Coverage Pointers - Volume V, No. 20
Tikhonova v. Ford Motor Company
Appellate Division, First Department
If a Car’s Driver is Immune from Liability, is the Owner Also Immune?
This is a fascinating and often overlooked question for auto insurance carriers and defense attorneys alike. If a driver cannot be sued by the plaintiff because of some sort of immunity, is the owner of the vehicle equally protected from a lawsuit? For example, if the plaintiff passenger is a co-employee of the defendant driver and therefore cannot sue because of the exclusivity of the Workers Compensation defense, do the provisions of Vehicle & Traffic Law Section 388 which impose liability on an owner for the permissive use of a vehicle apply? If the car is owned by the driver’s spouse, for example (rather than the co-employee driver) can the spouse be liable under the V&T law provision? On the other-hand, does the immunity flow from the driver to the owner so that the owner can rely and “hide behind” that immunity?
At least one court has held: "Vehicle and Traffic Law § 388 . . . imposes vicarious liability, which by its very nature cannot be imposed upon the owner unless there is liability on the part of the driver. Thus, the immunity of the driver immunizes the owner against a claim of vicarious liability". Other courts in New York have looked to the public policy reasons creating the immunity to see whether the purpose of the grant of immunity would be impaired if the owner was subject to suit. A very recent First Department case takes a middle ground, holding that a leasing company would not be able to hide behind “diplomatic immunity” of the driver diplomat. That decision is reported here.
Note that the Court reviews the conflicting case law and adopts an approach which doesn’t answer the question for all cases. The court reasoned that a driver's immunity should only preclude a claim of liability against the owner under Vehicle and Traffic Law § 388 where the statutory scheme or public policy so requires, such as where the immunity enjoyed by the driver arises from a statutory scheme intended to be an exclusive basis of compensation, or where the immunity granted to the driver would be compromised if the law permitted claims arising from his negligent operation of another's vehicle.
One judge dissented so this case can only go to the Court of Appeals if the Appellate Division or the high court grants permission.
You Need a Better Excuse Than “That” for Failure to Give Liability Carrier Notice of Accident
The plaintiff, who did not notify the defendant of the accident until 15 months thereafter, failed to meet that burden. It was not reasonable for the plaintiff to believe that he would not be liable when, shortly after the accident occurred, he knew that a tenant fell down stairs in his building, and that the tenant required surgery for the injury she sustained. Moreover, the fact that the plaintiff did not timely call the defendant, despite having timely contacted his insurance broker about the accident and acquiring the defendant's telephone number, was inconsistent with the plaintiff's claim of having a good faith belief in nonliability.
7/12/04 Wall v. Kings Row, Inc.
In Opposing Threshold Motion, Plaintiff’s Doctor Cannot Rely Upon Unsworn Medical Reports
The defendants made a prima facie showing that the plaintiff Thomas V. Wall (hereinafter the injured plaintiff) did not sustain a serious injury within the meaning of Insurance Law § 5102(d) through the affirmed medical reports of their examining physicians. The affirmation of the injured plaintiff's physician was insufficient to raise a triable issue of fact. It is apparent from the physician's affirmation that he improperly relied upon unsworn medical reports in arriving at his conclusions. Moreover, the plaintiffs never submitted any competent medical evidence indicating that the injured plaintiff was unable to perform substantially all of his daily activities for not less than 90 of the first 180 days subsequent to the accident.
Kaczmarski v. Suddaby
Appellate Division, Fourth Department
Health Insurer Given Right to Intervene
In a two rather startling decisions, the Fourth Department, in 3-2 votes, have given a health insurer the right to intervene in a personal injury action to try to recover for health insurance benefits paid to its insured, the plaintiff. The dissenting justices argued that health insurance benefits are not recoverable because of the collateral source rule and in any event, there is no proof that so called “equitable subrogation” rules would preclude the plaintiff’s opportunity for full recovery.
New York Central Mutual v. Czumaj
Appellate Division, Fourth Department
Service of Petition for Arbitration of No Fault Benefits by Federal Express is Not Service by Certified Mail and Therefore Invalid
In yet another 3-2 decision, the Fourth Department agreed that service of a demand for Arbitration of No Fault benefits by Federal Express is not an authorized way of commencing a proceeding and thus, since it was served the last day allowed by regulation, the demand for arbitration was untimely. Our office represented the successful insurer in this case.
Where Insured May Have Purposely Tried to Trick Carrier into Late Disclaimer, Issue of Fact Exists Over Timeliness of Denial Letter
While generally a four-month delay in denying coverage constitutes a waiver, as a matter of law, here insured may have purposely tried to trick carrier into denying untimely by sending notice letter to wrong office. Trial must be held to resolve timeliness issues.
Coverage Created by Estoppel
By undertaking the defense of an insured under a Builder’s Risk policy, which did not provide liability coverage, without a reservation of rights, carrier cannot be held to claim that no policy of liability coverage existed.
Whether Proofs of Claim are Complete and Timely are Questions of Fact
Appellate Division, Second Department
Despite the fact that the proof of claim submitted by one assignee of no-fault benefits was incomplete and the proof of claim of another assignee was untimely, both assignees demonstrated a prima facie showing of entitlement to summary judgment with evidence that their claims were neither denied nor paid within the requisite time period. In opposition, the no-fault carrier offered sufficient evidence to raise a triable issue of fact whether the claims were actually denied as untimely and whether the carrier timely sought verification of the claim.
Visit the Hot Cases section of the Federation of Defense & Corporate Counsel website, www.thefederation.org recently ranked among the top five legal research websites in an article published in the January 2004 issue of Litigation News, a publication of the Litigation Section of the American Bar Association. Dan Kohane serves as the FDCC’s Website Editor.
7/09/04 UTICA NATIONAL INS. CO. OF TEXAS V. AMERICAN INDEMNITY CO. AND TEXAS PROPERTY & CASUALTY INS. GUARANTY ASSOC.
Breach of Standard of Care Applies to Professional Services Exclusion In General Liability Insurance Policy
Texas Supreme Court
In this case, the court interpreted the scope of a professional services exclusion in a general liability insurance policy. The argued that the court of appeals erred in affirming the trial court’s judgment that it had a duty to defend and to indemnify its insured, a doctor’s association, against a claim filed by patients who were injured by the administration of contaminated anesthetics. The insurer relied on a provision in its policy excluding coverage for any “[b]odily injury…due to rendering or failure to render any professional service.” The insurer asserted that this exclusion precluded coverage any time a patient’s medical treatment is a but-for cause of an injury, even if the professional services themselves have been rendered to the patients with all due care. The court disagreed with the insurer and concluded that the policy excludes coverage only when the insured has breached the standard of care in rendering those professional services. In this case, the allegations in the pleadings raised both the possibility that the treating doctors were negligent in their administration of the drug and the possibility that the doctor’s association was negligent in the storage of the drug. Because the plaintiffs alleged both professional and non-professional negligence, the general liability insurer had a duty to defend the underlying suit under the eight-corners doctrine.
Submitted by: Bruce D. Celebrezze & Teresa Hu (Sedgwick, Detert, Moran & Arnold LLP)
7/09/04 Stevens v. Fireman’s Fund Ins. Co.
Dispatch of a Driver is Inextricably Intertwined with the Use of Motor Vehicle
Sixth Circuit Court of Appeals
Under Florida law, an auto exclusion clause in a general commercial liability insurance policy precluded coverage for damages arising out of negligent dispatch of a driver. The plaintiff asserted that the auto exclusion did not bar coverage because the alleged negligence in dispatching the driver was independent of the use of the auto. In support of its position, the plaintiff relied on a Florida opinion that damages may be covered under a general liability policy despite the existence of an auto exclusion clause if at least one alleged cause of the accident did not involve the use of an auto. The court rejected the plaintiff’s contention and reasoned that the injury would not have occurred but for the use of an auto. Because the dispatch of the driver was inextricably intertwined with the use of an auto, coverage was barred under the auto exclusion clause of the general liability policy.
Submitted by: Steve Farrar and Jonathan Hammond [Leatherwood Walker Todd & Mann, P.C.]
7/13/04 SMITH v. SHAW
Where An Injured Party Has Incurred No Expense, Obligation, or Liability, the Collateral Source Rule Should Not Be Applied
Court of Appeals of Missouri, Western District
The collateral source rule should not apply to underinsured motorist cases where the insured has paid a premium to the insured’s own insurance carrier for uninsured motorist coverage. The tortfeasor was permitted to present evidence that the plaintiff had received compensation or indemnity for the injury from an independent party. The trial court properly awarded prejudgment interest where the relevant state statute was satisfied by a letter received by the tortfeasor.
Submitted by: Steve Farrar and Jonathan Hammond [Leatherwood Walker Todd & Mann, P.C.]
7/20/04 USAA v. Kaschel
Claim That Driver Failed to Render Aid After Auto Accident Arises out of Use and Operation of Vehicle and Insurer Must Defend
Connecticut Appellate Court
In the present case, it is clear that, any injuries that Robert Choquette allegedly sustained as a result of Kelly’s failure to render aid to him arose out of Kelly’s use of his motor vehicle. The motor vehicle accident was the operative event giving rise to the injuries alleged in count two of the amended complaint and, therefore, those injuries were ‘‘ ‘connected with,’ ’’ ‘‘ ‘had [their] origins in,’ ’’ ‘‘ ‘grew out of,’ ’’ ‘‘ ‘flowed from,’ ’’ or were ‘‘ ‘incident to’ ’’; id.; the use of the vehicle. This is not a case in which the allegations in the underlying complaint reveal that the injuries could have resulted only from the wholly independent act of failing to render aid. Accordingly, auto carrier must defend claim
Submitted by: Dan D. Kohane (Hurwitz & Fine, P.C.)
& Fine, P.C. is a full-service law firm
providing legal services throughout the State of New York.
Scott C. Billman
Insurance Coverage Team
Dan D. Kohane, Team Leader
Michael F. Perley
Scott C. Billman
Audrey A. Seeley
Fire, First-Party and Subrogation Team
James D. Gauthier, Team Leader
Jody E. Briandi
Philip M. Gulisano
No-Fault/SUM Arbitration Team
Dan D. Kohane, Team Leader
Audrey A. Seeley
Ford Motor Company, et al., Defendants-Respondents, Car Corp. Inc., et al., Defendants.
Plaintiff appeals from an order of the
Supreme Court, Bronx County (Douglas E. McKeon, J.), entered March 10, 2003,
which, to the extent appealed from, granted the motion of defendants-
respondents for summary judgment dismissing the complaint as against them.
Pollack, Pollack, Isaac & DeCicco, New York (Brian J. Isaac and Alisa Lebensohn of counsel), and Sherman & Basichas, LLP, New York, for appellant. Nixon Peabody, LLP, Garden City (Santo Borruso and Joseph J. Ortego of counsel), for respondents.
SAXE, J.P. [*2]
Since 1924, the laws of this State have unequivocally provided that the owner of a motor vehicle shall be liable for the negligence of its driver (see Vehicle and Traffic Law § 388, formerly Vehicle and Traffic Law § 59, formerly Highway Law § 282-e [effective July 1, 1924]). In view of the strong public policy this statute represents, we decline to shield defendant car owners from suit simply because the negligent driver here is covered by diplomatic immunity.
The facts of this case are simple and undisputed. Plaintiff Svetlana Tikhonova suffered catastrophic injuries when a car in which she was a passenger, driven by Alexei Konovalov, a Russian diplomat, hit the rear end of the vehicle in front of it. The action before us does not involve a claim against Konovalov; it is undisputed that he is protected by diplomatic immunity, although plaintiff has the right to proceed directly against his insurer in federal court (see 28 USC § 1364[a]). Rather, plaintiff's claim at issue here is against Ford Motor Credit Corporation, the registered owner of the vehicle, and Ford Motor Company, the long-term lessee (collectively, the Ford companies), which in turn leased the vehicle to the Russian mission to the United States. Plaintiff relies upon Vehicle and Traffic Law § 388(1), which provides that:
Every owner of a vehicle used or operated in this state shall be liable and responsible for death or injuries to person or property resulting from negligence in the use or operation of such vehicle, . . . by any person using or operating the same with the permission . . . of such owner [emphasis added].
The question here is whether the Ford companies, who would normally be liable for the negligence of the car's driver under Vehicle and Traffic Law § 388, are protected by the driver's diplomatic immunity.
Vehicle and Traffic Law section 388 was enacted in order to ensure that persons injured by the negligent operation of a motor vehicle would have recourse to a financially responsible insured person (see Continental Auto Lease Corp. v Campbell, 19 NY2d 350, 352). From the language, as well as the purpose of section 388, it is apparent that the Legislature intended that vehicle owners would be held answerable whenever the driver was negligent, without reference to whether or not the driver was, or could be, found liable in court. Notably, the statute speaks of the driver's negligence, rather than his liability. The difference, of course, is that the concept of "negligence" applies whenever people act without exercising the appropriate degree of care, while to be "liable" they must be held obligated to another by law (see Black's Law Dictionary 925, 1056 [7th ed]). Even a driver immune from lawsuit may be negligent, although he cannot be held liable in court.
Just as section 388 by its terms applies where a driver is negligent irrespective of a liability finding, the concept of vicarious liability applies where one party is negligent, in order to make another party chargeable with that negligence (see Prosser and Keaton, Torts § 69, at 499 [5th ed]). It is not dependent upon the actual tortfeasor being charged with, or held liable for, the negligence; where vicarious liability applies, it is enough that the tortfeasor is found to have negligently caused the injury (see e.g. 1B PJI 2:235 [concerning vicarious liability for an employee's negligence]).
Yet, nevertheless, the owner and lessor of the vehicle suggest that regardless of the [*3]driver's negligence, since the driver is statutorily immune from liability, the vehicle's owner and lessor may not be held vicariously liable under Vehicle and Traffic Law § 388. It is not contended that Mr. Konovalov's diplomatic immunity extends to cover the Ford companies as well. Rather, it is simply contended that the vicarious liability created by section 388 cannot arise where the driver is immune from suit.
In order to maintain that despite the clear intent of Vehicle and Traffic Law § 388, a vehicle owner should not be subject to suit where the driver is protected by diplomatic immunity, defendants rely upon a rule that arose and evolved in the context of workers' compensation and similar statutory schemes restricting remedies against employers and employees. These cases began with Naso v Lafata (4 NY2d 585), in which the plaintiff was injured in a car accident while a passenger in a car owned by his employer and driven by his co-employee, in the course of their employment. The Court there held that notwithstanding Vehicle and Traffic Law § 59, the predecessor statute to § 388, the plaintiff's action against the owner/employer was precluded by (former) Workmen's Compensation Law § 29(6), which provided that an employee's right to workers' compensation or benefits "shall be the exclusive remedy to an employee . . . when such employee is injured or killed by the negligence or wrong of another in the same employ" (4 NY2d at 589).
Then, in Rauch v Jones (4 NY2d 592), where the plaintiff was injured in the course of his employment in a collision while a passenger in a tractor-trailer operated by a fellow employee, but the vehicle's owner was not the employer or a fellow employee, the action against the owner of the vehicle was nevertheless held to be barred by the Workmen's Compensation Law. In explaining why it declined to apply the Vehicle and Traffic Law provision to allow the injured employee to sue the owner of the vehicle, the Court remarked:
The unmistakable intention of the Legislature to make only one remedy available to an employee injured in the course of his employment by a fellow employee is manifested by the use of the emphatic language "exclusive remedy." The statute, having deprived the injured employee of a right to maintain an action against a negligent coemployee, bars a derivative action which necessarily is dependent upon the same claim of negligence for which the exclusive remedy has been provided"
(4 NY2d at 596).
In the case of Kenny v Bacolo (61 NY2d 642), the Court considered the negligence and statutory liability claims of the driver of a vehicle involved in a collision with a van whose driver and passenger were covered by a federal workers' compensation statute. The plaintiff was an employee of Atlantic Repair Co., and the van in which he was riding was driven by a co-worker, and leased by their employer from Decker Tank & Equipment Company. Their van collided with the defendant's vehicle while the plaintiff and his co-worker were returning from a marine maintenance and repair job. The Court of Appeals, noting that the injured plaintiff had received an award of compensation under the Longshoremen's and Harbor Workers' Compensation Act [*4](33 USC 901 et seq. [the Act]), not only dismissed the third-party claims brought by the driver of the other vehicle against the plaintiff's employer and the plaintiff's co-worker who had been driving the van, it also dismissed the third-party claims against the owner of the van. The Court explained the dismissal of the defendant's claim against the plaintiff's employer with the reasoning that the Act provides that "an employer's obligation to compensate an employee under the act 'shall be exclusive and in place of all other liability of such employer to the employee *** and anyone otherwise entitled to recover damages from such employer at law *** on account of such injury'" (id. at 644 [emphasis added]). As to Decker Tank & Equipment Co., the owner of the van, although it was not protected by the Act as an employer, the Court held that because the Act made plaintiff's co-worker, the driver, immune from suit (see 33 USC § 933[a]), there could be no vicarious liability imputed to Decker Tank (61 NY2d at 645).
The rule that vicarious liability under section 388 may not be imputed to the vehicle owner where the driver is statutorily immune from suit has been applied again more recently in workers' compensation matters (see e.g. Rodriguez v Lodato Rental, Inc., 267 AD2d 293; Jaglall v Supreme Petroleum Co., 185 AD2d 971), and in one other context: where the driver was a volunteer fire fighter who was involved in a collision in the course of going about his duties, and the car belonged to someone else (see Nelson v Garcia, 152 AD2d 22; Sikora v Keillor, 17 AD2d 6, affd 13 NY2d 610).
In the cases involving drivers who were volunteer fire fighters, the injured plaintiff was precluded from suing the owner of the vehicle, based upon the immunity granted the fire fighter pursuant to General Municipal Law § 205-b (see Nelson v Garcia, 152 AD2d 22; Sikora v Keillor, 17 AD2d 6, affd 13 NY2d 610). The first court to consider how the statutory immunity protecting a volunteer fire fighter affected the owner of the car he was driving employed a policy-based rationale for protecting the owner of the car as well. It reasoned that the purpose of the statutory immunity was "to encourage and facilitate" service by volunteer fire fighters, and found that this purpose would not be accomplished if the immunity from liability was not extended to the owner of the vehicle which was used by the fire fighter in the performance of those duties (see Sikora v Keillor, supra at 7-8).
However, the Court in Nelson v Garcia (152 AD2d 22, supra) did not limit its analysis to the policy-based rationale of Sikora. Rather, it very broadly remarked:
"Vehicle and Traffic Law § 388 . . . imposes vicarious liability, which by its very nature cannot be imposed upon the owner unless there is liability on the part of the driver. Thus, the immunity of the driver immunizes the owner against a claim of vicarious liability"
(152 AD2d at 24 [emphasis added]).
While the broad assertions made in such cases as Nelson v Garcia, supra, and Kenny v Bacolo, supra, appear to support the defendant's position that Mr. Konovalov's immunity prevents the Ford companies from being held liable under Vehicle and Traffic Law § 388, we conclude that these statements of law are unnecessarily expansive, protecting those who need no protection in circumstances that do not warrant any such protection, and decline to apply them in this context. Our decision in this respect is prompted by our belief that appellate courts have the [*5]responsibility to recognize when case law has evolved in an inappropriate direction or to a point where its statutory interpretation is contrary to the intent of the Legislature. Recently, for instance, this Court analyzed a line of cases and concluded that a previous decision of this Court must be overruled (see e.g. Lindenman v Kreitzer, __ AD3d __, 775 NYS2d 4; see also Cavanaugh v 4518 Associates, __ AD3d __, 776 NYS2d 260).
We agree with, and adopt, the reasoning employed in Padlo v Spoor (90 Misc 2d 1002, affd 72 AD2d 665). In that case, the driver was statutorily immune from suit under the Federal Drivers Act (28 USC § 2679[b]-[e]), yet liability was imposed upon the vehicle's owner under Vehicle and Traffic Law § 388. The court explained that a driver's immunity should only preclude a claim of liability against the owner under Vehicle and Traffic Law § 388 where the statutory scheme or public policy so requires, such as where the immunity enjoyed by the driver arises from a statutory scheme intended to be an exclusive basis of compensation, or where the immunity granted to the driver would be compromised if the law permitted claims arising from his negligent operation of another's vehicle (90 Misc 2d at 1005; see also Davis v Harrod, 407 F2d 1280, 1285 ["we see no reason why the owner of the car cannot be sued under 40 D.C. Code § 424 where the driver is negligent, even though the driver has a statutory immunity"]).
In the present matter, there is no relevant statutory scheme providing for an exclusive remedy, nor is there any corresponding public policy concern. We reject the suggestion of our dissenting colleague that our result somehow violates the policy concerns underlying federal law on diplomatic immunity. Imposing liability on the Ford companies would not jeopardize the ability of diplomats to rent or operate motor vehicles. They are already, in any event, required to maintain insurance and protected from direct lawsuit. Protecting diplomats' lessors from liability provides these lessors with an unnecessary protection, without any public policy rationale.
Nor does the federal statute which authorizes direct legal action against a diplomat's insurer (see 28 USC § 1364[a]) represent the exclusive avenue of recourse available to an injured party against all possible liable parties. It merely gives the district courts exclusive jurisdiction over "civil action[s] commenced by any person against an insurer who by contract has insured an individual, who is, or was at the time of the tortious act or omission, a member of a mission . . ." (id. [emphasis added]). It contains nothing that precludes or pre-empts an action under applicable state law against any other possibly liable parties. Indeed, since nothing in the statute requires the contemplated insurance policy covering a diplomat to provide for anything beyond the statutory minimum, nor any other motivation for a diplomat to obtain any insurance beyond the statutory minimum, it would be unconscionable to prevent a grievously injured party from proceeding against other potentially liable individuals simply because one of the potentially liable individuals was a diplomat.
There is no reason to apply a diplomat's immunity to protect any other entities who would otherwise be liable, and every reason to apply Vehicle and Traffic Law § 388 according to its terms. We therefore reverse, and hold that plaintiff must be permitted to proceed with her action against the Ford companies.
Accordingly, the order of the Supreme Court, Bronx County (Douglas E. McKeon, J.), entered March 10, 2003, which, to the extent appealed from, granted the motion of defendants [*6]Ford Motor Company and Ford Motor Credit Corporation for summary judgment dismissing the complaint as against them, should be reversed, on the law, without costs, the motion denied and the complaint reinstated.
All concur except Williams, J. who dissents in an Opinion.
WILLIAMS, J. (dissenting)
I would affirm Bronx Supreme Court's grant of the Ford defendants' motion for summary judgment dismissing the complaint as against them. The majority position represents a departure from settled New York law that ignores larger policy concerns.
The long-settled policy rationale underlying Vehicle and Traffic Law § 388, which imposes vicarious liability on a New York State vehicle owner for death or injuries to person or property resulting from negligence in the use or operation of such vehicle . . . by any personusing or operating the same with the permission, express or implied, of such owner
is that victims of such negligence would have recourse against a financially responsible entity (see Continental Auto Lease Corp. v Campbell, 19 NY2d 350, 352), and that a vehicle owner, who is otherwise blameless, would have recourse against the negligent user or operator of the vehicle (see Naso v Lafata, 4 NY2d 585, 590; Rauch v Jones, 4 NY2d 592, 596 [vehicle owner not liable under predecessor statute, VTL § 59, where his liability would be purely vicarious and alternative, statutory financial recourse is available to the injured party]). Consequently, it has been long settled in New York that when the driver of an alleged negligently operated vehicle is statutorily immune from liability, the vehicle owner may not be held vicariously liable
to plaintiff pursuant to VTL § 388 (see Kenny v Bacolo, 61 NY2d 642; Rodriguez v Lodato Rental, Inc., 267 AD2d 293; Jaglall v Supreme Petroleum Co., 185 AD2d 971; Nelson v Garcia, 152 AD2d 22).
The source of the immunity here, and the underlying policy concerns, should also give the majority pause. Foreign relations, which includes the delicate subject of diplomatic privileges and immunities, is a federal concern and, as such, federal law, the supreme law of the land, goes to great lengths in defining it. Hence, although a member of a foreign mission or his family who is alleged to be the driver of a negligently operated vehicle is immune from legal liability to the injured party, federal law provides a remedy to the injured party by mandating that foreign missions, their members and members' families obtain insurance against liabilities arising from operation of motor vehicles in the United States (22 USC § 254e) and that the injured party have exclusive and original recourse against the diplomat's insurer in federal district court [*7] (28 USC § 1364[a]). While this remedy is not denominated the exclusive remedy allowed the injured party, under current New York law it effectively operates that way.
General Accident Insurance Company of America, v. Metropolitan Steel Industries, Inc.,
Order, Supreme Court, New York County (Edward H. Lehner, J.), entered on or about September 8, 2003, which, upon the parties' respective motions for summary judgment, declared that plaintiffs insurers are obligated to defend and indemnify defendant insured in an underlying action for breach of a construction contract, unanimously affirmed, without costs.
Plaintiffs will not be heard to argue that
the subject "builder's risk" policy provides only first-party coverage for
damage to specified property, not third-party liability coverage for breach of
contract claims, where they undertook the defense of the underlying action for
breach of contract without reserving their right to assert
noncoverage, and defendant as a result lost
control of its own defense (see Schiff Assoc. v Flack, 51 NY2d 692, 699). We reject plaintiffs' argument that estoppel cannot be applied to create coverage where none exists, where, as here, the insured was covered by the policy at the time of the loss (compare Wausau Ins. Cos. v Feldman, 213 AD2d 179, 180; Nassau Ins. Co. v Manzione, 112 AD2d 408, 409), albeit perhaps not for the type of loss claimed, and lost control of its defense in reliance upon the insurer having undertaken its defense without a reservation of rights (cf. Schiff 51 NY2d at 700; see Wainwright v Charlew Constr. Co., 302 AD2d 784, 785, n1). Defendant sufficiently demonstrates that plaintiffs imposed a posture and strategy on the underlying action that it cannot now alter, and [*2]that its ability to control the defense of the underlying action was otherwise prejudiced by plaintiffs' delay in disclaiming until that action was well underway.
Bovis Lend Lease LMB, Inc., et al. v Zurich Insurance Company
Newman Fitch Altheim Myers, P.C., New York (Abraham S.
Altheim of counsel), for appellants-respondents.
Melito & Adolfsen P.C., New York (Ignatius John Melito of
counsel), for respondent-appellant.
Order, Supreme Court, New York County (Edward H. Lehner, J.), entered September 12, 2003, which, in a declaratory judgment action between insurers involving their respective obligations to defend and indemnify their mutual insured, a general contractor, denied the insurers' respective motions for summary judgment, unanimously affirmed, without costs.
Plaintiff is the general contractor's liability insurer; defendant is the subcontractor's liability insurer; defendant's policy covers the general contractor as an additional insured. The subcontractor's employee brought the underlying main action against the general contractor; the general contractor brought the underlying third-party action against the subcontractor. Defendant's New York office agreed to defend the subcontractor in a reservation of rights letter dated April 2, 2002, a copy of which was apparently also sent to the law firm that represents the general contractor in the underlying action and plaintiff in this action. This action was commenced on October 30, 2002 after defendant did not respond to plaintiff's July 23, 2002 letter demanding that defendant take over the defense of the general contractor in the underlying action. Defendant asserts that its first notice of such demand was the complaint herein, and argues that the disclaimer contained in its December 4, 2002 answer herein was therefore timely as a matter of law. We reject that argument in view of the return receipt showing that defendant's San Francisco office received plaintiff's July 23, 2002 letter on August 6, 2002. Plaintiff argues that defendant's four-month delay in disclaiming was untimely as a matter of law. We reject that argument because of plaintiff's failure to explain why it mailed the July 23, 2002 letter to defendant's San Francisco office, even though that office had no connection with the underlying action and plaintiff's counsel knew that defendant's New York office was handling the matter. Such mailing raises an issue of fact as to whether plaintiff was deliberately trying to trap defendant into making a late disclaimer (see Crawford v Merrill Lynch, Pierce, Fenner & Smith, 35 NY2d 291, 296). The reasonableness of defendant's response to plaintiff's July 23, 2002 letter (Insurance Law § 3420[d]), including whether its San Francisco office should [*2]have, for example, called the telephone number on the letter to find out more about the claim, is an issue of fact that should be left for trial (see First Fin. Ins. Co. v Jetco Contr. Corp., 1 NY3d 64, 70).
DEBORAH A. KACZMARSKI AND PAUL J. KACZMARSKI,
PLAINTIFFS-RESPONDENTS, V LOUBERT S. SUDDABY, M.D
Appeal from an order of the Supreme Court, Erie County (Joseph D.
Mintz, J.), entered March 21, 2003. The order denied Independent
Health Association, Inc.’s motion for permission to intervene in a personal injury action.
It is hereby ORDERED that the order so appealed from be and the
same hereby is reversed on the law without costs and the motion is granted.
Memorandum: Plaintiffs commenced this negligence and medical
malpractice action seeking damages for injuries sustained by Deborah A. Kaczmarski (plaintiff). Independent Health Association, Inc. (Independent Health), plaintiff’s health insurer, moved for permission to intervene in the action to assert an equitable subrogation claim, and plaintiffs opposed the motion. We conclude that Supreme Court abused its discretion in denying the motion. Independent Health established that its claim and plaintiffs’ claim share common questions of law and fact (see Berry v St. Peter’s Hosp. of City of Albany, 250 AD2d 63, 66, lv dismissed 92 NY2d 1045) and that its intervention would not unduly delay the action or unduly prejudice the rights of plaintiffs (see CPLR 1013; see also Omiatek v Marine Midland
Bank, ___ AD3d ___ [July 9, 2004]). We reject plaintiffs’ contention that Independent Health’s subrogation action is time-barred. Independent Health’s claim relates back to the date on which plaintiffs’ medical malpractice claim was interposed (see 203 [f]; Omiatek, ___ AD3d at ___). We reject plaintiffs’ further contention that CPLR 4545 precludes Independent Health from obtaining a verdict for medical expenses against the tortfeasors. CPLR 4545 (c) provides for a reduction in an award of damages after a trial based on reimbursement from collateral sources. “The purpose of the statutory collateral source rule is to prevent multiple recoveries for the same loss by an injured party ...[, and t]hat purpose would not be served by its application to subrogation claims” (Kelly v Seager, 163 AD2d
877, 877; see Nossoughi v Federated Dept. Stores, 175 Misc 2d 585, 589-590).
All concur except GORSKI AND MARTOCHE, JJ., who dissent and vote to
affirm in the following Memorandum: We respectfully dissent, for the same reasons set forth in the dissent in Omiatek v Marine Midland Bank (___ AD3d ___ [July 9, 2004]). In our view, the offset provisions in CPLR 4545 (c) preclude recovery by plaintiffs of any medical payments made by Independent Health Association, Inc. (Independent Health) or any other health insurer on behalf of plaintiff Deborah A. Kaczmarski (see Humbach v Goldstein, 229 AD2d 64, 67, lv dismissed 91 NY2d 921).
In addition, because discovery has not yet been conducted, it is not possible to ascertain at this juncture whether the alleged equitable subrogation rights of Independent Health conflict with the rights of plaintiffs to a full recovery (see Berry v St. Peter’s Hosp. of City of Albany, 250 AD2d 63, 67, lv dismissed 92 NY2d 1045).
MATTER OF NEW YORK CENTRAL MUTUAL FIRE INSURANCE COMPANY, PETITIONER-APPELLANT, V MEMORANDUM AND ORDER
GEORGE CZUMAJ, RESPONDENT-RESPONDENT.
HURWITZ & FINE, P.C., BUFFALO (PHYLISS A. HAFNER OF COUNSEL), FOR PETITIONER-APPELLANT.
JEFFREY FREEDMAN, ATTORNEYS AT LAW, BUFFALO (EDWARD J. MURPHY, III, OF COUNSEL), FOR RESPONDENT-RESPONDENT.
Appeal from an order of the Supreme Court, Erie County (John F.
O’Donnell, J.), entered April 1, 2003. The order denied the petition
for an order permanently staying arbitration.
It is hereby ORDERED that the order so appealed from be and the
same hereby is reversed on the law without costs and the petition is granted.
Memorandum: Respondent submitted claims for no-fault insurance
benefits for injuries he sustained in a motor vehicle accident in September 1995. Petitioner denied respondent’s claim for lost wages on May 6, 1996 and denied the balance of respondent’s claim on September 3, 1996. Respondent served a demand for arbitration dated August 29, 2002 via Federal Express overnight mail with signature required. Petitioner thereupon commenced this proceeding seeking a permanent stay of arbitration.
We conclude that Supreme Court erred in denying the petition. We
agree with petitioner that service of the demand for arbitration by Federal Express mail is jurisdictionally defective because Federal Express mail is not one of the permitted methods of service set forth in CPLR 7503 (c) (see Matter of Spychalski [Continental Ins. Cos.], 58 AD2d 193, 196, affd 45 NY2d 847; Matter of Yak Taxi v Teke, 41 NY2d 1020; Matter of Nationwide Ins. Enter. [Denga], 302 AD2d 929; Matter of Cartier v County of Nassau, 281 AD2d 477; Matter of Metropolitan Cas. & Prop. Ins. Co. v Suggs, 268 AD2d 240; cf. CPLR 3216; Balancio v American Optical Corp., 66 NY2d 750, 751). We therefore reverse the
order and grant the petition.
All concur except GREEN AND SCUDDER, JJ., who dissent and vote to
modify in accordance with the following Memorandum: We respectfully dissent. We disagree with the majority that the demand for arbitration by Federal Express mail is jurisdictionally defective because it is not one of the permitted methods of service set forth in CPLR 7503 (c), i.e., “in the same manner as a summons or by registered or certified mail, return receipt requested.” In our view, the procedure used herein is analogous to personal service by mail as provided for in CPLR 312-a. Furthermore, such service is the functional equivalent of registered or certified mail, return receipt requested, inasmuch as both methods provide for accountability and reliability with respect to the mailing and receipt of the demand for arbitration (see generally Secreto v International Bus. Machs. Corp., 194 Misc 2d 512, 513-514). We therefore conclude that the demand for arbitration was properly served (see Matter of Andy Floors [Tyler Constr. Corp.], 202 AD2d 938, 939).
Having concluded that the service is not jurisdictionally defective, we further conclude that respondent’s demand for arbitration is not time-barred with respect to the denial of respondent’s claim in September 1996. Contrary to petitioner’s
contention, the demand was properly served within the applicable six year statute of limitations (see CPLR 213 ; 7502 [b]; see generally Gurnee v Aetna Life & Cas. Co., 55 NY2d 184, 193, rearg denied 56 NY2d 567, cert denied 459 US 837). The remaining issue therefore is whether respondent’s demand for arbitration is time-barred with respect to the denial of respondent’s claim in May 1996. Respondent contends with respect thereto that, by filing the instant demand, he “re-filed” a demand for arbitration that was originally filed with the New York State Insurance Department and served on petitioner on October 1, 1997. He contends that his original demand was treated by the American Arbitration Association as “withdrawn without prejudice” because of settlement. Also pending at that time was a demand for arbitration made by a medical provider to which respondent had assigned his rights. Although the record establishes that arbitration hearings were scheduled and then adjourned by the American Arbitration Association, the record does not establish whether the hearings were to be conducted with respect to respondent’s claim, the medical provider’s claim, or both.
In denying the petition, Supreme Court determined that respondent filed a demand for arbitration in 1997 and that, because petitioner participated in a prior arbitration proceeding, it is barred from now seeking a stay of arbitration (see CPLR 7503 [b]). The court’s determination that respondent filed a demand for arbitration in 1997 is unsupported by the record, which contains only a copy of a cover letter from respondent’s attorney to the New York State Insurance Department and does not contain the demand for arbitration or the other enclosures discussed in the cover letter. Petitioner contends that it received only the cover letter. Petitioner further contends that it was never served with respondent’s demand for arbitration and thus that it participated only in arbitration proceedings with respect to the medical provider.
As respondent correctly concedes, arbitration with respect to the denial of his claim in May 1996 is time-barred if it is determined that there was no prior arbitration proceeding between these parties.
If, however, it is determined that there was a prior arbitration
proceeding between these parties, then petitioner’s “participation in the arbitration [proceeding] constituted a waiver of any right on [petitioner’s] part to ... obtain a stay of arbitration on statute of limitations grounds” (Matter of Civil Serv. Empls. Assn., Inc., Local 1000, AFSCME, AFL-CIO, Erie County White Collar Unit Local #815[County of Erie], 303 AD2d 1050, 1051; see CPLR 7503 [b]). We cannot determine from this record, however, whether there was any such prior arbitration proceeding and therefore conclude that the issue whether that claim is barred by the statute of limitations is a threshold question requiring a trial forthwith (see 7503 [a]). Thus, we would modify the order accordingly, and we would grant a trial with respect to that issue.
Medical Center, a/a/o Ernest Barfi, et al.,
plaintiffs, Mary Immaculate Hospital, a/a/o Scaarlin
Morales-Soriano, et al., respondents,
New York Central Mutual Fire Insurance Company, appellant. (Index No. 10391/02)
Short & Billy, P.C., New York, N.Y. (Michael Billy, Jr., of
counsel), for appellant.
Joseph Henig, P.C., Bellmore, N.Y. (Frank Piccininni of
counsel), for respondents and
In an action to recover no-fault medical payments under insurance contracts, the defendant appeals from so much of an order of the Supreme Court, Nassau County (Parga, J.), dated April 4, 2003, as granted those branches of the plaintiffs' motion which were for summary judgment on the causes of action to recover no-fault medical payments allegedly due to Mary Immaculate Hospital, as assignee of Scaarlin Morales-Soriano, and to recover no-fault medical payments allegedly due to Brooklyn Hospital Center, as assignee of Alberto Lopez.
ORDERED that the order is reversed insofar as appealed from, on the law, with costs, and those branches of the motion which were for summary judgment on the causes of action to recover no-fault medical payments allegedly due to Mary Immaculate Hospital, as assignee of Scaarlin Morales-Soriano, and to recover no-fault medical payments allegedly due to Brooklyn Hospital Center, as assignee of Alberto Lopez, are denied.
A complete proof of claim is a prerequisite to receiving no-fault benefits (see Insurance Law § 5106). Written proof of such a claim must be submitted to the insurance company within 180 days after the date services were rendered or 180 days after the date written notice of the claim was given to the insurance company, whichever is later (see 11 NYCRR 65.12). Within 30 days of receiving a claim, the insurer shall either pay or deny the claim in whole or in part (see 11 [*2]NYCRR 65.15[g]). This 30-day period may be extended by a timely demand by the insurance company for further verification of a claim (see 11 NYCRR 65.15[d]). A claim need not be paid or denied until all demanded verification is provided (see 11 NYCRR 65.15[g][i]; Westchester County Med. Ctr. v New York Cent. Mut. Fire Ins. Co., 262 AD2d 553). In the event an insurer fails to timely deny a claim or request verification from the hospital, the insurer is precluded from asserting that the claim was untimely or incomplete (see Presbyterian Hosp. in City of N.Y. v Maryland Cas. Co., 90 NY2d 274, 282; New York Hosp. Med. Ctr. of Queens v Country-Wide Ins. Co., 295 AD2d 583; St. Clare's Hospital v Allcity Ins. Co., 201 AD2d 718).
Despite the fact that the proof of claim submitted by Brooklyn Hospital Center, as assignee of Alberto Lopez (hereinafter Brooklyn Hospital), was incomplete, and the proof of claim submitted by Mary Immaculate Hospital, as assignee of Scaarlin Morales-Soriano (hereinafter Mary Immaculate), was untimely, both of these plaintiffs demonstrated a prima facie showing of entitlement to judgment as a matter of law with evidence that their claims were neither denied nor paid within the requisite time period (see Insurance Law § 5106[a]; 11 NYCRR 65.15[g]; St. Clare's Hosp. v Allcity Ins. Co., supra). In opposition, the defendant offered sufficient evidence to raise a triable issue of fact whether Mary Immaculate's claim was denied as untimely, and whether the defendant timely sought verification of Brooklyn Hospital's claim (see 11 NYCRR 65.12, 65.15[d]; St. Luke's-Roosevelt Hosp. v American Tr. Ins. Co., 274 AD2d 511; Westchester County Med. Ctr. v New York Cent. Mutual Fire Ins. Co., supra). Thus, summary judgment should not have been granted on those causes of action.
The parties' remaining
contentions either are unnecessary to address in light of the determination or
are without merit.
SANTUCCI, J.P., GOLDSTEIN, LUCIANO and MASTRO, JJ., concur.
Thomas V. Wall,
et al., appellants,
Kings Row, Inc., et al., respondents. (Index No. 43081/01)
Robert C. Fontanelli, P.C., Brooklyn, N.Y. (Sharon Weintraub
Dashow of counsel), for appellants.
Norman Volk & Associates, P.C., New York, N.Y. (Holly E.
Peck of counsel), for respondents.
In an action to recover damages for personal injuries, etc., the plaintiffs appeal from an order of the Supreme Court, Kings County (Ruditzky, J.), dated August 13, 2003, which denied their motion for partial summary judgment on the issue of liability and granted the defendants' cross motion for summary judgment dismissing the first through fourth causes of action on the ground that the plaintiff Thomas V. Wall did not sustain a serious injury within the meaning of Insurance Law § 5102(d).
ORDERED that the order is affirmed, with costs.
The defendants made a prima facie showing that the plaintiff Thomas V. Wall (hereinafter the injured plaintiff) did not sustain a serious injury within the meaning of Insurance Law § 5102(d) through the affirmed medical reports of their examining physicians (see Toure v Avis Rent A Car Sys., 98 NY2d 345; Gaddy v Eyler, 79 NY2d 955). The affirmation of the injured plaintiff's physician was insufficient to raise a triable issue of fact. It is apparent from the physician's affirmation that he improperly relied upon unsworn medical reports in arriving at his conclusions (see Friedman v U-Haul Truck Rental, 216 AD2d 266).
Moreover, the plaintiffs never submitted any competent medical evidence indicating [*2]that the injured plaintiff was unable to perform substantially all of his daily activities for not less than 90 of the first 180 days subsequent to the accident (see Sainte-Aime v Ho, 274 AD2d 569; Arshad v Gomer, 268 AD2d 450; DiNunzio v County of Suffolk, 256 AD2d 498, 499). Accordingly, the defendants were entitled to summary judgment dismissing the first through fourth causes of action.
The Supreme Court properly denied that branch of
the plaintiffs' motion which was for summary judgment on the issue of liability
on the remaining cause of action to recover for property damage.
Z. Fischer, appellant,
Centurion Insurance Company, respondent. (Index No. 572/03)
Alan M. Simon, Spring Valley, N.Y., for appellant.
O'Connor, McGuinness, Conte, Doyle & Oleson, White Plains,
N.Y. (Jennifer M. Klee of counsel), for
In an action for a judgment declaring that the defendant is obligated to defend and indemnify the plaintiff in an underlying action entitled Jacobowitz v Fischer, pending in the Supreme Court, Kings County, under Index No. 10274/02, the plaintiff appeals from an order of the Supreme Court, Rockland County (O'Rourke, J.), dated October 29, 2003, which granted the defendant's motion for summary judgment.
ORDERED that the order is affirmed, with costs, and the matter is remitted to the Supreme Court, Rockland County, for the entry of a judgment declaring that the defendant is not obligated to defend and indemnify the plaintiff in the underlying action entitled Jacobowitz v Fischer, pending in the Supreme Court, Kings County, under Index No. 10274/02.
"The requirement that an insured notify its liability carrier of a potential claim 'as soon as practicable' operates as a condition precedent to coverage [citations omitted]. There may be circumstances such as lack of knowledge that an accident has occurred or a reasonable belief in nonliability, that will excuse or explain delay in giving notice, but the insured has the burden of showing the reasonableness of such excuse" (White v City of New York, 81 NY2d 955, 957; see Security Mut. Ins. Co. of N.Y. v Acker-Fitzsimons Corp., 31 NY2d 436, 440).
The plaintiff, who did not notify the defendant of the accident until 15 months thereafter, failed to meet that burden. It was not reasonable for the plaintiff to believe that he would [*2]not be liable when, shortly after the accident occurred, he knew that a tenant fell down stairs in his building, and that the tenant required surgery for the injury she sustained. Moreover, the fact that the plaintiff did not timely call the defendant, despite having timely contacted his insurance broker about the accident and acquiring the defendant's telephone number, was inconsistent with the plaintiff's claim of having a good faith belief in nonliability (see Centrone v State Farm Fire & Cas., 275 AD2d 728; Transtate Ins. Co. v Paradise Palace, 238 AD2d 505).
Since this is a declaratory judgment action, the Supreme Court should have directed the entry of a judgment declaring that the defendant is not obligated to defend and indemnify the plaintiff in the underlying action (see Lanza v Wagner, 11 NY2d 317, 334, appeal dismissed 371 US 74, cert denied 371 US 901).