September 11th Coverage: Where Occurrence is Defined, World Trade Center Tragedy is One Occurrence, Not Two; Where Occurrence is Undefined, Extrinsic Evidence Can Be Considered to Ascertain Parties’ Intentions
The “WilProp” form was found to be applicable to all carriers (except Travelers) and contained the following definition: “Occurrence” shall mean all losses or damages that are attributable directly or indirectly to one cause or to one series of similar causes. All such losses will be added together and the total amount of such losses will be treated as one occurrence irrespective of the period of time or area over which such losses occur. Although the Silverstein Parties attempt to argue that this definition was ambiguous, Second Circuit agreed with the district court that no finder of fact could reasonably fail to find that the intentional crashes into the WTC of two hijacked airplanes sixteen minutes apart as a result of a single, coordinated plan of attack was, at the least, a “series of similar causes.” Accordingly, it agrees with the district court that under the WilProp definition, the events of September 11th constitute a single occurrence as a matter of law. However, with respect to Travelers binder, that does not define occurrence, the court concludes that given the significant distinction between first-party and third-party insurance policies, the fact-specific nature of the inquiry, and the fact that it is the parties’ intent that controls, the district court properly concluded that the meaning of “occurrence” in the Travelers binder is sufficiently ambiguous under New York law to preclude summary judgment and to warrant consideration by the fact finder of extrinsic evidence to determine the parties’ intentions.
Plaintiff’s case was
properly dismissed where he failed to submit competent medical evidence in
admissible form in opposition to defendant’s prima facie showing that
plaintiff did not sustain a serious injury within the meaning of Insurance Law §
5102(d) as a result of the subject motor vehicle accident.
Insurer’s Payment of Policy
Limits into Escrow Stopped Clock on Accrual of Interest on Judgment
Plaintiff’s brother recovered a judgment for $24,727,616.22 in an underlying personal injury action against Allstate’s insured. Allstate offered to settle the underlying action for $500,000, which constituted its policy limits, but the offer was rejected. Approximately two months after the judgment was entered, Allstate forwarded $750,000 to its attorney to be held in escrow “pending an appointment of a guardian” for the plaintiff, after which this action was commenced to recover the $500,000 policy limits, costs, and interest which accrued on the full amount of the judgment. The policy required Allstate to pay “all costs taxed against the ‘insured’ in any ‘suit’ we defend” and “all interest on the full amount of any judgment that accrues after entry of the judgment in any ‘suit’ we defend; but our duty to pay interest ends when we have paid, offered to pay or deposited in court the part of the judgment that is within our Limit of Insurance.” These terms could not be interpreted less generously than 11 NYCRR 60-1.1(b), which requires an insurance carrier to pay “all costs taxed against the insured in any [lawsuit], and all interest accruing after entry of judgment until the insurer has paid or tendered or deposited in court such part of such judgment as does not exceed the applicable policy limits”. The court held that Allstate’s offers to settle the action were not unconditional, and consequently did not satisfy the definition of tender required by the regulation. However, Allstate’s placement of $750,000 in escrow after the entry of judgment satisfied the definition of payment within the meaning of the policy. Payment could not be made to Alexander Levit directly, since he was not mentally or physically capable of receiving it. The $750,000 deposited in escrow was well in excess of the policy limits of $500,000, but was not sufficient to cover interest on the full amount of the judgment which accrued since entry of the judgment. In determining whether payment of the policy limits is sufficient to stop the clock on the accrual of interest against the insurance carrier, the court held that one must look to the language of the policy. Here, to stop the clock on the accrual of interest, the policy in issue requires payment of “our Limit of Insurance.” The policy specifically states that the obligation to pay interest and costs is “[i]n addition to the Limit of Insurance,” which language is similar to that found in 11 NYCRR 60.1.1(b). Accordingly, the terms “Limit of Insurance” and “applicable policy limits” do not include interest and costs. Payment of the policy limits of $500,000 into escrow stopped the clock on the accrual of further interest on the full amount of the judgment.
At the hearing conducted before the lower arbitrator, both sides rested after opening statements and after making a conscious decision not to call any witnesses. The lower arbitrator thereafter called the claimant as a witness, and he elicited her testimony. The lower arbitrator never provided a reason for calling the claimant as a witness, and the lower arbitrator eventually held in favor of the claimant in his award. The insurance carrier filed an appeal for master arbitration, and it asserted that the arbitrator denied its right to a fair and impartial hearing. The master arbitrator agreed and found it disturbing that the lower arbitrator failed to disclose his purpose in bringing the claimant to the stand after both sides had rested. In support of his decision the master arbitrator, relying upon People v Arnold, 98 NY2d 63, stated: “The overarching principle restraining the courts discretion is the function of the judge to protect the record at trial and not to make it. Although, the law would allow a certain degree of judicial intervention in the presentation of evidence, the line is crossed when the judge takes either the function or appearance of an advocate at trial.”
Umbrella and excess
liability insurers sought a declaration that they were not obligated to provide
coverage for certain sexual discrimination, harassment and retaliation claims
asserted against the insureds by former employees. Among other things, insurers
alleged the insureds failed to provide timely notice of the claims; that
underlying insurance had not been exhausted; and that the underlying claims were
not covered under the terms of the policies. The insureds asserted various
counterclaims, including a purported cause of action for “bad faith denial of
coverage.” Plaintiffs moved to dismiss the counterclaim as legally insufficient,
and to dismiss the insureds’ demand for an award of punitive damages. The lower
court dismissed the demand for punitive damages, based on determinations that
the insureds had not alleged “a violation of a duty independent of the
contract,” and that “[p]laintiffs’ theory of the case is not without merit.” The
court declined, however, to dismiss the counterclaim for compensatory damages.
The appellate court reversed, holding that allegations that an insurer had no
good faith basis for denying coverage are redundant to a cause of action for
breach of contract based on the denial of coverage, and do not give rise to an
independent tort cause of action. New York law recognizing a cause of action for
breach of the duty of good faith in the defense or settlement of a claim was
inapplicable here because the insurers never exercised control over the defense
or settlement of the underlying claims.
The insured alleged that Integrity Insurance had a duty to defend it under two policies issued by Integrity – one, a business owner's liability policy, and the other a commercial umbrella insurance policy. The court affirmed that Integrity had no duty to defend under either policy because coverage was excluded in both policies by professional services exclusions. In the underlying suit, the plaintiff alleged that prior to the date of her accident, the insured contracted with the town of Ottawa “to develop means; methods; techniques; sequences; procedures of construction and safety precautions and programs incident thereto; practices and specifications for the construction and repair of highways and highway shoulders in the Town of Ottawa.” She alleged that the insured was negligent in failing to adequately perform its duties under its contract with Ottawa, resulting in her injuries when she drove through a construction zone and slid off the road due to excess gravel and dirt on the shoulder of the road. The professional services exclusions excluded coverage for “bodily injury," "property damage," "personal injury" or "advertising injury" due to rendering or failing to render any professional service. This includes but is not limited to: ... (2) Preparing, approving, or failing to prepare or approve maps, drawings, opinions, reports, surveys, change orders, designs or specifications; (3) Supervisory, inspection or engineering services.” The court found that the allegations of the underlying complaint fall squarely within the professional services exclusions of the Integrity policies, since the only reasonable reading of Hanson's complaint is that the alleged negligence of the insured pertained to its role as engineer on the construction project. Contrary to the insured’s arguments, the complaint could not reasonably be understood to allege that the insured negligently performed actual construction work.
The insured sought attorney’s fees from American National Life Insurance after successfully suing for insurance coverage for medical expenses. The Court of Appeal affirmed the trial court’s denial of the motion because Florida does not allow attorney’s fees after a successful action for insurance coverage where the policy is issued out of state. The court rejected the insured’s argument that because an amendatory endorsement to the policy and the certificate of insurance were issued in Florida, the policy was issued in the state. The court found that the certificate and endorsement were not the equivalent of delivery of the full policy.
Plaintiff (an employee of Concord Technologies) was assaulted by his supervisor at work and the employee sued Concord for negligent hiring, retention, etc. and liability based on respondeat superior. The trial court granted summary judgment to Concord based on the workers compensation bar. The Texas Court of Appeals affirmed that decision, holding that the "intentional tort" exception to the WC bar did not apply to intentional torts of co-employees unless that co- employee was effectively the alter ego of the corporation (e.g., 100% shareholder) or the corporation specifically authorizes the intentional tort. The court opined, "the mere fact that the tortfeasor holds a supervisory position over the claimant should not trigger the exception." The Court also refused to apply the narrow "personal animosity" exception to the WC bar since the supervisor's assault on plaintiff was based on his late return from lunch break. Finally, the Court upheld the dismissal of plaintiff's cause of action for Concord's termination of him based on the filing of his lawsuit. As the court stated, "In the absence of an applicable statutory or judicially created exception, an at-will employee may be terminated for a good reason, a bad reason, or no reason."
Original claimant Scott Magnum settled his claim for $15,000 from the tortfeasor driver and $85,000 from his own UIM carrier. He subsequently filed for workers compensation benefits but the WC carrier became insolvent. CIGA stepped in and sought credit for the $85,000 that had been paid by the UIM carrier. The Workers Compensation Appeals Board (WCAB) refused the credit on the grounds there was “no statutory provision” for this credit. On appeal, the court held that California law provides that CIGA covers only claims only to the extent that they are not covered by other private insurance. Since there was $85,000 in other insurance benefits already paid, CIGA was entitled to a credit in that amount. WCAB decision reversed.
Deputy sued Lehman alleging fraud, negligent representation, and breach of duty amongst other charges, stemming from securities fraud by one of Lehman’s brokers. Lehman moved to stay the action and compel arbitration based on an arbitration clause in Lehman’s client agreement with Deputy. Deputy contended that she had not signed the arbitration clause and that it was against public policy in any event. The Seventh Circuit remanded for an evidentiary hearing on the authenticity of the signature. The court also rejected Deputy’s contention that the “legislature has expressed a clear policy of protecting investors against … fraudulent acts committed by securities brokers…” The Seventh Circuit found no correlation between the legislature policy of protecting investors and the enforcement of an arbitration clause. Rather, the court held that the Federal Arbitration Act has made it clear the public policy favors arbitration.
The court affirmed the trial court decision that the insured timely exercised its option to extend the reporting period of a claims-made professional liability policy for an additional year. The sixty-day period within which to exercise the option began the day after the policy period ended and extended through the entire sixtieth day after that. However, because the terms of the option to extend the reporting period provided that the policy became excess over any other policy providing coverage during the extended period, the court found that the trial court prematurely determined that there was a duty to defend where another insurer was defending and no other coverage issues had been addressed by the court.
A non-profit health insurance company does not owe fiduciary duties to its plan participants, because the relationship between the insurer and each insured, even in the case of a not-for-profit entity, is purely contractual.
In 1995, a natural gas explosion destroyed the home of William and Sally Brook. Their insurer, State Farm, paid the Brooks’ property damages. Nearly six years after the explosion, State Farm sued in federal court to recover its payments from three companies whose allegedly faulty products or negligent actions caused the explosion. On certification from the federal court, it now considers whether State Farm’s claim for the Brooks’ property damages is covered by Alaska’s two-year “tort” statute of limitations or its six-year statute of limitations “for waste or trespass upon real property.” Because it have recently held that the six-year statute for “trespass” attaches broadly to any alleged interference with a possessor’s property rights, Court concludes that the six year limit governs State Farm’s claim.
USX had umbrella liability insurance from multiple insurers between 1977 an 1983. In 1982, USX was charged with criminal violations of the Sherman Act, which was followed by massive civil litigation. Coverage for the claims was denied by the defendants under an exclusion for “Piracy or unfair competition.” The Third Circuit affirmed the underlying rulings in favor of the insurers, stating that USX “could not reasonably have expected when it obtained the insurance policies or at any later time to have had the coverage sought in this case for the consequence of its wrongful activities. While we are aware that USX obtained and paid for broad coverage, it should have recognized that there was some limit to it and we should regard its substantive contentions, though complex, as not meritorious.”
In an action to recover
damages for personal injuries, the plaintiff appeals from an order of the
Supreme Court, Queens County (Dollard, J.), dated August 15, 2002, which granted
the motion of the defendants Melissa I. Diamond and Cary L. Diamond, and the
separate motion of the defendant David A. Babb, for summary judgment dismissing
the complaint insofar as asserted against them on the ground that he 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 respondents appearing separately and filing separate briefs.
The defendants made a prima facie showing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject motor vehicle accident (see Toure v Avis Rent A Car Sys., 98 NY2d 345; Gaddy v Eyler, 79 NY2d 955). In opposition, the plaintiff failed to raise a triable issue of fact as to whether he sustained such an injury, since he failed to submit competent medical evidence in admissible form (see Grasso v Angerami, 79 NY2d 813; Rodney v Solntseu, 302 AD2d 442; Bourgeois v North Shore Univ. Hosp. at Forest Hills, 290 AD2d 525; Palo v Latt, 270 AD2d 323; Ford Motor Credit Co. v Prestige Gown Cleaning Serv., 193 Misc 2d 262).
In an action to compel
payment of insurance proceeds arising from the plaintiff's recovery of a
judgment in an underlying action entitled Levit v Chin in the Supreme
Court, Kings County, under Index No. 29428/92, the plaintiff appeals (1), as
limited by his brief, from so much of an order of the Supreme Court, Nassau
County (O'Connell, J.), entered April 5, 2002, as denied his motion for summary
judgment to recover the principal sum of $6,436,052.80, and granted that branch
of the defendant's cross motion which was to limit the plaintiff's recovery to
the principal sum of $750,000 plus interest which accrued on that amount while
it was held in escrow, and (2) a judgment of the same court dated June 11, 2002,
which is in favor of the defendant and against him dismissing the complaint and
awarding him the principal sum of $750,000 paid by Allstate into escrow plus
interest accruing thereon while it was deposited in an escrow account.
ORDERED that the appeal from the order is dismissed, without costs or disbursements; and it is further,
ORDERED that the judgment is modified, on the law, by deleting the second decretal paragraph thereof dismissing the complaint; as so modified, the judgment is affirmed, without costs or disbursements, the complaint is reinstated, and the matter is remitted to the Supreme Court, Nassau County, to compute the interest which accrued on the full amount of the judgment in the underlying action entitled Levit v Chin, in the Supreme Court, Kings County, under Index No. 29428/92 from the date of entry of that judgment until Allstate Insurance Company's deposit of $750,000 into escrow and for entry of an amended judgment awarding the plaintiff interest on the full amount of the judgment for that period of time, and the order is amended accordingly.
The appeal from the intermediate order must be dismissed because the right of direct appeal therefrom terminated with the entry of judgment in the action (see Matter of Aho, 39 NY2d 241, 248). The issues raised on the appeal from the order are brought up for review and have been considered on the appeal from the judgment (see CPLR 5501[a]).
The plaintiff's brother and ward, Alexander Levit, recovered a judgment in the sum of $24,727,616.22 against Alexander Chin in an underlying personal injury action entitled Levit v Chin, under Kings County Index No. 29428/92. Prior to the entry of judgment in that action, Alexander Chin's insurance carrier Allstate Insurance Company (hereinafter Allstate) offered to settle the underlying action for $500,000, which constituted the policy limits. The offer was rejected. Additional offers to settle the action were made subsequent to entry of judgment in that action.
Approximately two months after the judgment in the underlying action was entered, Allstate forwarded $750,000 to its attorney to be held in escrow "pending an appointment of a guardian" for Alexander Levit. Thereafter Leonid Levit was appointed guardian for his brother Alexander Levit and commenced the instant action to recover the $500,000 policy limits, costs, and interest which accrued on the full amount of the judgment in the underlying action.
Allstate's obligation to pay accrued interest is governed by the terms of its insurance policy which requires it to pay "all costs taxed against the 'insured' in any 'suit' we defend" and "all interest on the full amount of any judgment that accrues after entry of the judgment in any 'suit' we defend; but our duty to pay interest ends when we have paid, offered to pay or deposited in court the part of the judgment that is within our Limit of Insurance." The terms of that provision may not be interpreted less generously to the rights of the insured than 11 NYCRR 60-1.1(b) which requires an insurance carrier to pay "[A]ll costs taxed against the insured in any [lawsuit], and all interest accruing after entry of judgment until the insurer has paid or tendered or deposited in court such part of such judgment as does not exceed the applicable policy limits" (see Dingle v Prudential Prop. & Cas. Ins. Co., 85 NY2d 657).
Allstate's offers to settle the action were not unconditional, and consequently did not satisfy the definition of tender required by the regulation (see Fama v Metropolitan Prop. & Cas. Ins. Co., 242 AD2d 663; see Welhoff v Farm Bur. Town & Country Ins. Co., 54 SW3d 589 [Mo]; Safeway Ins. Co. of Ala. v Amerisure Ins. Co., 707 So 2d 218 [Ala]; Davis v Allstate Ins. Co., 434 Mass 174, 747 NE2d 141). However, Allstate's placement of $750,000 in escrow subsequent to the entry of judgment satisfied the definition of payment within the meaning of the policy (see Providence Washington Ins. Co. of Alaska v Fireman's Fund Ins. Cos., 778 P2d 200 [Alaska]). Payment could not be made to Alexander Levit directly, since concededly he was not mentally or physically capable of receiving it. In its letter to the plaintiff's attorney, Allstate stated that that sum was placed in escrow "pending appointment of a guardian" for Alexander Levit without specifying any additional conditions. The fact that the money was placed in the insured's attorney's escrow account is of no consequence, since the attorney owed a fiduciary obligation to "anyone with a beneficial interest in the trust" (Takayama v Schaefer, 240 AD2d 21, 25), including Alexander Levit and any guardian appointed to act on his behalf.
The $750,000 deposited in escrow was well in excess of the policy limits of $500,000, but was not sufficient to cover interest on the full amount of the judgment which accrued since entry of the judgment two months earlier. In determining whether payment of the policy limits is sufficient to stop the clock on the accrual of interest against the insurance carrier, one must look to the language of the policy (see Grimes v Swaim, 971 F2d 622).
Here, to stop the clock on the accrual of interest, the policy in issue requires payment of "our Limit of Insurance." The policy specifically states that Allstate's obligation to pay interest and costs is "[i]n addition to the Limit of Insurance" (emphasis supplied). Similarly, 11 NYCRR 60.1.1(b) provides that interest shall continue to accrue until payment of "such part of such judgment as does not exceed the applicable policy limits" and states that interest and costs incurred "shall be payable * * * in addition to the applicable policy limits." Accordingly, the terms "Limit of Insurance" and "applicable policy limits" do not include interest and costs. Payment of the the policy limits of $500,000 into escrow stopped the clock on the accrual of further interest on the full amount of the judgment (see Allegheny Airlines v Forth Corp., 663 F2d 751, 755, 756; Draper v Great Am. Ins. Co., 224 Tenn 552, 458 SW2d 428, 432; Levin v State Farm Mut. Auto. Ins. Co., 510 SW2d 455, 461 [Mo]).
Although Allstate's payment of in excess of $500,000 in escrow stopped the clock on the running of interest on the full amount of the judgment, the $750,000 deposited in escrow was not sufficient to satisfy Allstate's entire obligation. Allstate's obligation to the plaintiff includes the policy limits of $500,000, court costs of $1,425, and interest which accrued on the full amount of the judgment from the date of entry of the judgment in the underlying action until the deposit of the $750,000 in escrow. The matter is remitted to the Supreme Court, Nassau County, to calculate that amount, and for entry of an amended judgment accordingly.
SANTUCCI, J.P., GOLDSTEIN, H. MILLER and SCHMIDT, JJ., concur.
Travelers Insurance Co.
def Order, Supreme Court, New York County (Martin
Schoenfeld, J.), entered December 30, 2002, which, insofar as appealed
from, denied plaintiffs' motion to dismiss defendants-respondents' fifth
counterclaim, unanimously reversed, on the law, with costs, the motion granted
and the fifth counterclaim dismissed.
Plaintiffs are umbrella
and excess liability insurers that have issued policies to defendants Salomon
Smith Barney, Inc., Salomon Smith Barney Holdings, Inc., and Citigroup, Inc.
(collectively, the insureds). In this action, plaintiffs seek a declaration that
they are not obligated to provide coverage under these policies for certain
sexual discrimination, harassment and retaliation claims asserted against the
insureds by former employees. Among other things, plaintiffs allege that the
insureds failed to provide timely notice of the claims, as required by the
policies as a condition precedent to coverage; that other or underlying
insurance has not been exhausted so as to trigger coverage under the terms of
the policies; and that the underlying claims are not covered under the terms of
In their fifth counterclaim, the insureds assert a purported cause of action against plaintiffs for "bad faith denial of coverage" with respect to the underlying claims against the insureds. As a remedy for such bad faith, which is alleged in entirely conclusory fashion, the insureds seek compensatory and punitive damages in amounts to be determined at trial. Plaintiffs moved to dismiss the fifth counterclaim as legally insufficient pursuant to CPLR 3211(a)(7), and to dismiss the insureds' demand for an award of punitive damages. The IAS court dismissed the insureds' demand for punitive damages, based on determinations that the insureds had not alleged "a violation of a duty independent of the contract," and that "[p]laintiffs' theory of the case is not without merit." The court declined, however, to dismiss the fifth counterclaim to the extent it seeks compensatory damages.
We reverse. Allegations that an insurer had no good faith basis for denying coverage are redundant to a cause of action for breach of contract based on the denial of coverage, and do not give rise to an independent tort cause of action, regardless of the insertion of tort language into the pleading (see New York Univ. v Cont. Ins. Co., 87 NY2d 308, 319-320; Bettan v GEICO Gen. Ins. Co., 296 AD2d 469, 470, lv denied 99 NY2d 552; Makastchian v Oxford Health Plans, 281 AD2d 197, 198-199). Contrary to the view of the IAS court, it does not assist these insureds that New York law recognizes a cause of action against a liability insurer for breach of the duty of good faith in the defense or settlement of a claim (see Pavia v State Farm Mut. Auto. Ins. Co., 82 NY2d 445, 452-453), since it is undisputed that plaintiffs have never exercised any control over the defense or settlement of the underlying claims for which the insureds seek coverage.
This constitutes the decision and order of the Supreme Court, Appellate Division, First Department.