provide a time-consuming response to detailed and lengthy interrogatories" (Kish v Graham, 40 AD3d 118, 129 [4th Dept 2007] [Pine, J., dissenting]).

Plaintiffs also complain that in a more casual setting and without opposing counsel present, a physician might unwittingly divulge medical information as to which the privilege had not been waived, or might be gulled into making an improper disclosure. This is the same "danger of overreaching" that we rejected explicitly in Niesig and implicitly in Siebert, finding it to afford no basis for relinquishing the considerable advantages of informal discovery.

Again, we "assume[] that attorneys would make their identity and interest known to interviewees and comport themselves ethically" (Niesig, 76 NY2d at 376). In Siebert, where the executive was privy to information for which the attorney-client privilege had not been waived, we considered the risk of improper disclosure adequately addressed where the attorney conducting the interview prefaced his questioning with admonitions designed to prevent this from happening, and there was no reason to believe that privileged information had, in fact, been disclosed. Here, the danger that the questioning might encroach upon privileged matter is surely no greater than was the case in Siebert since the subject matter of the interview or discussion — a patient's contested medical condition — will be readily definable and understood by a physician or other health care professional. In sum, an attorney who approaches a nonparty treating physician (or other health care professional) must simply reveal the client's identity and interest, and make clear that any discussion with counsel is entirely voluntary and limited in scope to the particular medical condition at issue in the litigation.

Finally, we understand that, in fact, for many years trial attorneys in New York have engaged in the practice of interviewing an adverse party's treating physicians ex parte, particularly in malpractice actions, although only after a note of issue was filed (see Anker v Brodnitz, 98 Misc 2d 148 [1979], aff'd on opn below 73 AD2d 589 [2d Dept 1979], lv dismissed 51 NY2d 703, 743 [1980]; see also Vogel v Jewish Hosp. & Med. Ctr. of Brooklyn, 73 AD2d 601 [2d Dept 1979]; Brevetti v Roth, 114 AD2d 877 [2d Dept 1985]; Stoller v Moo Young Jun, 118 AD2d 637 [2d Dept 1986]; Reid v Health Ins. Plan of Greater New York, 80 AD2d 830 [2d Dept 1981]; Breen v Leonard Hosp., 82 AD2d 1000 [3d Dept 1981]; Feretich v Parsons Hosp., 88 AD2d 903 [2d Dept 1982]; Zimmerman v Jamaica Hosp., 143 AD2d 86 [2d Dept 1988]; Levande v Dines, 153 AD2d 671 [2d Dept 1989]; Tiborsky v Martorella, 188 AD2d 795 [3d Dept 1992]; Fraylich v Maimonides Hosp., 251 AD2d 251 [1st Dept 1998]; Luce v State of New York, 266 AD2d 877 [4th Dept 1999]; Klapper, Chipping Away at "Anker" Doctrine, NYLJ, Sept. 18, 1996, at 1, col 1 [discussing cases]; Connors, Appellate Division is Confronted with HIPAA, NYLJ, Jan. 17, 2007, at 3, col 1 [same]). As described by practitioners, "defense counsel would usually serve the doctor with a trial subpoena or an authorization for medical records, attempt to speak with the doctor, and hope that the doctor would cooperate," although "treating doctors have generally been disinclined to cooperate with attorneys for either side in malpractice actions" (Moore and Gaier, Recent Cases on Ex Parte Interviews with Treating Physicians, NYLJ, Oct. 4, 2005, at 3, col 1). The effort was seen as worth making because pretrial interviews are "essential in procuring the doctors' assistance at trial" (Moore and Gaier, Liability for Breach of Confidentiality — Part 2, NYLJ, Dec. 5, 2006, at 3, col 1).

We mention this long-standing practice for several reasons. First, the prohibition of interviews in lieu of article 31 discovery devices originated in the trial court's decision in Anker, a medical malpractice action handed down before — and at decided odds with our reasoning in — Dillenbeck, Hoenig, Niesig and Siebert. Second, it bears emphasizing that the filing of a note of issue denotes the completion of discovery, not the occasion to launch another phase of it. While interviews may still take place post-note of issue, at that juncture in the litigation there is no longer any basis for judicial intervention to allow further pretrial proceedings absent "unusual or unanticipated circumstances" and "substantial prejudice" (22 NYCRR 202.21[d]). As a result, if a treating physician refuses to talk with an attorney and the note of issue has already been filed, it would normally be too late to seek the physician's deposition or interrogatories as an alternative. Finally, as one commentator put it and as these appeals illustrate, the prevailing "state of affairs" in New York was thrown into considerable confusion "when the 800-pound gorilla, also known as HIPAA . . . entered the arena" (Connors, supra). We now turn our attention to this statute.
B. The Impact of HIPAA on Informal Discovery of Health Care Professionals

Congress enacted HIPAA principally to increase the portability and continuity of health insurance and to simplify administrative procedures so as to reduce health care costs (see HIPAA, Pub L 104-191, 110 Stat 1936 [1996]). The "cornerstone" of HIPAA's "administrative simplification" provisions (id. Pub L 104-191, §§ 261-264) was the electronic record, "believed in the 1990s to be the future key to the efficient delivery of health care" (see Kutzko, Boyer, Thoman and Scott, HIPAA in Real Time: Practical Implications of the Federal Privacy Rule, 51 Drake L Rev 403, 407 [2002-2003]). Thus, HIPAA mandated national standards for electronic medical data management. At the same time, this shift away from paper-based to systematized electronic records was perceived to threaten the confidentiality of sensitive patient information. As a result, HIPAA also authorized the Secretary of the United States Department of Health and Human Services (HHS) to promulgate standards governing disclosure of patient health information in the event Congress did not pass privacy legislation within three years of HIPAA's enactment.

When Congress did not meet its self-imposed deadline, HHS proposed and subsequently adopted a Privacy Rule (see 45 CFR parts 160, 164; see also South Carolina Med. Assn. v Thompson, 327 F3d 346 [4th Cir 2003] [discussing HIPAA and rejecting claims that Congress impermissibly delegated its legislative function to HHS]). When devising the Privacy Rule, HHS sought to "strike[] a balance that permits important uses of information, while protecting the privacy of people who seek care and healing"; and to fashion a scheme sufficiently "flexible and comprehensive to cover the variety of uses and disclosures that need to be addressed" (United States Department of Health and Human Services, Office for Civil Rights, Summary of the HIPAA Privacy Rule at 1, available at http://www.hhs.gov/ocr/hipaa/ [last revised May 2003])^[FN2]. In most instances, compliance with the Rule was required by April 14, 2003 (45 CFR 164.534).

The Privacy Rule forbids an organization subject to its requirements (a "covered entity") from using or disclosing an individual's health information ("protected health information") except as mandated or permitted by its provisions (45 CFR 164.502[a]). "Covered entities" generally include health plans, health care clearinghouses and health care providers such as physicians, hospitals and HMOs (45 CFR 160.103, 164.104[a]). "Protected health information" encompasses any individually identifiable health information held or transmitted by a covered entity in any form or medium, whether electronic, paper or oral (45 CFR 160.103).

The Privacy Rule mandates disclosure in only two situations: when an individual asks a covered entity for his or her own health information, or when the Secretary of HHS asks a covered entity for access to such information in order to enforce HIPAA (45 CFR 164.502[a][2])^[FN3]. The Rule, however, permits uses and disclosures in numerous circumstances as regulated by its provisions (45 CFR 164.502[a][1]). Uses and disclosures qualifying as permissive under the Privacy Rule are just that — for purposes of compliance with HIPAA, the covered entity is permitted, but not required, to use the information or make the disclosure (see 65 Fed Reg 82462, 82656-82657 ["[N]othing in the rule requires covered entities to act on authorizations that they receive, even if those authorizations are valid. A covered entity presented with an authorization is permitted to make the disclosure authorized, but is not required to do so"]). Stated another way, a covered entity, such as a physician, who releases a patient's protected health information in a way permitted by the Privacy Rule does not violate HIPAA; however, neither the statute nor the Rule requires the physician to release this information ^[FN4]. The permitted uses and disclosures relevant to these appeals are those made pursuant to authorization (45 CFR 164.502[a][1][iv], 164.508) and the so-called litigation exception (45 CFR 164.502[a][1][vi], 164.512[e]).

The Privacy Rule generally provides that a covered entity may not use or disclose an individual's protected health information to third parties without a valid authorization, except as otherwise permitted or mandated under the Rule (45 CFR 164.508[a]). An authorization must be written in plain language (45 CFR 164.508[c][3]); and it must contain specific "core elements and requirements," including a "specific and meaningful" description of the protected health information to be used or disclosed, the identity of those persons or classes of persons authorized to make and receive the requested use or disclosure, an expiration date or event, the individual's signature, and a statement notifying the signatory of the right to revoke the authorization in writing (45 CFR 164.508[c][1],[2]).

The Privacy Rule also permits covered entities to use or disclose protected health information without authorization pursuant to a court or administrative order so long as only the protected health information covered by the order is disclosed (45 CFR 164.512[e][1][i]); or in response to a subpoena, discovery request or other lawful process if the entity has received satisfactory assurances that the party seeking the disclosure has made reasonable efforts to ensure that the individual has been given notice of the request, or has made reasonable efforts to secure a qualified protective order from a court or administrative tribunal (45 CFR 164.512[e][1][ii]). While this litigation exception may appear to be tailored for those situations in which the protected health information is not being sought from a party to the proceedings, HHS has declared that "[t]he provisions in [section 164.512(e)] are not intended to disrupt current practice whereby an individual who is a party to a proceeding and has put his or her medical condition at issue will not prevail without consenting to the production of his or her protected health information" (65 Fed Reg 82462, 82530).

Next, the Privacy Rule sets out a floor of federal privacy protections whereby state laws that are "contrary" to the Privacy Rule are preempted unless a specific exception applies. A state law is "contrary" to the Privacy Rule, however, only if it would be impossible for a covered entity to comply with both the state requirement and the Rule, or the former is an obstacle to accomplishing the full purposes and objectives of HIPAA's "administrative simplification" provisions (45 CFR 160.202). Moreover, if a state law mandates a disclosure, the Privacy Rule permits the disclosure under its "required by law" exception, which generally allows a covered entity to disclose protected health information without authorization where disclosure is compelled by another law (45 CFR 164.512[a]). As one commentator has explained, the upshot of all this is to limit the potential for preemption to those situations where state law prohibits or restricts a disclosure that the Privacy Rule mandates (Cohen, Reconciling the HIPAA Privacy Rule with State Laws Regulating Ex Parte Interviews of Plaintiffs' Treating Physicians: A Guide to Performing HIPAA Preemption Analysis, 43 Hous L Rev 1091, 1123-1134 [2006]).

In addition, HHS has pointedly advised that where "there is a State provision and no comparable or analogous federal provision, or the converse is the case," there is no possibility of preemption because in the absence of anything to compare "there cannot be . . . a 'contrary' requirement" and so "the stand-alone requirement — be it State or federal — is effective" (64 Fed Reg 59918, 59995). As a result, there can be no conflict between New York law and HIPAA on the subject of ex parte interviews of treating physicians because HIPAA does not address this subject. Accordingly, the Privacy Rule does not prevent this informal discovery from going forward, it merely superimposes procedural prerequisites. As a practical matter, this means that the attorney who wishes to contact an adverse party's treating physician must first obtain a valid HIPAA authorization or a court or administrative order; or must issue a subpoena, discovery request or other lawful process with satisfactory assurances relating to either notification or a qualified protective order.

In the appeals now before us, defendants forwarded to plaintiffs HIPAA-compliant authorizations permitting their treating physicians to discuss the medical condition at issue in the litigation with defense counsel. After plaintiffs declined to sign these authorizations, defendants asked the trial courts for orders compelling them to do so, and the courts granted these requests. This was entirely proper. Plaintiffs waived the physician-patient privilege as to this information when they brought suit, so there was no basis for their refusal to furnish the requested HIPAA-compliant authorizations ^[FN5]. The waiver does not depend on the form or medium in which relevant medical information is kept or may be found: information does not fall outside the waiver merely because it is captured in the treating physician's memory rather than on paper (see generally 65 Fed Reg 82462, 82620 [explaining rationale for treating verbal communications the same as paper and electronically based information]). Of course, it bears repeating that the treating physicians remain entirely free to decide whether or not to cooperate with defense counsel. HIPAA-compliant authorizations and HIPAA court orders cannot force a health care professional to communicate with anyone; they merely signal compliance with HIPAA and the Privacy Rule as is required before any use or disclosure of protected health information may take place.

Finally, the trial court orders in Arons and Webb included stipulations not required by HIPAA and inconsistent with Niesig and Siebert — specifically, a direction for defense counsel to hand over to his adversary copies of all written statements and notations obtained from the physician during the private interviews, any audio or video recordings or transcripts, and interview memoranda or notes (excluding the attorneys' observations, impressions or analyses). Imposition of these conditions was improper.^[FN6]

Accordingly, the orders of the Appellate Division should be reversed, with costs, and defendants' motions to compel plaintiffs to provide the subject authorizations granted in accordance with this opinion. The certified questions should be answered in the negative.
# 147 - Arons v Jutkowitz
# 148 - Webb v New York Methodist Hospital
# 153 - Kish v Graham

In the Matter of State Farm Mutual Automobile Insurance Company v. Noble

 

White Fleischner & Fino, LLP, New York, N.Y. (Jason
Steinberg of counsel), for proposed additional respondent-appellant.
Richard T. Lau, Jericho, N.Y. (Joseph G. Gallo and Richard I.
Halpern of counsel), for petitioner-
respondent.


DECISION & ORDER

In a proceeding pursuant to CPLR article 75 to permanently stay arbitration of a claim for uninsured motorist benefits, Empire Fire & Marine Insurance Company appeals from an order of the Supreme Court, Suffolk County (Jones, J.), dated October 5, 2006, which, after a hearing, granted the petition and permanently stayed arbitration.

ORDERED that the order is affirmed, with costs.

On January 30, 2004, Sandra Noble, who was driving a vehicle insured by the petitioner, was involved in an accident with a vehicle owned by United Truck Van & Car Rentals (hereinafter United). Noble then filed a claim with the appellant, which, she believed, insured United's vehicle. However, the appellant denied Noble's claim, asserting that it did not insure United's vehicle. When Noble demanded that the petitioner arbitrate a claim that she had submitted under her insurance policy for uninsured motorist benefits, the petitioner commenced the instant proceeding, seeking to permanently stay arbitration of that claim. After the petitioner provided certain evidence establishing, prima facie, that the appellant Empire Fire & Marine Insurance Company insured United's vehicle at the time of the accident (cf. Matter of Eagle Ins. Co. v Kapelevich, 307 AD2d 927; American Tr. Ins. Co. v Story, 260 AD2d 240), the matter proceeded to a hearing, where the appellant attempted to demonstrate that it had effectuated a nonrenewal with respect to United's vehicle, and that coverage terminated before the accident occurred (see Matter of State Farm Mut. Auto. Ins. Co. v Yeglinski, 79 AD2d 1029). Contrary to the appellant's contention, the Supreme Court properly determined that the nonrenewal was not properly effectuated, and that the appellant did indeed insure United's vehicle at the time of the accident. Accordingly, the court correctly granted the petition and permanently stayed the arbitration.

Bedessee Imports, Inc., v.  Cook, Hall & Hyde, Inc., and Kemper Insurance Co.

Lustig & Brown, LLP, New York, N.Y. (Howard S. Kronberg and
Randolph E. Sarnacki of counsel), for appellant-respondent.
Tell, Cheser & Breitbart, Garden City, N.Y. (Kenneth R. Feit of
counsel), for respondents-appellants.
Samuel B. Freed, Forest Hills, N.Y. (Thomas Incantalupo and
Nicholas Corona, Jr., of counsel), for
respondent.


DECISION & ORDER

In an action, inter alia, to recover damages for breach of contract, (1) the defendant Cook, Hall & Hyde, Inc., appeals from a judgment of the Supreme Court, Kings County (Lewis, J.), dated December 27, 2005, which, upon an order of the same court dated November 18, 2005, among other things, granting the plaintiff's motion for summary judgment on the complaint insofar as asserted against it, is in favor of the plaintiff and against it in the total sum of $131,930, and (2) the defendants Kemper Insurance Companies and Lumbermens Mutual Casualty Company cross-appeal (a) from so much of the order dated November 18, 2005, as denied their cross motion for summary judgment dismissing the complaint and all cross claims insofar as asserted against them and, in effect, determining that they are not obligated to indemnify the plaintiff, and (b) from the judgment.

ORDERED that the cross appeal by the defendants Kemper Insurance Companies and Lumbermens Mutual Casualty Company from the judgment is dismissed, as those parties are not aggrieved by the judgment (see CPLR 5511); and it is further,

ORDERED that the judgment is affirmed; and it is further,

ORDERED that the order is modified, on the law, by deleting the provision thereof denying that branch of the cross motion of the defendants Kemper Insurance Companies and Lumbermens Mutual Casualty Company which was for summary judgment dismissing the second cross claim for common-law indemnification and substituting therefor a provision granting that branch of the cross motion; as so modified, the order is affirmed insofar as cross-appealed from; and it is further,

ORDERED that one bill of costs is awarded to the plaintiff payable by the appellant-respondent and the respondents-appellants appearing separately and filing separate briefs.

The Supreme Court properly granted the plaintiff's motion for summary judgment on the complaint insofar as asserted against the defendant Cook, Hall & Hyde, Inc. (hereinafter CHH). An insurance agent or broker such as CHH may be held liable under theories of breach of contract or negligence for failing to procure insurance (see Mickey's Rides-N-More, Inc. v Anthony Viscuso Brokerage, Inc., 17 AD3d 328, 329; Structural Bldg. Prods. Corp. v Business Ins. Agency, 281 AD2d 617, 620; American Ref-Fuel Co. v Resource Recycling, 281 AD2d 574, 575; see also Katz v Tower Ins. Co. of N.Y., 34 AD3d 432, 432; Trizzano v Allstate Ins. Co., 7 AD3d 783, 786). An insured must show that the agent or broker failed to discharge the duties imposed by the agreement to obtain insurance, either by proof that it breached the agreement or because it failed to exercise due care in the transaction (see Mickey's Rides-N-More, Inc. v Anthony Viscuso Brokerage, Inc., 17 AD3d at 329; Reilly v Progressive Ins. Co., 288 AD2d 365, 365-366; Structural Bldg. Prods. Corp. v Business Ins. Agency, 281 AD2d at 620; Santaniello v Interboro Mut. Indemn. Ins. Co., 267 AD2d 372, 372; Associates Commercial Corp. of Delaware v White, 80 AD2d 570, 571).

The plaintiff demonstrated its prima facie entitlement to judgment as a matter of law by presenting evidence that CHH failed to exercise due care in obtaining the insurance coverage requested by the plaintiff (see Trizzano v Allstate Ins. Co., 7 AD3d at 786; cf. Structural Bldg. Prods. Corp. v Business Ins. Agency, 281 AD2d at 620). In opposition, CHH failed to raise a triable issue of fact. Its contention that it is not subject to liability because, in attempting to procure a policy for the plaintiff, it acted as an agent for the defendants Kemper Insurance Companies and Lumbermens Mutual Casualty Company (hereinafter collectively Kemper) is without merit. "The fact that an agent acts for a disclosed principal does not relieve the agent of liability for its own negligent acts" (American Ref-Fuel Co. v Resource Recycling, 281 AD2d at 575; see Reliance Ins. Co. v Morris Assoc., 200 AD2d 728, 730; Tucci v Hartford Cas. Ins. Co., 167 AD2d 387, 388; Jones v Archibald, 45 AD2d 532, 535). The record contains evidence that CHH itself was negligent in failing to procure the coverage requested.

Also without merit is CHH's contention that the plaintiff's causes of action must fail because the coverage requested was actually effectuated after the plaintiff's payment for an insurance binder, pursuant to CHH's binding authority on behalf of Kemper under an agency agreement with Kemper. As CHH correctly contends, an insurance binder issued pursuant to binding authority constitutes a temporary or interim policy (see Springer v Allstate Life Ins. Co. of N.Y., 94 NY2d 645, 649). However, such a temporary or interim policy terminates when an insurance policy is either issued or refused by the insurer (see Springer v Allstate Life Ins. Co. of N.Y., 94 NY2d at 649). Here, the plaintiff submitted unrefuted evidence establishing that Kemper refused to issue the policy requested on the same day that CHH submitted the insurance application, months prior to the plaintiff's loss.

The Supreme Court properly denied that branch of Kemper's cross motion which was for summary judgment dismissing the complaint insofar as asserted against it. The plaintiff asserted causes of action against Kemper, inter alia, to recover damages for breach of contract and for a judgment declaring that Kemper is obligated to indemnify it. Kemper made a prima facie showing that it did not issue a policy to the plaintiff. The plaintiff submitted no opposition to Kemper's motion and, therefore, failed to raise a triable issue of fact with respect to its allegation that Kemper's conduct constituted an active breach of contract (see Corley v Country Squire Apts., Inc., 32 AD3d 978, 978; Thorner v Latture, 11 AD3d 448, 449; Fairhaven Apts. No. 4, Inc. v Town of N. Hempstead, 8 AD3d 425, 426). The plaintiff, moreover, may not rely upon CHH's opposing papers, since those papers are not sufficient to raise a triable issue of fact as to whether Kemper issued a policy to the plaintiff in response to CHH's requests and submissions to Kemper.

However, issues of fact exist as to whether Kemper may be liable to the plaintiff on the ground that any negligent acts by CHH with respect to procuring the insurance were performed in CHH's capacity as an agent for Kemper. "It is fundamental to the principal/agent relationship that an insurance company is liable to a third person for the wrongful or negligent acts and misrepresentations of its agent when made within the general or apparent scope of the agent's authority, although the acts or statements exceeded the agent's actual authority or disobeyed the principal's general or express instructions to the agent" (Gleason v Temple Hill Assoc., 159 AD2d 682, 683; see Tucci v Hartford Cas. Ins. Co., 167 AD2d at 388; Neil Plumbing & Heating Constr. Corp. v Providence Washington Ins. Co., 125 AD2d 295, 297). "Only when an agent is acting for his own purposes is the general rule of vicarious liability inapplicable" (Gleason v Temple Hill Assoc., 159 AD2d at 684). Here, the record demonstrates that, in attempting to procure a policy for the plaintiff, CHH was not acting "for its own purposes" but may have been acting as Kemper's agent, within the general scope of its actual authority under the agency agreement (cf. Standard Funding Corp. v Lewitt, 89 NY2d 546, 549-550). Accordingly, the Supreme Court properly determined that there are issues of fact as to whether Kemper is liable to the plaintiff based on negligent acts by CHH acting as Kemper's agent.

The Supreme Court also properly denied that branch of Kemper's cross motion which was for summary judgment dismissing CHH's first cross claim for contractual indemnification. The agency agreement entered into by Kemper and CHH provided for Kemper to indemnify CHH "against all civil liability . . . arising as a direct result of [Kemper's] error or omission, except to the extent that [CHH] has caused such error or omission." Although Kemper made a prima facie showing that it rejected CHH's submission of the plaintiff's application and that it was not, therefore, responsible for the plaintiff's loss, CHH raised triable issues of fact as to whether Kemper was negligent in failing adequately to train CHH's employees in the proper use of its online submission system, resulting in CHH's failure to procure the insurance requested by the plaintiff.

However, that branch of Kemper's cross motion which was for summary judgment dismissing CHH's second cross claim, which, contrary to Kemper's contention, was for common law indemnification, should have been granted. "The principle of common law, or implied, indemnification permits one who has been compelled to pay for the wrong of another to recover from the wrongdoer the damages it paid to the injured party" (Tiffany at Westbury Condominium v Marelli Dev. Corp., 40 AD3d 1073, 1077). "Common law indemnification is warranted where a defendant's role in causing the plaintiff's injury is solely passive, and thus its liability is purely vicarious" (Balladares v Southgate Owners Corp., 40 AD3d 667, 671). Thus, a party which has actually participated in the wrongdoing is not entitled to indemnification (see 17 Vista Fee Assoc. v Teachers Ins. & Annuity Assn. of Am, 259 AD2d 75, 80). In response to Kemper's prima facie showing that CHH was negligent in failing to procure the insurance coverage requested by the plaintiff, CHH failed to raise a triable issue of fact as to whether it was solely Kemper's alleged negligence and not its own negligence that caused the plaintiff's loss.

 

Madeline E. Labate v Liberty Mutual Ins. Co.

 

Feldman, Rudy, Kirby & Farquharson, P.C., Westbury, N.Y. (Brian
R. Rudy of counsel), for appellant-respondent.
Alan Jay Martin, New York, N.Y. (Seth A. Hauser of counsel),
for respondents-appellants.


DECISION & ORDER

In an action, inter alia, to recover damages for breach of an insurance contract, the defendant appeals from so much of an order of the Supreme Court, Nassau County (Davis, J.), dated March 20, 2007, as denied its motion for summary judgment dismissing the complaint and the plaintiffs cross-appeal from so much of the same order as denied their cross motion, in effect, for summary judgment on the complaint.

ORDERED that the order is modified, on the law, by deleting the provision thereof denying the defendant's motion for summary judgment dismissing the complaint and substituting therefor a provision granting the defendant's motion; as so modified, the order is affirmed insofar as appealed and cross-appealed from, with costs to the defendant.

The defendant, Liberty Mutual Insurance Company, issued a Deluxe Homeowners Insurance Policy (hereinafter the policy) insuring the residence of the plaintiffs, Madeline E. Labate and Joseph Labate, for the period of May 9, 2003, to May 9, 2004. During the coverage period, the plaintiffs' house suffered extensive damage when certain walls cracked and the concrete basement floor slab settled and cracked. The plaintiffs made a claim to the defendant pursuant to the policy for the building and structural damages sustained at the premises. However, the defendant disclaimed coverage based upon language in the insurance policy which excluded losses, inter alia, due to "Earth Movement . . . earth sinking, rising or shifting" and due to the "[s]ettling, shrinking, bulging or expansion, including resultant cracking, of pave-ments, patios, foundations, walls, floors, roofs or ceilings."

In 2003 the plaintiffs commenced the instant action against the defendant, seeking damages for breach of the insurance contract and related attorney's fees. The defendant moved for summary judgment dismissing the complaint based on the policy's exclusionary language, and the plaintiffs cross-moved, in effect, for summary judgment on the complaint. The Supreme Court denied both the defendant's motion and the plaintiffs' cross motion, finding triable issues of fact. We modify.

" [C]ourts bear the responsibility of determining the rights or obligations of parties under insurance contracts based on the specific language of the policies'" (Sanabria v American Home Assur. Co., 68 NY2d 866, 868, quoting State of New York v Home Indem. Co., 66 NY2d 669, 671), whose unambiguous provisions must be given "their plain and ordinary meaning" (United States Fid. & Guar. Co. v Annunziata, 67 NY2d 229, 232; see Maroney v New York Cent. Mut. Fire Ins. Co., 5 NY3d 467, 471-472; Catucci v Greenwich Ins. Co., 37 AD3d 513, 514). As such, "any such exclusions or exceptions from coverage must be specific and clear in order to be enforced" (Seaboard Sur. Co. v Gillette Co., 64 NY2d 304, 311). The plain meaning of the policy's language may not be disregarded in order to find an ambiguity where none exists (see Bassuk Bros. v Utica First Ins. Co., 1 AD3d 470, 471; Garson Mgt. Co. v Travelers Indem. Co. of Ill., 300 AD2d 538, 539; Sampson v Johnston, 272 AD2d 956).

In this case, the Supreme Court erred in denying the defendant's motion for summary judgment dismissing the complaint. The defendant met its initial burden of establishing its entitlement to judgment as a matter of law by demonstrating that the exclusions for "Earth Movement" and "settling" clearly and unambiguously applied to the property loss experienced by the plaintiffs (see Cali v Merrickman Mut. Fire Ins. Co., 43 AD3d 415, 417; Sheehan v State Farm Fire & Cas. Co., 239 AD2d 486; Kula v State Farm Fire & Cas. Co., 212 AD2d 16, 20; Nowacki v United Servs. Auto. Assn. Prop. & Cas. Ins. Co., 186 AD2d 1038). The defendant's expert and the plaintiffs' own engineers, hired to remedy the conditions, all opined that the property damage was caused directly or indirectly by earth movement and settlement. In opposition, the plaintiffs failed to raise a triable issue of fact (see Zuckerman v New York, 49 NY2d 557, 562).
GOLDSTEIN, J.P., FISHER, CARNI and McCARTHY, JJ., concur.

RALPH GALLO v MIDSTATE MUTUAL INS. CO.

GALLO & IACOVANGELO, LLP, ROCHESTER (DAVID D. SPOTO OF COUNSEL), FOR DEFENDANT-APPELLANT.
HARRIS, CHESWORTH, O'BRIEN, JOHNSTONE, WELCH & LEONE, LLP, ROCHESTER (EUGENE WELCH OF COUNSEL), FOR PLAINTIFF-RESPONDENT.

Appeal from an order of the Supreme Court, Monroe County (Kenneth R. Fisher, J.), entered October 25, 2006. The order granted plaintiff's motion for partial summary judgment with respect to liability against defendant Midstate Mutual Insurance Company and denied the cross motion of that defendant for summary judgment dismissing the amended complaint against it.

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

Memorandum: Plaintiff commenced this action seeking, inter alia, damages for the alleged breach by Midstate Mutual Insurance Company (defendant) of his casualty insurance contract. Plaintiff submitted a claim for losses incurred as a result of damage to his rental property, and defendant denied coverage based on certain policy exclusions. We conclude that Supreme Court properly granted plaintiff's motion for partial summary judgment with respect to liability against defendant and denied the cross motion of defendant for summary judgment dismissing the amended complaint against it.

It is well settled that the insurer has the burden to demonstrate that an exclusion from coverage contained in the policy is applicable and that "the policy language relied upon by the insurer in support of the exclusion is subject to no other reasonable interpretation' " (McCarthy v New York Prop. Ins. Underwriting Assn., 158 AD2d 961, 962, quoting Seaboard Sur. Co. v Gillette Co., 64 NY2d 304, 311). Further, insurance policy exclusions "are not to be extended by interpretation or implication, but are to be accorded a strict and narrow construction" (Seaboard Sur. Co., 64 NY2d at 311). Inasmuch as it is undisputed that plaintiff's loss was the direct result of the freezing of water pipes in the insured property, the loss is covered by the "Perils Section" of the policy. That section includes the peril of "Freezing of a plumbing . . . system" even if the property is vacant, so long as the insured "has used reasonable care to . . . maintain heat in the building," and, here, plaintiff established as a matter of law that he used reasonable care to maintain heat in the building. In support of his motion, plaintiff submitted the deposition testimony of his property manager, who testified that, in late December 2004, he restored electric power to the building himself by removing certain tabs in the electric meter. Plaintiff also submitted the deposition testimony of the property manager's rental agent, who testified that, on January 22, 2005, the electricity was on and the furnace blower was operating properly to heat the building.

In opposition to the motion, defendant submitted Rochester Gas & Electric (RG & E) records indicating that RG & E had "no record of electric service being delivered to [the property] between December 21, 2004 and May 4, 2005." That evidence, however, is insufficient to raise an issue of fact whether plaintiff's property manager took reasonable care to maintain heat in the building at the time the plumbing system froze, between January 22, 2005 and January 24, 2005. We note that defendant's contention that the act of plaintiff's property manager in restoring electricity to the building himself cannot, as a matter of law, constitute reasonable care to maintain heat because such act constitutes theft of services is raised for the first time on appeal and thus is not properly before us (see Ciesinski v Town of Aurora, 202 AD2d 984, 985).

We thus conclude that plaintiff's loss is specifically covered under the policy, and we further conclude that the exclusions relied on by defendant under paragraph 15 of the "Perils Section," "Accidental Discharge or Overflow of Liquids or Steam from a plumbing . . . system," do not unambiguously apply in this case (see generally Seaboard Sur. Co., 64 NY2d at 311; Oot v Home Ins. Co. of Ind., 244 AD2d 62, 70-71).

SUPREME COURT OF THE STATE OF NEW YORK

 

Appellate Division, Fourth Judicial Department

PRESENT: HURLBUTT, J.P., CENTRA, LUNN, FAHEY, AND PINE, JJ.

 Haymon v Pettit

Michael J. Willett, for appellant.
Matthew J. Kelly, for respondent.


JONES, J.:

In this appeal we are asked to decide whether a baseball park operator owes a duty to warn or protect non-patron spectators who are injured while chasing foul balls that are hit out of the stadium. Under the circumstances presented, we conclude that no duty exists.

Plaintiff's then 14-year-old son, Leonard, was injured when he was struck by an automobile driven by defendant, Donald Pettit. Specifically, Leonard chased a foul ball into traffic. The record indicates that he was wearing headphones while chasing the ball and failed to look both ways before crossing the street. Leonard apparently neither saw nor heard the oncoming vehicle. Pettit was operating his vehicle with a blood alcohol level of .11%. At the time, Leonard had congregated with friends outside of Falcon Park, a baseball stadium owned by the City of Auburn and operated by defendant Auburn Community Non-Profit Baseball Association, Inc. (Ball Club). Adjoining the stadium on the third base side is a two-way public street across from which is a parking lot owned by the City of Auburn and utilized by fans during games. At the time of the incident, the Ball Club offered free baseball tickets to non-patrons outside of the park who retrieved foul balls and returned them to the ticket window. Further, the record indicates that Leonard visited the stadium regularly to retrieve and collect foul balls hit out of the stadium.^[FN1]

Leonard's mother commenced this negligence action individually and on Leonard's behalf against defendants Ball Club, Donald Pettit and the City of Auburn, among others. The Ball Club moved for summary judgment dismissing the complaint on the ground that it owed no duty to plaintiff's son. Supreme Court denied the motion, finding that the Ball Club owed a duty to its fans outside the stadium "to prevent them from chasing foul balls into the nearby street, a foreseeably dangerous condition it took part in creating." The Appellate Division reversed and dismissed the complaint as to the Ball Club. The court determined that the Ball Club, "as an adjoining landowner [of a public street], owed no legal duty to plaintiff's son under the circumstances" despite the foreseeability that someone might run into the street to chase a foul ball (Haymon v Pettit, 37 AD3d 1194, 1195 [4th Dept 2007]). Two Justices dissented and voted to affirm on the ground that a duty existed due to the Ball Club's foul ball promotion, which "played a significant role in creating the danger" (id.).

Plaintiff argues that the Ball Club's foul ball promotion gave rise to a duty to warn or protect its participants. Specifically, plaintiff posits that a duty arose under these circumstances because the Ball Club provided an incentive to fans outside of the stadium to retrieve errant foul balls — namely, the prospect of free tickets. In short, plaintiff argues that the foreseeability of children chasing balls into the street, coupled with defendant's incentive for them to do so, required the Ball Club to provide some measure of protection or warning. We disagree.

An owner or occupier of land generally owes no duty to warn or protect others from a dangerous condition on adjacent property unless the owner created or contributed to such a condition (see Galindo v Town of Clarkstown, 2 NY3d 633, 636 [2004]). "The reason for such a rule is obvious — a person who lacks ownership or control of property cannot fairly be held accountable for injuries resulting from a hazard" on neighboring property (id.). Thus, in fixing the duty point, our analysis is tempered by considerations such as "the reasonable expectations of parties and society generally, the proliferation of claims, the likelihood of unlimited or insurer-like liability, disproportionate risk and reparation allocation" (Hamilton v Beretta U.S.A. Corp., 96 NY2d 222, 232 [2001]; see also Darby v Compagnie Natl. Air France, 96 NY2d 343, 347 [2001] [duty must "comport with what is socially, culturally and economically acceptable"]).

In Akins v Glens Falls City School Dist. (53 NY2d 325 [1981]) we limited the duty of a baseball field owner/operator to provide screening for errant baseballs around "the most dangerous section of the field — the area behind home plate — and the screening that is provided must be sufficient for those spectators who may be reasonably anticipated to desire protected seats on an ordinary occasion" (id. at 330; see also Davidoff v Metropolitan Baseball Club, 61 NY2d 996, 997-998 [1984]). Although in Akins the injury occurred inside the baseball park, it is instructive nonetheless. Akins is premised on "the practical realities" of the game — namely, that errant balls of any sort are an inherent part of the sport and that a baseball stadium owner/operator "is not an insurer of the safety of its spectators" and can only be held to exercise reasonable care under the circumstances (id. at 331). Even inside the park, screening of the area behind home plate offers the most protection spectators could reasonably expect. The nature of the game — and the spectator's involvement in it — is such that absolute protection around the entire stadium would be impractical. Any other formulation would defy a reasonable point at which duty can be fixed (see Darby, 96 NY2d at 349-350; Pulka v Edelman, 40 NY2d 781, 786 [1976]).

The same considerations govern this case. Here, plaintiff's theory rests upon defendant's "foul ball return for tickets" promotion. Plaintiff insists that this incentive foreseeably exposed fans — mostly children — to the hazard of chasing foul balls into the street. This argument, however, is one of foreseeability presupposing that a duty exists (see Hamilton, 96 NY2d at 232). The dangers of crossing the street — and individuals electing to cross it in pursuit of foul balls — exist independent of the Ball Club's promotion. This, coupled with the fact that the Ball Club could control neither the public street nor third persons who use it, strongly militates against a finding of duty.

Darby is also instructive. In that case, an individual drowned while swimming on a public beach in Brazil. He was a guest at a hotel which was separated from the beach by a four-lane public highway. The hotel actively encouraged guests to use the beach, and even provided them with umbrellas, towels and a security escort service. The hotel did not, however, warn beachgoers about dangerous surf conditions. Plaintiff sued the hotel on behalf of decedent alleging that it was negligent in failing to warn beachgoers of dangerous surf conditions. Concluding that no duty existed, we were unpersuaded by the fact that the hotel encouraged and facilitated use of the beach by providing certain related services, and we held that merely "[p]roviding these services does not make the hotel the insurer of its guests' safety at a locale over which it ha[d] no control" (Darby, 96 NY2d at 349). Here, the Ball Club's promotion did no more to contribute to an inherent risk than did the Meridien Copacabana Hotel in Darby.

The Court is mindful that, in this case — unlike Darby — the Ball Club rewarded participants of its promotion with tickets. Important to our resolution, however, is that under the circumstances of this case, like Darby, there are inherent risks associated with crossing the street. Those risks are multiplied when doing so indiscriminately. Moreover, we do not view the Ball Club's promotion as contributing to a dangerous condition, for it only rewarded the retrieval of foul balls. We must assume that adults, and children of Leonard's age, will act prudently in doing so.

Even assuming that mere encouragement of retrieving foul balls suffices, under the circumstances, to create — or contribute to — a dangerous condition (cf. Griffin v 19-20 Industry City Assoc., LLC, 37 AD3d 412 [2d Dept 2007]), a finding of duty would still be inappropriate. As in Akins, "the practical realities" of the game are not lost on the fact that players hit balls outside of the park. Foul balls can land on virtually any square foot of property surrounding a stadium, and imposition of a duty to warn or protect under such circumstances is neither fair nor practical (see Akins, 53 NY2d at 330; see also Stark v Town of Smithtown, 155 AD2d 526, 527 [2d Dept 1989]; Clark v Goshen Sunday Morning Softball League, 122 AD2d 769, 770 [2d Dept 1986]). Injury may befall someone — as in this case — as a result of conduct of a third person on a public road, or a group of fans in a struggle for the ball. The possibilities for injury — and consequently, for liability — are limitless, and the expectation that the stadium control the conduct of third persons is unrealistic (see Pulka, 40 NY2d at 785 [unreasonable to impose duty to protect from the negligent conduct of another "where the realities of every day experience show us that, regardless of the measures taken, there is little expectation that the one made responsible could prevent the negligent conduct"]).

Under these circumstances, it is difficult to imagine what steps the stadium operator could have taken that would have sufficed to meet a duty. Thus, we are constrained from imposing a requirement that the stadium exercise control over non-patron, third persons outside its premises over whom it has no actual authority to do so.

Accordingly, the order of the Appellate Division should be affirmed, with costs.
* * * * * * * * * * * * * * * * *
Order affirmed, with costs. Opinion by Judge Jones. Chief Judge Kaye and Judges Ciparick, Graffeo, Read, Smith and Pigott concur.
Decided November 20, 2007

Footnotes

Footnote 1: There is scant evidence in the record on this motion for summary judgment indicating whether or not Leonard even engaged in this activity for the purpose of receiving free tickets pursuant to the Ball Club's promotion. Leonard's sister testified that he left the house to go to the stadium, that he had money but "didn't want to spend it," and that he did not have a ticket but that "he had his glove with him" to try "to catch a [foul] ball." The sister added that Leonard "saved baseballs." Even viewing the evidence in a light most favorable to the non-moving party and giving the non-moving party the benefit of all reasonable inferences which can be drawn from the evidence (see Fundamental Portfolio Advisors, Inc. v Tocqueville Asset Mgt., L.P., 7 NY3d 96 [2006]), it is unclear whether plaintiff has succeeded in raising an issue of fact. Nevertheless, this becomes academic in light of our holding

Hospital for Joint Diseases, v. Travelers Property Casualty Insurance Company

Martha S. Henley, for appellants.
Gregory Henig, for respondents.
New York Central Mutual Fire Insurance
Company et al.; New York Insurance
Association, Inc., amici curiae.




GRAFFEO, J.:

In this action, a hospital seeks to recover no-fault insurance benefits for services rendered to a patient injured in a motor vehicle accident. We conclude that the insurance company's failure to timely request verification of the patient's assignment of benefits to the hospital precludes the carrier from now contesting the validity of the assignment. We therefore affirm the order of the Appellate Division so holding.

Plaintiff New York and Presbyterian Hospital treated patient Browne in 2004 for injuries he sustained as a result of an automobile accident. At the time of the accident, Browne had an automobile insurance policy with defendant Travelers Property Casualty Insurance Company affording him first-party no-fault coverage. In October 2004, the hospital, through its contract billing agent — Hospital Receivables Systems, Inc. — sought payment of $24,344.96 from Travelers for services provided to Browne. The billing agent sent Travelers a hospital facility form (NYS Form NF-5), a UB-92 form and an assignment of benefits form (NYS Form NF-AOB). The assignment portion of the NYS Form NF-5 and the assignment of benefits form both indicated that Browne's signature was "on file," but neither form displayed his actual signature.

Travelers did not reject the forms or request verification of the assignment. After Travelers failed to pay or deny the claim within 30 days of its receipt, the hospital commenced this action against Travelers and Farmington Casualty Company (an affiliated carrier) for payment of its bill as well as statutory interest and attorneys' fees under Insurance Law § 5106 (a)^[FN1]. In its answer, Travelers raised as an affirmative defense the lack of a valid assignment between Browne and the hospital.

Both parties moved for summary judgment and Supreme Court granted the hospital's motion and directed entry of judgment against Travelers in the amount of $24,344.96 plus statutory interest and attorneys' fees. The court held that Travelers' failure to timely contest any deficiency in the assignment documents precluded the carrier from raising the issue in this proceeding. The Appellate Division affirmed and we granted Travelers leave to appeal.

New York's no-fault automobile insurance system is designed "to ensure prompt compensation for losses incurred by accident victims without regard to fault or negligence, to reduce the burden on the courts and to provide substantial premium savings to New York motorists" (Matter of Medical Socy. of State of N.Y. v Serio, 100 NY2d 854, 860 [2003]). In furtherance of these goals, the Superintendent of Insurance has adopted regulations implementing the No-Fault Law (Insurance Law article 51), including circumscribed time frames for claim procedures. 

These regulations require an accident victim to submit a notice of claim to the insurer as soon as practicable and no later than 30 days after an accident (see 11 NYCRR 65-1.1, 65-2.4 [b]). Next, the injured party or the assignee (typically a hospital, as in the case here) must submit proof of claim for medical treatment no later than 45 days after services are rendered (see 11 NYCRR 65-1.1, 65-2.4 [c])^[FN2]. Upon receipt of one or more of the prescribed verification forms used to establish proof of claim, such as the NYS Form NF-5, an insurer has 15 business days within which to request "any additional verification required by the insurer to establish proof of claim" (11 NYCRR 65-3.5 [b])^[FN3]. An insurer may also request "the original assignment or authorization to pay benefits form to establish proof of claim" within this time frame (11 NYCRR 65-3.11 [c]). Significantly, an insurance company must pay or deny the claim within 30 calendar days after receipt of the proof of claim (see Insurance Law § 5106 [a]; 11 NYCRR 65-3.8 [c]). If an insurer seeks additional verification, however, the 30-day window is tolled until it receives the relevant information requested (see 11 NYCRR 65-3.8 [a] [1]).

An insurer's failure to pay or deny a claim within 30 days carries substantial consequences. By statute, overdue payments earn monthly interest at a rate of two percent and entitle a claimant to reasonable attorneys' fees incurred in securing payment of a valid claim (see Insurance Law § 5106 [a]). More importantly, a carrier that fails to deny a claim within the 30-day period is generally precluded from asserting a defense against payment of the claim (see Presbyterian Hosp. in City of N.Y. v Maryland Cas. Co., 90 NY2d 274, 282 [1997], rearg denied 90 NY2d 937 [1997]). This Court has recognized a narrow exception to this preclusion remedy for situations where an insurance company raises a defense of lack of coverage (see Central Gen. Hosp. v Chubb Group of Ins. Cos., 90 NY2d 195, 198 [1997]). In such cases, an insurer who fails to issue a timely disclaimer is not prohibited from later raising the defense because "the insurance policy does not contemplate coverage in the first instance, and requiring payment of a claim upon failure to timely disclaim would create coverage where it never existed" (Matter of Worcester Ins. Co. v Bettenhauser, 95 NY2d 185, 188 [2000]).

As a corollary to the Presbyterian preclusion rule, Appellate Division case law consistently holds that a carrier's failure to seek verification or object to the adequacy of claim forms pursuant to 11 NYCRR 65-3.5 precludes it from interposing any defenses based on such deficiencies (see e.g. Westchester Med. Ctr. v Safeco Ins. Co. of Am., 40 AD3d 984 [2d Dept 2007]; LMK Psychological Servs., P.C. v Liberty Mut. Ins. Co., 30 AD3d 727, 728-729 [3d Dept 2006]). We concur and note that an insurer that requests additional verification after the 10 or 15 business-day periods but before the 30-day claim denial window has expired is entitled to verification. In these instances, the 30-day time frame to pay or deny the claim is correspondingly reduced (see 11 NYCRR 65-3.8 [j]; Nyack Hosp. v General Motors Acceptance Corp., 8 NY3d 294, 300 [2007]).

Here, after Travelers obtained the NYS Form NF-5 and the assignment of benefits form — both of which plainly stated that the patient's signature was "on file" — it did not ask for further verification or request the original assignment, as permitted by the regulations. Travelers also failed to pay or deny the claim within 30 calendar days of receipt of the hospital's proof of claim. Nevertheless, Travelers argues that its neglect in demanding verification or timely denying coverage is irrelevant because the hospital's failure to proffer a validly executed assignment equates to a lack of coverage, a defense that is not subject to preclusion under Chubb. We disagree.

In Chubb, the insurer asserted as a defense that the claimant's injuries arose out of a prior work-related accident rather than a car accident. Alternatively, the carrier refused payment on the ground that the patient's treatment was excessive. We held that the insurer was not barred from arguing that the injuries were unrelated to the accident because, if true, the treatment would not have been covered by the automobile liability policy in the first instance. On the other hand, we indicated that an excessive treatment defense ordinarily does not implicate a coverage issue, in which situation the preclusion rule applies (90 NY2d at 199).^[FN4]

Here, there is no dispute that the hospital rendered medical services to Browne in the amount of $24,344.96 for injuries arising out of a motor vehicle accident, that Browne's policy with Travelers was in effect at the time of the accident and that the policy covered the [*5]accident. In our view, any defect or deficiency in the assignment between Browne and the hospital simply does not implicate a lack of coverage warranting exemption from the preclusion rule. We therefore determine that the failure by Travelers to seek verification of the assignment in a timely manner prevents the carrier from litigating the issue now.^[FN5]

To conclude otherwise, as proposed by the dissent, frustrates a core objective of the no-fault regime — "to provide a tightly timed process of claim, disputation and payment" (Presbyterian, 90 NY2d at 281). Upon receipt of a no-fault claim, the regulations shift the burden to the carrier to obtain further verification or deny or pay the claim. When, as here, an insurer does neither, but instead waits to be sued for nonpayment, the carrier should bear the consequences of its nonaction. To allow an insurance company to later challenge a hospital's standing as an assignee merely encourages the carrier to ignore the prescribed statutory scheme. As we observed in Presbyterian:

"No-fault reform was enacted to provide prompt uncontested, first-party insurance benefits. That is part of the price paid to eliminate the common-law contested lawsuits . . . The tradeoff of the no-fault reform still allows carriers to contest ill-founded, illegitimate and fraudulent claims, but within a strict, short-leashed contestable period and process designed to avoid prejudice and red-tape dilatory practices" (id. at 285 [internal citation omitted]).

Finally, Travelers contends that an assignment of benefits is a necessary component of the hospital's prima facie case for recovery of no-fault benefits. Even assuming that this is true, we conclude that an assignment form stating that the patient's signature is "on file" satisfies that burden where the carrier does not timely take action to verify the existence of a valid assignment (see Hospital for Joint Diseases v Allstate Ins. Co., 21 AD3d 348 [2d Dept 2005]). Since Travelers does not otherwise contest the hospital's entitlement to no-fault payments, the courts below appropriately awarded summary judgment to the hospital. We have considered Travelers' remaining contentions and find them without merit.

Accordingly, the order of the Appellate Division should be affirmed, with costs.
Hospital for Joint Diseases, et al. v Travelers Property Casualty Insurance Company, et al.
No. 140


PIGOTT, J.(dissenting) :

I respectfully dissent. In my view, Travelers should not be precluded from asserting the affirmative defense that plaintiff Hospital lacked standing to sue — i.e., that it did not obtain a valid assignment from the recipient of medical services — even though Travelers did not obtain additional verification or deny the claim within the prescribed time periods set forth in the no-fault insurance regulations ^[FN6].

As explained by the majority, Travelers failed to request additional verification after receiving the Hospital's claim and assignment of benefits forms, nor did it deny or pay the claim within the required thirty day time period. Nevertheless, after the Hospital commenced this action against Travelers for payment, Travelers asserted an affirmative defense that the Hospital lacked standing to bring the suit on the grounds that it did not obtain a valid assignment of benefits from the patient.

Of course, a plaintiff must have standing in order to bring an action in the courts of this State. "Whether a person seeking relief is a proper party to request an adjudication is an aspect of justiciability which, when challenged, must be considered at the outset of any litigation" [*7](Society of Plastics Indus. v County of Suffolk, 77 NY2d 761, 779 [1991], citing Matter of Dairylea Coop. v Walkley, 38 NY2d 6, 9 [1975]). "Standing is a threshold determination, resting in part on policy considerations, that a person should be allowed access to the courts to adjudicate the merits of a particular dispute that satisfies the other justiciability criteria" (Society of Plastics Indus., 77 NY2d at 779). This Court has also recognized that "questions of . . . standing of parties may be characterized as raising questions of subject matter jurisdiction" (Lacks v Lacks, 41 NY2d 71, 74 [1976]; see also City of New York v State, 86 NY2d 286, 292 [1995] ["The issue of lack of capacity to sue does not go to the jurisdiction of the court, as is the case when the plaintiffs lack standing"]).

Only where there is a properly executed assignment does an assignee become the "real party in interest" and acquire standing to enforce the rights of an assignor (James McKinney & Son v Lake Placid 1980 Olympic Games, 61 NY2d 836, 838 [1984]). "[T]o effect an assignment . . . there [must] be a perfected transaction between the assignor and assignee, intended by those parties to vest in the assignee a present right in the things [or rights] assigned" (Leon v Martinez, 84 NY2d 83, 88 [1994], citing 4 Corbin, Contracts § 879, at 528 [1951]). Without an assignment from the patient, a medical services provider clearly lacks standing to sue a no-fault insurance carrier to directly collect payment for services it rendered to the patient (see 11 NYCRR 65-3.11[b][1], [2] ["[i]n order for a health care provider [or] hospital to receive direct payment from the insurer, the health care provider or hospital must submit to the insurer . . . a properly executed Authorization to Pay Benefits" or "a properly executed assignment" from the injured party]).

As discussed by the majority, in Central Gen. Hosp. v Chubb Group of Ins. Cos. (90 NY2d 195, [1997]), we held that a no-fault insurer was not precluded from raising a defense of lack of coverage despite an untimely disclaimer. In so holding, the Court stated that "[t]he denial of liability based upon lack of coverage within the insurance agreement . . . is distinguishable from disclaimer attempts based on a breach of a policy condition" (id. at 199). The majority here further explains that a carrier is not precluded from asserting a noncoverage defense because "the insurance policy does not contemplate coverage in the first instance, and requiring payment of a claim upon failure to timely disclaim would create coverage where it never existed" (majority opn, at 5, citing Matter of Worcester Ins. Co. v Bettenhauser, 95 NY2d 185, 188 [2000]). In my view, a carrier's defense based on the lack of a valid assignment equates to a defense implicating "lack of coverage within the insurance agreement" (Chubb, 90 NY2d at 199), and thus, should similarly not be precluded. Although there is no dispute that the assignor-patient was covered by the insurance policy with Travelers and received medical treatment at the Hospital, similar to our concerns in Chubb, however, the policy here does not contemplate ]payment to the Hospital in the first instance. Indeed, the Hospital has no legal right to collect payment if and until a valid assignment is obtained from the patient. Thus, in my view, Travelers' defense challenging the validity of the assignment is akin to a defense premised upon lack of coverage.

Further, contrary to the majority's position, in my view, standing cannot be artificially created by a carrier's failure to object within the time periods set forth in the no-fault insurance regulations. Put another way, a medical services provider cannot establish standing by merely relying upon a carrier's pre-litigation inaction. By allowing a plaintiff to do so, the majority, in essence, creates a rule whereby a plaintiff can establish its standing by estoppel, as a result not only of a defendant's inaction, but by its simple neglect, oversight or clerical error.

I must take issue with the majority's view that this position would encourage noncompliance with the no-fault statutory and regulatory scheme. If an insurer fails to timely pay a valid claim, it is subject to the payment of interest at 2% per month plus attorneys' fees (see Insurance Law § 5106[a]; 11 NYCRR 65-3.9; 11 NYCRR 65-3.10), which is why these matters are better resolved in an arbitration setting rather than through the courts as has occurred here. Our decision today, in my view, encourages the use of the courts by eliminating an essential element of most lawsuits - standing, and runs the risk of encouraging this type of litigation at the carrier's peril.

Thus, here, the Hospital should be required to affirmatively prove standing, upon Travelers' objection, as part of its prima facie case (see TPZ Corp. v Dabbs, 25 AD3d 787, 789 [2d Dept 2006] [holding that the plaintiff was not entitled to summary judgment in an action to collect on a promissory note because "it failed to present competent proof of its standing as an assignee of the note" and defendant challenged "[t]he validity of the assignment of the note to the plaintiff, and the plaintiff's standing to prosecute [the] action" in its answer]; Rockland Lease Fund. Corp. v Waste Mgt. of N.Y., 245 AD2d 779, 779 [3d Dept 1997] [holding that the plaintiff lacked standing to bring the action where there was no record evidence supporting its contention that it obtained an assignment]). The Hospital could have done so simply by producing proper documentary evidence of the assignment vesting it with the right to collect payment. Because the Hospital failed to do so, it did not establish its entitlement to judgment as a matter of law.

Accordingly, I would reverse the Appellate Division order and deny plaintiff's motion for summary judgment.
* * * * * * * * * * * * * * * * *
Order affirmed, with costs. Opinion by Judge Graffeo. Chief Judge Kaye and Judges Ciparick, Read, Smith and Jones concur. Judge Pigott dissents and votes to reverse in an opinion.
Decided November 20, 2007

Footnotes

Footnote 1: Originally, plaintiff Hospital for Joint Diseases, as the assignee of two other patients, jointly sued Travelers and Farmington for nonpayment of no-fault benefits. Those claims were subsequently withdrawn.

Footnote 2: A hospital may request payment from the insurer by submitting a properly executed authorization to pay benefits or properly executed assignment on one of the prescribed verification forms or an assignment of benefits form (see 11 NYCRR 65-3.11 [b]).

Footnote 3: Where a claimant submits an application for no-fault benefits (NYS Form NF-2) without verification forms, the insurer has 10 business days to forward the "prescribed verification forms it will require prior to payment of the initial claim" (11 NYCRR 65-3.5 [a]).

Footnote 4: As another example, courts have held that an insurance company is not prevented from later denying a claim where the injured party deliberately caused the collision as part of a fraudulent scheme, holding that an intentional crash is not an "accident" covered by the policy (see Matter of Allstate Ins. Co. v Massre, 14 AD3d 610 [2d Dept 2005]; State Farm Mut. Auto. Ins. Co. v Laguerre, 305 AD2d 490 [2d Dept 2003]).

Footnote 5: We note that this conclusion is consistent with Appellate Division precedents that have considered similar circumstances (see Westchester Med. Ctr. v Safeco Ins. Co. of Am., 40 AD3d 984 [2d Dept 2007]; LMK Psychological Servs., P.C. v Liberty Mut. Ins. Co., 30 AD3d 727 [3d Dept 2006]; Nyack Hosp. v Encompass Ins. Co., 23 AD3d 535 [2d Dept 2005], app dismissed 8 NY3d 895 [2007]; Hospital for Joint Diseases v Allstate Ins. Co., 21 AD3d 348 [2d Dept 2005]; Nyack Hosp. v Metropolitan Prop. & Cas. Ins. Co., 16 AD3d 564 [2d Dept 2005], lv denied 5 NY3d 713 [2005]; New York Hosp. Med. Ctr. of Queens v New York Cent. Mut. Fire Ins. Co., 8 AD3d 640 [2d Dept 2004], lv denied 3 NY3d 609 [2004]; Presbyterian Hosp. in City of N.Y. v Aetna Cas. & Sur. Co., 233 AD2d 433 [2d Dept 1996], lv dismissed 89 NY2d 1030 [1997]).

Footnote 6: As a side note, at least one commentary has noted that the Civil Court of the City of New York and District Courts in Nassau and Suffolk Counties have been inundated with lawsuits filed by medical providers seeking reimbursement of first-party benefits for services rendered to injured claimants. It attributes this "litigation explosion" to two factors: (1) the perception of the medical providers that the American Arbitration Association Forum where medical providers have traditionally filed claims, is biased in favor of the insurer; and (2) decisions of the courts over the past six or seven years which have been favorable to the medical providers (see Lustig & Schatz, The End of Litigation Explosion in New York No-Fault, NYLJ, June 21, 2007, at 4, col 4).