Coverage Pointers - Volume VI, No. 15
3/24/05 Montgomery v Federal Express
New York State Court of Appeals
No 240(1) Action Found When a Ladder is on the Job Site, but Plaintiff Chooses a Bucket Nearer at Hand for the Climb
Plaintiff, an elevator mechanic, needed to access an elevator motor room four feet above roof level. The stairs were removed during renovation. No ladder was in the immediate vicinity, but were available on the job site. The plaintiff decided to use an inverted bucket rather than fetch a ladder and when he was finished in the motor room, jumped back down to the roof and injured his knee. The Court of Appeals, citing Blake v. Neighborhood Housing Services of NY City, 1 NY3d 280 (2003), affirms dismissal on the basis that since ladders were readily available, plaintiff's “’normal and logical response’ should have been to go get one. Plaintiff's choice to use a bucket to get up, and then to jump down, was the sole cause of his injury, and he is therefore not entitled to recover under Labor Law § 240 (1).”
3/24/05 Palmer v. Moulton
Appellate Division, Third Department
Serious Injuries Sub-par; Golfer’s Claim Carted Off
Plaintiff, who still plays 18 holes of golf with some regularity, now uses cart instead of lugging bag by hand. Court finds that plaintiff has not established that this limitation is sufficient to qualify under any category of “serious injury”
3/24/05 Ketz v. Harder
Appellate Division, Third Department
Plaintiff Behind the Eight Ball While Carrier Racks Up Another; Serious Injury Claim Impacting Ability to Play Pool Likewise Insufficient
Inability to play pool for three months does not support finding of 90 day disability, without objective medical evidence justifying qualification.
Appellate Division, First Department
A Mixture of Claims Requires Coverage of Tyco CEO
The Lower Court found Federal was obliged to defend Tyco International CEO Kozlowski in a civil action alleging that he breached his duties as a fiduciary of pension plans under ERISA, and to pay his defense costs arising out of the civil securities suit and the related criminal action. Federal had issued to Tyco a series of "Executive Protection" insurance policies intended to protect its directors and officers, including Kozlowski, against loss related to claims of"wrongful acts" as defined in the policies. The policies provided Executive Liability and Indemnification (ELI) coverage and Fiduciary Liability coverage for Tyco's directors and officers
The Appellate Division affirmed the Lower Court as to Federal's duty to defend the ERISA action, but modified with respect to the duty to pay defense costs of the securities action and the criminal prosecution, limiting Federal's obligation to pay only those costs relating to liabilities that fell under the coverage provided. To the extent claims fall under the “personal profit exclusion”, Federal was not obligated to reimburse Kozlowski for his defense costs.
Federal rescinded by notice almost two years after the policy took effect and after claims were asserted. The Court found that the rescission by notice could not be effective as to obligations tht accrued under the policy prior to rescission. As to any claims under the policy not yet incurred, Federal's rescission would be prospectively effective since "the actual rescission happen[s] not when the judgment [is] obtained in the action for a rescission, but when the election to rescind was made known" If Federal prevails in its claim of right to rescind on the basis of fraud in the inducement, its obligation to defend Kozlowski will end and the policy will be rendered void from its inception irrespective of the point in the life of the policy that a liability claim may have arisen.
Federal also raised as a defense to providing coverage under the policy’s personal profit exclusion provision. But, the Court found that the allegations in the underlying actions demonstrated that the claims asserted did not solely fall within the personal profit exclusion. For example, in the ERISA action, the complaint alleged that Kozlowski breached their fiduciary duties by permitting the plans to buy Tyco stock at a time when it was not prudent to do so, but did not allege that Kozlowski personally profited from the breach. As the insurer must afford a defense to the insured for covered as well as non-covered claims if the latter are intertwined with covered claims, Federal must pay defense costs as they are incurred in the securities action and the criminal proceeding, but its ultimate liability for such costs will be only with respect to such liabilities as fall under the provided coverage. To the extent such liabilities are excluded from coverage by the personal profit exclusion, Federal is not required to pay for defense costs. Since the allocation could not be made until a determination of the underlying claims against Kozlowski are resolved, Federal must pay all defense costs as incurred, subject to recoupment when Kozlowski's liabilities, if any, are determined.
Nyack Hospital, v. Metropolitan Property & Casualty Insurance Company
Appellate Division, Second Department
Courts Getting Tougher and Tougher on No Fault Denials – Dot those I’s, Cross those T’s
The defendant failed to submit a proper affidavit of service to establish that the denial of no fault claim form was in fact mailed to the plaintiff. Even if the defendant timely issued the denial of claim form within 30 days of its receipt of the plaintiff's medical records, "[a] timely denial alone does not avoid preclusion where said denial is factually insufficient, conclusory, vague or otherwise involves a defense which has no merit as a matter of law," A proper denial of claim must include the information called for in the prescribed denial of claim form. The denial of claim form issued by the defendant in the case at bar, even if timely, was fatally defective in that it omitted numerous items of requested information, and thus was incomplete.. Moreover, the denial of claim form incorrectly listed the injured party, John Watson, as the provider of the health services. The defendant's failure to object to the adequacy of the plaintiff's claim forms within 10 days of receipt constituted a waiver of any defenses based thereon
New York Central Mutual Fire Insurance Company v. Smith
Appellate Division, Fourth Department
Without Underlying Law Suit, Declaratory Judgment (Even One Commenced by Carrier) is Premature
Plaintiff commenced this action seeking a declaration that it has no duty to defend or indemnify Smith with respect to any losses arising from claims made by Boyette and Wilson against him. Boyette and Wilson appeal from an order denying their motion seeking dismissal of the complaint against them. "Because no personal injury action has been commenced to recover damages against [Smith], the declaratory judgment action is premature."
Simmons v. State Farm Mutual Automobile Insurance Company
Appellate Division, Fourth Department
No Fault Carrier Did Not Establish Failure to Cooperate
Insurer failed to meet its "heavy burden of showing lack of cooperation of its insured" as a matter of law when it failed to establish that claimant refused to participate in vocational rehabilitation. Defendant submitted conflicting medical opinions concerning the degree of plaintiff's disability from work, thereby raising an issue of credibility for the trier of fact to resolve and rendering summary judgment inappropriate. By failing to establish that claimant was able to return to work, insurer failed to establish that plaintiff's alleged refusal to participate in vocational rehabilitation constituted "'willful and avowed obstruction'"
Constantine v. Serafin
Appellate Division, Fourth Department
Serious Injury? Nah. “Permanent Loss” Must be Total and 180 Disability Must be Medically Determined
With respect to the permanent loss of use category,
defendant established that plaintiff's alleged cervical spine injury is not
"total." With respect to the 90/180 category, defendant established as a matter
of law that plaintiff did not sustain the requisite "medically determined injury
or impairment." Defendant submitted records of plaintiff's treating physicians
merely recording plaintiff's subjective complaints of pain and tenderness and
failing to provide the requisite objective evidence of plaintiff's alleged
injury or impairment. IME doctor concluded that any weakness or decreased range
of motion was "voluntary" because plaintiff was able to extend his cervical
spine fully when his oral cavity was examined.
Appellate Division, Fourth Department
The State Insurance Fund is Special, but Not THAT Special
Court determines that it is arbitrary and capricious to allow ONLY the State Insurance Fund to have wireless access to their files at the Workers Compensation Board while denying the same access to other litigants. While the SIF is a creature of the State, before the Board it is entitled to no special treatment denied other litigants.
3/14/05 Sciuti v. Worcester Insurance Company
Appellate Division, Second Department
Carrier Will Have Day in Court on Issue of Infant Plaintiff’s Residence, But BEWARE …
The infant plaintiff was injured in a dog attack at the insured’s house. Insurer disclaimed coverage, promptly, citing a provision that excluded coverage for injuries to insureds (claiming that infant lived in insured’s house). Nobody defended insured and a $250,000 default judgment was taken against insured. Infant plaintiff, through her father, then brought action under the “Direct Action” statute, Insurance Law §3420(a)(2) seeking to enforce the $250,000 judgment against the homeowner’s insurer, arguing that the child did not live in the insured’s residence. Court found that there was a question of fact about residency, ordered discovery and eventually the issue will be returned for a trial on the question.
So far, so good.
What’s the danger? The danger is in the Court of Appeals dicta in the November 2004 Lang decision reported in Volume VI, Number 6 of CP. It’s worth repeating in context. Remember, in Lang, the Court held that injured party (like the infant plaintiff in this case) cannot bring a action to determine coverage until after it obtains a judgment against that carrier’s insured. That’s what happened in this case. But then, the Court of Appeals said this, without citation to any authority:
Finally, we note that an insurance company that disclaims in a situation where coverage may be arguable is well advised to seek a declaratory judgment concerning the duty to defend or indemnify the purported insured. If it disclaims and declines to defend in the underlying lawsuit without doing so, it takes the risk that the injured party will obtain a judgment against the purported insured and then seek payment pursuant to Insurance Law ' 3420. Under those circumstances, having chosen not to participate in the underlying lawsuit, the insurance carrier may litigate only the validity of its disclaimer and cannot challenge the liability or damages determination underlying the judgment.
What does that mean? It means that IF in the Direct Action it is determined that the child did NOT live with the insured, and IF this dicta becomes the law of the land, the insurer will be unable to argue that the insured was not liable for the injuries or relitigate the $250,000 award. Perhaps it would have been safer for the carrier, in this case, to defend under reservation of rights while litigating the question of coverage.
Appellate Division, Second Department
We’ll Say it Again – Under New York Law, Particularly When Breach of Policy Conditions (such as Notice) Provide Policy Defense, a “Reservation of Rights” Letter is No Substitute for a Disclaimer
The infant defendant, Pablo,claims lead paint injury caused by exposure in property owned by defendants Pistilli. In October 1998 Balbuena sued the Pastillis and the Pastillis notified their insurance agent asking them to forward it to all insurers who provided coverage in 1992 and 1993. property] for the period 1992 and 1993." Agent didn’t notify Republic Franklin Insurance Company (RFIC) for over three additional years, until March 25, 2002. In April of 2002, three weeks later, RFIC sent insured a "reservation of rights" letter stating that based on the delay between the commencement of the underlying action in 1998 and the notice received in 2002, it reserved the right to disclaim coverage. It didn’t disclaim for at least five months.
On or about August 29, 2002, the RFIC sued the agent seeking indemnification. The agent moved for summary judgment arguing successfully that the the the failure of RFIC to disclaim coverage during the approximately five-month period following its notice of the underlying action in March 2002 was unreasonable as a matter of law, and rendered irrelevant any prior alleged wrongdoing on the agent’s part. The Appellate Division affirmed. Insurance Law § 3420(d) requires an insurer to provide a written disclaimer "as soon as is reasonably possible." Reasonableness of delay is measured from the time when the insurer "has sufficient knowledge of facts entitling it to disclaim, or knows that it will disclaim coverage." The insurer bears the burden of justifying any delay. The obligation to provide prompt notice under Insurance Law § 3420(d) is triggered when the insurer has a reasonable basis upon which to disclaim coverage, and cannot be delayed indefinitely until all issues of fact regarding the insurer's coverage obligations have been resolved. When in doubt, an insurer should issue a prompt disclaimer and then seek a declaratory judgment concerning its duty to defend or indemnify, rather than seeking such a judgment in lieu of issuing a disclaimer, as the plaintiff has done here.
On this record, we find that the plaintiff had a reasonable basis upon which to disclaim coverage in or about March 2002, when it was first informed by Newbridge of the underlying action. Its "reservation of rights" letter, however, issued on or about April 12, 2002, did not constitute an effective disclaimer for purposes of Insurance Law § 3420(d) (see e.g. Mohawk Minden Ins. Co. v Ferry, 251 AD2d 846, 848). Thus, the Supreme Court correctly determined, as a matter of law, that the plaintiff failed to comply with Insurance Law § 3420(d) (see Mann v Gulf Ins. Co., 3 AD3d 554; Mohawk Minden Ins. Co. v Ferry, supra; Nova Cas. Co. v Charbonneau Roofing, 185 AD2d 490). Since the plaintiff's inability to disclaim coverage was due to its own failure to comply with Insurance Law § 3420(d), irrespective of any alleged wrongdoing on Newbridge's part, the Supreme Court properly dismissed the fourth cause of action.
Green v. Liberty Mutual Insurance Company Trust
Appellate Divison, Second Department
Nothing’s “De Novo” Under the Sun, or, for that Matter, Under $5,000
No Fault providers and claimants are reminded of a rarely used provision of the statute, Insurance Law Section 5016, which provides that when a Master Arbitrator’s award is $5000 or greater, either party can “may institute a court action to adjudicate the dispute de novo.” What does that mean? It means, if the Master Arbitrator’s decision awards the claimant over the stated amount, either side can go to court and start over again, with a blank slate, to relitigate the dispute. This decision reaffirms the interpretation of this statutory remedy in place since the beginning. In order to have that right of review, the Master Arbitrator’s must actually make a monetary award. Without such an award, the Court is not permitted to make its own determination that the value of the decision exceeds $5000. The Court also turned away a constitutional challenge to the $5000 floor.
In the Matter of Eagle Insurance Company v. Hamilton
Appellate Division, Second Department
Does Reliance’s Liquidation Mean That Person Insured by Reliance Insured is Entitled to UM Benefits?
Great question. This Court provides a definite “maybe.” The Liquidation Bureau has determined that because of the financial strain on the Reliance account, insurance coverage is not available “at this time” but had not, outright, determined that coverage will not be there for the Reliance insured. Accordingly, the Court determines that it is too early to conclude that the plaintiff was injured by the insured of a carrier that has denied coverage (entitling the injured party to make an Uninsured Motorists claim.
Visit the Hot Cases section of the Federation of Defense & Corporate Counsel website, www.thefederation.org ranked among the top five legal research websites in an article published in Litigation News, a publication of the Litigation Section of the American Bar Association. Dan Kohane serves as the FDCC’s Website Editor Emeritus.
3/18/05 J.S.U.B Inc. v. United States Fire Ins.Co.
Florida Court of Appeals, 2nd District
Appellate Court Distinguishes
1980 Supreme Court Case -- Subcontractor Exception to “Your Work” Exclusion
Applied to Provide Coverage for General Contractor
J.S.U.B., a general contractor, tendered a construction defect claim to United States Fire and it denied coverage on the basis that its policy did not cover damage to J.S.U.B.’s own work or product that resulted from J.S.U.B.’s or a subcontractor’s faulty workmanship. J.S.U.B. filed a declaratory judgment action and trial court entered judgment in favor of the insurer based on the Florida Supreme Court’s decision in LeMarche v. Shelby Mutual Ins. Co., 390 So.2d 325 (Fla. 1980) and its progeny. Since LeMarche, Florida courts have ruled that CGL policies do not cover the cost of replacing the defective materials or workmanship of a builder or its subcontractors. However, the Florida Court of Appeal differed, holding that the exclusions in the United State Fire policy differed significantly from the policy analyzed in LeMarche and the subcontractor exception to the “your work” exclusion brought the claim back into coverage.
Submitted by: Donald J. Driscoll [RLI Insurance Co./RLI
Corp.] and Patrick J. Greiten [The Hartford Financial Services Group]
3/17/05 Amerisure Ins. v. State Farm Mutual Insurance Co.
Florida Supreme Court
Statute Requiring Reimbursement
A woman and children insured by State Farm were injured in an auto accident when driving a commercial motor vehicle insured by Amerisure. State Farm paid personal injury protection benefits to the woman and then requested reimbursement from Amerisure under a statute requiring insurers of commercial vehicles to reimburse insurers of private vehicles for PIP payments. Amerisure refused to pay, and State Farm sued Amerisure, and was granted summary judgment in State Farm’s favor. Amerisure argued on appeal that the statute created an arbitrary classification of private and commercial vehicles in violation of the equal protection clauses of the federal and state constitutions. The appeals court rejected Amerisure’s argument, finding that the statute served a legitimate government purpose by reallocating some of the risk from the insurers of private vehicles to the insurers of commercial vehicles, with the result of reducing insurance premium rates for the owners of private vehicles. The Supreme Court agreed with the appeals court and held that the classification in the statute does not violate the federal and state equal protection clauses because it is rationally related to a legitimate state objective of regulating insurance rates.
Submitted by: Bruce Celebrezze and Vanessa O'Brien (Sedgwick, Detert, Moran & Arnold LLP)
Wisconsin Court of Appeals
Unambiguously Applies to Bar Coverage
The issue before the appeals court was whether pollution exclusion in a business liability policy applied to preclude coverage for claims arising form the escape, dispersal, discharge, or release of fuel oil. The insured argued that coverage survives because the pollution exclusion does not unambiguously exclude smells or odors as pollutants. Alternatively, the insured argued that the exclusion does not negate coverage because some of the property damage alleged was caused by a non-toxic quality of spilled fuel oil, its smell. The court rejected these arguments, finding that the phrase “arising out of” as found within the pollution exclusion, is broad, general, and comprehensive. The phrase means something more than direct or immediate cause, such as “flowing from”, and that the lingering odor or smell flowed from an attempt to remove a substance unambiguously excluded from coverage.
Submitted by: Bruce Celebrezze and Vanessa O'Brien (Sedgwick, Detert, Moran & Arnold LLP)
3/15/05 Finger Furniture Company Inc. v. Commonwealth Ins. Co.
Fifth Circuit Court of Appeals
Insurer Not Allowed to Reduce
Business Interruption Loss with Insured’s Post-Storm Profits
On June 10, 2001, Finger Furniture lost one day of sales at their seven stores due to Tropical Storm Allison. The following weekend, Finger slashed prices and made tremendous sales. Finger filed a business interruption claim with Commonwealth for the $342,029 it lost in June 10th sales. Commonwealth denied the claim and filed a declaratory judgment action against Finger. The district court awarded summary judgment to Finger in the claimed amount and Commonwealth appealed. The Fifth Circuit upheld the award, holding that Commonwealth’s policy stated that the loss would be adjusted on historical sales figures, not post-damage sales.
Submitted by: Donald J. Driscoll [RLI Insurance Co./RLI Corp.] and Patrick J. Greiten [The Hartford Financial Services Group]
3/14/05 WestPort Ins. Co. v. Tuskegee Newspapers
Eleventh Circuit Court of Appeals
Newspaper’s Failure to Publish
Foreclosure Notice is Covered Under E&O Policy
Tuskegee Newspapers failed to publish foreclosure notices and was sued by the bank which had ordered the publication. Tuskegee tendered the claim to its Communications Liability insurer who agreed to defend and filed a declaratory judgment action. The trial court granted summary judgment to the insurer on the basis that the policy only covered omissions occurring within published articles, not a complete omission of an entire legal notice. On appeal, the Eleventh Circuit held that the word “matter” in the policy could have different meanings in separate sections of the policy. Therefore, “matter” in the E&O coverage could refer to the newspaper in its entirety while “matter” in communications liability section could refer to an individual published article. Since the policy was susceptible of more than one reasonable reading and ambiguities are to be construed in favor of coverage under Alabama law, the court reversed and remanded with orders to enter summary judgment in favor of Tuskegee.
Submitted by: Donald J. Driscoll [RLI Insurance Co./RLI
Corp.] and Patrick J. Greiten [The Hartford Financial Services Group]
Hurwitz & 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
Andrea Schillaci, Team Leader
Jody E. Briandi
Philip M. Gulisano
No-Fault/SUM Arbitration Team
Dan D. Kohane, Team Leader
Audrey A. Seeley
Scott C. Billman, Team Leader
Dan D. Kohane
Sciuti v. Worcester Insurance Company
Steven M. Burton, Ronkonkoma, N.Y., for appellants.
O'Connor, Redd, Gollihue & Sklarkin, LLP, White Plains,
N.Y. (Laura Freeman of counsel),
In an action, inter alia, to recover the proceeds of an insurance policy, the plaintiffs appeal, as limited by their brief, from so much of an order of the Supreme Court, Suffolk County (Oliver, J.), dated April 7, 2004, as denied that branch of their motion which was for summary judgment in their favor and against the defendant in the principal sum of $250,000.
ORDERED that the order is affirmed insofar as appealed from, with costs.
In December 1996 the infant plaintiff was attacked and injured by dogs owned by a nonparty, Joseph Coles, while she was in Coles's house. It is undisputed that the defendant insurer had issued a homeowner's policy (hereinafter the policy) to Coles, for his house, insuring him, inter alia, for personal liability. Under the terms of the policy, the defendant was not obligated to pay damages for bodily injury to an insured. Coles subsequently notified the defendant of the incident and allegedly gave a statement to one of its employees on September 15, 1997. That same day, that same employee sent Coles a letter disclaiming coverage on the ground that the infant was an insured under the terms of the policy.
Thereafter, the infant, by her father, the plaintiff Roscoe Sciuti, commenced an action (hereinafter the prior action) against Coles to recover damages for her injuries. When Coles turned the papers over to the defendant, it again disclaimed coverage, inter alia, on the same ground. The plaintiffs then obtained a judgment against Coles in the prior action, upon his default in appearing, in the principal sum of $250,000. After the plaintiffs' counsel notified the defendant of this and the defendant failed to pay the judgment, the plaintiffs commenced this action against the defendant, inter alia, to recover the proceeds of the policy. Almost immediately after the defendant served its answer together with discovery demands, the plaintiffs moved, inter alia, for summary judgment.
The Supreme Court properly denied that branch of the plaintiffs' motion which was for summary judgment. The plaintiffs' papers were sufficient to establish a prima facie case. However, the facts set out in the defendant's opposing papers were sufficient to raise a triable issue of fact as to whether or not the infant plaintiff was an insured under the terms of the policy. If she was, there was no coverage for the injuries she received at the home of Coles, the policy's named insured (see Kwi Bong YI v JNJ Supply Corp., 274 AD2d 453; see also Phillips v Kantor and Co., 31 NY2d 307).
We note, as the defendant asserts, that it is entitled to obtain needed discovery.
In the Matter
of Eagle Insurance Company v. Hamilton
Motion by the Superintendent of the New York State Insurance Department for leave to reargue an appeal from an order of the Supreme Court, Kings County, dated October 17, 2002, which was determined by decision and order of this court dated February 2, 2004, and in effect, for clarification of the decision and order of this court dated February 2, 2004.
Upon the papers filed in support of the motion and the papers filed in opposition thereto, it is
ORDERED that the branch of the motion which is, in effect, for clarification of the decision and order of this court dated February 2, 2004, is granted, the motion is otherwise denied, the decision and order of this court dated February 2, 2004, in the above-entitled case is recalled and vacated, and the following decision and order is substituted therefor:
Samuel K. Rubin, Bethpage, N.Y. (Lawrence R. Miles of counsel), for appellant.
Lurie & Flatow, P.C., New York, N.Y. (Jay Flatow of counsel), for respondent.
In a proceeding pursuant to CPLR article 75 to permanently stay arbitration of a claim for uninsured motorist benefits, the petitioner appeals from an order of the Supreme Court, Kings County (Schneier, J.), dated October 17, 2002, which denied the petition and dismissed the proceeding.
ORDERED that the order is reversed, on the law, without costs or disbursements, and the matter is remitted to the Supreme Court, Kings County, for further proceedings consistent [*2]herewith; and it is further,
ORDERED that the petitioner shall serve a supplemental notice of petition (see CPLR 305[a]) and amended petition (see CPLR 3025[b]) upon the Superintendent of the New York State Insurance Department, in his capacity as Administrator of the New York Public Motor Vehicle Liability Security Fund, joining him as an additional respondent to the proceeding within 30 days after service upon him of a copy of this decision and order.
In July 1998 the respondent, Neville Hamilton, allegedly was injured in a motor vehicle accident involving the proposed additional respondent Jean R. Lazard. At the time, Hamilton was insured by the petitioner, Eagle Insurance Company (hereinafter Eagle). Hamilton's policy with Eagle provided compulsory uninsured motorist coverage (hereinafter UM coverage) (see Insurance Law § 3420[f]). However, Hamilton did not purchase supplemental uninsured motorist coverage (hereinafter SUM coverage) from Eagle (see Insurance Law § 3420[f]; 11 NYCRR 60-2.3). Lazard was insured by the proposed additional respondent Reliance National Indemnity Company (hereinafter Reliance), a Pennsylvania company authorized to sell insurance in New York. After commencing an action against Lazard, Hamilton learned that Lazard's insurer, Reliance, had been declared insolvent, and its New York assets were in receivership and were being liquidated by the Superintendent of the New York State Insurance Department (hereinafter the Superintendent) pursuant to Insurance Law article 74. Accordingly, Hamilton sent a letter to Reliance via the Superintendent requesting that it appear in the action on behalf of Lazard. In response, Hamilton was sent a copy of a letter sent to Lazard by the Superintendent stating that, although Hamilton's claim against Lazard was "covered by the New York Public Motor Vehicle Liability Security Fund [hereinafter the PMV Fund] . . . [a]t this time, the PMV Fund is unable to provide either a defense to or indemnification of this claim insofar as the PMV Fund is financially strained." Thereafter, Hamilton made a demand upon his own insurance company, Eagle, to arbitrate a claim for uninsured motorist benefits pursuant to his policy with Eagle.
Eagle commenced this proceeding for a permanent stay of arbitration, arguing that the record revealed that Lazard's vehicle was not uninsured at the time of the accident, but rather, was insured by Reliance. In opposition, Hamilton argued that Reliance's insolvency triggered UM benefits, relying on Insurance Law § 3420(f)(2) and Regulation 35-D, specifically 11 NYCRR 60-2.3(f). In reply, Eagle argued that Insurance Law § 3420(f)(2) and Regulation 35-D were not applicable, as they applied to SUM coverage only, which Hamilton did not purchase. Rather, Eagle asserted, the UM coverage provided to Hamilton was governed by Insurance Law § 3420(f)(1), which was triggered, inter alia, when "the insurer disclaims liability or denies coverage." Here, Eagle argued, Reliance neither disclaimed liability nor denied coverage, but rather was insolvent, which did not trigger UM coverage. The Supreme Court, finding that the Lazard vehicle qualified as an uninsured vehicle for purposes of Insurance Law § 3420(f)(1), denied a stay of arbitration. We reverse and remit the matter for further proceedings.
The issues raised on this appeal implicate the interplay among various statutes, regulations, and case law related to UM coverage. Insurance Law § 3420(f)(1) mandates that all policies issued or delivered in this state insuring against loss for bodily injury or death arising from a motor vehicle accident must contain a provision providing for UM coverage. Such compulsory UM coverage is triggered, inter alia, where an insured is entitled to recover damages from an insured motor vehicle but "the insurer disclaims liability or denies coverage." Insurance Law § 3420(f)(2) requires an insurer to provide, at the option of the insured, the right to purchase supplementary SUM coverage. The regulations promulgated by the Superintendent concerning SUM coverage, generally referred to as Regulation 35-D, provide that such coverage is triggered, inter alia, by the "insolvency" of the alleged tortfeasor's insurer (see 11 NYCRR 60.23[f][[c][iii]). Since 1958 the Legislature has also provided for a fund, currently known as the PMV Fund, pursuant to article 76 of the Insurance Law. The PMV Fund provides coverage for, inter alia, allowed claims of injured parties that remain unpaid, in whole or in part, due to the insolvency of an insurer (see Insurance Law § 7604). A claim to the fund is made with the Superintendent pursuant to Article 74 of the Insurance Law (see Insurance Law art 74; see also Insurance Law §§ 7607, 7608).
In 1977, before the promulgation of Regulation 35-D (which concerns SUM coverage), the Court of Appeals decided State-Wide Ins. Co. v Curry (43 NY2d 298). In State-Wide, the appellant Virginia Curry was injured in a motor vehicle accident. After the accident, the insurer of the alleged tortfeasor's vehicle was declared insolvent and placed in liquidation. Curry proceeded against her own insurer, State-Wide Insurance Co. (hereinafter State-Wide), seeking UM coverage. State-Wide argued that Curry's remedy was against the PMV Fund. Curry argued that the insolvency of the tortfeasor's insurer provided her with option of pursuing either the PMV Fund or State-Wide. The Court of Appeals held that, on the facts presented, the insolvency of the alleged tortfeasor's insurer did not provide Curry with such an option. Rather, the Court held, the statutory coverage mandated by then Insurance Law § 167(2-a) (currently Insurance Law § 3420[f]] i.e., UM coverage) "presupposes that no other liability coverage exists to compensate innocent victims of motor vehicle accidents" (id. at 302). In the case before it, the Court noted, there was such other coverage, i.e., the PMV Fund. Thus, the Court held, "there [was] no need to protect such injured person under the Indemnification Endorsement [UM coverage], since compensation is otherwise available" (id.; see also Matter of Union Indem. Ins. Co. of New York, 92 NY2d 107, 113). Furthermore, the State-Wide Court noted, the language of then-subdivision 2-a of Insurance Law § 167 [currently Insurance Law § 3420(f)(1)] was triggered "where the insurer disclaims liability or denies coverage" (State Wide Ins. v Curry, supra at 303). The Court held that the insolvent insurer fit "neither of these categories" (id. at 303). Rather, while that insurer had become insolvent after the accident, "the insurance policy itself survived, and the obligations owed its insured were assumed by the [PMV Fund]" (id. at 303). Thus, the Court concluded, the alleged tortfeasor's vehicle "was neither 'an uninsured motor vehicle' nor 'an insured vehicle where the insurer disclaim[ed] liability or denie[d] coverage' within the meaning of subdivision 2-a of section 167 of the Insurance Law [currently Insurance Law § 3420[f]]"(id. at 303).
The Court of Appeals found its conclusion bolstered by the legislative history of Insurance Law § 167, the purpose of which was to "'close the gaps * * * with respect to assuring payment of compensation to innocent victims of motor vehicle accidents'" (id., quoting NY Legis Ann, 1958, p 299). The Court stated that "surely the Legislature did not intend to provide another remedy for those insured by insolvent domestic insurers, where, due to [the PMV Fund], no gap had existed as to assuring compensation to such victims for many years" (id.). Finally, the State-Wide Court noted, the Appellate Divisions, First and Third Departments, when confronted with similar issues, had arrived at a different interpretation of Insurance Law § 167. In Matter of Taub (MVAIC) (31 AD2d 378), the Appellate Division, First Department, held that the insolvency of the alleged tortfeasor's insurer after the underlying accident "was tantamount to a disclaimer of liability, or denial of coverage." In Matter of Travis (General Acc. Group) (31 AD2d 20), the Appellate Division, Third Department, reached a "like result" when the alleged tortfeasor's insurer was declared insolvent before the accident. The State-Wide Court held that while both cases "expressed an overly broad interpretation of subdivision 2-a of section 167," both were correctly decided on their facts because in each case the alleged tortfeasor's insurer had not been licensed to do business in New York and, therefore, had not contributed to the PMV Fund (State Wide Ins. v Curry, supra at 304). Thus, payment from the PMV Fund was not available.
The distinction to be drawn between UM coverage and SUM coverage, in light of the language of the various statutes and regulations, and implied by the decision in State-Wide, was made manifest in a decision of this court after the enactment of Regulation 35-D, dealing with SUM coverage. In American Mfrs. Mut. Ins. Co. v Morgan (296 AD2d 491), the alleged tortfeasor's insurer had been declared insolvent after an underlying motor vehicle accident and was in liquidation. The insured, Karen Morgan, who had purchased SUM coverage from her own insurer, the petitioner American Manufacturers Mutual Insurance Company (hereinafter American Manufacturers), filed a claim for such coverage and demanded arbitration. American Manufacturers sought a permanent stay, arguing that because the alleged tortfeasor's insurer had paid into the PMV Fund, Morgan's recourse was against the fund. This court held that, given the express language of Regulation 35-D (which expressly references insolvency), and the "greater breadth of SUM coverage," Morgan was entitled to seek SUM coverage from American Manufacturers based on the insolvency of the alleged tortfeasor's insurer, and need not pursue the PMV Fund (American Mfrs. Mut. Ins. Co. v Morgan, supra at 494: see Matter of Eagle Ins. Co. v St. Julian, 297 AD2d 737).
Here, because Hamilton purchased UM coverage only from his insurer (Eagle), and the alleged tortfeasor's now insolvent insurer (Reliance) paid into the PMV Fund, Hamilton's recourse is not against Eagle for UM coverage, but against the PMV Fund (see State-Wide Ins. Co. v Curry, supra; Eagle Ins. Co. v St. Julian, supra; American Mfrs. Mut. Ins. Co. v Morgan, supra). However, this is not to say that under no circumstances will Hamilton be entitled to UM coverage from Eagle. Rather, resolution of this issue turns on a question not expressly answered by the analysis, supra, to wit: What is to occur if the Superintendent, as administrator of the PMV Fund, denies Hamilton recovery from the fund. That is, whether this would be a denial of coverage within the meaning of Insurance Law § 3420(f)(1), thereby triggering Hamilton's right to UM coverage from Eagle. Resolution of this question implicates the statutory scheme concerning the PMV Fund and its place in the highly regulated area of no-fault benefits. Whether this question need be reached turns on the threshold factual issue of whether coverage from the PMV Fund is being denied. The only evidence in the record concerning this issue the letter from the Superintendent, carbon copied to Hamilton, stating that coverage from the PMV Fund was being denied "at this time" due to "financial strain," is wholly insufficient. Given this threshold factual issue, and the potentially broad significance of resolution of the question of whether the denial of recovery from the PMV Fund is a denial of coverage within the meaning of Insurance Law § 3420(f)(1), these matters are best determined in the first instance by the Supreme Court, on a more fully developed record and after joinder of the Superintendent.
Appeal from an order of the Supreme Court, Erie County (Donna M. Siwek, J.), entered March 19, 2004. The order denied the motion of defendants Tracey Boyette and Kameron Wilson and the cross motion of defendant William F. Smith seeking dismissal of the complaint pursuant to CPLR 3211 in a declaratory judgment action.
It is hereby ORDERED that the order so appealed from be and the same hereby is unanimously reversed on the law without costs, the motion and cross motion are granted and the complaint is dismissed.
Memorandum: Defendant Tracey
Boyette and her son, defendant Kameron Wilson, resided in premises owned by
defendant William F. Smith and insured under a homeowner's policy issued by
plaintiff. Wilson was receiving treatment for lead poisoning when his family
moved into the Smith premises, and a health department investigation thereafter
identified a number of lead-based paint conditions that were abated when he
resided there. Plaintiff commenced this action seeking a declaration that it has
no duty to defend or indemnify Smith with respect to any losses arising from
claims made by Boyette and Wilson against him. Boyette and Wilson appeal from an
order denying their motion seeking dismissal of the complaint against them.
"Because no personal injury action has been commenced to recover damages against
[Smith], the declaratory judgment action is premature" (Terry v Farmer's Ins.
Co. of Ariz., 236 AD2d 829, 829; see Allstate Ins. Co. v Hertz Corp.,
119 AD2d 612, 613; Soto v Motor Veh. Acc. Indem. Corp., 23 AD2d 728).
Thus Supreme Court erred in denying the motion. The court also erred in denying
the cross motion of Smith seeking dismissal of the complaint against him, and we
grant the cross motion notwithstanding Smith's failure to appeal from the order
Hecht v City of New York, 60 NY2d 57, 62).
Matter of Central New York Workers’ Compensation Bar Association v. NYS Workers Compensation Board
Appeals from a judgment (denominated order) of the Supreme Court, Onondaga County (John V. Centra, J.), entered June 22, 2004 in a proceeding pursuant to CPLR article 78. The judgment granted the petition.
ELIOT SPITZER, ATTORNEY GENERAL, ALBANY (MICHAEL S. BUSKUS OF COUNSEL), FOR RESPONDENTS-APPELLANTS.
MACKENZIE HUGHES LLP, SYRACUSE (PETER D. CARMEN OF COUNSEL), FOR PETITIONERS-RESPONDENTS.
It is hereby ORDERED that the judgment so appealed from be and the same hereby is unanimously affirmed without costs.
Memorandum: Petitioners commenced this CPLR article 78 proceeding seeking a judgment that the policy of respondent State of New York Workers' Compensation Board (Board) of permitting the State Insurance Fund (Fund) to install certain computer hardware in the Syracuse office of the Board, enabling the Fund's attorneys to have wireless Internet access to their files during proceedings before the Board, while denying the same opportunity to other attorneys appearing before the Board, is arbitrary and capricious. We agree with Supreme Court that the Board's policy is arbitrary and capricious.
Although the Fund is an agency of the State created to "achieve the governmental purpose of all-inclusive [workers'] compensation insurance coverage" (Matter of State Ins. Fund v Boyland, 282 App Div 516, 523, affd 309 NY 1009; see Methodist Hosp. of Brooklyn v State Ins. Fund, 102 AD2d 367, 373-374, affd 64 NY2d 365, appeal dismissed 474 US 801), it has nevertheless been held that, in litigation, "it is considered to be an entity separate from the State itself" (Commissioners of State Ins. Fund v Low, 3 NY2d 590, 595; see Matter of Carney v Newburgh Park Motors, 84 AD2d 599, 600; see also Royal Ins. Co. of Am. v Commissioners of State Ins. Fund, 289 AD2d 807, 808). In the context of its dealings within the Board, the Fund is merely one of the insurers appearing in proceedings before the Board. The wireless access sought by the Fund provides the Fund an unfair competitive advantage in litigated matters as the installed hardware permits only the Fund's attorneys access to their case files in the heat of [*2]litigation, putting at their fingertips volumes of meaningful exhibits, legal research and other information, with no similar provision for claimants and the myriad of other insurance carriers whose representatives appear before the Board. By providing wireless Internet access to one of the litigants that appear before it and not to the adversaries of that litigant who also appear before the Board, the Board acted arbitrarily and capriciously.
Constantine v. Serafin
Appeal from an order of the Supreme Court, Erie County (Eugene M. Fahey, J.), entered February 2, 2004 in a personal injury action. The order denied defendant's motion for summary judgment and transferred the matter to Buffalo City Court.
QUINN, MC GARRY, CAFFERY & PATRICIA, P.C., BUFFALO (KEVIN M. MALEY OF COUNSEL), FOR DEFENDANT-APPELLANT.
It is hereby ORDERED that the order so appealed from be and the same hereby is unanimously reversed on the law without costs, the motion is granted and the complaint is dismissed.
Memorandum: Plaintiffs commenced this action seeking damages for injuries sustained by Tanios M. Constantine (plaintiff) when a vehicle driven by defendant struck the vehicle driven by plaintiff. Supreme Court erred in denying defendant's motion for summary judgment dismissing the complaint on the ground that plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102 (d) under the two categories of serious injury alleged by plaintiffs, i.e., the permanent loss of use and 90/180 categories of serious injury.
With respect to the permanent loss of use category, defendant established as a matter of law that plaintiff's alleged cervical spine injury is not "total" (Oberly v Bangs Ambulance,96 NY2d 295, 299), and plaintiffs failed to raise a triable issue of fact. With respect to the 90/180 category, defendant established as a matter of law that plaintiff did not sustain the requisite "medically determined injury or impairment" (Insurance Law § 5102 [d]). In support of the motion, defendant submitted records of plaintiff's treating physicians merely recording plaintiff's subjective complaints of pain and tenderness and failing to provide the requisite objective evidence of plaintiff's alleged injury or impairment (see Nitti v Clerrico, 98 NY2d 345, 357; O'Neal v Cancilla, 294 AD2d 921; Brown v Wagg, 280 AD2d 891, lv denied 96 NY2d 711; see generally Franchini v Palmieri,1 NY3d 536, 537). Indeed, one of those treating physicians noted that plaintiff has full range of motion of his neck and shoulder without tenderness. Further, the physician who examined plaintiff on defendant's behalf concluded that any weakness or decreased range of motion was "voluntary" because plaintiff was able to extend his cervical spine fully when his oral cavity was examined. In opposing defendant's motion with respect to the 90/180 category, plaintiffs failed to raise an issue of fact whether plaintiff's alleged injury or impairment was medically determined (see generally Vitez v Shelton,6 AD3d 1180, 1181).
Appeal from an order and judgment (one paper) of the Supreme Court, Ontario County (Craig J. Doran, A.J.), dated April 23, 2004. The order and judgment, insofar as appealed from, denied that part of defendant's motion for summary judgment dismissing the first cause of action.
GOLDBERG SEGALLA LLP, ALBANY (MATTHEW S. LERNER OF COUNSEL), FOR DEFENDANT-APPELLANT.
STEPHEN D. ARONSON, CANANDAIGUA, FOR PLAINTIFFS-RESPONDENTS.
It is hereby ORDERED that the order and judgment so appealed from be and the same hereby is unanimously affirmed without costs.
Memorandum: Plaintiffs commenced this action after defendant refused to continue providing no-fault insurance benefits to Patricia Simmons (plaintiff). Defendant moved for summary judgment dismissing the complaint, and Supreme Court granted defendant's motion only in part, denying the motion with respect to the first cause of action but otherwise dismissing the complaint. We affirm.
Contrary to the contention of defendant, it failed to meet its "heavy burden of showing lack of cooperation of its insured" as a matter of law (Nationwide Mut. Ins. Co. v Graham, 275 AD2d 1012, 1013; see Thrasher v United States Liab. Ins. Co., 19 NY2d 159, 168-169). Furthermore, defendant submitted conflicting medical opinions concerning the degree of plaintiff's disability from work, thereby raising an issue of credibility for the trier of fact to resolve and rendering summary judgment inappropriate (see e.g. Gedon v Bry-Lin Hosps., 286 AD2d 892, 894, lv denied 98 NY2d 601; Cavallaro v Baker, 187 AD2d 976). By failing to establish that plaintiff was able to return to work, defendant failed to establish that plaintiff's alleged refusal to participate in vocational rehabilitation constituted "'willful and avowed obstruction'" (Thrasher, 19 NY2d at 168; see Matter of New York Cent. Mut. Fire Ins. Co. [Salomon], 11 AD3d 315,
L'Abbate, Balkan, Colavita & Contini, LLP, Garden City, N.Y.
(Monte Sokol and Claudia M. Kessler of counsel), for appellant.
Lustig & Brown, LLP, New York, N.Y. (William C. Kelly of
counsel), for respondent.
In an action, inter alia, for indemnification, the plaintiff appeals, as limited by its brief, from so much of an order and judgment (one paper) of the Supreme Court, Queens County (Kitzes, J.), dated June 23, 2003, as granted that branch of the motion of the defendant Newbridge Coverage Corporation which was for summary judgment dismissing the fourth cause of action for indemnification insofar as asserted against it, and dismissed that cause of action.
ORDERED that the order and judgment is affirmed insofar as appealed from, with costs.
The infant defendant, Pablo Balbuena, allegedly sustained injuries as a result of exposure to lead paint in an apartment owned by the defendants Michael Pistilli, Joseph Pistilli, and Anthony Pistilli (hereinafter the insureds). In October 1998 Balbuena and his mother commenced a personal injury action entitled Balbuena v Pistilli, in the Supreme Court, Queens County, under Index No. 022421/98 (hereinafter the underlying action) against the insureds. By letter dated October 22, 1998, the insureds sent the defendant Newbridge Coverage Corporation (hereinafter Newbridge) a copy of the summons in the underlying action, asking Newbridge to forward it "to all the insurance companies that provided coverage for the [subject property] for the period 1992 and 1993."
The plaintiff, which had issued a commercial general liability policy covering the subject property for the period beginning April 13, 1992, at 12:01 A.M., and ending April 13, 1993, at 12:00 A.M., was not informed of the underlying action until approximately March 25, 2002, when Newbridge sent it a package of information, including a copy of the letter dated October 22, 1998. On or about April 12, 2002, the plaintiff sent the insureds a "reservation of rights" letter stating, inter alia, that based on the delay between the commencement of the underlying action in 1998 and the notice received in 2002, it reserved the right to disclaim coverage.
On or about August 29, 2002, the plaintiff commenced this action, inter alia, for indemnification against Newbridge. Newbridge moved, among other things, for summary judgment dismissing the fourth cause of action for indemnification on the ground that the plaintiff's failure to disclaim coverage during the approximately five-month period following its notice of the underlying action in March 2002 was unreasonable as a matter of law, and rendered irrelevant any prior alleged wrongdoing on Newbridge's part. The Supreme Court granted that branch of Newbridge's motion and dismissed the fourth cause of action. We affirm.
Insurance Law § 3420(d) requires an insurer to provide a written disclaimer "as soon as is reasonably possible." Reasonableness of delay is measured from the time when the insurer "has sufficient knowledge of facts entitling it to disclaim, or knows that it will disclaim coverage" (First Fin. Ins. Co. v Jetco Contr. Corp., 1 NY3d 64, 66). The insurer bears the burden of justifying any delay (id. at 69). Contrary to the plaintiff's contention, the obligation to provide prompt notice under Insurance Law § 3420(d) is triggered when the insurer has a reasonable basis upon which to disclaim coverage, and cannot be delayed indefinitely until all issues of fact regarding the insurer's coverage obligations have been resolved. When in doubt, an insurer should issue a prompt disclaimer and then seek a declaratory judgment concerning its duty to defend or indemnify, rather than seeking such a judgment in lieu of issuing a disclaimer, as the plaintiff has done here (cf. Lang v Hanover Ins. Co., 3 NY3d 350, 356).
On this record, we find that the
plaintiff had a reasonable basis upon which to disclaim coverage in or about
March 2002, when it was first informed by Newbridge of the underlying action.
Its "reservation of rights" letter, however, issued on or about April 12, 2002,
did not constitute an effective disclaimer for purposes of Insurance Law §
3420(d) (see e.g. Mohawk Minden Ins. Co. v Ferry, 251 AD2d 846, 848).
Thus, the Supreme Court correctly determined, as a matter of law, that the
plaintiff failed to comply with Insurance Law § 3420(d) (see Mann v Gulf
Ins. Co., 3 AD3d 554; Mohawk Minden Ins. Co. v Ferry, supra; Nova Cas. Co. v Charbonneau Roofing, 185 AD2d 490). Since the plaintiff's inability to disclaim coverage was due to its own failure to comply with Insurance Law § 3420(d), irrespective of any alleged wrongdoing on Newbridge's part, the Supreme Court properly dismissed the fourth cause of action.
Kujawski & Dellicarpini, Deer Park, N.Y. (Mark C. Kujawski and
Brian Kujawski of counsel), for appellant.
Loccisano & Larkin, Riverhead, N.Y. (John C. Meszaros of
counsel), for respondent.
In an action to recover no-fault benefits, the plaintiff appeals from an order of the Supreme Court, Suffolk County (Molia, J.), dated February 10, 2004, which granted the defendant's motion to dismiss the complaint pursuant to CPLR 3211(a)(5) and Insurance Law § 5106(c).
ORDERED that the order is affirmed, with costs.
The plaintiff contends that he was entitled to a trial de novo of his no-fault claim pursuant to Insurance Law § 5106(c) because the amount in controversy was greater than $5,000. We disagree. The statute permits an insurer or a claimant to institute a court action to adjudicate the dispute de novo where the master arbitrator's award is $5,000 or greater. Here, the master arbitrator made no monetary award and the statutory predicate for a de novo court adjudication was not satisfied (see General Acc. Fire and Life Ins. Co. v Avlontis, 156 AD2d 424; Harley v United Servs. Automobile Assn., 191 AD2d 768, 769; see also Matter of Greenberg, 70 NY2d 573).
The plaintiff contends, in the alternative, that the statute is unconstitutional because the $5,000 threshold limits the ability of claimants to obtain de novo court adjudication while allowing insurance companies readier access to the judicial forum. We disagree. Insurance Law § 5106(c) does not violate due process and equal protection because the classification it creates between claimants and insurance carriers is reasonably related to a legitimate state interest and has a rational basis (see Booth v Hartford Ins. Group, 531 F Supp 481; Country-Wide Ins. Co. v Harnett, 426 F Supp 1030; see also City of New Orleans v Dukes, 427 US 297).
Nyack Hospital, v. Metropolitan Property & Casualty Insurance Company
In an action to recover no-fault insurance medical payments, the defendant appeals from an order of the Supreme Court, Nassau County (Martin, J.), dated December 19, 2003, which granted the plaintiff's motion for summary judgment and denied its cross motion for summary judgment dismissing the complaint.
ORDERED that the order is affirmed, with costs.
The plaintiff made a prima facie showing of entitlement to judgment as a matter of law by submitting evidentiary proof that the prescribed statutory billing forms were mailed and received, and that payment of no-fault benefits was overdue (see Insurance Law § 5106[a]; 11 NYCRR 65.15[g]; Alvarez v Prospect Hosp., 68 NY2d 320, 325; Mary Immaculate Hosp. v Allstate Ins. Co., 5 AD3d 742). In opposition, the defendant failed to raise a triable issue of fact (see Zuckerman v City of New York, 49 NY2d 557, 562).
The defendant failed to submit a proper affidavit of service to establish that the denial of claim form was in fact mailed to the plaintiff (see Hospital for Joint Diseases v Nationwide Mut. Ins. Co., 284 AD2d 374, 375; cf. St. Clare's Hosp. v Allcity Ins. Co., 201 AD2d 718, 719). Moreover, even if the defendant timely issued the denial of claim form within 30 days of its receipt of the plaintiff's medical records, "[a] timely denial alone does not avoid preclusion where said denial is factually insufficient, conclusory, vague or otherwise involves a defense which has no merit as a matter of law" (Amaze Med. Supply v Allstate Ins. Co., 3 Misc 3d 43, 44; see Nyack Hosp. v State Farm Mut. Auto. Ins. Co., 11 AD3d 664, 665). A proper denial of claim must include the information called for in the prescribed denial of claim form (see 11 NYCRR 65-3.4[c]; Nyack Hosp. v State Farm Mut. Auto. Ins. Co., supra at 664). The denial of claim form issued by the defendant in the case at bar, even if timely, was fatally defective in that it omitted numerous items of requested information, and thus was incomplete (see 11 NYCRR 65-3.4[c]; Nyack Hosp. v State Farm Mut. Auto. Ins. Co., supra at 665; Presbyterian Hosp. in City of N.Y. v Maryland Cas. Co., 226 AD2d 613, 614). Moreover, the denial of claim form incorrectly listed the injured party, John Watson, as the provider of the health services.
The defendant's failure to object to the adequacy of the plaintiff's claim forms within 10 days of receipt constituted a waiver of any defenses based thereon, including the alleged lack of a valid assignment of benefits (see 11 NYCRR 65.15[d]; New York Hosp. Med. Ctr. Of Queens v AIU Ins. Co., 8 AD3d 456, 457; New York & Presbyt. Hosp. v American Tr. Ins. Co., 287 AD2d 699, 701; Mount Sinai Hosp. v Triboro Coach, 263 AD2d 11, 17; Presbyterian Hosp. in City of N.Y. v Aetna Cas. & Sur. Co., 233 AD2d 433).
The defendant's remaining contentions either are unpreserved for appellate review or without merit.
Plaintiff appeals from an
interlocutory judgment of the Supreme Court, New York County (Helen E. Freedman,
J.), entered June 22, 2004, declaring, inter alia, that it is obligated to
defend defendant Kozlowski in the ERISA action and pay current and future
defense costs in a certain criminal proceeding and a civil securities action,
and from an order, same court and Justice, entered on or about March 5, 2004,
which granted defendant Kozlowski's motion for partial summary judgment.
Hogan & Hartson L.L.P., Washington, DC (David J. Hensler [of
the District of Columbia Bar, admitted pro hac vice], Paul B.
Sweeney, David Newmann and Lorane F. Hebert of counsel),
Anderson Kill & Olick, P.C., New York (William G.
Passannante, Jeffrey E. Glen, Alex D. Hardiman and Danielle
Feldman of counsel), for respondent.
This is an appeal from an interlocutory judgment in defendant Kozlowski's favor, declaring that plaintiff Federal Insurance Company is obliged to defend him in a civil action alleging that he breached his duties as a fiduciary of pension plans under the Employee Retirement Income Security Act of 1974 [FN1] (ERISA), and to pay his defense costs as and when incurred in two other separate legal proceedings — a civil securities suit [FN2] and a criminal action [FN3] (collectively, the underlying actions). Although Tyco International and numerous individuals were originally named as defendants in this action, only Kozlowski, Tyco's former chief executive officer,[FN4] and two others, Mark Swartz and Mark Belnick, remain as defendants. Only Kozlowski and Federal are parties to this appeal.
Federal had issued to Tyco a series of "Executive Protection" insurance policies intended to protect its directors and officers, including Kozlowski, against "loss" due to "claims" alleging "wrongful acts" as defined in the policies. This case involves two of those policies, which were virtually identical as pertinent herein. The policies provided Executive Liability and Indemnification (ELI) coverage and Fiduciary Liability coverage for Tyco's directors and officers. The fiduciary liability section contains a duty-to-defend provision [FN5] while the ELI section, which has no duty-to-defend provision, does contain a provision requiring Federal to pay defense costs.
The fiduciary liability section of the policies requires Federal to pay "on behalf of" Tyco's directors and officers all "Loss" that such insured person "becomes legally obligated to pay on account of any Claim" made during the policy period for an alleged "Wrongful Act" by such director or officer or "by any person for whose Wrongful Acts" such director or officer is legally responsible. Wrongful Acts are defined as, inter alia, "any breach of the responsibilities, obligations or duties imposed upon fiduciaries of [a] Sponsored Plan by [ERISA]," as well as "any negligent act, error or omission in the Administration of [such a plan]." A "Claim" is defined as a civil, criminal, administrative or regulatory proceeding. As noted, plaintiff agreed to defend all such claims.
The ELI section of the policies requires Federal to pay "on behalf of" Tyco's directors and officers (the Insured Persons) all "Loss" that any Insured Person "becomes legally obligated to pay on account of any Claim" made against him/her during the policy period for an alleged "Wrongful Act." "Loss" is defined as "the total amount which any Insured Person becomes legally obligated to pay on account of each Claim and for all Claims in each Policy Period . . . made against them for Wrongful Acts for which coverage applies, including, but not limited to, damages, judgments, settlements, costs and Defense Costs." The ELI section defines a "Wrongful Act" as "any error, misstatement, misleading statement, act, omission, neglect, or breach of duty committed, attempted, or allegedly committed or attempted, by any Insured Person, individually or otherwise, in his Insured Capacity, or any matter claimed against him solely by reason of his serving in such Insured Capacity." The section defines "Claim" to include written demands for monetary damages and civil, criminal, administrative and regulatory proceedings.
The policy contains exclusions applicable to these coverages, only one of which — a so-called "personal profit" exclusion for claims "based upon, arising from, or in consequence of such Insured Person having gained in fact any personal profit, remuneration or advantage to which such Insured Person was not entitled" — is relevant to this appeal.[FN6]
The policy also contains two severability clauses, one applicable to representations made to Federal as part of Tyco's application for insurance, and the other to certain policy exclusions. The severability clause relating to the insurance application precludes Federal from imputing to any insured person a statement or knowledge possessed by any other insured person "for the purpose of determining if coverage is available." Similarly, the severability provision with respect to certain exclusions, including the personal profit exclusion, precludes Federal from imputing to an insured person any facts or knowledge of other insured persons "to determine if coverage is available."
In the ERISA action the plaintiffs allege that Kozlowski and other fiduciaries of employee benefit plans acted negligently and breached their fiduciary duties with respect to those plans by, inter alia, negligently misrepresenting and failing to disclose information regarding the management of plan assets, and negligently permitting the plans to purchase and hold shares in the Tyco stock fund when it was imprudent to do so. The ERISA plaintiffs also allege that Kozlowski negligently misrepresented, failed to disclose or omitted information in Securities and Exchange Commission (SEC) filings, as well as about Tyco's acquisitions, improper accounting practices, earnings and investment objectives, and the fund's risk and return characteristics.
In the securities action, a 330-page complaint sets forth various violations of security laws and rules. Among other things, it alleges that Tyco's and Kozlowski's misstatements, acts and omissions caused the plaintiffs to purchase Tyco stock at excessive prices, resulting in damages. The criminal action [FN7] involves charges that Kozlowski was involved in a criminal enterprise in which he and Swartz stole Tyco assets. He is also charged with falsifying business records and concealing and distorting material information. Throughout the indictment there are numerous allegations of wrongful acts including misstatements, misleading statements or omissions about the level of spending, compensation, loans, stock sales and earnings. Federal had notice of the underlying lawsuits against Kozlowski as well as numerous other lawsuits against him at least as early as May 10, 2002. Thereafter, on May 30, 2002, Federal extended the coverage period of the 2001-2002 policy, including coverage for Kozlowski, one additional year to March 15, 2003. On February 13, 2003, approximately nine months after notice of dozens of lawsuits, Federal sent a letter purporting to rescind the 2001-2003 policy "based on material misrepresentations and omissions in the information" upon which it relied in issuing and extending the policy. Specifically, the rescission letter stated that Federal had relied upon Tyco's 2000 and 2001 10-K statements filed with the SEC in issuing the 2001 policy and the 2002 renewal. According to Federal, these documents contained misrepresentations as to purported loans to Kozlowski, compensation, unauthorized cash payments, accounting practices and distribution of funds received from the sale of company assets.
On the same date as the purported rescission, Federal filed this lawsuit against Kozlowski, Tyco and 14 other defendants, seeking a declaratory judgment that the 2001-2003 policy is rescinded and void ab initio, and that Federal is entitled to deny coverage as to all defendants. Federal subsequently amended its complaint, relinquishing its claims against Tyco and the other defendants except, as noted, Kozlowski, Swartz and Belnick [FN8]. Kozlowski counterclaimed, seeking, inter alia, a declaration that Federal's policy covers his losses in connection with the underlying actions.
After joinder of issue, Kozlowski moved for partial summary judgment, seeking a declaration that Federal is required to defend him in the ERISA action and pay his defense costs in the securities litigation and criminal prosecution. In opposition, Federal argued that it had effected a rescission of the policy and tendered a return of Tyco's premiums. It argued, alternatively, that the motion was premature, given its lack of opportunity to conduct discovery.
Supreme Court granted Kozlowski's motion. Finding a dearth of New York law on the question of whether Federal's unilateral rescission excuses its current duty, if any, to defend or pay defense costs, the court looked to rulings from other jurisdictions and held that until Federal's rescission claims are litigated and determined in its favor, the policy obligation to defend or pay for a defense remains in effect. In so ruling, the court recognized that if Federal ultimately prevailed on its rescission claim, it could seek to recover the costs of the defense it provided Kozlowski.
In addition, the court rejected Federal's claim that the policy's personal profit exclusion applied and determined that Federal was obligated, as the case may be, to defend or pay defense costs in each of the underlying actions, finding that the allegations in the underlying actions do not solely and entirely fall within the exclusion.
We affirm Supreme Court's declaration as to Federal's duty to defend the ERISA action, but modify with respect to the duty to pay defense costs of the securities action and the criminal prosecution to the extent of limiting Federal's obligation to pay only those costs relating to liabilities that fall under the coverage provided, i.e., defense costs for covered claims. To the extent claims fall under the personal profit exclusion, Federal is not obligated to reimburse Kozlowski for his defense costs.
As noted, under the fiduciary liability section of the policy Kozlowski is entitled to a defense against any third-party claim alleging that he committed "Wrongful Acts" as a fiduciary of the Tyco ERISA plan. Under the ELI section, Federal must pay all "Loss" for which an insured person, who is not being indemnified by Tyco, "becomes legally obligated to pay" as a result of alleged "Wrongful Acts." "Defense Costs" are defined as a loss item. Thus, whether the obligation is to provide a defense or pay defense costs, the primary issue presented on appeal is whether Federal, as it contends, may avoid its obligations by electing to rescind by notice on the grounds of material misrepresentations and omissions in the information provided for the issuance of the policies.
Insurance Law § 3105(a) defines a misrepresentation as a false "statement as to past or present fact, made to the insurer by, or by authority of, the applicant for insurance or the prospective insured, at or before the making of the insurance contract as an inducement to the making thereof." Section 3105(b) provides that an insurance contract cannot be avoided unless the misrepresentation is material, and that "[n]o misrepresentation shall be deemed material unless knowledge by the insurer of the facts misrepresented would have led to a refusal by the insurer to make such contract." "An insurer may avoid an insurance contract if the insured made a false statement of fact as an inducement to making the contract and the misrepresentation was material" (Curanovic v New York Cent. Mut. Fire Ins. Co., 307 AD2d 435, 436 ). "Materiality is generally a question of fact" (id. at 437).
In this regard, it should be noted that the 2001-2003 policy contains a severability provision that precludes Federal from imputing to Kozlowski statements or knowledge of other insureds. Thus, Federal must show that Kozlowski participated, directly or indirectly, in misrepresenting facts to induce Federal to issue the policy (Wedtech Corp. v Federal Ins. Co., 740 F Supp 214, 218-219 [SD NY 1990]). Federal makes no effort to meet this burden. It fails to cite any alleged misrepresentation made by Kozlowski to induce the issuance of the 2001-2003 policy or even allege that Kozlowski ever signed an application or furnished any answers or information as part of the application process. Rather, Federal alleges that it relied on public financial statements, which, tellingly, it does not allege were part of the application.
Putting aside the merits of Federal's substantive right to rescission, there is the issue of its attempt to avoid the policy's defense obligations by the assertion of a common-law rescission by notice, based on fraudulent inducement, without the need of a judicial determination to that effect. In support of its position, Federal cites McNaught v Equitable Life Assur. Socy. (136 App Div 774, 776 ), which held that upon discovery of a fraud that induced a party to enter into a contract, such party "may make [a rescission] by his own act . . . or he may go into a court of equity and ask for a rescission." No one contests the validity of that principle. It must be noted, however, that in McNaught, which involved an insured's attempt to rescind a life insurance policy, there had been no change in the parties' respective positions since the contract had been entered into, except for the payment of premiums, the return of which the plaintiffs sought in exchange for the tender back of the policy.[FN9]
Here, in contrast, Federal elected to rescind by notice on February 13, 2003, almost two years after the policy in question had gone into effect and after claims, as reflected in the underlying actions, had been asserted thereunder. Thus, the status quo has not been maintained. In such circumstances, a rescission by notice cannot, without legal sanction, have retroactive effect and serve to suspend, even temporarily, obligations that — absent a basis for rescission — have accrued under the policy. Of course, as to any claim of obligation under the policy not yet incurred, Federal's rescission by notice would be prospectively effective since "the actual rescission happen[s] not when the judgment [is] obtained in the action for a rescission, but when the election to rescind was made known" (McNaught, 136 App Div at 778). Needless to say, if Federal prevails in its claim of right to rescind on the basis of fraud in the inducement, its obligation to defend Kozlowski is vitiated and the policy will be rendered void from its inception irrespective of the point in the life of the policy that a liability claim may have arisen.
Although Federal cites authority other than McNaught for the proposition that a party has a right to rescind by notice a contract induced by fraud (see e.g. LaRocca v John Hancock Mut. Life Ins. Co., 286 NY 233, 236 ; Energy Capital Co. v Caribbean Trading & Fid. Corp., 1996 US Dist LEXIS 4170, *20, 1996 WL 157498, *7 [SD NY]; Restatement [Second] of Contracts § 7, § 164), none involves the situation presented here, where the insurer asserts the right to rescind by notice at a time when there are outstanding claims against an insured who is seeking coverage under the policy's obligation to defend or pay defense costs with respect to those claims.
Aside from the rescission issue, which must await judicial determination, the only argument advanced to avoid providing a defense or reimbursing Kozlowski for his defense expenses is the policy's personal profit exclusion. On that point, Supreme Court appropriately recognized that the duty to defend or pay defense expenses turns solely on whether, as to each of the underlying actions, the complaint alleges any facts or grounds that bring the action within the liability coverage purchased.
The rule is well settled that the duty to defend is broader than the duty to indemnify (Fitzpatrick v American Honda Motor Co., 78 NY2d 61, 65 ). The duty to defend arises whenever the underlying complaint alleges facts that fall within the scope of coverage (see Seaboard Sur. Co. v Gillette Co., 64 NY2d 304, 310 ). "[T]he same allegations that trigger a duty to defend trigger an obligation to pay defense costs" (Travelers Prop. Cas. Corp. v Winterthur Intl., 2002 US Dist LEXIS 11342, *17, 2002 WL 1391920, *6 [SD NY]). Both "an insurer's duty to defend and to pay defense costs under liability insurance policies must be construed broadly in favor of the policyholder"[FN10] (Admiral Ins. Co. v Weitz & Luxenberg, P.C., 2002 US Dist LEXIS 20306, *9, 2002 WL 3140950, *3 [SD NY]). The ultimate validity of the underlying complaint's allegations is irrelevant. "The existence of the duty is dependent upon whether sufficient facts are stated so as to invoke coverage under the policy" (American Home Assur. Co. v Port Auth. of N.Y. & N.J., 66 AD2d 269, 278 ).
The allegations in each of the underlying actions demonstrate that the claims asserted do not solely and entirely fall within the personal profit exclusion. In the ERISA action, for instance, although the complaint alleges that Kozlowski and the other defendants breached their fiduciary duties by permitting the plans to buy Tyco stock at a time when it was not prudent to do so, it fails to allege that Kozlowski personally profited from this purported breach. As for the securities action, the claims against Kozlowski are based on his alleged misstatements and omissions and harm caused to plaintiffs in overstating Tyco's assets and value, and failing to reveal illegal profits and disclose facts regarding Tyco's strategy and accounting practices. These are archetypical of claims that encompass both excluded and covered behavior. Supreme Court properly rejected the applicability of the personal profit exclusion to the criminal prosecution because the indictment charges Kozlowski not only with crimes involving personal profit, but those such as making false entries to facilitate loans for other Tyco employees, from which he did not directly profit.
The obligation to defend is readily understood and its requirement is clear — the insurer must afford a defense to the insured for covered as well as non-covered claims if the latter are intertwined with covered claims. The obligation to pay defense expenses, on the other hand, is not as easily defined or applied. Under this type of defense coverage, the insurer is entitled to differentiate between covered and non-covered claims (National Union Fire Ins. Co. of Pittsburgh, Pa. v Ambassador Group, 157 AD2d 293 , lv dismissed 77 NY2d 873 ), despite the fact that a promise to pay defense costs has been construed to require contemporaneous payment. In Gon v First State Ins. Co. (871 F2d 863 [9th Cir 1989]), the insurer who issued a Directors and Officers liability policy argued that absent a duty to defend, it did not have to pay legal defense expenses as incurred. The court held that because the policy provided coverage for loss that the insured shall become "legally obligated" to pay [FN11] and an insured becomes legally obligated to pay legal expenses as soon as the services are rendered, the insurer was required to pay defense expenses as incurred (id. at 868). The court also held that defense expenses were subject to apportionment between covered and non-covered claims (id.; see Okada v MGIC Indem. Corp., 823 F2d 276 [9th Cir 1986]).
This Court has recognized that under a directors and officers liability policy calling for the reimbursement of defense expenses, as in Gon and Okada, "insurers are required to make contemporaneous interim advances of defense expenses where coverage is disputed, subject to recoupment in the event it is ultimately determined no coverage was afforded" (National Union Fire Ins. Co., 157 AD2d at 299). The duty to pay "arises at the time the insured becomes 'legally obligated to pay'" (Little v MGIC Indem. Corp., 836 F2d 789, 793 [3d Cir 1987], quoting policy definition of loss). The contemporaneous payment of defense costs is required because "[t]he only reasonable interpretation of the loss clause in the . . . D&O Policy is that the insurer's obligation to pay accrues when the insured incurs the obligation, not after it has paid a judgment" (National Union Fire Ins. Co. of Pittsburgh, Pa. v Brown, 787 F Supp 1424, 1430 [SD Fla 1991], affd 963 F2d 385 [11th Cir 1992]).
Thus, while Federal must pay defense costs as they are incurred in the securities action and the criminal proceeding, its ultimate liability for such costs is only with respect to such liabilities as fall under the coverage provided. To the extent such liabilities are excluded from coverage by the personal profit exclusion, Federal is not required to pay for defense costs. Since this allocation cannot be made at this juncture and the duty to defend is broader than the duty to indemnify, Federal must pay all defense costs as incurred, subject to recoupment when Kozlowski's liabilities, if any, are determined.
Accordingly, the interlocutory judgment of the Supreme Court, New York County (Helen E. Freedman, J.), entered June 22, 2004, declaring, inter alia, that plaintiff is obligated to defend defendant Kozlowski in the ERISA action and pay current and future defense costs in a certain criminal proceeding and a civil securities action, should be modified, on the law, to declare that plaintiff's obligations with respect to the criminal proceeding and the securities action are limited to defense costs incurred, subject to apportionment and reimbursement for the cost of the defense of non-covered claims, and, except as thus modified, affirmed, without costs or disbursements. Appeal from order, same court and Justice, entered on or about March 5, 2004, which granted defendant Kozlowski's motion for partial summary judgment, should be dismissed, without costs or disbursements.
THIS CONSTITUTES THE DECISION AND
OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.
ENTERED: MARCH 22, 2005
Footnote 1:Overby v Tyco, No. 02-CV-13-7-B (DNH) [ERISA action].
Footnote 2:In re Tyco International, Ltd. MDL Docket No. 02-1335-B(DNH) [securities action].
Footnote 3:People v Kozlowski, Indictment No. 5259/02 (NY Sup. Ct.) [criminal action].
Footnote 4:In its brief, Federal states that Kozlowski resigned on June 3, 2002.
Footnote 5:"[Federal] shall have the right and duty to defend any Claim covered by this coverage section. Coverage shall apply even if any of the allegations are groundless, false or fraudulent."
Footnote 6:This language, quoted from the personal profit exclusion in the ELI section, is virtually identical to the personal profit exclusion in the fiduciary liability section.
Footnote 7:At the first trial the jury was unable to agree, and a retrial is currently under way.
Footnote 8:Despite its assertions that the policy is void by virtue of its February 13, 2003 rescission, Federal has continued to defend Tyco and the defendants other than Kozlowski, Swartz and Belnick and has stated its willingness to continue to pay their defense costs.
Footnote 9:Ultimately, the case was decided against the plaintiffs on the ground of ratification.
Footnote 10:The effective difference between the two defense obligations is who chooses and pays the defense attorney, not whether a defense obligation lies with the insurer (see e.g. In re Worldcom, Inc. Sec. Litig., 2005 US Dist LEXIS 1466, *21 n 11, 2005 WL 254684, *6 n 11 [SD NY]).
Footnote 11:The policy defined loss explicitly to include the cost of the defense of legal actions.
MEMORANDUM AND ORDER
Calendar Date: January 18, 2005
Before: Cardona, P.J., Crew III, Carpinello, Mugglin and Kane, JJ.
De Filippo Law Firm L.L.P., Elmira (Gerald E. De
Filippo of counsel), for appellants.
Coughlin & Gerhart L.L.P., Binghamton (Keith A.
O'Hara of counsel), for respondents.
Appeal from an order of the Supreme Court (Mulvey, J.), entered April 7, 2004 in Chemung County, which granted defendants' motion for summary judgment dismissing the complaint.
Plaintiff Max A. Palmer (hereinafter plaintiff) was injured when the vehicle in which he was riding as a rear-seat passenger collided with a vehicle owned and/or operated by defendants. Following the accident, plaintiff complained of soreness and was transported to the hospital where he was treated and released after being diagnosed with a thoracic and abdominal contusion caused by seat-belt restraint. Plaintiff had two subsequent unremarkable visits to his treating physician, Brian Cassetta. However, five weeks after the accident, he presented to Cassetta complaining of weight loss, shortness of breath, abdominal pain and diarrhea. Resulting tests revealed a pulmonary embolism for which plaintiff was admitted to the hospital, treated and released. A pelvic CT scan performed at that time suggested the existence of a bowel wall contusion and follow-up testing was recommended. Plaintiff apparently did not undergo the testing and, approximately one month later, he drove to Florida. Shortly thereafter, plaintiff resumed golfing. There is no indication that plaintiff pursued medical treatment while in Florida.
Upon his return to New York some five months after the accident, plaintiff underwent an independent medical examination after which his health was reported as normal. Nonetheless, plaintiff was seen by Cassetta twice over the next two months, again complaining of, among other things, fatigue, abdominal cramping and diarrhea. Thereafter, radiological examinations revealed, among other things, abnormalities in plaintiff's soft tissue in his bowel and plaintiff later underwent surgery which resulted in, among other things, the resection of a six-inch portion of his small intestine. The surgery apparently relieved plaintiff's abdominal pain and he has since resumed all of his normal activities, except he now relies on the use of a golf cart when playing 18 holes of golf.
In February 2002, plaintiff and his wife, derivatively, commenced this action against defendants alleging that plaintiff sustained a serious injury (see Insurance Law § 5102 [d]). Specifically, plaintiffs averred that, as a result of the accident, plaintiff suffered a serious injury under four categories of the no-fault law: (1) a permanent loss of use of a body organ, member, function or system, (2) a permanent consequential limitation of use of a body organ, (3) a significant limitation of use of a body function or system, and (4) a nonpermanent, medically-determined injury which prevented him from performing his daily activities for 90 of the first 180 days following the accident (see Insurance Law § 5102 [d]). After joinder of issue and discovery, defendants successfully moved for summary judgment dismissing the complaint and plaintiffs now appeal.
As an initial matter, we agree with Supreme Court that defendants satisfied their "initial burden to establish a prima facie case that plaintiff's alleged injuries did not meet the serious injury threshold under the [n]o-[f]ault [l]aw" (Toure v Avis Rent A Car Sys., 98 NY2d 345, 352 ; see John v Engel, 2 AD3d 1027, 1028 ). In an affidavit in support of defendants' motion, a physician concluded that, based on review of plaintiff's medical records and a subsequent examination of plaintiff himself, plaintiff is now asymptomatic, displays no significant present limitations related to either the pulmonary embolism or his intestinal maladies and experienced no substantial restrictions on his normal activities throughout his course of treatment [FN1]. Defendants' burden thus being satisfied, we turn to an examination of whether plaintiffs successfully established "a triable issue of fact through competent medical evidence based upon objective medical findings and diagnostic tests" sufficient to defeat the motion (Hines v Capital Dist. Transp. Auth., 280 AD2d 768, 769 ; see Nichols v Turner, 6 AD3d 1009, 1011 ; Dabiere v Yager, 297 AD2d 831 , lv denied 99 NY2d 503 ).
As to plaintiffs' claim under the permanent loss of use category of serious injury, it is now settled that any loss under this category must be "total" in order to satisfy the statutory criteria (see Oberly v Bangs Ambulance, 96 NY2d 295, 299 ; Paradis v Burlarley, 3 AD3d 718, 719-720 ; Mikl v Shufelt, 285 AD2d 949, 950 ). Similarly, as to plaintiffs' claims concerning the permanent consequential and significant limitation categories of Insurance Law § 5102 (d), it is beyond cavil that a "plaintiff [is] required to show more than 'a mild, minor or slight limitation of use'" (Mikl v Shufelt, supra at 950, quoting King v Johnston, 211 AD2d 907, 908 ; accord June v Gonet, 298 AD2d 811, 811 ). Inasmuch as plaintiffs have only adduced proof that plaintiff's bowel resection would result in little more than possible intermittent future discomfort and that plaintiff's now-resolved pulmonary embolism has only the "potential" for limiting plaintiff's future exercise tolerance, we conclude that Supreme Court appropriately dismissed these aspects of plaintiffs' claims.
Finally, as to plaintiffs' claims under the 90/180 category of serious injury, we find that their allegations, including plaintiff's claimed relegation to the use of a golf cart, are insufficient to meet plaintiffs' burden of producing evidence that his "usual activities were curtailed 'to a great extent rather than some slight curtailment'" (Monk v Dupuis, 287 AD2d 187, 191 , quoting Licari v Elliott, 57 NY2d 230, 236 ; compare Badger v Schinnerer, 301 AD2d 853, 854 ; Sellitto v Casey, 268 AD2d 753, 755-756 ). In any event, plaintiffs' medical submissions offer no definitive correlative opinion concerning whether plaintiff's alleged restrictions were "'medically indicated and causally related to the injuries sustained in the accident'" (Monk v Dupuis, supra at 191, quoting Blanchard v Wilcox, 283 AD2d 821, 824 ; compare Nichols v Turner, supra at 1011-1012 ; Van Norden-Lipe v Hamilton, 294 AD2d 749, 749-750 ). Accordingly, plaintiffs' 90/180 claim was also properly dismissed by Supreme Court.
MEMORANDUM AND ORDER
Calendar Date: January 14, 2005
Before: Mercure, J.P., Peters, Spain, Lahtinen and Kane, JJ.
James M. Woolsey Jr., Albany, for appellant.
Law Office of Joseph W. Buttridge, Albany (Joseph
W. Buttridge of counsel), for respondent.
Appeal from an order of the Supreme Court (Sheridan, J.), entered March 10, 2004 in Albany County, which granted defendant's motion for summary judgment dismissing the complaint.
A vehicle operated by plaintiff was stopped at a traffic light when it was struck in the rear by defendant's vehicle. Although plaintiff declined medical assistance at the scene, he sought treatment later that day. An X ray of his neck was negative and he was diagnosed with acute cervical strain. He subsequently sought medical treatment from a general practitioner who prescribed physical therapy and referred plaintiff to an orthopedist. Plaintiff treated with the orthopedist who eventually referred him to chiropractic care. He missed about five to six full weeks and three to four partial weeks of work following the accident. He stated that he was unable to participate in his primary hobby, playing pool, for three to four months and continues to be limited in the length of time he can play pool comfortably. Plaintiff commenced this action and currently contends his injuries satisfy the serious injury categories of permanent consequential limitation, significant limitation and 90/180 days. Defendant's motion for summary judgment dismissing the complaint was granted by Supreme Court and this appeal by plaintiff ensued.
Plaintiff argues that defendant's proof was insufficient to meet her initial burden of establishing that he did not sustain a serious injury (see Gaddy v Eyler, 79 NY2d 955, 956-957 [*2]; Monk v Dupuis, 287 AD2d 187, 189 ). Defendant's submissions in support of her motion included the affirmation of Louis Benton, an orthopedic surgeon, in which he reported that, shortly before the motion was filed, he conducted an examination of plaintiff and reviewed plaintiff's medical records, including physical therapy and chiropractic notes, X rays and an MRI. Benton found that plaintiff's cervical X rays and MRI were within normal range. Benton concluded that the bulging discs indicated on the MRI were not the result of this accident but, rather, were within normal limits for a man of plaintiff's age. He further reported that plaintiff had no "functional deficits" and was under no medical treatment for the injuries alleged to have been sustained in the accident. This evidence was sufficient to shift the burden as to the permanent consequential limitation and significant limitation categories. Moreover, the excerpts from plaintiff's deposition and medical records reflected that he returned to part-time work within six weeks and to full-time work without significant restriction within 9 to 10 weeks of the accident. While his pool playing hobby was affected for a longer period, no other activities were reportedly curtailed. This evidence satisfied defendant's burden regarding the 90/180 category (see Creech v Walker, 11 AD3d 856, 856 ; Mack v Goodrich, 11 AD3d 846, 848 ).
The analysis next shifts to whether plaintiff proffered adequate evidence in opposition to the motion to raise factual issues regarding any of the three categories of serious injury he is pursuing (see Dongelewic v Marcus, 6 AD3d 943, 943-944 ). Plaintiff relied in large part on affidavits of the physician who initially treated him, Gregory Stahl, and the orthopedic surgeon to whom he was referred, J. David Abraham. Neither of these doctors had treated plaintiff for over two years at the time they executed their affidavits and each had referred him for further treatment. Under such circumstances, the circumspect prediction, unsupported by any elucidation, of each doctor that plaintiff's condition "may be permanent" is insufficient to create a factual issue regarding the contention of a permanent consequential injury (see John v Engel, 2 AD3d 1027, 1028-1029 ; Trotter v Hart, 285 AD2d 772, 773 ).
The proof offered by plaintiff as to significant limitation is likewise deficient. While Stahl noted muscle spasms and employed tests from which he recorded specific limitations in the range of motion of plaintiff's spine, it appears from his affidavit that these results were based on an examination conducted within days of the accident. Yet, plaintiff's testimony reflects that his condition improved with time and further treatment, and Stahl's affidavit does not address the progression of plaintiff's condition. Abraham's affidavit, in addition to lacking the required specificity (see Toure v Avis Rent A Car Sys., 98 NY2d 345, 350 ; Pinkowski v All-States Sawing & Trenching, 1 AD3d 874, 875 ), suffers from the fact that he also referred plaintiff for further treatment, which plaintiff indicated helped his condition, and the extent of the concededly improved nature of plaintiff's condition is not addressed. This is not a situation of a gap in treatment (cf. Akamnonu v Rodriguez, 12 AD3d 187 ), but instead a cessation of treatment by the doctors submitting affidavits years before those affidavits were executed and whose treatment occurred at a time when plaintiff's condition was still changing and improving. Under such circumstances, the affidavits are insufficient to raise a factual issue (see Davis v Evan, 304 AD2d 1023, 1025 ). Nor did plaintiff submit any relevant evidence rebutting defendant's proof on the 90/180 category and, hence, Supreme Court properly dismissed the complaint.
Montgomery v Federal Express
Submitted by Brian J. Isaac, for appellant.
Submitted by John T. McNamara, for respondents.
The order of the Appellate Division should be affirmed with costs. [*2]
Plaintiff, who was employed as a helper by an elevator company, and Peter Mazzei, an elevator mechanic, were assigned to do work in an elevator "motor room" located some four feet above the roof level of a building. Arriving on the roof, plaintiff and Mazzei found that stairs that had previously led from the roof to the motor room had been removed. There was no ladder in the immediate vicinity, but ladders were available at the job site.
Rather than go and get a ladder, plaintiff and Mazzei climbed to the motor room by standing on an inverted bucket. When he left the motor room, plaintiff jumped down to the roof, injuring his knee in the process.
agree with the Appellate Division that, since ladders were readily available,
plaintiff's "normal and logical response" should have been to go get one.
Plaintiff's choice to use a bucket to get up, and then to jump down, was the
sole cause of his injury, and he is therefore not entitled to recover under
Labor Law § 240 (1) (Blake v Neighborhood Hous. Servs. of N.Y. City,Inc.,
1 NY3d 280 ).
* * * * * * * * * * * * * * * * *
On review of submissions pursuant to section 500.4 of the Rules, order affirmed, with costs, in a memorandum. Chief Judge Kaye and Judges G.B. Smith, Ciparick, Rosenblatt, Graffeo, Read and R.S. Smith concur.
Decided March 24, 2005