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Coverage Pointers - Volume V, No. 8

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10/23/03          NATIONAL UNION FIRE INS. CO. OF PITTSBURGH, PA v RED APPLE GROUP

New York State Supreme Court, Appellate Division, First Department

Claimant is Third-Party Beneficiary of Indemnity Agreement under Lease and Additional Insured Provisions

Where the indemnitee fails to notify the indemnitor of a settlement with the claimant, indemnification is conditioned upon the indemnitee’s demonstration that it would have been liable to the claimant, that there was no good defense, and that the settlement was in a reasonable amount. Neither side contested that a question of fact existed as to the reasonableness of the amount of the settlement. The only issues on appeal were whether National Union had demonstrated that it would have been liable to the claimant (HELM) and that there were no good defenses to the action by HELM against National Union and defendants. Court held that National Union has made such a showing. HELM had standing to assert a claim under the policy as a third-party beneficiary. Although HELM was not named as a third-party beneficiary, the policy endorsement, the certificate of insurance, the indemnification agreement and the lease clearly demonstrated an intent that HELM was to be a third-party beneficiary. The Policy endorsement was specifically and expressly created to satisfy the terms of the lease between defendants and HELM, which lease required that insurance on the property be maintained for the “mutual benefit” of HELM and the tenant defendants. Furthermore, defendants waived any right to make a claim under the policy endorsement at the time of its making, leaving HELM as the only possible claimant, thus evidencing its intended status as a third-party beneficiary.

 

10/21/03          AJ CONTRACTING CO., INC. v FOREST DATACOM SERVICES

New York State Supreme Court, Appellate Division, First Department

Issue Concerning Carrier’s Willingness to Accept Oral Notice of Claim Precludes Summary Judgment

In this coverage dispute concerning whether an additional insured gave timely notice of the claim, the court concluded that a question of fact existed whether the insurer evinced to the additional insured and its agents a willingness to permit a claimant to tender a claim orally, rather than strictly enforce its policy requirement of written notice. A letter by the third-party claims administrator, while rejecting another carrier’s tender of the claim pursuant to the named insured’s contractual indemnification obligation, advised that the carrier was evaluating whether the tender will be accepted pursuant to the insurance procurement obligation. This reservation of rights letter on behalf of the carrier acknowledged Travelers’ “oral request of May 14, 1998,” and contained no indication that the carrier required written notice of the claim in order to evaluate it. Both letters tended to show that the carrier received notice of the claim being tendered by the additional insured and, rather than rejecting the tender outright because it was not in writing, had decided to proceed with an evaluation of its merits. While the affidavit of the carrier stated that the carrier demanded compliance with the policy’s notice requirements, it made no specific reference to the requirement that notice be in writing.

 

10/20/03          VILLAGE MALL AT HILLCREST CONDOMINIUM v MERRIMACK MUT. FIRE INS. CO.

New York State Supreme Court, Appellate Division, Second Department

Issue of Fact Whether Asbestos is Pollutant under “Pollution Exclusion”

Although the Court of Appeals, as well as this court, has acknowledged that asbestos may be a thermal irritant, the term “asbestos” is not specifically included within the definition of “pollutants” under the pollution exclusion provision of the subject policies. Merrimack’s interpretation of the pollution exclusion clauses under the subject policies presents an ambiguity which must be resolved against it as insurer. As such, there was an issue of fact whether asbestos fell within the definition of a “pollutant” as defined under the terms of the policies.

 

10/14/03          BELLAMY v KAPLAN

New York State Supreme Court, Appellate Division, First Department

Jury’s Award of Future Damages Consistent with Finding that Plaintiff Sustained  Significant Limitation of Use of Body Function or System under Insurance Law’s “Serious Injury” Threshold; Permanent Injury Not Excluded from Definition

On the threshold issue of “serious injury” under Insurance Law § 5102(d), the jury found that plaintiff did not suffer a permanent and significant limitation of use of a body organ or member that is both permanent and significant, but did sustain a significant limitation of use of a body function or system. The jury also awarded plaintiff damages for future pain and suffering based on a 21 ½ year life expectancy. Defendant moved to set aside the verdict as against the weight of the evidence, but the court, sua sponte, raised the issue whether the jury’s verdict was inconsistent. Because the award for future damages, given the plaintiff's age, was the equivalent of a finding of permanency, the court believed the verdict to be inconsistent. However, the court properly instructed the jury that plaintiff met the threshold issue of “serious injury” if he sustained either a permanent and significant limitation of use of a body organ or member or a significant limitation of use of a body function or system. Indeed, “[a] permanent injury is not excluded” from the definition of a significant limitation of use of a body function or system. Therefore, the jury’s verdict was not inconsistent and was reinstated.

 

10/09/03          MJ FRENZY, LLC v UTICA NATIONAL INS. GROUP

New York State Supreme Court, Appellate Division, First Department

Availability of Justification Defense to Assault Claim Excused Insured’s Late Notice of Occurrence

Insured’s bartender was involved in an altercation after a drunk, disorderly and abusive patron grabbed him. Police responded and the patron was eventually removed from the premises complaining of an injury to his ankle. Thereafter, plaintiff was served with a summons and complaint by the patron alleging assault and battery, negligent hiring and supervision and violation of the Dram Shop Act. Insured forwarded the suit papers to its insurer two days later. The insurer disclaimed coverage, relying on the exclusion for intentional acts and asserting that notice was untimely. The policy contained an exclusion for “bodily injury … intended from the standpoint of the insured,” which exempted from the exclusion “bodily injury resulting from the use of reasonable force to protect persons or property.” As to late notice, the court held that because of the availability of justification as a defense to the assault claim, plaintiff’s belief that no lawsuit would be brought was reasonable and its duty to notify defendant of the incident was not triggered until its receipt of the complaint. Moreover, the policy exclusion did not apply. The cases cited by the insurer in support of its contention that the policy's intentional acts exclusion relieved it of any duty to defend or indemnify plaintiff for the acts of its employee were inapposite, since they dealt with the assault and battery exclusion.

 

10/09/03          HARRIMAN ESTATES DEVELOPMENT CORP. v GENERAL ACCIDENT INS. CO.

New York State Supreme Court, Appellate Division, First Department

Decision that Named Insured Not Liable for Indemnification in Underlying Action Binding in Additional Insured’s Action for Coverage

A contract between Harriman and X Traire provided that X Traire was to indemnify Harriman for liabilities “arising out of or in any way relating to the work performed … by [X Traire] … under this contract.” The obligation to indemnify was the same as, or broader than that imposed under the additional insured clause in the insurance policy procured by X Traire, which was limited to liabilities “arising out of  … ‘[X-Traire’s] work’ for [Harriman].” Thus, in granting X Traire’s motion in the underlying action for summary judgment dismissing Harriman’s third-party complaint, the court necessarily decided that the injuries claimed did not arise out of X Traire’s work for Harriman, and therefore were not covered by the additional insured clause. Therefore, the court held it was appropriate to collaterally estop Harriman from asserting coverage.

 

10/07/03          CABREJA v MORRIS

New York State Supreme Court, Appellate Division, First Department

Unsworn Medical Affidavit Inadequate to Defeat Serious Injury Threshold Motion

Court held that summary judgment dismissing the complaint on the ground that plaintiff did not sustain a serious injury as required by Insurance Law § 5102(d), was properly granted. In opposition to defendant’s prima facie showing of no serious injury, plaintiff submitted the report of his treating physician which was not affirmed or sworn, and thus failed to provide the requisite medical evidence of serious injury. Moreover, the physical limitations described therein were not supported by clinical findings of decreased range of motion, or shown to be causally related to the accident by the medical evidence submitted by defendant.

 

10/06/03          EAGLE INS. CO. v BROWN

New York State Supreme Court, Appellate Division, Second Department

Arbitration of Uninsured Motorist Claim Stayed for Respondent’s Failure to Report Hit-and-run and Notify Carrier

Petition to stay arbitration of uninsured motorist claim should have been granted where petitioner made unopposed showing that respondent failed to report the alleged hit-and-run accident to the police within 24 hours, and failed to notify the petitioner of the uninsured motorist claim as soon as practicable.

 

Across Borders

 

Visit the HOT CASES section of the Federation of Defense and Corporate Counsel website for cases covering a broad range of legal issues from other jurisdictions.

 

10/22/03          WHITEHEAD v ZURICH AM. INS. CO. 

Fifth Circuit (applying Mississippi law)

Claim against Workers Compensation Carrier for Intentional Tort Dismissed Because of Failure to Exhaust Administrative Remedies

The district court’s dismissal of plaintiff’s claim and denial of motion to amend were affirmed where plaintiff failed to exhaust the administrative remedial process before bringing an intentional tort claim against his workers compensation carrier.

 

10/21/03          DELK v MARKEL INSURANCE CO.

Oklahoma Supreme Court

Less Than 100% Ownership Does Not Preclude Full Recovery of Policy Limits of Insurance on Real Property

Delk owned a 1/6 interest in a home. She was the sole named insured on a policy of homeowners’ insurance for the dwelling. The home was completely destroyed by fire. Defendant insurance company, upon learning she was only a 1/6 co-tenant denied payment of the policy limits. The question certified to the Oklahoma Supreme Court from the US District Court for the Western District of Oklahoma, was whether Delk could recover the policy’s dwelling coverage limits even though she was not the sole owner. The court determined that she could recover the full policy limits, reasoning that a co- tenant is obligated to use ordinary care in the use of the common property and stands liable to the other joint tenants for damage to or destruction of the property. A cotenant in possession may hence become subject to pecuniary loss in tort if the dwelling is damaged or destroyed. This legal liability provides an insurable interest for purposes of property insurance.

Karen White and Jacqueline Jauregui of Sedgwick, Detert, Moran & Arnold

 

10/21/03          OKULY v USF&G INSURANCE CO.

Montana Supreme Court

Workers Compensation Exclusive Remedy, Even if Motorist Uninsured

Appellant’s wife was killed while traveling as a passenger in a car, in the course and scope of her employment, which was hit by another vehicle. The other vehicle was also driven by a person in the course and scope of their employment. Both the deceased and the driver of the other vehicle worked for the same employer. Appellant received worker’s compensation benefits, and also brought suit against the employer’s insurance carrier for wrongful death under the policy provision for uninsured motorists. The court decided that Appellant was not legally entitled to recover damages, and was limited to the exclusive remedy of worker’s compensation, which he had received.

Karen White and Jacqueline Jauregui of Sedgwick, Detert, Moran & Arnold

 

10/20/03          AUTO-OWNERS INS. CO. v CARL BRAZELL BUILDERS, INC.
South Carolina Supreme Court

Suit for Diminution of Value Due to Chemical Pollutants Not “Physical Injury” to Property

Claimants purchased homes from contractors that were built on land they allege contains potentially hazardous materials of which the contractors were aware. Claimants brought an action against contractors for economic damages and diminution of value of their property. Contractors’ insurers seek declaratory relief, asserting that the policies issued to Contractors preclude coverage for the claims in the underlying litigation. The policies provide coverage for “property damage” caused by an “occurrence.” “Property damage” was defined as physical injury to tangible property, including all resulting loss of use of that property. Claimant property owners did not allege physical damage to property, but rather alleged economic damage and diminution of value. Diminished value of tangible property does not constitute property damage within the meaning of CGL policies which define property damage as physical injury, therefore the claims do not fall within the policies held by the contractors.

Karen White and Jacqueline Jauregui of Sedgwick, Detert, Moran & Arnold

 

10/20/03          GEORGIA NORTHEASTERN RAILROAD, INC. v LUSK

Georgia Supreme Court

Recovery for Diminution in Value and Restoration Costs Amounts to Impermissible Double Recovery

Lusk owned just over 90 acres on a riverfront, a portion of which property was damaged by Georgia Northeastern. He was awarded approximately $5,000 to compensate him for diminution of value of property as a result of erosion caused by Georgia Northeastern, and also awarded over $180,000 for the estimated costs to repair the property. Because the injury to the property would have been remedied by the restoration costs, the recovery for diminution constituted an impermissible double recovery.

Karen White and Jacqueline Jauregui of Sedgwick, Detert, Moran & Arnold

 

10/20/03          CSX TRANSPORTATION, INC. v CITY OF GARDEN CITY  
Georgia Supreme Court

Sovereign Immunity May be Waived by Purchase of Liability Insurance Covering Occurrence to Which Defense Applies

Garden City contracted with CSX to use railroad right-of-way to install sewer lines; agreement required Garden City to indemnify CSX for all liabilities suffered in connection with the project and to maintain insurance covering indemnity obligations. The Court held that agreements to indemnify by municipalities are void as ultra vires, but the purchase of liability insurance for occurrences that may be subject to the sovereign immunity defense becomes a waiver of sovereign immunity.

Erin Adrian and Jacqueline Jauregui of Sedgwick, Detert, Moran & Arnold

 

10/17/03          DICKSON v SELECTIVE INS. GROUP, INC.

New Jersey Appellate Division

Corporate Executive Not Entitled to UM/UIM Coverage Even Though Shareholder of Insured Corporation and Authorized Driver of Covered Vehicle

Plaintiff was injured in accident in a third party’s car; his injuries exhausted the policy limits of both the driver of the car he was in and the other car involved. His personal vehicle was purchased for him by the corporation and was covered by a corporate policy for business and personal use. But, since he was not specifically named in the policy and had no additional “drive other car” coverage (one of the other executives did), the court held he could not be covered by the policy’s uninsured/underinsured motorist coverage as the vehicle was not owned or insured by his employer and it was not being used for business purposes.

Erin Adrian and Jacqueline Jauregui of Sedgwick, Detert, Moran & Arnold

 

10/17/03          RICHARDS v MONTGOMERY

Kentucky Court of Appeals

Auto Policy Covers Vehicle Even if Certificate of Title Has Not Yet Passed to Policyholder

Title to log truck involved in an accident had not yet passed from prior owner to purchaser. As a result, vehicle was covered by two policies-that of the certificate owner as well has the new owner who had purchased and paid premiums for a policy covering the vehicle. Carrier of certificate owner’s policy settled with the injured party and filed suit for indemnification by new purchaser’s carrier. The new owner’s carrier argued they had no liability because their policyholder did not own the vehicle. The Court held both policies covered the vehicle, and the amount of coverage would be determined proportionally by the amount of their policy limits.

Erin Adrian and Jacqueline Jauregui of Sedgwick, Detert, Moran & Arnold

 

10/15/03          CDM INVESTORS v AMERICAN NATIONAL FIRE INS. CO.

California Court of Appeal

Insured’s Payment of Response Costs not Covered under Damages-Only Liability Policies; Insurers’ Duty to Defend not Triggered By Purely Defensive Affirmative Defenses

The California Court of Appeal, Sixth Appellate District, affirmed demurrers sustained by the Santa Clara County Superior Court which had been filed by insurers on the ground that the insurers’ obligations to indemnify for “damages” and to defend “suits” did not cover (1) costs incurred in response to an environmental claim, or (2) costs allegedly incurred to defend against affirmative defenses which could not have been asserted independently in a suit for damages. The court of appeal first discussed the California Supreme Court’s decisions in Foster-Gardner, Inc. v. National Union Fire Ins. Co. (1998) 18 Cal.4th 857 (Foster-Gardner) and Certain Underwriters at Lloyd’s of London v. Superior Court (2001) 24 Cal.4th 945 (Powerine). It found that read together, Foster-Gardner and Powerine stand for the proposition that the duty to defend a “suit” seeking “damages” under pre-1986 CGL policies is restricted to lawsuits prosecuted in a court and does not include claims, which can denote proceedings conducted by administrative agencies under environmental statutes. Likewise, the duty to indemnify for “all sums that the insured becomes legally obligated to pay as ‘damages’” is limited to money ordered by a court, and does not include “expenses” such as may be incurred in responding to administrative agency orders.

Michael Lucey of Gordon & Rees, LLP

 

And In Defense

 

10/21/03          STRIEGEL v HILLCREST HEIGHTS DEVELOPMENT

New York State Court of Appeals

Slip Down (But Not Off) Slanted Roof is Elevation-Related Risk Subjecting Owner and General Contractor to Labor Law Section 240(1) Liability

The New York high court determined that where a roofer slips down a slanted roof as a result of a lack of protective equipment, his claim falls within the “Scaffolding Law” even though he did not fall to the ground.

 

10/21/03          PRATS v PORT AUTHORITY OF NEW YORK AND NEW JERSEY

New York State Court of Appeals

In Second of Two Labor Law §240(1) Decisions, New York High Court Gives Broadened Protection to “Inspection” Activities

As an assistant mechanic, plaintiff worked on overhauling air conditioning systems, and return and exhaust units. He also assisted a more senior mechanic in changing bearings, motor sheaves and flywheels. His specific tasks varied as he received each day’s assignments when signing in for work. On the day of the injury, plaintiff and co-worker Bob Card were readying air handling units for inspection, using tools (wrenches, a welder set and “Craftsman-type” tools) to perform any work that had to be done. Card set up a ladder to inspect an air conditioning return fan about eight feet tall, suspended at a height of approximately 20 feet. Plaintiff held the ladder while Card climbed up and on to the unit. Card then asked plaintiff to give him a wrench, and plaintiff began to climb the ladder. When he was about 15 feet off the ground, the ladder slid out from under him, and he fell. The ladder bounced off the floor and hit plaintiff in the face before he fell to the ground. Since the contract required his employer to level floors, lay concrete and rebuild walls to replace large air filtering systems, Court finds that plaintiff was involved in “alteration” of building. Court finds that “inspection” in preparation for “alteration” of building was within ambit of Labor Law §240(1) protection.

 

10/22/03          New Legislation Eliminates Statement of Specific Dollar Amount of Damages from Pleadings

Governor Pataki signed a bill that eliminates demands for the amount of damages in all actions for personal injuries or wrongful death, and allows attorneys to make reference, during opening statements and/or closing statements, to a specific dollar amount that the attorney believes to be appropriate compensation. The law will go into effect on November 21, 2003.

 

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Text of Reported Decisions

 

BELLAMY v KAPLAN

 

Order, Supreme Court, Bronx County (Alan Saks, J.), entered on or about April 4, 2002, which granted defendant's motion to set aside the jury verdict and directed a new trial on the issue of serious injury, unanimously reversed, on the law, without costs, the motion denied and the verdict reinstated.

On the threshold issue of serious injury (see Insurance Law § 5102[d]), the jury found that plaintiff did not suffer a permanent and significant limitation of use of a body organ or member that is both permanent and significant, but did sustain a significant limitation of use of a body function or system. The jury also awarded plaintiff damages for future pain and suffering based on a 21 1/2 year life expectancy. Defendant moved to set aside the verdict as against the weight of the evidence, but the court, sua sponte, raised the issue whether the jury's verdict was inconsistent. Because the award for future damages, given the plaintiff's age, was the equivalent of a finding of permanency, the court believed the verdict to be inconsistent. However, the court properly instructed the jury that plaintiff met the threshold issue of serious injury if he sustained either a permanent and significant limitation of use of a body organ or member or a significant limitation of use of a body function or system. Indeed, "[a] permanent injury is not excluded" from the definition of a significant limitation of use of a body function or system (see
Preston v Young, 239 AD2d 729, 732). Therefore, the jury's verdict was not inconsistent and is reinstated.

 

This constitutes the decision and order of the Supreme Court, Appellate Division, First Department.

 

MJ FRENZY, LLC v UTICA NATIONAL INS. GROUP

 

Judgment, Supreme Court, New York County (Joan Madden, J.), entered April 4, 2003, which, inter alia, denied defendant's motion for summary judgment and declared that defendant was obligated to provide plaintiff with a defense to the underlying action against it, unanimously affirmed, with costs.

 

Plaintiff jazz club is insured under a policy issued by defendant that contains an exclusion for "bodily injury * * * intended from the standpoint of the insured" but which exempts from such exclusion "bodily injury resulting from the use of reasonable force to protect persons or property." On April 23, 2000, plaintiff's bartender was involved in an altercation after a drunk, disorderly and abusive patron grabbed him. Police responded and the patron was eventually removed from the premises complaining of an injury to his ankle. On or about March 21, 2001, plaintiff was served with a summons and complaint by the patron alleging assault and battery, negligent hiring andsupervision and violation of the Dram Shop Act (General Obligations Law § 11-101[1]), which plaintiff forwarded to defendant two days later. Defendant disclaimed coverage, relying on the exclusion for intentional acts and asserting that notice was untimely.

 

Because of the availability of justification as a defense to the assault claim, plaintiff's belief that no lawsuit would be brought was reasonable and its duty to notify defendant of the incident was not triggered until its receipt of the complaint (see Merchants Mut. Ins. Co. v Hoffman, 56 NY2d 799, 801). The cases cited by defendant in support of its contention that the policy's intentional acts exclusion relieved it of any duty to defend or indemnify plaintiff for the acts of its employee are inapposite, since the governing policies in those cases expressly provide for the exclusion of any claims arising out of assault and battery (see U.S. Underwriters v Val-Blue Corp., 85 NY2d 821, 823; Perez-Mendez v Roseland Amusement & Dev. Corp., __ AD2d __, 757 NYS2d 848; Handlebar Inc. v Utica First Ins. Co., 290 AD2d 633, lv denied 98 NY2d 601).

 

This constitutes the decision and order of the Supreme Court, Appellate Division, First Department.

 

HARRIMAN ESTATES DEVELOPMENT CORP. v GENERAL ACCIDENT INS. CO.

 

Order, Supreme Court, New York County (Diane Lebedeff, J.), entered July 19, 2002, which, in a declaratory judgment action involving defendant insurer (Transcontinental)'s obligation to defend and indemnify plaintiff home builder (Harriman) in an underlying personal injury action brought against Harriman and others by an employee of Transcontinental's insured (X Traire), one of Harriman's contractors, granted Transcontinental's motion for summary judgment dismissing the complaint on the ground of collateral estoppel, unanimously affirmed, with costs.

 

The contract between Harriman and X Traire provides that X Traire is to indemnify Harriman for liabilities "arising out of or in any way relating to the work performed . . . by [X Traire] . . . under this contract." Such obligation to indemnify is the same as, if not broader than that imposed under the additional insured clause in the Transcontinental insurance policy procured by X Traire, which is limited to liabilities "arising out of . . . '[X-Traire's] work' for [Harriman]." Thus, in granting X Traire's motion in the underlying action for summary judgment dismissing Harriman's third-party complaint, the court necessarily decided that the injuries claimed therein did not arise out of X Traire's work for Harriman, and therefore are not covered by the additional insured clause. Indeed, given an indemnity clause in a construction contract that requires the subcontractor to obtain insurance naming the general contractor as an additional insured, it should come as no surprise that the issue of liability under the contract's indemnity clause would have consequences on the issue of liability under the policy's additional insured clause. Thus, it is appropriate to collaterally estop Harriman from asserting coverage in this action even though, for unstated reasons, it chose not to oppose X Traire's motion for summary judgment in the underlying action (see Buechel v Bain, 97 NY2d 295, 303-305, cert denied 535 US 1096).

 

In any event, it appears that X Traire's employee was working on a completely different job when injured, and merely returned to Harriman's job site to retrieve some items that had been left behind after the Harriman job had been completed. Given these facts we would find, in the absence of collateral estoppel, that the claimed injuries did not arise out of X Traire's work for Harriman (see Glynn v United House of Prayer for All People, 292 AD2d 319, 323), and declare that Transcontinental is not obligated to defend and indemnify Harriman.

 

This constitutes the decision and order of the Supreme Court, Appellate Division, First Department.

 

CABREJA v MORRIS

 

Order, Supreme Court, Bronx County (Gerald Esposito, J.), entered April 16, 2002, which, insofar as appealed from, granted defendant's motion for summary judgment dismissing the complaint on the ground that plaintiff did not sustain a serious injury as required by Insurance Law § 5102(d), unanimously affirmed, without costs.

 

In opposition to defendant's prima facie showing of no serious injury, plaintiff submitted the report of his treating physician which, while denominated an affirmation, is neither affirmed (CPLR 2106) nor sworn (see Merrill/New York Co. v Celebrity Sys., 300 AD2d 206), and thus failed to provide the requisite medical evidence of serious injury (see Grasso v Angerami, 79 NY2d 813; Charlton v Almaraz, 278 AD2d 145). In any event, the physical limitations described therein are neither supported by clinical findings of decreased range of motion (see Toure v Avis Rent A Car Sys., 98 NY2d 345, 350), nor shown to becausally related to the accident by the medical evidence of record submitted by defendant (see Chrisomalides v Ekow, 291 AD2d 202).

 

This constitutes the decision and order of the Supreme Court, Appellate Division, First Department.

 

EAGLE INS. CO. v BROWN

 

In a proceeding pursuant to CPLR article 75 to stay arbitration of a claim for uninsured motorist benefits, the petitioner appeals from (1) an order of the Supreme Court, Westchester County (Nastasi, J.), entered September 20, 2002, which denied the petition and dismissed the proceeding, and (2) an order of the same court dated December 11, 2002, which denied its motion for leave to reargue or renew the prior motion.

 

ORDERED that the order entered September 20, 2002, is reversed, on the law, without costs or disbursements, the petition is granted, and arbitration is permanently stayed; and it is further,

 

ORDERED that the appeal from so much of the order dated December 11, 2002, as denied that branch of the defendant's motion which was for leave to reargue is dismissed, without costs or disbursements, as no appeal lies from an order denying leave to reargue, and the appeal from so much of the order dated December 11, 2002, as denied that branch of the motion which was for leave to renew is dismissed as academic, without costs or disbursements, in light of our determination on the appeal from the order dated September 20, 2002.

 

Contrary to the Supreme Court's determination, the petitioner established that it properly commenced this proceeding to stay arbitration by filing the petition with the Clerk of the Supreme Court and purchasing an index number (see CPLR 304). Moreover, since the petitioner made an unopposed showing that the respondent failed, among other things, to report the alleged hit-and-run accident to the police within 24 hours, and failed to notify the petitioner of the uninsured motorist claim as soon as practicable, the petition for a permanent stay of arbitration should have been granted (see Matter of Interboro Mut. Indemnity Ins. Co. v Brown, 300 AD2d 660; Matter of Government Employees Ins. Co. v Snell, 286 AD2d 682; State Farm Mut. Ins. Co. v Genao, 210 AD2d 340; Matter of United States Fire Ins. Co. v Williams, 166 AD2d 538).

 

FLORIO, J.P., S. MILLER, FRIEDMANN and LUCIANO, JJ., concur

 

 

S T A T E   O F   N E W   Y O R K                  

________________________________________________________________________
                                                                              

4404

2003-2004 Regular Sessions                      
                                                                              

I N  S E N A T E                           
                                                                              

April 14, 2003                            

___________                             

 

Introduced  by  Sen.  DeFRANCISCO -- read twice and ordered printed, and when printed to be committed to the Committee on Codes               

 

AN ACT to amend the civil practice law and rules, in relation to  eliminating  demands  for  the  amount of damages sought in all actions for personal injuries or wrongful death                                  
                                                                              

THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND  ASSEMBLY, DO ENACT AS FOLLOWS:                                              
                                                                              

1   Section  1.  Section  3017  of  the  civil  practice law and rules, as
2  amended by chapter 955 of the  laws  of  1976  and  subdivision  (c)  as
3  amended  by  chapter  442  of  the  laws  of 1989, is amended to read as
4  follows:                                                               

5    S 3017. Demand  for  relief.  (a)  Generally.    Except  as  otherwise
6  provided  in  subdivision (c) of this section, every complaint, counter-

7  claim, cross-claim, interpleader complaint,  and  third-party  complaint

8  shall contain a demand for the relief to which the pleader deems himself

9  entitled.    Relief in the alternative or of several different types may

10  be demanded.  Except as provided in section 3215, the court may grant
11  any  type  of  relief  within  its jurisdiction appropriate to the proof

12  whether or not demanded, imposing such terms as may be just.           

13    (b) Declaratory judgment. In an action for a declaratory judgment, the
14  demand for relief in the complaint shall specify the  rights  and  other
15  legal  relations  on  which a declaration is requested and state whether
16  further or consequential relief is or could be claimed  and  the  nature
17  and extent of any such relief which is claimed.                        
18    (c)  {Medical or dental malpractice action or action against a munici-
19  pal corporation} PERSONAL INJURY OR WRONGFUL DEATH ACTIONS. In an action
20  TO RECOVER DAMAGES for {medical or dental malpractice or  in  an  action 21  against a municipal corporation, as defined in section two of the gener-
22  al  municipal  law}  PERSONAL INJURIES OR WRONGFUL DEATH, the complaint,
23  counterclaim,  cross-claim,  interpleader  complaint,  and   third-party
24  complaint  shall contain a prayer for general relief but shall not state
                                                                              

EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets

{ } is old law to be omitted.                    

LBD13788-02-3
                                                                              

S. 4404                             2                                  
                                                                              

1  the amount of damages to which the pleader deems  himself  entitled.  If
2  the  action  is  brought  in  the supreme court, the pleading shall also
3  state whether or not the amount of damages sought exceeds the  jurisdic-
tional  limits  of all lower courts which would otherwise have jurisdic-
tion.  Provided, however, that a party against whom an action TO RECOVER
6  DAMAGES for {medical or dental malpractice} PERSONAL INJURIES OR  WRONG-
FUL  DEATH  is  brought  {or the municipal corporation}, may at any time
8  request a supplemental demand setting forth the total damages  to  which
9  the  pleader  deems  himself  entitled.  A  supplemental demand shall be
10  provided by the party bringing the action within  fifteen  days  of  the
11  request.  In  the  event  the  supplemental  demand is not served within
12  fifteen days, the court, on motion, may  order  that  it  be  served.  A
13  supplemental demand served pursuant to this subdivision shall be treated
14  in  all  respects  as  a demand made pursuant to subdivision (a) of this
15  section.  
16    S 2. Rule 4016 of the civil practice law and rules, as  renumbered  by
17  chapter 318 of the laws of 1962, is amended to read as follows:        
18    Rule  4016. Opening and closing statements. (A) Before any evidence is
19  offered, an attorney for each plaintiff having a separate right, and  an
20  attorney for each defendant having a separate right, may make an opening
21  statement.  At  the  close  of  all the evidence on the issues tried, an
22  attorney for each such party may make a  closing  statement  in  inverse
23  order to opening statements.                                           
24    (B) IN ANY ACTION TO RECOVER DAMAGES FOR PERSONAL INJURIES OR WRONGFUL
25  DEATH,  THE  ATTORNEY  FOR A PARTY SHALL BE PERMITTED TO MAKE REFERENCE,
26  DURING OPENING STATEMENT AND/OR DURING CLOSING STATEMENT, TO A  SPECIFIC
27  DOLLAR  AMOUNT THAT THE ATTORNEY BELIEVES TO BE APPROPRIATE COMPENSATION
28  FOR ANY ELEMENT OF DAMAGE THAT IS SOUGHT TO BE RECOVERED IN THE  ACTION.
29  IN  THE EVENT THAT AN ATTORNEY MAKES SUCH A REFERENCE IN AN ACTION BEING
30  TRIED BY A JURY, THE COURT SHALL, UPON THE REQUEST OF ANY PARTY,  DURING
31  THE  COURT`S  INSTRUCTIONS  TO THE JURY AT THE CONCLUSION OF ALL CLOSING
32  STATEMENTS, INSTRUCT THE JURY THAT:                                    
33    (1) THE ATTORNEY`S REFERENCE TO SUCH SPECIFIC DOLLAR AMOUNT IS PERMIT-
34  TED AS ARGUMENT;                                                       
35    (2) THE ATTORNEY`S REFERENCE  TO  A  SPECIFIC  DOLLAR  AMOUNT  IS  NOT
36  EVIDENCE AND SHOULD NOT BE CONSIDERED BY THE JURY AS EVIDENCE; AND     
37    (3) THE DETERMINATION OF DAMAGES IS SOLELY FOR THE JURY TO DECIDE.   

38    S  3.  This  act shall take effect on the thirtieth day after it shall
39  have become a law.

 

National Union Fire Ins. Co. of Pittsburgh, PA, v Red Apple Group, Inc.

 

Order, Supreme Court, New York County (Karla Moskowitz, J.), entered April 9, 2003, which denied defendants' motion for summary judgment, and implicitly granted plaintiff insurer's motion for partial summary judgment on the issue of defendants' liability to indemnify it for a settlement entered into with a third party to the extent of finding that the only issue left for trial was the reasonableness of the settlement amount paid by plaintiff, unanimously affirmed, with costs.

 

Where, as here, the indemnitee fails to notify the indemnitor of a settlement with the claimant, indemnification is conditioned upon the indemnitee's demonstration that it would have been liable to the claimant, that there was no good defense, and that the settlement was in a reasonable amount (see Chase Manhattan Bank v 264 Water St. Assocs., 222 AD2d 229, 231; Feuer v Menkes Feuer Inc., 8 AD2d 294, 299). Neither side contests that a question of fact exists as to the reasonableness of the amount of the settlement, as the motion court found. The only issues on appeal, apparently resolved by the motion court in plaintiff National Union's favor, are whether National Union has demonstrated that it would have been liable to the claimant (HELM) and that there were no good defenses to the action by HELM against National Union and defendants. We find that National Union has made such a showing.

 

HELM had standing to assert a claim under the policy as a third-party beneficiary. Although HELM was not named as a third-party beneficiary, the Policy endorsement, the Certificate of Insurance, the indemnification agreement and the lease clearly demonstrate an intent that HELM was to be a third-party [*2]beneficiary (see Fourth Ocean Putnam Corp. v Interstate Wrecking Co., 66 NY2d 38, 44). The Policy endorsement was specifically and expressly created to satisfy the terms of the lease between defendants and HELM, which lease required that insurance on the property be maintained for the "mutual benefit" of HELM and the tenant defendants. Furthermore, defendants waived any right to make a claim under the Policy endorsement at the time of its making, leaving HELM as the only possible claimant, thus evidencing its intended status as a third-party beneficiary (Alicea v City of New York, 145 AD2d 315, 318 citing Fourth Ocean Putnam Corp. v Interstate Wrecking Co., supra at 45). Additionally, it is uncontested that the property was destroyed and that defendant tenants were liable for its repair or replacement, and that, as the insurer of the property, National Union became obligated to make the payment.

 

Defendants' contention that there were good defenses to the action with HELM are conclusory and speculative, and as such, fail to raise a triable issue of fact. Furthermore, defendants' assertion that National Union breached the Policy by paying the settlement money, in escrow, to HELM, instead of defendants' related company, was expressly rejected when defendants' breach of contract counterclaim was dismissed on a prior motion, which disposition was affirmed by this Court (281 AD2d 296).

We have examined defendants' remaining contentions and find them unavailing.

 

THIS CONSTITUTES THE DECISION AND ORDER
OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.


Village Mall at Hillcrest Condominium v
Merrimack Mut. Fire Ins. Co.

 

In an action, inter alia, for a judgment declaring that the defendant Merrimack Mutual Fire Insurance Company is obligated to defend and indemnify the plaintiff in an underlying action entitled Pitcairn v A.C. & S., Inc., pending in the Supreme Court, New York County, under Index No. 111557/99, the defendant Merrimack Mutual Fire Insurance Company appeals from an order of the Supreme Court, Queens County (Dollard, J.), dated May 24, 2001, which denied its [*2]motion for summary judgment.

 

ORDERED that the order is affirmed, with costs.

 

The plaintiff commenced this action, inter alia, for a judgment declaring that the defendant Merrimack Mutual Fire Insurance Company (hereinafter Merrimack) was obligated under seven successive annual insurance policies to provide a defense and/or indemnify it in connection with an underlying personal injury action brought against it arising out of asbestos inhalation. Merrimack disclaimed coverage based upon the pollution exclusion clauses under the subject policies.

 

The pollution exclusion clauses under the subject policies indicated that coverage did not apply to "'bodily injury' or 'property damage' arising out of the actual, alleged or threatened discharge, dispersal, release or escape of pollutants." Pollutants were defined as "any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste includes materials to be recycled, reconditioned or reclaimed" (emphasis added).

 

Merrimack moved for summary judgment in the declaratory judgment action. The Supreme Court denied the motion, finding that while Merrimack established, prima facie, its entitlement to judgment as a matter of law, there were issues of fact as to whether asbestos was considered a "pollutant," as that term was defined under the subject policies.

"To negate coverage by virtue of an exclusion, an insurer must establish that the exclusion is stated in clear and unmistakable language, is subject to no other reasonable interpretation, and applies in the particular case" (Continental Cas. Co. v Rapid-Am. Corp., 80 NY2d 640, 652; see Belt Painting Corp. v TIG Ins. Corp., 100 NY2d 377; Westview Assocs. v Guaranty Natl. Ins. Co., 95 NY2d 334, 340). Where the language of the policy "is doubtful or uncertain in its meaning, any ambiguity must be resolved in favor of the insured and against the insurer" (see Westview Assocs. v Guaranty Natl. Ins. Co., supra at 340). Further, if the exclusionary clause fails to include the particular loss that the insurer alleges, then the insured is entitled to be defended and possibly indemnified (id. at 340; see also Servidone Constr. Corp. v Security Ins. Co. of Hartford, 64 NY2d 419, 425; Seaboard Sur. Co. v Gillette Co., 64 NY2d 304; Cepeda v Varveris, 234 AD2d 497).

 

Although the Court of Appeals, as well as this court, has acknowledged that asbestos may be a thermal irritant (see Belt Painting v TIG Ins. Corp., supra; Continental Cas. Co. v Rapid-[*3]Am. Corp., supra; A-One Oil v Massachusetts Bay Ins. Co., 250 AD2d 633), the term "asbestos" is not specifically included within the definition of "pollutants" under the pollution exclusion provision of the subject policies. Merrimack's interpretation of the pollution exclusion clauses under the subject policies presents an ambiguity which must be resolved against it as insurer. As such, there is an issue of fact as to whether asbestos falls within the definition of a "pollutant" as defined under the terms of the policies herein. Accordingly, the Supreme Court properly denied the motion by Merrimack for summary judgment.

 

FEUERSTEIN, J.P., S. MILLER, FRIEDMANN and COZIER, JJ., concur.

 

AJ Contracting Company Inc. v. Forest Datacom Services Inc.

 

Order, Supreme Court, New York County (Paula Omansky, J.), entered January 2, 2002, which, inter alia, granted the motion of defendant CIGNA Property & Casualty Insurance Company for summary judgment dismissing the claim of plaintiff AJ Contracting Company against it, and denied plaintiff's motion for summary judgment and a declaration that CIGNA was obligated to defend plaintiff in an underlying personal injury action, unanimously modified, on the law, so as to grant the motion of CIGNA only to the extent of declaring that CIGNA has no obligation to defend AJ Contracting in the underlying personal injury action, and otherwise deny defendant-respondent's motion and reinstate the complaint, and otherwise affirmed, without costs.

 

The core of the current dispute regarding insurance coverage initially focuses on whether AJ Contracting, as an additional insured under the CIGNA insurance policy procured by Forest Datacom Services, gave proper timely notice of the claim to CIGNA. CIGNA claims that it did not receive the requisite written notice until it was served with the third-party summons and complaint in November 1998, well outside the time frame for proper notice.

 

The CIGNA policy requires written notice of a claim, and we agree with the motion court's implicit conclusion that plaintiff failed to establish written notice to CIGNA as a matter of law by the testimony of Travelers' representative Mary Kawas-Rutolo. However, other documentation regarding communications between CIGNA and Travelers during the spring of 1998 have a bearing on this claim. Review of these documents leads us to conclude that a question of fact exists as to whether CIGNA evinced to AJ and its agents a willingness to permit a claimant to tender a claim orally, rather than strictly enforce its policy requirement of written notice.

A letter by Forest's third-party claims administrator, ESIS, dated April 28, 1998, while rejecting Traveler's tender of AJ's claim pursuant to Forest's contractual indemnification obligation, advised that "Carolann Myrtetus of INA [CIGNA] is evaluating whether the tender will be accepted pursuant to the insurance procurement obligation." Although in her affidavit Myrtetus denied any knowledge of the correspondence between ESIS and Travelers, her reservation of rights letter on behalf of CIGNA on June 3, 1998 acknowledged Travelers' "oral request of May 14, 1998," and contained no indication that CIGNA required written notice of the claim in order to evaluate it. Both letters tend to show that CIGNA received notice of the claim being tendered by AJ Contracting and, rather than rejecting the tender outright because it was not in writing, had decided to proceed with an evaluation of its merits. While the affidavit of CIGNA representative Anne Donohue states that CIGNA demanded compliance with the policy's notice requirements, the letter to which she refers made no specific reference to the requirement that notice be in writing. Accordingly, we conclude that summary judgment should not have been granted on the ground that CIGNA received no written notice; rather, first there must be a factual determination as to whether CIGNA's conduct communicated that it would not rely upon the policy's requirement of written notice, and if so, whether CIGNA received such notice as was necessary.

CIGNA also claims that it was entitled to summary judgment because the settlement payment made by AJ was voluntary. However, assuming the notice issue is resolved against CIGNA, CIGNA's disclaimer of coverage excused AJ from complying with the term of the policy obligating it to obtain the insurer's consent before settlement of any matter (see American Ref-Fuel Co. of Hempstead v Resource Recycling, Inc., 281 AD2d 573, 574).

We agree with CIGNA that its duty to defend is entirely eliminated by policy Endorsement 70, which states that, in view of Forest's entry into a third-party agreement with ESIS for purposes of investigation and adjustment of claims, CIGNA "shall not have any duty to defend any such 'suit.'"

Finally, on this record, there is nothing to support the conclusion that AJ intentionally spoliated evidence, or, indeed, even that any evidence was spoliated. At best, all that is shown is that some boxes listed on a printout were missing from the warehouse, but nothing is demonstrated as to what was even in the boxes.

Accordingly, the matter must be remanded for trial.

The Decision and Order of this Court entered herein on May 8, 2003, is hereby recalled and vacated. See M-2881 decided simultaneously herewith.

This constitutes the decision and order of the Supreme Court, Appellate Division, First Department.

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