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6/29/05            Raymond Corporation v. National Union Fire Insurance Company
New York Court of Appeals

Vendor Endorsement Interpreted To Cover Only Product Defect Claims, Not Independent Negligence of Vendor

The issue on this appeal is whether a vendor's endorsement in the CGL policy covered personal injury claims caused by the vendor's independent acts of negligence.  The Court concludes that the vendor's endorsement only covers those claims stemming from the defective products of the insured.   The Appellate Division read the vendor's endorsement as broad enough to cover claims arising out of the vendor's negligence.  Here, the policy covers vendors, such as Arbor,

 

"only with respect to Bodily Injury or Property Damage arising out of [Raymond's products] . . . which are distributed, sold, repaired, serviced, demonstrated, installed or rented to others in the regular course of the vendor[']s business" (emphasis added).
 

The majority interprets this provision that "arising out of [Raymond's products]" means injuries arising out of defects in the products, rather than arising out of the vendor's negligence. The modifying phrase, "which are distributed, sold, repaired, serviced, demonstrated, installed or rented to others in the regular course of the vendor[']s business," on which the insured places so much emphasis, is most naturally read to describe Arbor's activities with respect to Raymond's products, not — as the insured argues — to indemnify Arbor for its negligent performance of those activities.

The dissent points out the following:
 

The majority reads the words "arising out of 'Your Products'" to mean "arising out of defects in 'Your Products'" (majority op at 6). This reading of the phrase is not an impossible one, though it departs from our usual practice of resolving ambiguities in favor of the insured (U.S. Fidelity & Guar. Co. v Annunziata, 67 NY2d 229, 232 [1986]); I might accept the majority's reading if the rest of the vendor's endorsement were consistent with it. When I read the exclusions from the vendor's endorsement, however, I cannot believe that the author of the document intended only actions arising out of product defects to be within the endorsement's coverage. If that was the author's intention, the exclusions are largely unnecessary.
 

6/29/05            Munoz v. DJZ Realty, LLC

New York Court of Appeals

New York High Court Holds Changing Artwork on a Billboard not an Alteration Under Labor Law 240(1)

Plaintiff was injured in a fall while applying a new advertisement to the face of a billboard that sat atop a building owned by defendant. Plaintiff's activities may have changed the outward appearance of the billboard, but it did not change the billboard's structure, and thus were more akin to cosmetic maintenance or decorative modification than to "altering" for purposes of Labor Law § 240(1).

 

6/30/05            Segal Company v Lloyds London

Appellate Division, First Department

Insured not Entitled to ERP Coverage as Reg 121 Exceptions Apply to Foreign Underwriter

Lower Court granted plaintiff's motion for summary judgment on public policy grounds and directed defendants to sell to plaintiff extended reporting period coverage (ERP) for its primary and excess insurance policies.  The Appellate Division reverses and provides an overview of the restrictions placed on renewals of claims made policies (coverage provided only for those claims reported during the policy period). 

 

Defendants sold plaintiff a primary and excess professional liability insurance policies.  By letter dated March 25, 2003, defendants transmitted "2003 Renewal Terms" for plaintiff's insurance. Because of plaintiff's adverse loss history, which included paid claims of more than $21 million between 1999 and 2001, as compared to $1.52 million in premiums paid by plaintiff for the same period, the renewal terms included higher deductibles and higher premiums.  The insured considered the new terms a refusal to renew the policies and requested to purchase ERP coverage that would extend the existing policies.  Lloyds refused and the insured brought suit claiming the Lloyds improperly denied the ERP coverage.

The Court indicates New York State's disapproval of claims-made policies as is expressly set forth in Insurance Department Regulation 121 (more complicated and confusing method of coverage for the insured).  Various restrictions are placed on claims made policies, including that the insurer must make ERP coverage available upon termination of coverage under the policy.  However, policies procured from unauthorized insurers by licensed excess line brokers are exempt.  Here, Lloyds, as a foreign underwriter, was not an authorized insurer and they procured the policy through Aon Risk, an excess line broker.  The Court also found as a large commercial insured, Reg 121’s protections would not apply to Segal.

 

6/30/05            Martin v. Fitzpatrick

Appellate Division, Third Department

Corroborating Chiropractors Results in Finding of Permanency

Supreme Court rendered a verdict in plaintiffs' favor, finding plaintiff had sustained serious injury under three statutory categories: permanent consequential limitation of use, significant limitation of use and the 90/180-day category.  Appellate Divison affirms on all categories.  Plaintiff’s chiropractor testified as to the permanency of the plaintiff’s injuries and this was corroborated by the no-fault carrier’s chiropractor who examined plaintiff on several occasions.

 

6/28/05            Montgomery v. Pena

Appellate Division, First Department

Plaintiff’s Offer of Subjective Proof Fails to Prevent Dismissal on Serious Injury Grounds

Court holds that Plaintiff did not suffer serious injury within the meaning of Insurance Law § 5102(d).  Defendants offered the affirmed reports of an orthopedist and a neurologist that found plaintiff suffered from no orthopedic or neurological disability. In addition, defendants offered affirmed reports by a radiologist, opining that MRI scans of plaintiff's right knee and right shoulder, made within about two months of the subject accident, indicated that plaintiff suffered from preexisting degenerative conditions in both of these joints, but showed no evidence of any trauma-related injury.  In response, plaintiff offered an affirmed report of plaintiff's treating physician that failed to give any objective basis for finding plaintiff's alleged limitations resulted from the subject accident.  The plaintiff’s physician report didn’t even mention prior injuries or preexisting conditions that were well documented by the defendants. 

 

6/28/05            Mendoza v. American Country Insurance Company

Appellate Division, First Department

Six Month Delay to Disclaim Untimely

Defendant's unexplained delay in disclaiming coverage for six months after having been notified of the lawsuit against its insured was untimely, and thus ineffective.  Court affirms the grant of plaintiff's motion for summary judgment and directs insurer pay plaintiff proceeds of $100,000 under the subject liability policy.

 

6/27/05            Allcity Insurance Company v. Borrello

Appellate Division, Second Department

Absent Location Limiting Language, Insurer Owes Defense and Indemnification

Allcity Insurance Company (hereinafter Allcity), defended the Borrellos under an insurance policy and the policy renewals it had issued to them for the years 1994 through 1998 (hereinafter collectively the policy), under reservation of rights letters. The policy's declaration page names the Borrellos individually as the insureds. Contrary to insured’s contention, the coverage provided by the policy to the insureds was not limited to the locations listed on its declaration page. The policy language provides that Allcity is to indemnify the insureds, in this instance the Borrellos, up to the policy limits for sums they become obligated to pay with respect to the conduct of a business owned solely by them. That clearly includes the building of which Ann Marie is the sole owner. Since there is no geographical or location-limiting language in the policy, or a rider limiting liability to the locations listed on the declaration page annexed as part of the policy during the relevant time periods, and since it is uncontested that Ann Marie Borrello, individually, owned that building, Allcity is obligated to defend and indemnify the Borrellos in the underlying action.

 

6/27/05            H.L. & F.H. Realty v. Gulf Insurance

Appellate Division, Second Department

Retroactive Issuance of Endorsement – to Correct Clerical Error -- with Knowledge of Pending Claim Not Fraudulent

Gulf asserted an affirmative defense, as well as a cross claim against the insurance broker's past and present employers, alleging that the broker fraudulently induced Gulf's underwriter to issue an endorsement naming the plaintiff as an additional insured. Contradicting the broker's testimony, the underwriter claimed that the broker requested the endorsement without informing him that a loss had just occurred. The evidence established that the omission of the plaintiff's name from the insurance policy was a clerical error, the identity of the insured did not affect the risk assumed by Gulf, and, as the underwriter's supervisor conceded, there was no reason for excluding the plaintiff as an insured on the policy. Under the circumstances of this case, the broker's alleged omission of the fact that a claim was being made against the policy was, as a matter of law, not material and not made with fraudulent intent.

 

6/27/05            Labate v. Liberty Mutual Fire Insurance

Appellate Division, Second Department

Causative Event not the Trigger for Coverage, But When the Damage Occurred

The complaint in the underlying action contained allegations of property damage sustained during the policy period. The Court finds that it’s immaterial whether the causative event happened during or before the policy period.  Based on the homeowners insurance policy issued by Liberty, an "occurrence" is defined as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions, which results, during the policy period, in . . . [p]roperty damage.  The Court holds that "the language of the occurrence clause ascribed no temporal relevance to the causative event preceding the covered [property damage], but rather premises coverage exclusively upon the sustaining of specified [property damage] during the policy period".  and so, the Supreme Court correctly determined that the "occurrence" did not pre-date the inception of the homeowners policy and that the plaintiffs timely notified Liberty of the underlying action.

 

6/23/05            Rucaj v. Progressive Insurance Company
Appellate Division, First Department
Cooperation Defense Fails; Phone Call and Skip Trace Not Enough; Accordingly Carrier Must Pay Judgment

The actions taken by defendant insurer to secure the insured's cooperation were, as a matter of law, insufficient to be termed either diligent or reasonably calculated to obtain his cooperation (id.). There was one phone contact with a request for information which was not provided. The residency skip trace he arranged confirmed the insured’s New York license and Virginia residence. The investigator did not attempt to contact insured again until eight months later, when he learned in June 2003 that plaintiff had commenced a lawsuit against insured and obtained a default judgment, and at that point his attempts to contact insured were limited to telephone calls to his cell phone number, his Virginia number, and his mother's residence in the Bronx. Although the calls were either unanswered, or were answered by unidentified persons who refused to provide any information concerning insured’s whereabouts, the investigator did nothing more than conduct another trace search, which revealed no new information. No attempt was made to send an investigator to his residence in Virginia or his mother's residence in the Bronx, to inquire of neighbors and/or family members as to whereabouts. Nor was an attempt made to contact his place of employment and speak to his employer or coworkers. The only written correspondence sent to Garcia was apparently that announcing the disclaimer of insurance coverage, which was sent to Garcia on July 8, 2003, and was returned as unclaimed. Having disclaimed its duty to defend its insured in the underlying action, may not . . . raise defenses extending to the merits of plaintiff's claim against the insured even where the judgment was rendered by default.

 

6/23/05            McGarr v.  Guardian Life Insurance Company

Appellate Division, First Department

Material Representation by Insured and Policy Lapse Preclude Coverage for Insured

Insured purchased a policy through defendant Downing, who was employed by defendant Collins & Associates. The policy lapsed for nonpayment of premiums.  In September 1995, Mooney applied to reinstate the policy and to reduce the amount of coverage from $800,000 to $200,000.  The court held that defendants were not estopped from asserting the policy's lapse. The policy clearly stated that if premium payments were not made within a 31-day grace period, the policy lapsed.  Mooney stated that he had had no medical treatment within the past five years, when in fact he had had medical treatment within the preceding month. Because of this material misrepresentation, Guardian was not required to pay out on the $200,000 policy. 

 

Plaintiff claimed that defendants failed to notify the insured of the $800,000 policy's lapse in accordance with the requirements of Insurance Law § 3211(a) (1) was improperly raised for the first time on appeal, and although the court declined to consider it, the stated in dicta that since the premiums were paid on a monthly basis, § 3211(a) (1) did not apply.

The court acknowledged that the $800,000 policy obtained by Downing was not what insured requested - a $1 million policy with premiums lower than the ones he had been paying.  Nevertheless, plaintiff's cause of action for negligence was properly dismissed. The Guardian policy clearly sets forth the coverage amount and the annual premiums, and Mooney is presumed to have read and understood his policy. If the policy was not what he wanted, he should have exercised his right to cancel it within 10 days of receipt.
 

6/23/05            Sojka v. 43 Wooster LLC
Appellate Division, First Department
Carrier Cannot Test its Disclaimer by Having Defense Counsel Seek to Withdraw
After assigning defense counsel to defend insured, carrier discovered reason to deny coverage.  Defense counsel made an application to withdraw as counsel, arguing that it was not getting paid and therefore should no longer be required to defend insured.  Court held, as courts have held on many prior occasions, that an application to withdraw as counsel is not a proper method to test the validity of a disclaimer.  Carrier is required to retain separate counsel and commence a declaratory judgment action to be relieved of obligation to defend, once it begins defending.  Hint:  a non-waiver agreement might have been an alternative.

 

6/23/05            McNamara v. Wood

Appellate Division, Third Department

No Proof of Serious Injury Flowing from Plaintiff’s First of Two Accidents – Pommels Begins to Take Hold

Plaintiff commenced this action for injuries to her right knee allegedly sustained when her car was struck from behind on two separate occasions.  Defendant involved in the first accident moves on serious injury threshold.  Plaintiff's testimony and medical records establish that during the 26 months between the first and second accidents, she never sought or received treatment for any injury sustained as a result of the first accident.  Plaintiff offered no explanation for this other than her belief that nothing could be done for her pain. The only medical evidence of any damage to plaintiff's knee prior to the second accident is the report of her arthroscopic knee surgery, performed almost four months after the second accident.  That report indicated the presence of preexisting degenerative arthritic changes to the knee, but did not relate them to the first accident.  The Court cited to the recent Court of Appeals case in Pommels.  See discussion of Pommels in the review of the Ali case below.

 

6/22/05            Ali v. Vasquez

Appellate Division, Second Department
Pommels
Strikes Again – Plaintiff Fails to Explain Gap, Serious Injury Claim Fails
In the May 6th issue of Coverage Pointers (Volume VI, Issue 18, for those who collect these or wish to find them on our website) we reported on the Pommels decision by the Court of Appeals.  We interpreted Pommels as imposing on the plaintiff the responsibility of “explaining away” a gap in treatment, a preexisting condition or a subsequent injury, once the defendant has put in sufficient proof of a lack of serious injury.  Since we own the franchise in crystal balls, we’re delighted to report on an Appellate Division decision that says just that.  In this case, the defendant made a showing that the plaintiff did not sustain a serious injury using affirmed medical reports of their examining neurologist and orthopedist. The Appellate Division then required the plaintiff to satisfy TWO separate burdens.  First, the plaintiff was thus required to come forward with objective medical evidence, based upon a recent examination, to verify his subjective complaints of pain and limitation of motion.  In addition, with a nod to Pommels, the Court held that “any significant lapse in time between the conclusion of the plaintiff's medical treatment and the physical examination conducted by his physician had to be adequately explained” and commented that “the plaintiff's physician, which was based upon an examination conducted six years after the accident and did not explain a lengthy gap in treatment, was insufficient to raise a triable issue of fact as to whether the plaintiff sustained a serious injury.”

 

6/22/05            Mohamed v. Siffrain

Appellate Division, Second Department
Explanation of 4 ½ Year Gap in Treatment Unsupported by Record and Unsworn Reports – Pommels Discussed Again

Defendant's neurologist and orthopedist examined the plaintiff approximately four years after the accident and found he had a full range of motion in his cervical and lumbar spines, shoulders, and knees, and no evidence of any neurological deficits. In addition, the defendant's radiologist reviewed the plaintiff's magnetic resonance imaging films which revealed that the cervical spine was normal, and that the plaintiff's left knee exhibited only degenerative changes.  The explanation of the plaintiff's physician for the 4½-year lapse in time between the conclusion of medical treatments and the date of his examination of the plaintiff is unsupported by the record). Furthermore, the physician's findings were based upon the unsworn medical reports of others, as well as upon the plaintiff's own subjective complaints of discomfort and pain.

 

6/22/05            Neugebauer v. Gill

Appellate Division, Second Department

Failure to Provide Proof of Treatment Received is Fatal to Plaintiff’s Case – Pommels Authority for Dismissal of Action

The plaintiff failed to provide testimony from any of her treating physicians, or introduce medical records in admissible form, establishing what treatment she received for her alleged injuries in the more than four-year period between the date of her accident and the examination conducted by her expert. The plaintiff's failure to adequately explain the four-year gap in medical treatment prevented her from proving a prima facie case for any category of serious injury.  Guess what?  Pommels is again cited by Court is dismissing lawsuit.

 

6/22/05            Brighton Central School District v. American Cas. Co. of Reading, PA

Appellate Division, Second Department
Carrier’s Excuse Insufficient to Justify Five Month Delay in Denying Coverage
a delay of over five months in disclaiming liability was unreasonable as a matter of law. In light of the relationship between the plaintiff and the primary insured, the carrier did not need to review the underlying contract to know that the exclusion applied. Carrier “estopped” (actually it isn’t estopped, it’s waiver) from raising exclusion and must defend and indemnify.

 

6/22/05            Colonial Penn Insurance Company v. New York Central Mut. Ins. Co.
Appellate Division, Second Department
Poor Policy Cancellation Saved by Replacement Policy
While plaintiff may have improperly cancelled policy because it failed to properly mail it and file it with Department of Motor Vehicles, it is undisputed that insured secured a replacement policy with NYCM.  This case reminds us of the long-standing rule that where replacement insurance is actually obtained so as to continue coverage from the expiration date of the previous policy, the “old” insurer is relieved of the risk despite failure to notify the commissioner of termination of coverage.

 

6/21/05            Nix v. Xiang
Appellate Division, First Department
Serious Injury Threshold Motion Fails Because of Defendant’s Lack of Proof
Once again, a “serious injury threshold” motion was nixed, pun intended, because of a failure on the part of the defense to offer sufficient proof of a lack of serious injury to require a response from plaintiff.  Here, the Court found that the examining neurologist's report was conclusory and failed to identify those objective tests relied upon, and failed to address the objective findings of plaintiff's MRI and CT scan, which showed disc herniations and bulges. Defendant's radiologist failed to consider the CT scan and only partially addressed the MRI.  Accordingly, the Court did not even need to consider, and did not consider, the plaintiff’s submission in opposition.

 

6/20/05            Frankel v.  Western Select Insurance Company

Appellate Division, First Department

Direct Action against Insurer Barred Until Judgment Obtained Against Tortfeasor

This action arising seeks recovery for medical expenses from carrier of the alleged tortfeasor with whom plaintiff settled her claims in March 2004 and which paid the full amount of the settlement.  The court holds that the action is barred by Insurance Law § 3420, which precludes a direct action against a tortfeasor's insurer, where, as here, no judgment has been obtained against the tortfeasor.

 

Audrey’s Angle on No-Fault
Audrey Seeley

[email protected]

 

Welcome to the first column of Coverage Pointers that focuses on No-Fault arbitration awards and cases as well as insurance department opinions regarding No-Fault coverage.  As you may know the reporting of No-Fault arbitration awards is not at the same level of reported case law, meaning there is no one source to turn to for comprehensive research of arbitration awards.  We encourage you to submit to us, in a PDF format, at [email protected], any recent no-fault arbitration awards that address interesting no-fault issues.  We kindly request that you omit the Applicant’s name as well as counsel’s name upon submission to us.

 

5/20/05:     In the Matter of the Arbitration between the Applicant and New York Central Mut. Fire Ins. Co.,
Arbitrator John J. O’Grady

Insurer Successful in Denial Based On Failure to Cooperate with Investigation

Here is the Angle:     Before denying based upon failure to cooperate with the insurer’s investigation ensure that:

 

·         the insurer has a valid reason for the investigation which is in line with the claims practice principles set forth in 11 NYCRR §65-3.2; and

·         that the insurer complied with 11 NYCRR §65-3.6(b) and provided a second opportunity to cooperate.

 

When arbitrating a failure to cooperate with the insurer’s investigation the insurer must demonstrate that it complied with the above criteria and that the Applicant unreasonably failed to comply on at least two occasions.

 

The Analysis:

 

Arbitrator John J. O’Grady declined to award payment of Applicant’s electrodiagnostic testing as the Insurer, New York Central Mutual Fire Insurance Company (“NYCM”), successfully set forth a valid defense of the Applicant’s assignor’s failure to cooperate with its investigation.

 

Under 11 NYCRR §65-1.1 the Applicant, as a condition precedent to coverage, must, upon the insurer’s request, provide any other pertinent information that assists the insurer in determining the amount of benefits due.  Arbitrator O’Grady points out that an insurer’s request for investigation is a valid verification request and compliance with same is not as clearly addressed within the regulations like a verification request for an independent medical examination or examination under oath.  

 

Before an insurer can deny a claim for no-fault benefits based upon lack of cooperation with an investigation, it must pursuant to the procedures set forth in 11 NYCRR §65-3.6(b), provide the Applicant with a second opportunity to cooperate.

 

More importantly, in determining whether a condition precedent to coverage was breached by failing to cooperate with the insurer’s investigation the following factors are considered:

 

·         The facts and circumstances surrounding the request for investigation and the Applicant’s failure to cooperate; and

 

·         Compliance with 11 NYCRR §65-3.2, the claim practice principles.

 

Further, the insurer must demonstrate:

 

  • It had a good reason, that is consistent with the claim practice principles, to conduct the investigation;

 

  • It provided the Applicant with reasonable and adequate notice that it was conducting an investigation and required the Applicant’s cooperation and apprised the Applicant of the steps he/she must take to comply with the investigation; and

 

  • The Applicant unreasonably failed to comply with the investigation on at least two instances after receiving notice.

 

NYCM demonstrated that it sent Applicant correspondence properly delaying the claim as the no-fault application from the assignor was not received.  A week later NYCM sent correspondence to Applicant that NYCM was awaiting the results of investigation into the claim for benefits.  Soon thereafter, NYCM notified Applicant that the claim was still under investigation.  In the meantime, NYCM sent an investigator to the assignor’s counsel’s office to schedule an appointment for a statement.  The assignor’s counsel requested that the appointment be rescheduled to a later date, which the NYCM confirmed that date in a letter.  On the agreed upon date, counsel sent a letter to NYCM advising that they could not locate their client.  NYCM sent correspondence to the assignor’s counsel advising of the obligation to cooperate with investigation under the insurance policy.  NYCM’s conduct was appropriate and neither the assignor nor the Applicant came forward with a reason why the multiple requests were not complied with or that they were not represented by the attorney contacted to arrangement the appointment for a statement.  Thus, there was a failure to cooperate with NYCM’s investigation.  Further, since the Applicant stands in the shoes of the assignor the entire claim was denied.

 

1/13/05            Insurance Department Opinion on Pharmacy Billing For Prescription Medication

When a pharmacy submits a bill for prescription medication dispensed to the eligible injured person how is actual cost determined for payment of the claim?

 

The Insurance Department opined that as there is no pertinent regulation that defines “actual cost” for purposes of prescription medication reimbursement therefore it is a question of fact based upon the relevant documentation and information presented.

 

The Department references Regulation 83, Appendix C, Part E regarding prescription drugs.  Part E provides that the maximum permissible charge for drugs that are dispensed by a licensed pharmacist and that require a prescription is the actual cost of the drug to the pharmacist, which cannot exceed the cost shown in either the American Druggist Blue Book or the Drug Topic Red Book, plus a $5.00 dispensing fee.  Further a compounded prescription must have an additional $2.00 fee to the dispensing fee.

 

Also, if the insurer seeks to determine the actual cost it may request, as verification of the claim, from the pharmacist invoices or other relevant information to compare to the costs shown in the Blue or Red Book.  Of course, if a dispute arises as to the actual cost the Insurance Department opines that it is ultimately a question of fact properly left for determination either by arbitration or a court.
 

 

Across Borders

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.


6/24/05            Galbraith v. Allied Mutual Insurance Company

Iowa Supreme Court

Underinsured-Motorist Carrier’s Delay In Payment Until Resolution of Underlying Action Not Bad Faith
The Iowa Supreme Court affirmed the trial court’s judgment granting the underinsured-motorist carrier’s motion for summary judgment on its insured’s bad faith claim, thus reversing the Court of Appeal. The Supreme Court held that an underinsured-motorist carrier cannot be expected to make payment to its insured prior to the time that the underlying tort litigation has been fully resolved and a determination has been made concerning the presence or absence of liability insurance available for payment of the claim. The Galbraiths had underinsured-motorist coverage through Allied Mutual Insurance Company, when Mr. Galbraith was injured in an automobile accident caused by Wendell Wantjes. The Galbraiths sued the Wantjes, and later amended their petition to assert claims against Wantjes’ employer claiming he was acting within the course and scope of employment at the time of the accident, and Allied on the ground that the defendants were underinsured. The trial court severed the claim against Allied to be tried after the resolution of the underlying action. Galbraith later informed Allied that Wantjes’ insurer had offered to pay policy limits of $100,000, but that the employer had indicated that its policy did not provide coverage for Wantjes. Therefore, Galbraith demanded Allied pay the $50,000 of outstanding damages, threatening a bad faith claim. Allied paid the policy limit of $50,000 ten days after receiving Galbraith’s settlement with defendants. The Supreme Court held that as a matter of law, Allied had not acted in bad faith when it delayed payment until a determination of the underlying liability had been made.

 

Submitted by: Bruce D. Celebrezze & Michelle Y. McIsaac (Sedgwick Detert Moran & Arnold LLP


6/20/05            Lloyds of London v. Wolleson

Idaho Supreme Court

Attorney’s Fees Not Recoverable against Insurer for Failure to Pay Only a Potential Claim
The Idaho Supreme Court affirmed the trial court’s interpretation of Iowa’s attorney’s fee statute, finding that the statute required an insurer to wrongly refuse to pay an “amount justly due.” In this case, there was no evidence of an “amount justly due” to the insured; therefore no attorney’s fees were recoverable under the statute. Wolleson operated a fertilizer business, which was insured by Certain Underwriters at Lloyds. Allegedly, Wolleson caused damage to a third party property when he applied fertilizer. Wolleson notified Lloyds of the potential claim. However, when Lloyds inquired of the third party the amount of property damage allegedly suffered, no information was provided. In a subsequent declaratory relief action brought by Lloyds against Wolleson, Wolleson prevailed. However, Wolleson’s request for attorney’s fees was denied on the ground that Lloyd had never refused to pay any amount due because no amount had ever been demanded. The statute required a showing that an amount was due.

 

Submitted by: Bruce D. Celebrezze & Michelle Y. McIsaac [Sedgwick, Detert, Moran & Arnold LLP]


6/17/05            Arizona Prop & Cas. Ins. v. Martin

Arizona Court of Appeals

Insurer’s Exclusive Remedy Defense Was Proper in Declaratory Relief Action
An insurer’s declaratory relief action was on the grounds that coverage was excluded because appellant Martin’s alleged injuries occurred in the course and scope of his employment, and because the insureds in the underlying tort action had violated their professional code of conduct. Martin and the insureds entered into a Morris agreement in the underlying tort action and the trial court entered a default judgment against the insureds. Thereafter, the insurer moved for summary judgment in the declaratory relief action and Martin, standing in the shoes of the insureds pursuant to the Morris agreement’s assignment provision, cross-moved and the trial court granted summary judgment in favor of the insurer. Martin appealed the trial court’s grant of summary judgment in favor of the insurer, contending the trial court erred in allowing the insurer to litigate alleged liability issues in the coverage phase of the case. Martin alleged that Morris prevents an insurer to litigate tort liability and damage issues in the guise of a coverage defense. Martin alleged that the workers’ compensation defense and the trial court’s ruling in favor of the insurer on this defense hinged on facts and law bearing, on the insureds’ liability in the underlying action, which under Morris and another decision, is improper. The court rejected the argument, holding that the insurer litigated a legitimate coverage issue (the workers’ compensation defense) in the declaratory relief action, based upon specific exclusions in the policy.

Submitted by: Bruce D. Celebrezze & Vanessa L. O'Brien (Sedgwick Detert Moran & Arnold LLP)


6/17/05            Machan v . Unim Life Ins. Co.

Utah Supreme Court

Insured May Recover Consequential Damages Sustained as a Result of Express Breach of Insurance Contract
In this case, the Utah Supreme Court was asked to consider whether an insured may recover consequential damages for breach of the express terms of an insurance contract and, if so, the scope consequential damages recoverable for such breach. The court held that both parties to an insurance contract should expect that a carrier may require a reasonable amount of time to process or investigate a claim before determining whether to pay or deny it. Where an insurance company’s breach consists only of ultimately resolving a claim incorrectly and failing to pay the insured, we may presume that any damages sustained by the insured during the initial reasonable investigation period were not caused by the breach. However, where the insurance company has unreasonably delayed processing a claim or has otherwise acted in bad faith during the investigation process, it is much more likely that any damages sustained by the insured were caused by the breach. As such, delay or other bad faith behavior is itself part of the breach. To the extent any damages caused by this conduct are reasonably foreseeable; they should be included in the consequential damages calculation for breach of the express terms of the contract.

 

Submitted by: Bruce D. Celebrezze & Vanessa L. O'Brien (Sedgwick Detert Moran & Arnold LLP) –


6/16/05            Darel Lewis v. Mid-Century Insurance Company

Supreme Court of
Arkansas

Underinsured Motorist Insurance Coverage Existed Where the Accident Was Caused by an Underinsured Driver and That No Involvement of the Underinsured Vehicle Was Required
The court considered the issue of whether a Mid-Century Insurance policy provided coverage where the underinsured driver was driving a vehicle insured under the Mid-Century policy rather than a vehicle that was underinsured under the driver’s insurance policy. Arkansas statutes do not require that an auto policy provide underinsured coverage where no underinsured vehicle is involved in the accident. However, there is nothing in the statute that prohibits parties from agreeing that the underinsured coverage extends to operation of the insured vehicle by an underinsured driver. The policy provided as follows: “Coverage C - Uninsured Motorist Coverage (Including Underinsured Motorist Coverage) – We will pay all sums which an insured person is legally entitled to recover as damages from the owner or operator of an uninsured motor vehicle because of bodily injury sustained by the insured person. The bodily injury must be caused by accident and arise out of the ownership, maintenance or use of the uninsured motor vehicle.” The policy further provided specifically for underinsured motorist coverage, “Coverage C1 – ...We will pay all sums which an insured person is legally entitled to recover as damages from the owner or operator of an underinsured motor vehicle because of bodily injury sustained by the injured person.” That language makes coverage dependant upon involvement of the “owner or operator” of an underinsured vehicle. The language in the uninsured motorist clause stating that the accident must arise out of the ownership, maintenance, or use of the uninsured motor vehicle is not present. The court found the policy is ambiguous and must be construed in favor of the insured and strictly against the insurer. Therefore, coverage existed where the accident is caused by an underinsured driver and that no involvement of the underinsured vehicle was required.

 

Submitted by: Richard Chappuis and Laura E. Kraemer (Voorhies & Labbe)

 

 

 

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Dan D. Kohane, Team Leader

[email protected]

Audrey A. Seeley

 

Appellate Team

Scott C. Billman, Team Leader

[email protected]

Dan D. Kohane

 

 

Nix v. Xiang

Order, Supreme Court, Bronx County (Betty Owen Stinson, J.), entered May 27, 2004, which granted defendant's motion for summary judgment dismissing the complaint, unanimously reversed, on the law, without costs, the motion denied and the complaint reinstated.

In this personal injury action that resulted from an automobile-pedestrian accident, the IAS court erred when it granted defendant's summary judgment motion premised on the absence of a "serious injury" as defined by Insurance Law § 5102(d), since he did not meet his burden of presenting competent evidence that plaintiff had not sustained a serious injury (see Chatah v Iglesias, 5 AD3d 160 [2004]; Rodriguez v Goldstein, 182 AD2d 396 [1992]). The examining neurologist's report was conclusory, failed to indicate what, if any, objective tests were relied upon, and failed to address the objective findings of plaintiff's MRI and CT scan, which showed disc herniations and bulges. Defendant's radiologist failed to consider the CT scan and only partially addressed the MRI. Since defendant failed to submit proof in admissible form to meet his burden of establishing a prima facie entitlement to summary judgment, the IAS court should have denied the motion without considering the sufficiency of plaintiff's opposing papers (see Diaz v Nunez, 5 AD3d 302 [2004]).

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

ENTERED: JUNE 21, 2005

CLERK

Ali v. Vasquez




Cheven,
Keely & Hatzis, New York, N.Y. (William B. Stock of
counsel), for appellants.
Charles E. Holster III,
Mineola, N.Y., for respondent.

In an action to recover damages for personal injuries, the defendants appeal from an order of the Supreme Court, Kings County (F. Rivera, J.), dated May 7, 2004, which denied their motion for summary judgment dismissing the complaint on the ground that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d).

ORDERED that the order is reversed, on the law, with costs, the motion is granted, and the complaint is dismissed.

The defendants made a prima facie showing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) through the submission of the affirmed medical reports of their examining neurologist and orthopedist (see Toure v Avis Rent A Car Systems, 98 NY2d 345; Howell v Reupke, 16 AD3d 377; Kearse v New York City Tr. Auth., 16 AD3d 45; Meely v 4 G's Truck Renting Co., 16 AD3d 26). The plaintiff was thus required to come forward with objective medical evidence, based upon a recent examination, to verify his subjective complaints of pain and limitation of motion (see Batista v Olivo, 17 AD3d 494; Isakov v Day, 15 AD3d 622). Moreover, any significant lapse in time between the conclusion of the plaintiff's medical treatment and the physical examination conducted by his physician had to be adequately explained (see Batista v Olivo, supra; Jimenez v Kambli, 272 AD2d 581). The affirmed report of [*2]the plaintiff's physician, which was based upon an examination conducted six years after the accident and did not explain a lengthy gap in treatment, was insufficient to raise a triable issue of fact as to whether the plaintiff sustained a serious injury (see Batista v Olivo, supra; Pommells v Perez, NY3d [Apr. 28, 2005]; Howell v Reupke, supra; Guzman v New York City Tr. Auth., 15 AD3d 541; Kearse v New York City Tr. Auth., supra).

In addition, the plaintiff's submissions failed to raise a triable issue of fact as to whether he was unable to perform substantially all of his daily activities for not less than 90 of the 180 days immediately following the accident (see Batista v Olivo, supra; Howell v Reupke, supra; Kearse v New York City Tr. Auth., supra).
KRAUSMAN, J.P., CRANE, RIVERA and FISHER, JJ., concur.

Brighton Central School District v. American Casualty Company of Reading, PA.
 

In an action, inter alia, for a judgment declaring that the defendant American Casualty Company of Reading, PA, is obligated to defend and indemnify the plaintiffs in an action entitled Tebo v Brighton Central School District, pending in the Supreme Court, Monroe County, under Index No. 1265/03, the defendant American Casualty Company of Reading, PA, appeals from so much of an order of the Supreme Court, Nassau County (O'Connell, J.), entered July 2, 2004, as denied its cross motion for summary judgment and granted that branch of the plaintiffs' motion which was for summary judgment on the cause of action declaring that it is obligated to defend, indemnify, and reimburse the plaintiffs for costs already incurred in the underlying action.

ORDERED that the order is affirmed insofar as appealed from, with costs, and the matter is remitted to the Supreme Court, Nassau County, for the entry of a judgment declaring that the appellant is obligated to defend, indemnify, and reimburse the plaintiffs for costs already incurred in the action entitled Tebo v Brighton Central School District, pending in the Supreme Court, Monroe County, under Index No. 1265/03.

"Pursuant to Insurance Law § 3420(d), an insurance carrier is required to provide the insured with timely notice of its disclaimer or denial of coverage on the basis of a policy exclusion and will be estopped from disclaiming liability or denying coverage if it fails to do so" (Moore v Ewing, 9 AD3d 484, at 487[ citation omitted]; see First Fin. Ins. Co. v Jetco Contr. Corp., 1 NY3d 64, 68-69; Markevics v Liberty Mut. Ins. Co., 97 NY2d 646, 648-649; Matter of Worcester Ins. Co. [*2]v Bettenhauser, 95 NY2d 185, 188-189; Hartford Ins. Co. v County of Nassau, 46 NY2d 1028; Campos v Sarro, 309 AD2d 888; Mount Vernon Fire Ins. Co. v Gatesington Equities, 204 AD2d 419).

A delay of over five months in disclaiming liability was unreasonable as a matter of law (see Aull v Progressive Cas. Ins. Co., 300 AD2d 302; Bernstein v Allstate Ins. Co., 199 AD2d 358, citing Hartford Ins. Co. v County of Nassau, supra; Matter of State Farm Mut. Ins. Co. v Del Pizzo, 185 AD2d 352). We agree with the Supreme Court's determination that, in view of other indicia of the relationship between the plaintiffs and the primary insured, the appellant did not need the written contract to determine that the claim was governed by the exclusion in question. Therefore, the plaintiffs demonstrated, as a matter of law, that the appellant should be estopped from disclaiming liability or denying coverage and is obligated to defend, indemnify, and reimburse the plaintiffs for costs already incurred in the underlying personal injury action. In opposition, the appellant failed to raise a triable issue of fact. Accordingly, the Supreme Court properly granted the plaintiffs' motion for summary judgment on the cause of action declaring that the appellant is obligated to defend, indemnify, and reimburse the plaintiffs for costs already incurred in the personal injury action, and properly denied the appellant's cross motion for summary judgment.

Since this is a declaratory judgment action, we remit the matter to the Supreme Court, Nassau County, for the entry of a judgment declaring that the appellant is obligated to defend, indemnify, and reimburse the plaintiffs for costs already incurred in the underlying personal injury action (see Lanza v Wagner, 11 NY2d 317, 334, appeal dismissed 371 US 74, cert denied 371 US 901).

Colonial Penn Insurance Company v. New York Central Mutual Insurance Company 



            In an action, inter alia, for a judgment declaring that the defendant is obligated to defend and indemnify George E. Heffran, Frances T. Heffran and Matthew Heffran in three underlying actions to recover damages for personal injuries entitled Zerilli v Mella, Bednar v Mella, and Mella v Heffran, commenced in the Supreme Court, Richmond County, under Index Nos. 13437/95, 11212/96, and 12122/96, respectively, the defendant appeals from (1) an order of the Supreme Court, Nassau County (Davis, J.), entered July 26, 2004, which granted that branch of the plaintiff's motion which was for summary judgment declaring that it is obligated to indemnify the plaintiff for the amounts paid in the underlying actions and denied its cross motion for summary judgment, and (2) a judgment of the same court entered September 27, 2004, which, inter alia, in effect, declared that it was obligated to reimburse the plaintiff for payments made in connection with the subject motor vehicle accident and is in favor of the plaintiff and against it in the principal sum of $161,461.56.

ORDERED that the appeal from the order is dismissed; and it is further,

ORDERED that the judgment is affirmed; and it is further, [*2]

ORDERED that one bill of costs is awarded to the plaintiff.

The appeal from the intermediate order must be dismissed because the right of direct appeal therefrom terminated with the entry of judgment in the action (see Matter of Aho, 39 NY2d 241, 248). The issues raised on the appeal from the order are brought up for review and have been considered on the appeal from the judgment (CPLR 5501[a][1]).

On June 5, 1993, the plaintiff issued a one-year motor vehicle liability insurance policy to nonparty Frances Heffran which covered, inter alia, a 1988 Isuzu Trooper. On March 15, 1994, it issued a notice of cancellation due to nonpayment of premium effective April 2, 1994. Assuming that the cancellation was ineffective either because it was improperly mailed to the insured or was not timely filed with the Commissioner of the Department of Motor Vehicles (see Vehicle and Traffic Law § 313), it is undisputed that Ms. Heffran's husband, George E. Heffran, subsequently procured an assigned risk replacement policy from the defendant effective April 7, 1994, covering the 1988 Isuzu Trooper.

"[W]here replacement insurance is actually obtained so as to continue coverage from the expiration date of the previous policy, the superseded insurer is relieved of the risk despite failure to notify the commissioner of termination of coverage" (Employers Commercial Union Ins. Co. of N.Y. v Firemen's Fund Ins. Co., 45 NY2d 608, 615; Matter of AIU Ins. Co. v Marciante, 8 AD3d 266, 267; Kaplan v Travelers Ins. Co., 205 AD2d 501, 503; Kelly v Amica Mut. Ins. Co., 142 AD2d 555).

Contrary to the defendant's contention, the plaintiff's April 18, 1994, issuance of a superfluous notice of nonrenewal did not terminate the replacement policy or revive its prior coverage. Accordingly, the Supreme Court correctly concluded that the defendant insured the 1988 Isuzu Trooper permissively operated by Matthew Heffran at the time of the April 7, 1994, accident and is therefore obligated to indemnify the plaintiff.

The defendant's remaining contentions are without merit.

 

Mohamed v. Siffrain


 

In an action to recover damages for personal injuries, the defendant appeals from an order of the Supreme Court, Kings County (Kramer, J.), dated July 23, 2004, which denied her motion for summary judgment dismissing the complaint on the ground that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d).

ORDERED that the order is reversed, on the law, with costs, the motion is granted, and the complaint is dismissed.

The defendant made a prima facie showing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) (see Toure v Avis Rent a Car Sys., 98 NY2d 345; Gaddy v Eyler, 79 NY2d 955). The defendant's neurologist and orthopedist examined the plaintiff approximately four years after the accident and found, inter alia, that he had a full range of motion in his cervical and lumbar spines, shoulders, and knees, and no evidence of any neurological deficits. In addition, the defendant's radiologist reviewed the plaintiff's magnetic resonance imaging films which revealed that the cervical spine was normal, and that the plaintiff's left knee exhibited only degenerative changes. The explanation of the plaintiff's physician for the 4½-year lapse in time between the conclusion of medical treatments and the date of his examination of the plaintiff is unsupported by the record (see Pommells v Perez, NY3d [Apr. 28, 2005]; [*2]Jimenez v Kambli, 272 AD2d 581, 582; Smith v Askew, 264 AD2d 834). The plaintiff's explanation was not sufficient to raise a triable issue of fact (see Villalta v Schechter, 273 AD2d 299, 300). Furthermore, the physician's findings were based upon the unsworn medical reports of others (see Friedman v U-Haul Truck Rental, 216 AD2d 266), as well as upon the plaintiff's own subjective complaints of discomfort and pain (see Davis v New York City Tr. Auth., 294 AD2d 531, 532; Barrett v Howland, 202 AD2d 383, 384; LeBrun v Joyner, 195 AD2d 502).

Moreover, the plaintiff did not submit any competent medical evidence to support a claim that he was unable to perform substantially all of his daily activities for not less than 90 of the first 180 days as a result of the subject accident (see Sainte-Aime v Ho, 274 AD2d 569, 570; Jackson v New York City Tr. Auth., 273 AD2d 200, 201; Greene v Miranda, 272 AD2d 441, 442).

Accordingly, the defendant was entitled to summary judgment dismissing the complaint.
FLORIO, J.P., KRAUSMAN, CRANE, RIVERA and FISHER, JJ., concur.

ENTER:

James Edward Pelzer

Clerk of the Court

 

Neugebauer v. Gill


In an action to recover damages for personal injuries, the plaintiff appeals, as limited by her brief, from so much of a judgment of the Supreme Court, Nassau County (Mahon, J.), dated January 6, 2003, as, upon granting the defendant's motion pursuant to CPLR 4401 made at the close of the plaintiff's case at the trial on the issue of damages to dismiss the complaint for failure to establish, prima facie, that she sustained a serious injury within the meaning of Insurance Law § 5102(d), is in favor of the defendant and against her, dismissing the complaint.

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

The plaintiff failed to elicit any testimony from her treating physicians, or introduce medical records in admissible form, establishing what treatment she received for her alleged injuries in the more than four-year period between the date of her accident and the examination conducted by her expert (see Crespo v Kramer, 295 AD2d 467). The plaintiff's failure to adequately explain the four-year gap in medical treatment prevented her from proving a prima facie case for any category of serious injury on which she relied (see Pommells v Perez, NY3d [Apr. 28, 2005]). The explanation offered by the plaintiff was legally insufficient (see Villalta v Schechter, 273 AD2d 299, 300). Accordingly, the Supreme Court properly granted the defendant's motion pursuant to CPLR 4401 to dismiss the complaint (see Godlewska v Niznikiewicz, 8 AD3d 430, 431). [*2]

In view of the foregoing, it is unnecessary to reach the plaintiff's remaining contentions.
SCHMIDT, J.P., GOLDSTEIN, CRANE and FISHER, JJ., concur.

ENTER:

James Edward Pelzer

Clerk of the Court

 

McNamara v. Wood

Rose, J.

Appeals (1) from an order of the Supreme Court (Mulvey, J.), entered July 6, 2004 in Tompkins County, which, inter alia, granted a motion by defendants Lee A. Wood and Charles Wood Jr. for summary judgment dismissing the complaint against him, and (2) from the judgment entered thereon.

Plaintiff commenced this action for injuries to her right knee allegedly sustained when her car was struck from behind on two separate occasions, the first in May 1999 by a vehicle operated by defendant Lee A. Wood and the second in August 2001 by a vehicle operated by defendant Tun Win. Wood and defendant Charles Wood Jr. (hereinafter collectively referred to as defendants) moved for summary dismissal of the complaint on the ground that plaintiff did not suffer a serious injury as a result of the first accident as required by Insurance Law § 5104. Supreme Court granted defendants' motion, prompting this appeal by plaintiff.

Defendants met their initial burden by submitting plaintiff's deposition testimony, her unsworn medical records and the affirmed independent medical examination report of John Forrest, an orthopedist retained by the second accident defendants (see Franchini v Palmieri, 1 NY3d 536, 537 [2003]; Cody v Parker, 263 AD2d 866, 867 [1999]). Plaintiff's testimony and medical records establish that during the 26 months between the first and second accidents, she [*2]never sought or received treatment for any injury sustained as a result of the first accident. Plaintiff offered no explanation for this other than her belief that nothing could be done for her pain (see Pommells v Perez, ___ NY3d ___, ___, 2005 NY Slip Op 03277, * 5 [Apr. 28, 2005]). Although she did consult with a rheumatologist in August 1999, it was for an arthritic condition in her hands unrelated to the first accident, his report makes no mention of the accident or any complaints of knee pain and his examination revealed no knee effusions.

The only medical evidence of any damage to plaintiff's knee prior to the second accident is the report of her arthroscopic knee surgery, performed almost four months after the second accident. This report indicates the presence of preexisting degenerative arthritic changes to the knee, but does not relate them to the first accident. Forrest relies on this report to opine that plaintiff had knee problems that preexisted the second accident and "became symptomatic" with the first accident, but he reaches this conclusion based only on plaintiff's subjective account of her knee pain and her statement that she began limiting certain physical activities after the first accident. Forrest cites no objective evidence of the extent or degree of any physical limitations caused by the first accident (see Owens v Nolan, 269 AD2d 794, 795 [2000]; cf. Reilly v Fulmer, 9 AD3d 818, 819-820 [2004]). Since Forrest's opinion causally linking plaintiff's injuries to the first accident is not based on objective medical findings or diagnostic tests, it is conclusory and speculative and will be disregarded (see Freese v Maffetone, 302 AD2d 490, 491 [2003]; Broderick v Spaeth, 241 AD2d 898, 900 [1997], lv denied 91 NY2d 805 [1998]).

In response to this proof, plaintiff was required to present "competent medical evidence based upon objective medical findings and tests to support [the] claim of serious injury and to connect the condition to the [first] accident" (Blanchard v Wilcox, 283 AD2d 821, 822 [2001]; see Dabiere v Yager, 297 AD2d 831, 832 [2002], lv denied 99 NY2d 503 [2002]). This plaintiff failed to do, instead relying on the same medical records and independent medical examination report submitted by defendants. Assuming, without deciding, that Forrest's opinion is sufficient to establish that plaintiff suffered a serious injury following the second accident, there still would be no competent evidence or objective findings showing a causal link between plaintiff's arthritis or any other injury and the first accident. Thus, Supreme Court properly granted defendants' motion for summary dismissal of the complaint against them (see Daisernia v Thomas, 12 AD3d 998, 999 [2004]).

Crew III, J.P., Peters, Mugglin and Lahtinen, JJ., concur.

ORDERED that the order and judgment are affirmed, with costs.

 

Rucaj v. Progressive Insurance Company



 

            Order, Supreme Court, Bronx County (Betty Owen Stinson, J.), entered on or about April 2, 2004, which denied plaintiff's motion for summary judgment and granted defendant's cross motion for summary judgment dismissing the complaint, unanimously reversed, on the law, with costs, the cross motion denied, the complaint reinstated, and summary judgment granted in favor of plaintiff up to the limit of defendant's policy. The Clerk is directed to enter judgment in favor of plaintiff and against defendant in the amount of $50,000 with statutory interest from September 17, 2003 (the date defendant received a certified copy of the default judgment with notice of entry).

Plaintiff Meliha Rucaj was injured on September 30, 2002 when a car owned and operated by Jason Garcia made a left turn onto White Plains Road at the intersection of White Plains Road and Morris Park Avenue in the Bronx and struck her while she was crossing the street. Garcia was insured by defendant Progressive Insurance Company.

Having notified Progressive of her claim against Garcia, plaintiff brought an action against Garcia, obtaining a default judgment on liability upon his failure to answer. Plaintiff's counsel informed Progressive of the scheduled inquest on damages; however, rather than seek to appear at the inquest or to vacate the default, Progressive allowed the inquest to proceed unopposed, and served a disclaimer of coverage on the ground of Garcia's asserted non-cooperation.

Defendant failed, as a matter of law, to establish any of the claimed defenses to plaintiff's action. Initially, defendant failed to establish its jurisdictional defense. Service of the summons and complaint was made on a Ms. Pierce, who sat at the front desk in defendant's Yonkers office. No affidavit by Ms. Pierce was submitted as to the extent and limits of her authority, nor was there a statement by a corporate officer competent to speak on behalf of the company as to Ms. Pierce's status and authorization. The affidavit of Brian Olewnick, a casualty claims specialist, did not indicate any basis for his knowledge of his co-employee's status and authorization to accept process, and indeed, failed to indicate that he was himself authorized to speak on behalf of Progressive on this issue.

Additionally, the evidence submitted by defendant insurer was insufficient, as a matter of [*2]law, to establish a defense of non-cooperation. An insurer who seeks to disclaim liability based upon lack of cooperation of the insured, must demonstrate (1) that it acted diligently in seeking to bring about the insured's cooperation, (2) that its efforts were reasonably calculated to obtain the insured's cooperation, and (3) that the attitude of the insured was one of "willful and avowed obstruction" (see Thrasher v United States Liability Ins. Co., 19 NY2d 159, 168 [1967]; see also Matter of New York Cent. Mut. Fire Ins. Co. [Salomon], 11 AD3d 315 [2004]).

The actions taken by defendant insurer to secure the insured's cooperation were, as a matter of law, insufficient to be termed either diligent or reasonably calculated to obtain his cooperation (id.). The submitted affidavit of the insurer's casualty claims specialist does not establish the necessary diligence as a matter of law. Defendant's claims specialist indicated that he contacted Garcia by cell phone on October 8, 2002, questioned Garcia about his license and residence, and asked Garcia to send him proof of residency, which Garcia never did. The residency skip trace he arranged confirmed Garcia's New York license and Virginia residence. The investigator did not attempt to contact Garcia again until eight months later, when he learned in June 2003 that plaintiff had commenced a lawsuit against Garcia and obtained a default judgment, and at that point his attempts to contact Garcia were limited to telephone calls to his cell phone number, his Virginia number, and his mother's residence in the Bronx. Although the calls were either unanswered, or were answered by unidentified persons who refused to provide any information concerning Garcia's whereabouts, the investigator did nothing more than conduct another trace search, which revealed no new information. No attempt was made to send an investigator to Garcia at his residence in Virginia or his mother's residence in the Bronx, to inquire of neighbors and/or family members as to Garcia's whereabouts. Nor was an attempt made to contact Garcia's place of employment and speak to his employer or coworkers. The only written correspondence sent to Garcia was apparently that announcing the disclaimer of insurance coverage, which was sent to Garcia on July 8, 2003, and was returned as unclaimed.

Moreover, the submissions do not permit the motion court's determination that the insured willfully obstructed the insurer's attempt to investigate (see Matter of Empire Mutual Ins. Co. [Stroud], 36 NY2d 719 [1975]). Defendant's assertion is based merely upon the claim that Garcia was apparently aware of the lawsuit since he was served with the summons and complaint and notice of motion for entry of a default judgment. It cannot be concluded from this alone that he was aware of the lawsuit and an obligation to cooperate with his insurer. Indeed, even assuming Garcia was aware of the lawsuit, he could have believed his insurance company was taking care of it. While Garcia may be guilty of inaction, carelessness or neglect, it cannot be concluded that defendant insurer provided sufficient evidence from which it could be inferred that after Garcia's cooperation was sought his attitude was one of willful and avowed obstruction (see Hanover Ins. Co. v DeMato, 143 AD2d 807 [1988]).

Accordingly, the motion court erred in granting summary judgment to the defendant insurer dismissing plaintiff's Insurance Law § 3420 claim.

In view of our determination rejecting defendant's pleaded defenses as a matter of law, no issues remain preventing an award of judgment in plaintiff's favor. Plaintiff's submissions establish the predicates for a direct action against an insurer. Garcia was insured under an automobile liability policy issued by Progressive, and the policy covered incidents such as that in which plaintiff was injured. The injured plaintiff (1) obtained a judgment against the insured in an amount up to the policy limits; (2) waited 30 days from service of the judgment with notice of entry upon the insured and the insurer, following which the judgment remained unsatisfied; and [*3](3) brought the present action against the insurer (see Insurance Law § 3420[a]). Notice of entry of the judgment was properly served on the insured by certified mail, return receipt requested, sent to the insured's address as it was indicated in the Police Accident Report and the insurance policy, since this method of service was reasonably calculated to provide him with notice. Plaintiff need not prove that the insured actually received the judgment (see Fortis v Glens Falls Ins. Co., 23 AD2d 88 [1965], affd 18 NY2d 779 [1966]).

An insurer, "[h]aving disclaimed its duty to defend its insured in the underlying action, . . . may not . . . raise defenses extending to the merits of plaintiff's claim against the insured" (Robbins v Michigan Millers Mut. Ins. Co., 236 AD2d 769, 771 [1997]; see also Matychak v Security Mut. Ins. Co., 181 AD2d 957 [1992], lv denied 80 NY2d 758 [1992]), even where the judgment was rendered by default (see 70A NY Jur 2d, Insurance § 1976). The insurer's defenses in such an action are limited to those it would have against the insured (see McNamara v Allstate Ins Co., 3 AD2d 295 [1957]; Fox v Employers' Liability Assur., 243 App Div 325 [1935], affd 267 NY 609 [1985]), and in this instance, those defenses have already been rejected as a matter of law.

In the absence of any remaining factual issues, plaintiff is entitled to summary judgment.

Sojka v. 43 Wooster LLC
 

Order, Supreme Court, New York County (Shirley Werner Kornreich, J.), entered August 6, 2004, which granted the motion to withdraw of the nonparty law firm retained by the insurance carrier to defend defendant, unanimously reversed, on the law, without costs, and the motion denied.

Defendant is the owner of the property designated as 43 Wooster Street, New York, New York, where plaintiff, a construction worker, was allegedly injured when he fell from a scaffold. Defendant's liability carrier, Indian Harbor Insurance Company, by letter dated May 14, 2004, disclaimed coverage, claiming that defendant did not report the accident until approximately two years after the occurrence. Indian Harbor advised defendant that it would no longer pay to defend the claim or indemnify it in the case of liability.

The law firm retained by Indian Harbor to represent defendant subsequently moved to be relieved as counsel on the grounds that withdrawal is permitted if the client refuses to pay, and that the case is in its infancy, so no prejudice to defendant would result should the motion be granted. Defendant's arguments revolve primarily around the validity of Indian Harbor's disclaimer, but also note that a motion to withdraw is not the proper vehicle for testing a carrier's right to disclaim coverage. We agree and reverse, as it is settled that a motion for withdrawal by counsel under such circumstances is an improper attempt to test the disclaimer of coverage by the insurer (see Brothers v Burt, 27 NY2d 905, 906 [1970]; Pryer v DeMatteis Orgs., Inc., 259 AD2d 476, 477 [1999]; Garcia v Zito, 242 AD2d 258, 259 [1997]), and that the right of an insurer to deny coverage, "'can only be resolved by a declaratory judgment action in which the defendant would be able to adequately litigate the facts of [the insurance company's] [*2]disclaimer'" (Garcia v Zito, 242 AD2d at 259, quoting Laura Accessories, Inc. v A.P.A. Warhouses, Inc., 140 AD2d 182 [1988]).

 

McGarr v.  Guardian Life Insurance Company 

 

Order, Supreme Court, New York County (Leland DeGrasse, J.), entered October 22, 2003, which granted defendant Guardian Life Insurance Company's motion for summary judgment dismissing the complaint as against it, unanimously affirmed, without costs. Order and judgment (one paper), same court and Justice, entered June 16, 2004, which granted the summary judgment motion of defendants James V. Downing and Collins & Associates, denied plaintiff's cross motion to strike those defendants' answer pursuant to CPLR 3126, declared in defendants' favor and otherwise dismissed the complaint as against defendant movants, unanimously modified, on the law, the facts and in the exercise of discretion, to grant the cross motion insofar as to deny so much of the summary judgment motion as is made on Downing's behalf, and accordingly to vacate the dismissal and award of declaratory relief in Downing's favor, without prejudice, and otherwise affirmed, without costs.

In 1994, Richard C. Mooney purchased a Guardian life insurance policy through defendant Downing, who was then employed by defendant Collins & Associates. The policy lapsed for nonpayment of premiums. In September 1995, Mooney applied to reinstate the policy and to reduce the amount of coverage from $800,000 to $200,000.

Plaintiff's fact-based argument that defendants failed to notify the insured of the $800,000 policy's lapse in accordance with the requirements of Insurance Law § 3211(a)(1) is improperly raised for the first time on appeal, and we decline to consider it (see e.g. City of New York v Stack, 178 AD2d 355 [1991], lv denied 80 NY2d 753 [1992]). Were we to reach this issue, we would find that, since premiums were paid on a monthly basis,
§ 3211(a)(1) does not apply (see Insurance Law § 3211[f][2]; Elston v Allstate Life Ins. Co.
of
New York, 274 AD2d 938 [2000]). [*2]

Contrary to plaintiff's claim, there are no triable issues as to whether the $800,000 policy lapsed; hence, summary judgment was properly granted to Guardian and Collins on this issue (see e.g. Brecher v Mut. Life Ins. Co., 120 AD2d 423 [1986]). Defendants were not estopped from asserting the policy's lapse; the policy clearly states that if premium payments are not made within a 31-day grace period, the policy will lapse (see e.g. Great Neck Saw Mfrs., Inc. v Manhattan Life Ins. Co., 163 AD2d 273, 274-275 [1990], lv denied 76 NY2d 711 [1990]).

In his reinstatement application, Mooney stated that he had had no medical treatment within the past five years, when in fact he had had medical treatment within the preceding month. Because of this material misrepresentation, Guardian was not required to pay out on the $200,000 policy (see e.g. Process Plants Corp. v Beneficial Natl. Life Ins. Co., 53 AD2d 214 [1976], affd 42 NY2d 928 [1977]).

Viewing the facts in the light most favorable to plaintiff, the $800,000 policy obtained by Downing was not what Mooney had requested - Mooney purportedly requested a $1 million policy with premiums lower than the ones he had been paying. Nevertheless, plaintiff's cause of action for negligence was properly dismissed (see Busker on the Roof Ltd. Partnership v Warrington, 283 AD2d 376 [2001]). The Guardian policy clearly sets forth the coverage amount and the annual premiums, and Mooney is presumed to have read and understood his policy (id. at 377). If the policy was not what he wanted, he should have exercised his right to cancel it within 10 days of receipt.

Plaintiff's cause of action for "detrimental reliance" was also properly dismissed, since there was no special relationship between Mooney and defendants (see Murphy v Klein, 90 NY2d 266 [1997]).

Mooney's widow commenced the instant action on August 27, 1997 and died three days later. In May 1998, plaintiff, the executor of the widow's estate, served document requests and a deposition notice on defendants. However, plaintiff took no further steps to prosecute this action until 2001. During that period, Downing left the life insurance industry. By the time plaintiff tried to depose Downing, he could not be located.

Plaintiff's cross motion to strike Downing's and Collins' answer was properly denied as to Collins. Since Downing left Collins' employ years before November 2001, Collins should not be penalized for Downing's failure to appear (see e.g. Moriates v Powertest Petroleum Co., 114 AD2d 888, 890 [1985], lv dismissed 67 NY2d 603 [1986]), especially because Collins was not in default of any of its own disclosure obligations (see Magee v City of New York, 242 AD2d 239 [1997]).

While the penalty of striking Downing's answer may be too harsh (see Heyward v Benyarko, 82 AD2d 751 [1981]; but see Montgomery v Colorado, 179 AD2d 401, 402 [1992]), in light of Downing's failure to meet his obligation to remain in contact with his attorney an award of summary relief to him would at this juncture be inappropriate. Indeed, since defense counsel was unable to locate Downing, Downing could not have authorized counsel to make a summary judgment motion on his behalf. Under the circumstances, an appropriate sanction is to deny the summary judgment motion as to Downing (see e.g. Crawford v Toyota Motor Corp., 283 AD2d 184 [2001]). However, the denial is without prejudice; if Downing reappears in the future, he may make a summary judgment motion at that point.

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

M-2350McGarr, etc. v Guardian Life Ins. Co., et al. [*3]

Motion seeking leave to file supplemental authority granted.

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

ENTERED: JUNE 23, 2005

CLERK

 

 

Frankel v.  Western Select Insurance Company

 

Plaintiff appeals from an order of the Small Claims Part of the Civil Court of the City of New York, New York County, entered September 22, 2004 (Cynthia S. Kern, J.) which granted defendant's motion to dismiss the action.

 

PER CURIAM:

Order entered September 22, 2004 (Cynthia S. Kern, J.) affirmed, without costs.

This action arising from a slip and fall which occurred in California in 2001 seeks recovery for "medical expenses" from defendant, the insurance carrier of the alleged tortfeasor with whom plaintiff settled her claims in March 2004 and which paid the full amount of the settlement. As Civil Court properly recognized in granting the motion to dismiss, the action is barred by Insurance Law § 3420, which precludes a direct action against a tortfeasor's insurer, where, as here, no judgment has been obtained against the tortfeasor (see Lang v Hanover Insurance Company, 3 NY3d 350 [2004]). Dismissal of the action thus achieved "substantial justice" between the parties according to the rules and principles of substantive law (see CCA 1807) and does not warrant appellate intervention (see Blair v Five Points Shopping Plaza, Inc., 51 AD2d 167 [1976]).

This constitutes the decision and order of the court. [*2]
I concur.


I concur.
I concur.
Decision Date: June 20, 2005

 

 

Mendoza v. American Country Insurance Company



Wilson, Elser, Moskowitz, Edelman & Dicker LLP, New York
(Judith Zuckerman Frantz of counsel), for appellant.
Jeffrey A. Berson, New York, for respondent.

Order, Supreme Court, Bronx County (Douglas E. McKeon, J.), entered June 8, 2004, which, in an action pursuant to Insurance Law § 3420(a)(2), granted plaintiff's motion for summary judgment insofar as to direct that defendant insurer pay plaintiff proceeds of $100,000 under the subject liability policy, unanimously affirmed, without costs.

Defendant's unexplained delay in disclaiming coverage for six months after having been notified of the lawsuit against its insured was untimely, and thus ineffective (see Insurance Law
§ 3420[d]; Hartford Ins. Co. v County of Nassau, 46 NY2d 1028, 1029 [1979]). We have considered defendant's remaining contentions and find them unavailing.

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

ENTERED: JUNE 28, 2005

CLERK

 

Montgomery v. Pena


Cheven,
Keely & Hatzis, New York (Mayu Miyashita of
counsel), for appellants.
Pollack, Pollack, Isaac &
DeCicco, New York (Brian J. Isaac of
counsel), for respondent.

Order, Supreme Court, Bronx County (Anne E. Targum, J.), entered June 27, 2003, which denied defendants' motion for summary judgment dismissing the complaint, unanimously reversed, on the law, without costs, and the motion granted. The Clerk is directed to enter judgment in favor of defendants dismissing the complaint.

In this personal injury action, plaintiff alleges that, in a motor vehicle accident on October 12, 2000, she suffered "serious injury," within the meaning of Insurance Law § 5102(d), to her right shoulder, right knee, and back. In moving for summary judgment, however, defendants established a prima facie case that the subject accident did not cause plaintiff any serious injury. Among other things, defendants offered the affirmed reports of an orthopedist and a neurologist, who opined, after personally examining plaintiff on September 10, 2002, that plaintiff suffered from no orthopedic or neurological disability as of that date. In addition, defendants offered affirmed reports by a radiologist, opining that MRI scans of plaintiff's right knee and right shoulder, made within about two months of the subject accident, indicated that plaintiff suffered from preexisting degenerative conditions in both of these joints, but showed no evidence of any trauma-related injury. Similarly, a November 2000 radiologist's report in plaintiff's medical file stated that an x-ray of the right knee showed an early stage of osteoarthritis, but "no evidence of fracture or gross destructive lesion," and an x-ray of the right shoulder showed "no evidence of fracture." Defendants also submitted the transcript of plaintiff's deposition, at which she testified (1) that, due to a heart condition, she has been unable to work since 1992, (2) that she injured her right knee in a fall in 1991, and (3) that she injured her back in an automobile accident in June 2000, about four months before the subject accident.

In the face of defendants' evidence, plaintiff failed to come forward with the "objective proof" (Toure v Avis Rent A Car Sys., 98 NY2d 345, 350 [2002]) required to create a triable issue as to whether her alleged injuries, even if assumed to have met the serious injury threshold, were caused by the subject motor vehicle accident. The affirmed report of plaintiff's treating physician (Dr. Marrone) fails to give any objective basis for concluding that plaintiff's alleged limitations result from the October 2000 accident, rather than from her 1991 right-knee injury, her June 2000 back injury, or from the preexisting degenerative conditions of the right knee and the right shoulder that were identified by defendants' radiologist. Indeed, Dr. Marrone's report [*2]does not even mention the prior injuries or the preexisting conditions. In view of this omission, Dr. Marrone's conclusion that plaintiff's condition is causally related to the subject accident is mere speculation insufficient to defeat defendants' well-supported summary judgment motion (see Pommells v Perez, __ NY3d __, 2005 NY LEXIS 1041, 2005 WESTLAW 975859 [April 28, 2005] [affirming summary judgment dismissing the complaint where "plaintiff failed to address the effect of his kidney disorder on his claimed accident injuries," and, in another case, where, "with persuasive evidence that plaintiff's alleged pain and injuries were related to a pre-existing condition," plaintiff failed to carry his "burden to come forward with evidence addressing defendant's claimed lack of causation"]; Franchini v Palmieri, 1 NY3d 536, 537 [2003], affg 307 AD2d 1056 [2003]; Shaw v Looking Glass Assocs., L.P., 8 AD3d 100, 103 [2004]; Medley v Lopez, 7 AD3d 470 [2004]; Medina-Santiago v Nojovits, 5 AD3d 253, 254 [2004]; Shinn v Catanzaro, 1 AD3d 195, 198 [2003]; Lorthe v Adeyeye, 306 AD2d 252, 253 [2003]).

Finally, to the extent plaintiff claims to have suffered a "serious injury" under the 90-day/180-day prong of Insurance Law § 5102(d), the conclusory and medically uncorroborated assertions
of her affidavit are insufficient to raise a triable issue (see
Beaubrun v
New York City Tr. Auth., 9 AD3d 258, 259 [2004]; Sherlock v Smith, 273 AD2d 95 [2000]). Accordingly, defendants are entitled to summary judgment.

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

ENTERED: JUNE 28, 2005

CLERK

 

 

Raymond Corporation v. National Union Fire Insurance Company



Andrew Zajac, for appellant.
Michael J. Hutter, for respondents.




READ, J.:

Plaintiff Raymond Corporation manufactures sideloader forklifts [FN1]. Defendant [*2]National Union Fire Insurance Company of Pittsburgh, Pa. is Raymond's primary liability insurer. At the time of the accident prompting this lawsuit, plaintiff TBS Group, Inc., formerly Arbor Handling Services, Inc., was one of Raymond's vendors. The issue on this appeal is whether the vendor's endorsement in the commercial general liability policy that National issued to Raymond covers personal injury claims caused by the vendor's independent acts of negligence. For the reasons that follow, we conclude that the vendor's endorsement only covers those claims stemming from a defective product.

I.

In 1994, Arbor sold J.T. Ryerson & Sons, a steel distributor, two new Raymond sideloaders for installation in its Philadelphia facility. Because its new cantilever rack system [FN2] was put into place months before the sideloaders' anticipated delivery date, Ryerson asked Arbor to secure two rental units for its use in the meantime. Arbor had one rental sideloader in-house in its own fleet, and agreed to "support . . . as if it were its own" any second sideloader that Ryerson might locate "either internally or externally."[FN3]

Ryerson subsequently located a second Raymond sideloader in Chicago. Ryerson rented this unit, which was disassembled and shipped to its facility in Philadelphia. Arbor sent two service technicians to reassemble and adjust the sideloader, which was configured for use in a rail-guided system where the guide rails were both closer together and higher than at Ryerson's facility.

In a rail-guided system, guide rollers are attached to the four corners of a sideloader and engage the rails, which are secured to the floor of the aisles between the racks. With proper [*3]adjustment, the guide rollers run against the parallel-facing rails with minimal clearance. A rail-guided system reduces the need for steering and thus the risk of injury to the operator, who does not have to place his head outside the vehicle to look at the wheels.

Arbor's technicians did not properly fit the sideloader's guide rollers within the rails at Ryerson's facility. As a result, the sideloader tended to wobble from side to side and to jam. A Ryerson employee sustained serious head and brain injuries while operating it. The parties do not dispute that Arbor's negligence — not any defect in Raymond's product, the sideloader — caused this accident.

The injured worker sued Raymond and Arbor, among others, for damages. During discovery, one of the two Arbor technicians essentially admitted that he knew the sideloader was unsafe when he placed it into service. Arbor and Raymond settled the action prior to trial for $6 million, and Arbor's primary liability insurer contributed $3 million toward the settlement. Raymond looked to National for the balance, contending that the vendor's endorsement, which listed Arbor as an additional insured, provided coverage. National contested coverage. Ultimately, however, National and Raymond agreed to contribute $2.5 million and $500,000 respectively, while reserving their rights to resolve their coverage dispute in a separate action.

Raymond and Arbor brought this action seeking judgment against National for Raymond's $500,000 contribution towards the settlement of the underlying action. National counterclaimed for judgment against Raymond in the amount of its $2.5 million contribution. After discovery, both parties moved for summary judgment. Supreme Court denied Raymond's motion and granted National summary judgment, dismissing Raymond's complaint and issuing judgment on National's counterclaim. The court concluded that the vendor's endorsement was limited to personal injury claims arising out of a product defect.

The Appellate Division, unlike Supreme Court, read the vendor's endorsement as broad enough to cover claims arising out of the vendor's negligence. Accordingly, the Appellate Division reversed on the law, denied National's motion, and granted Raymond summary judgment, declaring that Arbor is an additional insured under the policy. National appealed, and we now reverse.

II.

The vendor's endorsement (Endorsement 5, Additional Insured — Vendors Schedule) in the policy states that

" '[s]ection III — Who is An Insured' is amended to include as an Insured any person or organization (referred to below as 'vendor') shown in the schedule, but only with respect to 'Bodily Injury' or 'Property Damage' arising out of 'Your Products' [Raymond's [*4]products] shown in the schedule which are distributed, sold, repaired, serviced, demonstrated, installed or rented to others in the regular course of the vendor[']s business, subject to" several exclusions.

"In determining a dispute over insurance coverage, we first look to the language of the policy. We construe the policy in a way that affords a fair meaning to all of the language employed by the parties in the contract and leaves no provision without force and effect" (Consolidated Edison Co. of N.Y. v Allstate Ins. Co., 98 NY2d 208, 221-222 [2002] [internal quotations and citations omitted]). We will "not disregard clear provisions which the insurers inserted in the policies and the insured accepted, and equitable considerations will not allow an extension of coverage beyond its fair intent and meaning in order to obviate objections which might have been foreseen and guarded against" (Caporino v Travelers Ins. Co., 62 NY2d 234, 239 [1984]).

Here, the policy covers vendors, such as Arbor,

"only with respect to Bodily Injury or Property Damage arising out of [Raymond's products] . . . which are distributed, sold, repaired, serviced, demonstrated, installed or rented to others in the regular course of the vendor[']s business" (emphasis added).

We conclude that bodily injuries "arising out of [Raymond's products]" means injuries arising out of defects in the products, rather than arising out of the vendor's negligence. The modifying phrase, "which are distributed, sold, repaired, serviced, demonstrated, installed or rented to others in the regular course of the vendor[']s business," on which Raymond places so much emphasis, is most naturally read to describe Arbor's activities with respect to Raymond's products, not — as Raymond argues — to indemnify Arbor for its negligent performance of those activities.

This phrase reflects that Arbor is not only a vendor of Raymond's products, but also repairs, services, demonstrates, installs and rents them. A vendor's endorsement "extend[s] coverage to distributors of [the vendor's] product who may be sued for breach of warranty or for strict products liability should the product turn out to be defective or unreasonably dangerous and cause an injury" (Hartford Fire Insurance Co v St. Paul Surplus Lines Insurance Co., 280 F3d 744, 745 [7th Cir 2002]). The vendor's endorsement here also extends coverage for any defective-product suits arising out of all the activities in addition to sale and distribution which Arbor, in fact, performs with respect to Raymond's products. [*5]

The dissent would discover coverage for vendor negligence in negative inferences from the policy's exclusions, but "an exclusion from insurance coverage cannot create coverage" (Continental Cas. Co. v Pittsburgh Corning Corp., 917 F2d 297, 300 [7th Cir 1990]; see also Weedo v Stone-E-Brick, Inc., 81 NJ 233, 247 [NJ 1979] [it is a "basic principle that exclusion clauses subtract from coverage rather than grant it" (emphasis in original)]). In any event, the exclusions that trouble the dissenters are consistent with our reading of the endorsement.

Exclusion 1.A excludes coverage for claims "for which the Insured is obligated to pay 'damages' by reason of the assumption of liability in a contract or agreement." For example, in order to obtain business or other favorable contract terms from a customer, Arbor might agree to assume liability in any product-defect suit brought against the customer by Arbor's employee who installed or repaired Raymond's product, or by the customer's employee. By excluding coverage for "[a]ny Express Warranty unauthorized by [Raymond]," Exclusion 1.B simply provides that the policy's coverage for product defects is unavailable where the plaintiff's claim is based on an express warranty made by Arbor — for example, in a marketing or sales brochure — when this warranty was unauthorized by Raymond.

Exclusion 1.D. excludes coverage for Arbor's failure to make promised or normally-performed "inspections, adjustments, tests or servicing . . . in connection with the sale or distribution of the products." Thus, this exclusion provides that, while defective-product injuries generally fall within the scope of the endorsement, there is no such coverage if Arbor fails to maintain the product. Contrary to the view expressed by the dissent, this exclusion makes sense because neglect to maintain a product properly may eventually cause it to become defective, or so it might be alleged in a product-defect lawsuit.

Under Exclusion 1.E., the coverage afforded Arbor does not apply to "demonstration, installation, servicing or repair operations except such operations performed by the Vendor" (emphasis added). Thus, there is no coverage where the defective product causing the injury was being demonstrated, installed, serviced, repaired or rented by someone other than Arbor, Raymond's vendor. This exclusion ensures that Raymond - rather than a non-vendor third-party - created the allegedly injury-causing product defect. Exclusions 1.D and 1.E both supply incentives for Arbor to maintain and demonstrate Raymond's products itself rather than farm out these activities to third parties who may lack Arbor's expertise or knowledge.

The vendor's endorsement has its genesis in products liability law. Accordingly, "[s]uch an endorsement covers the vendors' liability arising out of their role in passing the manufacturer's product on to customers, but does not cover vendors for their own negligence. Coverage under the vendor's endorsement is limited to injuries arising out of a defect in the manufacturer's product" (9 Couch on Insurance § 130:3 [3d ed 1996]). [*6]

As the Seventh Circuit Court of Appeals elaborated in Hartford,

"the purpose of a vendor's endorsement is to protect the vendor (i.e., dealer or other distributor) against the expense of being dragged as an additional defendant into a lawsuit arising from a defect in a product that it distributes. It makes sense for the manufacturer to buy the insurance, as he has a better sense of the risk that there will be suits complaining about defects in his products. This assumes, however, that the vendor's role in the distribution of the product is passive. The manufacturer would be unlikely to insure the vendor against defects introduced by the vendor himself, . . . the risk of those defects being better known to the vendor than the manufacturer. . . .

"Beyond that, the vendor's endorsement is inapplicable if the vendor, whether by participating in the creation of the product or by altering or repairing it, may be responsible for the alleged defect out of which the products liability suit arises. That at least is the majority view" (280 F3d at 746-747 [internal citations omitted]) (emphasis added).


The Court further remarked upon the "improbability of supposing that the manufacturer's insurer intends to protect others against the risks that the others create" (id. at 747), and noted the

"further consideration . . . that vendor's endorsement policies are cheap add-ons to products liability policies . . . and their cheapness makes the most sense if they're limited to the case in which the vendor, being completely passive in relation to the harm giving rise to liability rather than the active author of the harm, would be entitled to indemnity from the manufacturer in the event that he (the vendor) was sued and held liable and made to pay damages. For in such a case the vendor's endorsement would be unlikely to impose a big loss on the insurance company even if the vendor was hit with a damages judgment" (id. [internal citation omitted]).

In sum, the vendor's endorsement in this case covers Arbor for defective-product suits arising out of its distribution, sale, repair, servicing, demonstration or rental of Raymond's products. Nothing in the wording of the endorsement (or the exclusions, for that matter) suggests that bodily injuries "arising out of" Raymond's products encompasses the vendor's independent acts of negligence. Our interpretation of the endorsement follows its language and comports with the traditional majority view, the origins of the vendor's endorsement as an outgrowth of products liability law, and common and economic sense. [*7]

Accordingly, the order of the Appellate Division should be reversed, with costs, and the order of Supreme Court reinstated.


R. S. Smith, J. (dissenting):

I agree that the "purpose of a vendor's endorsement", as it is described in Hartford Fire Ins. Co. v St. Paul Surplus Lines Ins. Co. (280 F3d 744, 746 [7th Cir 2002]) and elsewhere, would be served by reading the endorsement in this case the way the majority does. But I cannot reconcile that reading with the language of the endorsement, and I therefore dissent.

The endorsement protects vendors like Arbor against claims for "'Bodily Injury' or 'Property Damage' arising out of 'Your [Raymond's] Products' . . . which are distributed, sold, repaired, serviced, demonstrated, installed or rented to others in the regular course of the vendors [sic] business." The majority reads the words "arising out of 'Your Products'" to mean "arising out of defects in 'Your Products'" (majority op at 6). This reading of the phrase is not an impossible one, though it departs from our usual practice of resolving ambiguities in favor of the insured (U.S. Fidelity & Guar. Co. v Annunziata, 67 NY2d 229, 232 [1986]); I might accept the majority's reading if the rest of the vendor's endorsement were consistent with it. When I read the exclusions from the vendor's endorsement, however, I cannot believe that the author of the document intended only actions arising out of product defects to be within the endorsement's coverage. If that was the author's intention, the exclusions are largely unnecessary.

The vendor's endorsement contains six exclusions, of which four are rendered pointless by the majority's interpretation. Those four provide:

"The Coverage afforded the Vendor does not apply to:

A. 'Bodily Injury' or 'Property Damage' for which the Insured is obligated to pay 'damages' by reason of the assumption of liability in a contract or agreement;

This exclusion does not apply to liability for 'damage' that the 'Insured' would have in absence of the contract or agreement;

B. Any Express Warranty unauthorized by 'YOU';

. . .

D. Any failure to make such inspections, adjustments, tests or [*8]servicing as the Vendor has agreed to make or normally undertakes to make in the usual course of business, in connection with distribution or sale of the products;

E. Demonstration, installation, servicing or repair operations except such operations performed by the Vendor . . . ."

If, as the majority says, the vendor's endorsement applies only in cases arising out of product defects, why did the author bother to write Exclusion A, for cases where the claim arises not out of a product defect, but solely out of a "contract or agreement"? Or Exclusion B, for cases arising not out of product defects, but out of express warranties? Or Exclusion D, for cases arising from certain failures by the vendor? Exclusion D is a very strange provision if all failures by the vendor are outside the endorsement's coverage to begin with. Perhaps most compelling, Exclusion E, which denies coverage for "[d]emonstration, installation, servicing or repair operations except such operations performed by the Vendor", necessarily implies that coverage does exist for demonstrations and the like that are performed by the vendor.

I find the majority's attempts to give these exclusions some meaning that is consistent with its interpretation of the endorsement completely unpersuasive. It is far-fetched to think that Exclusion A was intended to cover the very rare case where a manufacturer would not be liable for a product defect but for its assumption of liability in a contract; I am impressed that the majority can come up with a single example — an agreement to waive workers' compensation protection (majority op at 7) — but I cannot believe that is what the author of the endorsement had in mind. The majority simply restates Exclusion B, mentioning that express warranties might be contained "in a marketing or sales brochure," but making no attempt to explain why claims based on such warranties would be excluded from an endorsement that did not cover them in the first place (id.). I think the majority is simply wrong in saying that Exclusion D "makes sense because neglect to maintain a product properly may eventually cause it to become defective" (id. at 8); that is not what "product defect" means (see Black's Law Dictionary 450 [8th ed 2004]: "An imperfection in a product that has a manufacturing defect or design defect, or is faulty because of inadequate instructions or warnings"). The majority is no doubt right that a product defect caused by poor maintenance, or any other imaginable piece of illogic, "might be alleged in a product-defect lawsuit" (id.), but it is highly unlikely that Exclusion D was written to provide against that possibility. The majority's explanation of Exclusion E is that it is designed [*9]to insure "that Raymond — rather than a non-vendor third-party — created the allegedly injury-causing product defect" (id.). But defects are not product defects unless the manufacturer "created" them, and if the endorsement were limited to claims based on product defects, there would be no reason either to exclude any acts by vendors or to distinguish, as Exclusion E does, between third-party vendors and Arbor.

Thus, I read the vendor's endorsement here as applicable to a case, like this one, arising out of an injury caused by a Raymond product, whether the product was defective or not. Cases from other jurisdictions support this reading. The Pep Boys v Cigna Indem. Ins. Co. of N. Am. (300 NJ Super 245, 692 A2d 546 [1997]) and Sportmart, Inc. v Daisy Mfg. Co. (268 Ill. App 3d 974, 645 NE2d 360 [1994]) are indistinguishable from this case. Both involved vendors that negligently sold products to minors; in neither case was there any claim that there was anything wrong with the products themselves. Both cases involved policy language that, to the extent it is quoted in the decisions, was word-for-word identical to the language at issue here. In both cases, the vendor was held to be covered by the policy.

The majority relies on Hartford but, while Judge Posner's opinion contains general remarks about vendor's endorsements that are consistent with the result the majority reaches, Hartford was quite a different case. The vendor there had not only sold the product in question — a diet pill — but had "designed the contents of the label, including the warnings" (280 F3d at 746). The injured person claimed that the warnings were inadequate (id.). The vendor's endorsement contained "an express exception for cases in which a claim of products liability is based on the labeling or relabeling of the product by the vendor" (id. at 747) — so that the result in Hartford seems to have been compelled by clear policy language. Nor do any of the cases cited by the Hartford court for what it called the "majority view" (id.) turn on an interpretation of language similar to that at issue here.

The majority also relies on Couch's treatise, which says that coverage under vendor's endorsements "is limited to injuries arising out of a defect in the manufacturer's products" (9 Couch on Insurance § 130.3 [3d ed 1996], quoted at majority op at 8-9). But the treatise does not offer this comment as an interpretation of any particular policy language. The treatise, I believe, must be read as describing what vendor's endorsements often say, or what its author believes they ought to say. This one does not say it.

I therefore conclude that the Appellate Division correctly held that the claim against Arbor was within the coverage provided by the vendor's endorsement, and I would affirm the Appellate Division's order.
* * * * * * * * * * * * * * * * *
Order reversed, with costs, and order of Supreme Court, Chenango County, reinstated. Opinion [*10]by Judge Read. Chief Judge Kaye and Judges G.B. Smith and Ciparick concur. Judge R.S. Smith dissents and votes to affirm in an opinion in which Judges Rosenblatt and Graffeo concur.
Decided June 29, 2005

Footnotes



Footnote 1:Sideloader forklifts have forks on the side, and they run on rail systems in the aisles of warehouses.

Footnote 2:Cantilever racks have arms cantilevered off a vertical column, and loads are placed either directly on the arms or on shelves supported by them. Their long, unobstructed shelves with no uprights are well suited for storage of long and varied loads.

Footnote 3:When asked what he meant by this representation, Arbor's sales manager explained that Arbor typically would not service a competitor's unit installed in a customer's facility; however, "because of the unusual circumstances, with [Arbor] not being able to acquire a unit, if [Ryerson] . . . acquire[d] the unit, [Arbor] would fix the unit should it break down and . . . provide parts. And . . . not tell [Ryerson] to fly someone in from Chicago to fix the unit that they rented from someone else."


 

Munoz v. DJZ Realty, LLC


Submitted by Gordon T. Sakow, for appellant.
Submitted by Frank Gulino, for respondent.


MEMORANDUM:

The order of the Appellate Division should be reversed, with costs, and [*2]defendant's motion for summary judgment dismissing the Labor Law § 240(1) cause of action granted. The certified question should be answered in the negative.

Plaintiff was injured in a fall while applying a new advertisement to the face of a billboard that sat atop a building owned by defendant. Plaintiff's activities may have changed the outward appearance of the billboard, but it did not change the billboard's structure, and thus were more akin to cosmetic maintenance or decorative modification than to "altering" for purposes of Labor Law § 240(1) (see Joblon v Solow, 91 NY2d 457, 465 [1998]).
* * * * * * * * * * * * * * * * *
On review of submissions pursuant to section 500.4 of the Rules, order reversed, with costs, defendant's motion for summary judgment dismissing the Labor Law § 240(1) cause of action granted and certified question answered in the negative, in a memorandum. Chief Judge Kaye and Judges G.B. Smith, Ciparick, Rosenblatt, Graffeo, Read and R.S. Smith concur.
Decided June 29, 2005

 

 

Segal Company v Lloyds London

 

Cross appeals from an order of the Supreme Court, New York County (Richard B. Lowe III, J.), entered January 7, 2004, which granted plaintiff's motion for summary judgment on public policy grounds and directed defendants to sell to plaintiff extended reporting period coverage for its primary and excess insurance policies.


Mendes & Mount, LLP, New York (George L. Maniatis, Mary
Ann D'Amato and Alex K. Ross of counsel), for appellants-
respondents.
Dickstein Shapiro Morin & Oshinsky LLP, New York
(Randy Paar and John P. Winsbro of counsel), for respondent-
appellant. [*2]




ELLERIN, J.

The issue before us is whether public policy requires that an insured under a claims-made liability insurance policy be offered a right to purchase extended reporting period coverage upon the termination of coverage under the policy.

Plaintiff is an employee benefits consulting firm that has been insured by defendants since 1997. Defendants are individuals or corporations who are members of syndicates that conduct business at Lloyd's in London, which syndicates "subscribe" in proportionate shares to insurance policies.

Defendants sold plaintiff a primary professional liability insurance policy and an excess professional liability insurance policy for the period April 15, 2000 to April 15, 2003. Both were "claims-made" policies, as to which the primary policy contains the following notice:

This is a Claims made form. Except to such extent as may otherwise be provided herein, the coverage afforded under this insurance policy is limited to liability for only those Claims that are first made against the Insured and reported to the Underwriters while the insurance is in force. The limit of liability available to pay Damages shall be reduced and may be completely exhausted by payment of Claims Expenses. Damages and Claims Expenses shall be applied against the deductible. Please review the coverage afforded under this insurance policy carefully and discuss the coverage hereunder with your insurance agent or broker.


The excess policy contains a similar notice.

Pursuant to these policies, defendants agreed

To pay on behalf of the Insured Damages and Claim Expenses which the Insured shall become legally obligated to pay because of any Claim or Claims, first made against the Insured,

. . . and reported to the Underwriters during the Period of Insurance or Extended Reporting Period, arising out of any act, error or omission of the Insured in rendering or failing to render Professional Services

. . . .

The Extended Reporting Period referred to in the paragraph quoted above is defined in the policies as "the selected period of time purchased in accordance with Clause X after the end of the Period of Insurance for reporting Claims, suits or proceedings arising out of acts, errors or omissions which take place prior to the end of the Period of Insurance and otherwise covered by this insurance." Clause X provides that

[i]n the event of cancellation or non-renewal of this insurance by [*3]Underwriters, the Named Insured shall then have the right, in consideration of the appropriate additional premium, to an extension of the cover granted by this policy to apply . . . in respect of any Claim made against any Insured during the period selected below after the expiration date of this policy but only when such Claim arises out of acts, errors or omissions committed prior to the expiration date of this policy.

Clause X further provides that

[t]he quotation by Underwriters of a different premium or deductible or limits of liability or changes in policy language for the purpose of renewal shall not constitute a refusal to renew by the Underwriters.

By letter dated March 25, 2003, defendants transmitted "2003 Renewal Terms" for plaintiff's insurance. Because of plaintiff's adverse loss history, which included paid claims of more than $21 million between 1999 and 2001, as compared to $1.52 million in premiums paid by plaintiff for the same period, the renewal terms included higher deductibles and higher premiums. The expiring primary policy provided $5,000,000 in coverage, subject to an annual aggregate of $5,000,000 and a $250,000 deductible for each claim; the renewed policy would provide $5,000,000 coverage for any one claim and in the aggregate for one year, subject to a $7,500,000 deductible for each claim. Plaintiff paid three annual premiums of $218,500 for the expiring policy and would pay a premium of $3,250,000 for the renewed policy. The expiring excess policy provided an additional $5,000,000 in coverage, for which plaintiff paid three annual premiums of $80,000; the renewed policy would provide the same additional coverage, for which plaintiff would pay a premium of $2,000,000.

Plaintiff regarded the above terms as a refusal on defendants' part to renew the policies, and advised defendants that it intended to purchase extended reporting period (ERP) coverage for the policies. Defendants declined to sell plaintiff ERP coverage, on the ground, as provided in Clause X of the policy cited above, that such coverage is only available in the event of defendants' cancellation or non-renewal of the insurance, and that the quotation of different limits, deduction, premium and alternative terms and conditions does not constitute a non-renewal.

Plaintiff then brought this action, seeking a declaration that the 2003 renewal terms do not constitute a renewal of the policies and that plaintiff is entitled to purchase ERP coverage in accordance with the terms of those policies, and asserting that defendants breached the terms of the policies by refusing to sell plaintiff such coverage. Plaintiff then moved for summary judgment declaring that defendants refused to renew the policies and ordering them to sell plaintiff ERP coverage in accordance with the policies' terms.

The motion court denied plaintiff's request for a declaration that the 2003 renewal terms [*4]were not an offer to renew the policies, but, as a matter of public policy, ordered defendants to sell plaintiff ERP coverage. In light of Clause X, we conclude that the court correctly determined that there was no contractual triggering of plaintiff's right to purchase ERP coverage under its policies. However, the court erred in holding categorically that public policy favors the automatic triggering of a right to purchase ERP coverage upon the termination of policies.

New York State's general disapproval of claims-made policies, such as plaintiff's, is expressly set forth in Insurance Department Regulation 121 (11 NYCRR part 73; see Curiale v Ardra Ins. Co., 88 NY2d 268, 276 [1996] ["The regulation of the insurance industry is closely related to the public interest and a legitimate exercise of a State's police powers"]). In contrast to the traditional "occurrence" policy, which generally provides liability coverage for injury or damage that occurs within the policy period, without regard to when the claim is made or suit is filed, the "claims-made" policy generally provides coverage only when a claim is made during the policy period (§ 73.0[a]). The Insurance Department promulgated Regulation 121 as a consequence of its finding that "claims-made coverage tends to provide less protection than occurrence coverage, [and] that claims-made coverage compared to occurrence coverage is a more complicated and confusing method of coverage that can create potential coverage gaps" (§ 73.0[c]).

To counter this consequence, Regulation 121, with certain exceptions, prohibits the provision of claims-made coverage in any policy issued or renewed in this State (§ 73.2), and imposes certain minimum standards on those claims-made policies that are permitted and on the issuing insurers (§ 73.3). Among the minimum standards with which a claims-made liability insurance policy and the issuing insurer must comply is that ERP coverage must be available upon termination of coverage under the policy (§ 73.3[c][1]).

However, because the policies issued by defendants in the instant case fall within an exception to Regulation 121, they are not subject to these minimum standards. Policies procured from unauthorized insurers by licensed excess line brokers are exempt from the provisions of Regulation 121 (11 NYCRR 27.10[a]; see Matter of John Paterno, Inc. v Curiale, 88 NY2d 328, 332, n* [1996]). Defendants are foreign Lloyds underwriters and as such are not "licensed to do an insurance business in this state" (Insurance Law § 6116[c]). While as a general rule New York State Insurance Law prohibits the sale in New York of insurance underwritten by insurers not authorized to conduct business in New York (Insurance Law § 2117[a]; 11 NYCRR 27.0[a]), it permits excess line brokers to procure insurance from unauthorized insurers (see Insurance Law § 2105[a]; § 2117[h]), if they have been unable "after diligent effort" to procure the full amount of required insurance from authorized insurers (Insurance Law § 2118[b][3][A]).

The instant policies were written in the excess and surplus lines market through Aon Risk Services, Inc. of New York, plaintiff's surplus lines broker. Accordingly, they are not subject to the provisions of Regulation 121 (11 NYCRR 27.10[a]). We therefore hold that the motion court erred in finding that New York public policy as expressed in Regulation 121, a regulation that is not applicable to defendants, requires them to sell ERP coverage to plaintiff.

The instant policies also fall within another exception to the requirement of § 73.3(c)(1) that extended reported period coverage be available upon termination of coverage. Section [*5]73.3(c)(3) provides that "[f]or policies issued or renewed pursuant to section 73.2(d)(1) of this Part, extended reported period coverage need not be offered upon termination of coverage pursuant to section 73.1(n)(2) of this Part" (emphasis added). Section 73.1(n)(2) defines termination of coverage as "decrease in limits, reduction of coverage, increased deductible or self-insured retention, new exclusion or any other change in coverage less favorable to the insured."

Policies issued pursuant to § 73.2(d)(1) are policies that meet any of the following criteria: (i) they insure large commercial insureds (as defined in § 73.1[g]); (ii) they provide primary coverage of at least $5,000,000 per occurrence; (iii) they provide excess coverage of at least $1,000,000 per occurrence; or (iv) they are written with a deductible of at least $100,000 per occurrence. "Large commercial insured" is defined as an insured that meets any of five standards of net worth, assets and revenue, one of which is that it is a for-profit business entity that has gross assets exceeding $25,000,000 and generates annual gross revenues exceeding $25,000,000 (§ 73.1[g][4]).

Plaintiff's policies meet all four criteria of § 73.2(d)(1). It is a "large commercial insured" as measured by its total estimated revenues of $181,921,000 and total gross assets of $100,000,000 in 2002 (subd [i]), and its policies provide for primary coverage of $5,000,000 for each claim (subd [ii]) and for excess coverage of $5,000,000 (subd [iii]), and are written with a $250,000 deductible for each claim (subd [iv]). Accordingly, pursuant to § 73.3(c)(3), ERP coverage was not required to be offered for plaintiff's policies upon termination of coverage.

Thus, even if defendants were subject to the provisions of Regulation 121, they would not be required to offer ERP coverage to plaintiff upon the termination of its policies because
§ 73.3(c)(3) excepts policies such as plaintiff's from that requirement. Indeed, Regulation 121 makes clear that it is not New York State policy to give every insured the protection of the automatic right to purchase ERP coverage upon the termination of its policies.

The cross appeal by plaintiff should be dismissed as taken by a party not aggrieved (CPLR 5511; see Parochial Bus Sys., Inc. v Board of Educ. of City of N.Y., 60 NY2d 539, 544 [1983]).

Accordingly, the order of the Supreme Court, New York County (Richard B. Lowe III, J.), entered January 7, 2004, which granted plaintiff's motion for summary judgment on public policy grounds and directed defendants to sell to plaintiff extended reporting period coverage for its primary and excess insurance policies, should be reversed, on the law, without costs, and the [*6]motion denied. The cross appeal by plaintiff should be dismissed, without costs.

All concur.

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

ENTERED: JUNE 30, 2005

CLERK

 

Martin v. Fitzpatrick



Spain, J.

Appeal from an order and judgment of the Supreme Court (Cannizzaro, J.), entered June 16, 2004 in Albany County, upon a decision of the court in favor of plaintiffs.

Plaintiff Gregory L. Martin (hereinafter plaintiff) and his wife, derivatively, commenced this action alleging that plaintiff sustained serious injuries within the meaning of Insurance Law § 5102 (d) when his vehicle, stopped at a traffic light, was hit from the rear by a vehicle driven by Edward Jones [FN1]. Following a nonjury trial, Supreme Court rendered a verdict in plaintiffs' favor, finding plaintiff had sustained serious injury under three statutory categories: permanent consequential limitation of use, significant limitation of use and the 90/180-day category. The court concluded that the accident severely exacerbated plaintiff's preexisting but asymptomatic arthritis in his back, crediting plaintiff's testimony and that of plaintiff's treating chiropractor and the carrier's chiropractor who performed several independent medical exams of plaintiff. Plaintiff was awarded $70,000 for past pain and suffering and $125,000 for future pain and suffering and plaintiff's wife was awarded $15,000 and $10,000 for past and future loss of consortium, respectively. Defendant now appeals, and we affirm. [*2]

We reject as unfounded defendant's initial claim that due to the insufficiency of plaintiffs' proof of serious injury defendant was entitled to judgment under CPLR 4401 dismissing the complaint as a matter of law at the close of plaintiffs' proof. On such a motion, the evidence is viewed most favorably to plaintiffs, who are entitled to "every favorable inference which may properly be drawn from the evidence [and] [o]nly if . . . there is no rational process by which the factfinder could base a finding in favor of [plaintiffs], is judgment dismissing their [complaint] as a matter of law appropriate" (Butler v New York State Olympic Regional Dev. Auth., 292 AD2d 748, 750 [2002] [citations omitted]; see Szczerbiak v Pilat, 90 NY2d 553, 556 [1997]).

So viewed, the testimony established that, prior to the November 15, 2000 accident, plaintiff held two full-time jobs requiring physical labor, as a barber and a cleaning supervisor, at which he worked over 13 hours per day, five days per week. After the accident, plaintiff was treated by a chiropractor, Eric Luper, for two years, who testified that as a result of the trauma of the accident, plaintiff sustained significant and permanent limitations on the use of his cervical and lumbar spine. While physical therapy and treatment brought some improvement, by mid 2001, repeated range of motion tests consistently demonstrated a 21% to 23% loss in his cervical range and a 36% loss to his lumbar range, reflecting permanency. Aside from the range of motion tests, Luper's opinions were supported by objective medical tests, including an MRI of the cervical and lumbar spine, reflecting herniated discs, neuritis and radiculitis and sprain. An EMG reflected cervical root irritation. Luper opined that the test results were consistent with his diagnoses and plaintiff's symptoms, as well as his exam of plaintiff and the range of motion test results (see Durham v New York E. Travel Co., 2 AD3d 1113, 1114-1115 [2003]; cf. Burford v Fabrizio, 8 AD3d 784, 785-786 [2004]). Luper opined that plaintiff's symptoms and injuries were causally related to the accident and were not attributable to his preexisting degenerative condition (see Chunn v Carman, 8 AD3d 745, 747 [2004]; cf. Pommells v Perez, 4 NY3d 566 [2005]; Franchini v Palmieri, 1 NY3d 536, 537 [2003]).

Luper's testimony about the extent and cause of plaintiff's injuries was corroborated by the testimony of an independent chiropractor who examined plaintiff on several occasions for the no-fault carrier, duplicating the range of motion loss and detecting muscle spasms upon palpation. We find that plaintiffs' submissions provided both a quantitative and a qualitative assessment of plaintiff's condition demonstrating the extent and degree of his physical limitations, supported by the requisite objective proof, upon which a factfinder could base a finding in favor of plaintiffs on the permanent and significant limitation of use categories thereby warranting the denial of defendant's motion for a directed verdict at the close of plaintiffs' proof (see Toure v Avis Rent A Car Sys., 98 NY2d 345, 350-351 [2002]; cf. Dabiere v Yager, 297 AD3d 831, 832 [2002], lv denied 99 NY2d 503 [2002]).

With regard to the 90/180-day category of serious injury, we reach the same conclusion based upon the testimony of plaintiff and his wife and that of Luper establishing that, as a result of plaintiff's impairment, his usual activities, including work, were extensively curtailed, i.e., "to a greater extent rather than some slight curtailment" (Licari v Elliot, 57 NY2d 230, 236 [1982]). Luper testified that due to plaintiff's cervical and lumbar impairment, he was unable to work at all for three months following the accident, during which he was instructed to limit walking, standing and sitting to 30 minutes and not lift more than 10 pounds. He was then cleared for light duty work, but remained restricted as to lifting and sitting, restrictions which remained medically necessary and determined to be permanent about 18 months after the accident when he was unable to work more than 20 hours per week, four hours per day (see Nichols v Turner, 6 [*3]AD3d 1009, 1011-1012 [2004]; Badger v Schinnerer, 301 AD2d 853, 854 [2003]; Monk v Dupuis, 287 AD2d 187, 190-192 [2001]).

Next, we address defendant's challenge to Supreme Court's factual and credibility determinations and her request that we set aside the verdict as contrary to the weight of the evidence and as insufficiently supported. On our review of a verdict after a bench trial, we independently review the weight of the evidence and may grant the judgment warranted by the record, while according due deference to the trial judge's factual findings particularly where, as here, they rest largely upon credibility assessments (see Butler v New York State Olympic Regional Dev. Auth., 307 AD2d 694, 695 [2003]; Shawangunk Conservancy v Fink, 305 AD2d 902, 903-904 [2003]). We find that the court's factual findings fully comport with a fair and reasonable interpretation of the evidence, including that, prior to this accident, plaintiff's preexisting back condition was not significant and was asymptomatic and that he received only incidental, brief treatment for his back the year before the accident, when he received treatment for a knee injury, and had been discharged feeling fine (see id.). Despite defendant's contentions, we discern no basis upon which to disturb the court's determination to discredit the opinion of defendant's expert, an orthopedic surgeon who examined plaintiff once, based upon the court's finding that the expert was biased and determined to diminish and disregard the objective findings reflected in the diagnostic tests (see New York Tel. Co. v Harrison & Burrowes Bridge Contrs., 3 AD3d 606, 608 [2004]). Plaintiff's testimony, which the court fairly credited, supported its conclusions regarding the dormant nature and extent of plaintiff's preexisting back condition and prior treatment, and Luper testified that his diagnoses and opinion regarding causation were unaffected by plaintiff's neglect to report that prior treatment. As the court's findings, which defendant now disputes, are based upon sufficient evidence and a fair and reasonable interpretation of witness credibility, we affirm them and the verdict in favor of plaintiffs (see id.; Butler v New York State Olympic Regional Dev. Auth., 307 AD2d 694, 695 [2003], supra).

Finally, in view of the extent, duration and permanence of plaintiff's injuries and the substantial restrictions on his ability to work and to engage in other normal daily activities, we do not find that the award of damages is excessive as it does not deviate materially from what would be reasonable compensation (see CPLR 5501 [c]; see also Jones v Davis, 307 AD2d 494, 497 [2003], lv dismissed 1 NY3d 566 [2003]; Laguesse v Storytown USA, 296 AD2d 798, 801 [2002]; cf. Deyo v Laidlaw Tr., 285 AD2d 853, 854 [2001]).

Crew III, J.P., Peters, Mugglin and Rose, JJ., concur.

ORDERED that the order and judgment is affirmed, with costs.

Footnotes



Footnote 1: Jones died prior to the trial and Paula Fitzpatrick, the executor of his estate, was substituted as defendant.


 

Allcity Insurance Company v. Borrello

 

In an action, inter alia, for a judgment declaring that the plaintiff, Allcity Insurance Company, has no duty to defend or indemnify the defendants Ann Marie Borrello and Ann Marie Borrello, as Administratrix for the Estate of Roger Borrello, in an underlying personal injury action entitled Santana v Borrello, pending in Supreme Court, Kings County, under Index No. 31282/98, the plaintiff appeals (1) from an order of the Supreme Court, Kings County (Jacobson, J.), entered November 12, 2003, which, inter alia, denied its motion for summary judgment, and (2), as limited by its brief, from so much an order of the same court entered August 23, 2004, as denied its motion for leave to renew.

ORDERED that the order entered November 12, 2003, is affirmed; and it is further,

ORDERED that, upon searching the record, summary judgment is awarded in favor of the defendants Ann Marie Borrello and Ann Marie Borrello, as Administratrix for the Estate of [*2]Roger Borrello, and the matter is remitted to the Supreme Court, Kings County, for the entry of an appropriate judgment declaring that the plaintiff, Allcity Insurance Company, has a duty to defend and indemnify the respondent Ann Marie Borrello in her personal and administrative capacities in the underlying personal injury action entitled Santana v Borrello; and it is further,

ORDERED that the order entered August 23, 2004, is affirmed insofar as appealed from; and it is further,

ORDERED that one bill of costs is awarded to the respondents.

In September 1998, in the underlying personal injury action, Denisse Santana, an infant, by her mother and natural guardian Belkis Santana, sued Roger Borrello and Ann Marie Borrello (Roger later died and Ann Marie was substituted as his administratrix. They will be referred to collectively as the Borrellos). The infant allegedly was injured by the lead paint in an apartment in a building owned by the Borrellos.

Thereafter, starting in 1998, the plaintiff, Allcity Insurance Company (hereinafter Allcity), defended the Borrellos under an insurance policy and the policy renewals it had issued to them for the years 1994 through 1998 (hereinafter collectively the policy), under reservation of rights letters. The policy's declaration page names the Borrellos individually as the insureds.

In June 2002 Allcity notified the Borrellos that it would continue to defend them but would not indemnify them. In August 2002, Allcity commenced this action for a judgment declaring that it had no obligation to either defend or indemnify the Borrellos under the policy and to be relieved of their defense. The Supreme Court denied Allcity's motion for summary judgment and subsequently denied its motion for leave to renew.

The Supreme Court properly denied Allcity's motion for summary judgment. Moreover, upon searching the record, we find that the Borrellos are entitled to summary judgment and a declaration that Allcity has a duty to defend and indemnify them in the underlying action (see Dunham v Hilco Constr. Co., 89 NY2d 425, 429, 430; Image Clothing Co. v State Natl. Ins. Co., 291 AD2d 377; Gallati v Alliance Funding Co., 228 AD2d 550).

In the section captioned "COVERAGE," the policy provides, inter alia, that Allcity "will pay those sums that the insured" "becomes legally obligated to pay as damages because of 'bodily injury' . . . This insurance applies only to 'bodily injury' . . . which occurs during the policy period. The 'bodily injury' . . . must be caused by an 'occurrence'. The 'occurrence' must take place in the coverage territory." It also defines as an insured anyone designated in the declaration section but "only with respect to the conduct of a business of which you are the sole owner." It defines coverage territory as, inter alia, the United States, and occurrence as an "accident including continuous or repeated exposure to substantially the same general harmful conditions."

Contrary to Allcity's contention, the coverage provided by the policy to the insureds was not limited to the locations listed on its declaration page. The policy language provides that Allcity is to indemnify the insureds, in this instance the Borrellos, up to the policy limits for sums they become obligated to pay with respect to the conduct of a business owned solely by them. That clearly includes the building of which Ann Marie is the sole owner. Since there is no geographical or location-limiting language in the policy, or a rider limiting liability to the locations listed on the [*3]declaration page annexed as part of the policy during the relevant time periods of 1993-1997, and since it is uncontested that Ann Marie Borrello, individually, owned that building, Allcity is obligated to defend and indemnify the Borrellos in the underlying action (see Mazzuoccolo v Cinelli, 245 AD2d 245, 246-248; see also GRE Ins. Group v Metropolitan Boston Housing Partnership, 61 F3d 79, 82; cf. Gordon and Jack v Royal Indem. Co., 219 AD2d 617).

The parties' remaining contentions are either without merit or need not be reached in light of this determination.

Since this is a declaratory judgment action, we remit the matter to the Supreme Court, Kings County, for the entry of a judgment declaring that Allcity is obligated to defend and indemnify the Borellos in the underlying action (see Lanza v Wagner, 11 NY2d 317, 334, appeal dismissed 371 US 74, cert denied 371 US 901).
FLORIO, J.P., SCHMIDT, SANTUCCI and SPOLZINO, JJ., concur.

ENTER:

James Edward Pelzer

Clerk of the Court

 

H.L. & F.H. Realty v. Gulf Insurance


In an action, inter alia, for indemnification for any costs incurred in connection with the environmental remediation of a retail gasoline station located in Goshen, New York, the defendants Gulf Insurance Company and Gulf Underwriters Insurance Company appeal, as limited by their brief, from so much of an order of the Supreme Court, Orange County (Slobod, J.), dated [*2]March 24, 2004, as granted that branch of the cross motion of the defendant Kreiner Company, Inc., and that branch of the cross motion of the defendant Briceland Agency, Inc., and the third-party defendants, Vincent Mitchell and John Teach, d/b/a John Teach Agency, and Susan Peterson, which were for summary judgment dismissing the cross claim of the defendants Gulf Insurance Company and Gulf Underwriters Insurance Company against the defendants Kreiner Company, Inc., and Briceland Agency, Inc., in effect, granted that branch of the cross motion of the defendant Kreiner Company, Inc., and that branch of the cross motion of the defendant Briceland Agency, Inc., and the third-party defendants, Vincent Mitchell and John Teach, d/b/a John Teach Agency, and Susan Peterson, which were to dismiss their fifteenth affirmative defense, and denied their cross motion for summary judgment determining that they are not obligated to provide insurance coverage for any costs incurred in connection with the environmental remediation of the subject retail gasoline station located in Goshen, New York.

ORDERED that the appeal from so much of the order as denied the cross motion of the defendants Gulf Insurance Company and Gulf Underwriters Insurance Company for summary judgment determining that they are not obligated to provide insurance coverage for any costs incurred in connection with the environmental remediation of the subject retail gasoline station located in Goshen, New York, is dismissed as academic; and it is further,

ORDERED that the order is affirmed insofar as reviewed; and it is further,

ORDERED that one bill of costs is awarded to the respondents appearing separately and filing separate briefs.

The plaintiff, the owner of a gasoline station, entered into a lease with the defendant Panco Equipment Corp. (hereinafter Panco), which required Panco to obtain pollution insurance covering both Panco and the plaintiff. Panco applied for an "Environmental Impairment Liability" insurance policy, to be issued by the defendant Gulf Insurance Company (hereinafter Gulf), and Panco's insurance broker made a handwritten notation on the application indicating that the plaintiff should appear on the policy as an additional insured. The plaintiff, however, was not listed as an additional insured on the declarations page of either the original policy or the renewal policy issued the following year. An underground petroleum spill was subsequently detected at the gasoline station, and the plaintiff thereafter notified Gulf of the occurrence. Meanwhile, upon discovering that the plaintiff's name had been omitted from the insurance policy, Panco's insurance broker contacted a Gulf underwriter who, at the broker's request, issued an endorsement retroactively designating the plaintiff an additional insured on the policy. Gulf subsequently disclaimed coverage for the cleanup costs associated with the petroleum spill. The plaintiff commenced this action against Gulf and Gulf Underwriters Insurance Company (hereinafter collectively referred to as the Gulf defendants), and other parties, seeking, inter alia, indemnification from the Gulf defendants for any cleanup costs it incurred.

The Gulf defendants asserted an affirmative defense, as well as a cross claim against the insurance broker's past and present employers, alleging that the broker fraudulently induced Gulf's underwriter to issue the endorsement naming the plaintiff as an additional insured. Contradicting the broker's testimony, the underwriter claimed that the broker requested the endorsement without informing him that a loss had just occurred. The evidence in the record established, inter alia, that the omission of the plaintiff's name from the insurance policy was a [*3]clerical error, the identity of the insured did not affect the risk assumed by Gulf, and, as the underwriter's supervisor conceded, there was no reason for excluding the plaintiff as an insured on the policy. Therefore, under the circumstances of this case, the broker's alleged omission of the fact that a claim was being made against the policy was, as a matter of law, not material and not made with fraudulent intent (see Giurdanella v Giurdanella, 226 AD2d 342; Lipschitz v Hotel Charles, 226 App Div 839, affd 252 NY 518). Having failed to raise a triable issue of fact, the Gulf defendants' fifteenth affirmative defense asserting fraud and their cross claim were properly dismissed.

In light of the settlement of the action as between the plaintiff and the Gulf defendants during the pendency of this appeal, the Gulf defendants' contentions with respect to their defenses of late notice, failure to obtain prior approval of the remedial measures, and Policy Exclusions E, J, L, and M, have been rendered academic. Accordingly, we dismiss the appeal from so much of the order as denied the cross motion for summary judgment determining that the Gulf defendants are not obligated to provide insurance coverage for any costs incurred in connection with the environmental remediation of the subject retail gasoline station located in Goshen, New York.
SCHMIDT, J.P., MASTRO, RIVERA and SKELOS, JJ., concur.

ENTER:

James Edward Pelzer

Clerk of the Court

Labate v. Liberty Mutual Fire Insurance 



 

In an action, inter alia, for a judgment declaring that the defendant Liberty Mutual Fire Insurance Company is obligated to defend and indemnify the plaintiffs in an action entitled Scappatura v Labate, pending in the Supreme Court, Nassau County, under Index No. 10031/03, and a third-party action entitled Allstate Insurance Company v Labate, interposed in an action entitled Scappatura v Allstate Insurance Company, commenced in the Supreme Court, Nassau County, under Index No. 12691/01, the defendant appeals, as limited by its brief, from so much of an order of the Supreme Court, Nassau County (Davis, J.), dated August 3, 2004, as granted that branch of the plaintiffs' motion which was for summary judgment declaring that it was obligated to defend the plaintiffs in the underlying action and third-party action.

ORDERED that the appeal from so much of the order as granted that branch of the plaintiffs' motion which was for summary judgment declaring that it was obligated to defend the plaintiffs in the third-party action is dismissed as academic as the third-party action has been discontinued; and it is further,

ORDERED that the order is affirmed insofar as reviewed; and it is further,

ORDERED that one bill of costs is awarded to the plaintiffs.

"[T]he duty to defend is broader than the duty to indemnify" and "arises whenever the allegations in a complaint state a cause of action that gives rise to the reasonable possibility of [*2]recovery under the policy" (Fitzpatrick v American Honda Motor Co., 78 NY2d 61, 65; see Town of Massena v Healthcare Underwriters Mut. Ins. Co., 98 NY2d 435, 443). "'[T]he duty to defend arises whenever the allegations in a complaint against the insured fall within the scope of the risks undertaken by the insurer . . . [and, it is immaterial] that the complaint against the insured asserts additional claims which fall outside the policy's general coverage or within its exclusory provisions'" (Town of Massena v Healthcare Underwriters Mut. Ins. Co., supra at 443-444, quoting Seaboard Sur. Co. v Gillette Co., 64 NY2d 304, 310). "[I]f the insurer is to be relieved of a duty to defend, it must demonstrate that the allegations of the underlying complaint place that pleading solely and entirely within exclusions of the policy and that the allegations are subject to no other interpretation" (Baron v Home Ins. Co., 112 AD2d 391, 392; see County of Columbia v Continental Ins. Co., 83 NY2d 618, 627; Dayton Beach Park No. 1 Corp. v National Union Fire Ins. Co., 175 AD2d 854, 856; National Cas. Ins. Co. v City of Mount Vernon, 128 AD2d 332, 335-336).

Pursuant to the homeowners insurance policy issued by the defendant, Liberty Mutual Fire Insurance Company (hereinafter Liberty Mutual), to the plaintiffs, an "occurrence" is defined as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions, which results, during the policy period, in . . . [p]roperty damage." Contrary to the arguments of Liberty Mutual, "the language of the occurrence clause herein ascribes no temporal relevance to the causative event preceding the covered [property damage], but rather premises coverage exclusively upon the sustaining of specified [property damage] during the policy period" (National Cas. Ins. Co. v City of Mount Vernon, supra at 336; see United States Liab. Ins. Co. v Farley, 215 AD2d 371, 373; Levine v Lumbermen's Mut. Cas. Co., 147 AD2d 423, 425-426). The complaint in the underlying action entitled Scappatura v Labate pending in the Supreme Court, Nassau County, under Index No. 10031/03 contains allegations of property damage sustained, in part, during the policy period. It is immaterial whether the causative event happened during or before the policy period (see National Cas. Ins. Co. v City of Mount Vernon, supra at 336). Thus, the Supreme Court correctly determined that the "occurrence" did not pre-date the inception of the homeowners policy and that the plaintiffs timely notified Liberty Mutual of the underlying action.

Liberty Mutual's remaining contentions are without merit.
S. MILLER, J.P., GOLDSTEIN, CRANE and LIFSON, JJ., concur.

ENTER:

James Edward Pelzer

Clerk of the Court