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Coverage Pointers - Volume VI, No. 3

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10/7/04            Andoh v. Milano
Appellate Division, First Department

A Rare Victory for Car Leasing Company’s Insurer in Battle with Lessee’s Carrier Over Primacy of Coverage
T
he lessee's $1 million policy plainly states that it is primary insurance for any vehicles leased by the named insured. The lessor's policy, which insures the lessor for $1 million and the lessee in the "step-down" amount of $10,000, plainly states that it is to be excess of any other collectible insurance obtained for the lessor's benefit pursuant to a lease agreement. Thus, the plain terms of the two policies show a clear intent that the lessee's policy is to be primary.  The Court held that the lessor's insurer is not responsible even for the $10,000 step-down amount.

 

10/7/04            The Insurance Corporation of New York v. U.S. Underwriters Insurance

Appellate Division, First Department

A Certificate of Insurance Is Merely Evidence Of A Contract For Insurance Not Conclusive Proof That The Contract Exists

Insurance Corporation sought a declaration that U.S. Underwriters, by reason of the policy it issued to a subcontractor was obligated to defend and indemnify a general contractor in an underlying action for personal injuries brought by subcontractor’s employee. The court held that the general contractor was not an additional insured on the U.S. Underwriters' policy.  The court rejected the argument that the finding was made sua sponte, or improperly based on an argument raised by U.S. Underwriters for the first time in reply papers.  On the merits, the certificate of insurance naming the general contractor as an additional insured was not, by itself sufficient to raise a factual issue as to the existence of coverage nor was U.S. Underwriters' inclusion of the certificate in the certified copies of its policy it produced in disclosure (asserted to be clerical errors) the type of additional factor favoring coverage.
 

 

10/4/04            Quality Investors, Ltd. v. Lloyd's London

Appellate Division, Second Department

The Requirement That an Insured Comply With The Notice Provision Of An Insurance Policy Operates As A Condition Precedent To Coverage

The plaintiffs' insurance policy required them to notify the defendant immediately of "any happening likely to give rise to a claim." The defendant demonstrated that the plaintiffs did not give notice for more than three months, and perhaps for as long as 11 months. In opposition to this prima facie establishment of entitlement to judgment as a matter of law, the plaintiffs failed to raise a triable issue of fact as to their failure to provide the defendant with timely notice. Absent a valid excuse, the failure to comply with the notice requirement vitiates the policy, and an insurer need not demonstrate prejudice before it asserts the defense of noncompliance Therefore, defendant was entitled to dismissal of the complaint.

 

 

10/4/04            In re Government Employees Insurance Company v.  Burrell

Appellate Division, Second Department

Evidentiary Hearing Is Necessary To Determine Whether Underinsured Motorist Coverage Was Validly Disclaimed

Government Employees Insurance Company (GEICO) commenced an Article 75 proceeding to permanently stay arbitration of its insured's claim for underinsured motorist benefits. According to GEICO, at the time of the accident, the vehicle operated by its insured was insured by State Farm under a policy of insurance which provided underinsured motorist benefits. GEICO claimed that its insured had to first proceed against State Farm. State Farm opposed the petition, claiming that it disclaimed coverage because the notice of the underinsured motorist claim was "improper and untimely." The Supreme Court granted the petition without a hearing finding that State Farm's disclaimer was invalid. The Second Department holds that an evidentiary hearing on the issue of whether State Farm validly disclaimed underinsured motorist coverage was necessary.

 

10/1/04            C-KITCHEN ASSOCIATES v. TRAVELERS INSURANCE COMPANY

Appellate Division, Fourth Department

Where Punitive Damages are Sought in a Breach of Insurance Contract Action, Defendant's Conduct must be Actionable as an Independent Tort

The court concludes that defendant established that there was no tort independent of the alleged breach of the insurance contract, and plaintiffs failed to raise an issue of fact.  Contrary to plaintiffs' contention, defendant established as a matter of law that there was no independent tort of fraud. The written terms of the insurance contract directly conflict with defendant's alleged misrepresentation, and thus plaintiffs could not be said to have justifiably relied on the alleged misrepresentation.

10/1/04            Lyell Party House v. Travelers Indemnity Company
Appellate Division, Fourth Department
Notice Given to Liability Carrier Eight Months After Insured Aware of Accident is Untimely
Although plaintiff was aware of the accident and the injury when it occurred, it did not notify defendant until it was served with the summons and complaint in the underlying action, approximately eight months after the accident. Court rejects the contention of plaintiff that it had a good-faith belief that it was not liable and that its delay in notifying defendant is therefore excusable. "At issue is not whether the insured believes [it] will ultimately be found liable for the injury, but whether [it] has a reasonable basis for a belief that no claim will be asserted against [it].”  Court did not buy argument that insured didn’t believe a claim would be made.

10/1/04            Matter of New York Central Insurance Company v. Guarino
Appellate Division, Fourth Department
Where Insurer Claimed in No Fault Proceeding, That Plaintiff Didn’t Suffer Much of an Injury, It Cannot Claim that Same Plaintiff Failed to Give Timely Notice of Underinsured Claim When Plaintiff Claimed Injury Wasn’t Serious Enough
Independent Medical Exam by carrier in No Fault proceeding advised insurer that injuries were not particularly serious, despite claims by claimant to contrary.  Later, claimant gave notice of potential underinsured motorist claim, alleging serious injuries. Court found it “both inconsistent and inequitable, in light of that denial of no-fault benefits, for petitioner now to contend that claimant was then on notice that she had a viable claim for SUM benefits.”

10/1/04            Blinco v. Preferred Mutual Insurance Company
Appellate Division, Fourth Department
Lack of Cooperation by Insured is Difficult to Establish, Indeed
In order to meet its burden of proving that the insured failed to cooperate with the insurer in connection with a loss, the insurer was required to establish “(1) that it acted diligently in seeking to bring about [plaintiff’s] cooperation, (2) that the efforts employed by [defendant] were reasonably calculated to obtain [plaintiff’s] cooperation, and (3)that the attitude of [plaintiff], after his cooperation was sought, was one of willful and avowed obstruction”.  “Willful noncooperation has been found to exist when there is a pattern of noncompliance for which no reasonable excuse can be offered ..., or where the failure to cooperate is persistent.”

 

In this case, plaintiffs’ alleged loss occurred at some time between October 27, 2000 and November 7, 2000 and, despite prompt notification by plaintiffs of the alleged loss, defendant did not notify plaintiff that it wished to examine him under oath until defendant’s counsel sent a letter dated September 23, 2002 offering plaintiff five dates in October in which to attend the examination and produce his tax returns for the last three years and documentation concerning “any and every claim” made by plaintiff or on his behalf “to or against an insurance company.” Plaintiffs’ counsel objected thereto and sought a protective order.

 

The Court found that the insured did not willfully and avowedly seek to obstruct the investigation process by seeking to clarify the extent of the document request and change the date of the oral examination.

 

 

10/1/04            Agway Insurance Company as Subrogee of Tillotson v. P and R Truss Company, et al

Appellate Division, Fourth Department
Too Late for Insured to Intervene in Subrogation Action to Recover Business Interruption Loss
Insured’s claim for business interruption loss not contemplated under contract with builder after collapse caused alleged losses.  In any event, it is too late for insured to intervene in long-standing subrogation action as its separate claim will not relate back to timely commencement of a subro lawsuit.

 

9/30/04            Baker Residential Limited Partnership v. Travelers Insurance Company

Appellate Division, First Department
Installation of Defective Beams Not an “Occurrence”

The commercial general liability policies cover "bodily injury" or "property damage" caused by an "occurrence," the latter defined as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions which resulted in bodily injury or property damage neither expected nor intended from the standpoint of the insured." The underlying lawsuit alleged that plaintiffs delivered and installed defective structural beams that have deteriorated from water penetration due to improper installation, flashing and waterproofing. This is considered, by the Appellate Division, to be "a classic faulty workmanship/construction contract dispute,” that did not arise from an "occurrence" resulting in damage to property distinct from plaintiffs' own work product.

 

9/27/04            Met Life Auto and Home Insurance Company v. Pennella
Appellate Division, Second Department
An Uninsured Motorist Insurer Seeking to  Party to Challenge Mailing of Policy Cancellation Notice Can’t Both Waive Testimony on the Mailing of the Notice While at the Same Time Maintaining a Challenge that it Wasn’t Mailed Properly
Met Life challenged the purported cancellation via an alleged mailing by the respondent Highlands Insurance Company (hereinafter Highlands) of the auto insurance policy it issued to the respondent. A hearing was held to determine the validity of the cancellation, at which the Met Life waived live testimony regarding the alleged mailing. A party who agrees not to take a certain position in a trial court will be held to have waived that position on appeal. By agreeing to waive live testimony regarding the alleged mailing, the appellant waived any challenge to the sufficiency of the evidence on that issue. Therefore, the Supreme Court properly determined that the cancellation notice was mailed and that the policy issued by Highlands was cancelled. policy.   

 

9/27/04            Palazzo v. Hartford Insurance Company of the Midwest
Appellate Division, Second Department
Residency in Household, So as to Become an Insured, Requires Some Degree of Permanence and Intention to Remain

Whether a person is a 'resident' of an insured's 'household' requires something more than temporary or physical presence and requires at least some degree of permanence and intention to remain.  Here there was no evidence that the grandchild was a resident of his grandparent’s household at the time of the accident.

 

9/27/04            Singh v. Friedson
Appellate Division, Second Department
Where Defendant Successful Made Application to Vacate Default Judgment Against Him But Failed to Contest Issue of Serious Injury in His Application, He Loses His Right to Contest “Serious Injury” in Lawsuit
A default judgment had been entered against the defendant.  His auto carrier then retained counsel to vacate the default showing a meritorious defense and excusable neglect.  However, the defense counsel did not argue that the plaintiff failed to have a qualifying injury under the No Fault statute.  The Court held that a failure to challenge the “serious injury” threshold in the application to open up the default effectively resolved that issue in favor of the plaintiff and against the defendant and the defendant was effectively “stuck” with a finding of “serious injury”.

 

Editors Note:  This is a potentially dangerous case for the defense to overlook.  It suggests that defense counsel specifically address the issue of serious injury when seeking to open up a default, at a time when defendant may not even have any of the plaintiff’s medical records!  There was a previous appeal in this case where the serious injury issue wasn’t raised; the Court indicated that the failure to raise the issue of serious injury in that appeal precludes the defendant from raising it now.  While the Court may be resting this decision on the previous appeal, the question remains – how can a defendant raise a question of the plaintiff’s serious injury, or lack of it, when the defendant who has defaulted (unless insured by the plaintiff’s No Fault carrier) does not have access to the plaintiff’s medical records?

 

Across Borders

 

Visit the Hot Cases section of the Federation of Defense & Corporate Counsel website, www.thefederation.org recently ranked among the top five legal research websites in an article published in the January 2004 issue of Litigation News, a publication of the Litigation Section of the American Bar Association. Dan Kohane serves as the FDCC’s Website Editor.

 


10/6/04            JONES v. LIBERTY MUTUAL INS.

Fourth Circuit Court of Appeals

Insurers’ Asbestos Liability Losses Subject to Pro-rata Rule for Allocation and are Subject to an Aggregate Limit Under Policies’ Completed Operations Provisions

Wallace & Gale's liabilities stem from alleged injuries of former employees of Bethlehem Steel Corp. from asbestos exposure while installing Wallace & Gale products. The policies were issued between 1962 and 1985, some after Wallace & Gale ceased operations. The insurers argued that injuries occurring thereafter fall within the completed operations hazard clauses, which render any coverage owed subject to a single aggregate limit. The District Court held that the insurers are responsible for coverage based on time on the risk and that Wallace & Gale is liable for a share relative for the periods of non-insurance. The Court further held that an aggregate limit will apply to a claim involving exposure after operations were completed or exposure that began during operations and continued after operations were complete. An aggregate limit will not apply to a claim for which the exposure took place while Wallace & Gale was still conducting operations, the Court noted. The Fourth Circuit affirmed.

Submitted by: Victoria H. Roberts (RiverStone Claims Management, LLC)

 


10/4/04            Allstate Ins. Co. v. Teel

Alaska Supreme Court

Policy Definition of Insured Person Permitted Mother to Recover for her own Emotional Distress Resulting from Son’s Death, as an Occupant in Vehicle
A mother sought to recover under a theory of negligent infliction of emotional distress under a driver’s automobile policy, when her son was a passenger who was injured, and then died, in a car accident caused by the intoxicated driver. The mother based her right to recover on policy language which permitted recovery of damages by an “insured person,” and defined “insured person” to include a person “who is legally entitled to recover because of bodily injury to…an occupant of the insured’s vehicle.” The insurer argued this clause was only intended to permit recovery for derivative claims, such as the recovery of funeral expenses, or damages related to loss of consortium. The Court held that based on the plain meaning of the policy language the mother’s direct NIED claim was not barred, and that if the mother could prove all the elements of a bystander NIED claim, then her injuries could be deemed “because of” the bodily injuries suffered by her son.

Submitted by: Bruce D. Celebrezze & Supriya Sundarrajan (Sedgwick, Detert, Moran & Arnold LLP)


9/27/04            National Union Fire Ins. Co. v .Lumbermens Mutual Casualty Co.

First Circuit Court of Appeals

Contractor Covered Under Subcontractor’s Policy As Additional Insured Based on Court’s Interpretation of “Your Work” Clause
The Court considered whether an insurance policy issued to a subcontractor also provided coverage to the prime contractor as an additional insured, given the policy’s definition of “liability arising out of…work.” The court held that the policy requirements were satisfied given that the contractor’s employees were injured in the general area where the subcontractor’s work was being performed. The court explained that the “your work” clause was at least designed to cover injuries incurred in the subcontractor’s general work area, and not only injuries to employees performing specific tasks; to hold otherwise would be to create artificial distinctions.

Submitted by: Bruce D. Celebrezze & Supriya Sundarrajan (Sedgwick, Detert, Moran & Arnold LLP)

 

 

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In the Matter of Metlife Auto & Home v. Pennella, et al.


            In a proceeding, inter alia, to permanently stay arbitration of a claim for uninsured motorist benefits, the petitioner appeals, as limited by its brief, from so much of an order of the Supreme Court, Westchester County (Carey, J.H.O.), dated February 3, 2003, as denied that branch of the petition which was to permanently stay arbitration.

ORDERED that the order is affirmed insofar as appealed from, with one bill of costs.

The appellant contends that the purported cancellation by the respondent Highlands Insurance Company (hereinafter Highlands) of the auto insurance policy it issued to the respondent Windsor Waste Management was invalid because there was no proof that the notice of cancellation was properly mailed. A hearing was held to determine the validity of the cancellation, at which the appellant waived live testimony regarding the alleged mailing. A party who agrees not to take a certain position in a trial court will be held to have waived that position on appeal (see generally Matter of Attorney Gen. of State of N.Y. v Firetog, 94 NY2d 477, 484; Grimaldi v Spievogel, 300 AD2d 200). By agreeing to waive live testimony regarding the alleged mailing, the appellant waived any challenge to the sufficiency of the evidence on that issue. Therefore, the Supreme Court properly determined that the cancellation notice was mailed and that the policy issued by Highlands  was cancelled. Thus, the Supreme Court properly denied that branch of the petition which was to permanently stay arbitration.

Palazzo, etc., v. Hartford Insurance Company of the Midwest, et al.,

 


            In an action for a judgment declaring that the defendant Hartford Insurance Company of the Midwest is obligated to indemnify the defendant Richard J. Corio in this action, and to recover damages for personal injuries, etc., the plaintiffs appeal from (1) an order of the Supreme Court, Kings County (Schmidt, J.), dated August 30, 2002, which granted that branch of the motion of the defendant Hartford Insurance Company of the Midwest which was for summary judgment declaring that it is not obligated to defend and indemnify defendant Richard J. Corio in this action, and, in effect, denied their cross motion for summary judgment declaring that the defendant Hartford Insurance Company of the Midwest is obligated to indemnify the defendant Richard J. Corio in this action, and (2) a judgment of the same court (Schneier, J.), entered March 19, 2003, which, upon a jury verdict after a trial on the issue of liability, is in favor of the defendant Richard J. Corio and against them.

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

ORDERED that the judgment is affirmed; and it is further,

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

"It is well settled that whether a person is a 'resident' of an insured's 'household' requires something more than temporary or physical presence and requires at least some degree of permanence and intention to remain" (Lindner v Wilkerson, 2 AD3d 500, 501; see Appell v State Farm Ins. Co., 292 AD2d 407; Matter of New York Cent. Mut. Fire Ins. Co. v Bonilla, 269 AD2d 599; New York Cent. Mut. Fire Ins. Co. v Kowalski, 195 AD2d 940, 941). In opposition to the prima facie case for summary judgment established by the respondent Hartford Insurance Company of the Midwest (hereinafter Hartford), the plaintiffs failed to present any facts sufficient to raise a triable issue as to whether the defendant Richard J. Corio was a resident of his grandparents' household at the time of the accident (see Lindner v Wilkerson, supra). Contrary to the plaintiffs' contentions, an erroneous statement of a claims representative employed by Hartford that Corio was an insured under the insurance policy of their insured, Corio's grandparents, did not raise an issue of fact as to Corio's residence, and could not create coverage where none existed (see generally Coburn v Aetna Cas. & Sur. Co., 212 AD2d 752, 754; Zappone v Home Ins. Co., 55 NY2d 131, 138).

Although the Supreme Court erred in refusing to instruct the jury that the injured infant plaintiff should be held to the standard of care of a reasonably prudent child, this error does not warrant reversal since the jury found Corio free from any negligence and did not reach the question of the injured infant plaintiff's negligence (see Weingarten v Landesman, 137 AD2d 520).

The Supreme Court properly denied the plaintiffs' request for a jury charge consistent with Noseworthy v City of New York (298 NY 76). Despite the injured infant plaintiff's alleged amnesia, he successfully answered every question posed to him on direct examination, including numerous questions about the events leading up to the accident, and an eyewitness for the plaintiffs also testified regarding those events. The plaintiffs also failed to show that there were any factual events about which the injured infant plaintiff could have testified which would have been relevant to the issue of liability other than those about which both he and the eyewitness testified (see Feltus v Staten Is. Univ. Hosp., 285 AD2d 445, 446).
ALTMAN, J.P., FLORIO, SMITH and RIVERA, JJ., concur.

Singh v. Friedson, et al.

 

Motion by the appellant for leave to reargue an appeal from an order of the Supreme Court, Queens County, dated August 16, 2002, which was determined by decision and order of this court dated November 17, 2003.

Upon the papers filed in support of the motion and the papers filed in opposition thereto, it is

ORDERED that the motion is granted; and it is further,

ORDERED that upon reargument, the decision and order dated November 17, 2003, is recalled and vacated, and the following decision and order is substituted therefor:

Barry Siskin, New York, N.Y., for appellant.

 


Brand & Brand, Garden City, N.Y. (Charles R. Gueli of counsel), for respondents.

In an action to recover damages for personal injuries, the plaintiff appeals from so much of an order of the Supreme Court, Queens County (Polizzi, J.), dated August 16, 2002, as denied his cross motion to disqualify the law firm of Brand & Brand from representing both defendants, and, in effect, to determine that he was not obligated to prove that he sustained a serious injury within the meaning of Insurance Law § 5102 against the defaulting defendant Jon Friedson.

ORDERED that the order is modified, on the law, by deleting the provision thereof denying that branch of the cross motion which was, in effect, to determine that the plaintiff is not obligated to prove that he sustained a serious injury within the meaning of Insurance Law § 5102 against the defaulting defendant Jon Friedson and substituting therefor a provision granting that branch of the cross motion; as so modified, the order is affirmed insofar as appealed from, with costs to the appellant.

The Supreme Court erred in denying that branch of the plaintiff's cross motion which was, in effect, to determine that he is not obligated to prove that he sustained a serious injury within the meaning of Insurance Law § 5102 against the defaulting defendant Jon Friedson (hereinafter Friedson). Under the circumstances, Friedson is precluded from contesting the issue of whether the plaintiff sustained a serious injury at the inquest on damages. The plaintiff previously moved for leave to enter a default judgment against the defendant Friedson upon his failure to answer. In his cross motion to vacate his default, Friedson alleged a meritorious defense as to the happening of the accident, but failed to address the issue of serious injury. The Supreme Court granted Friedson's cross motion and denied the plaintiff's prior motion. On appeal, this court reversed (see Singh v Friedson, 288 AD2d 292). Accordingly, Friedson is precluded, pursuant to the doctrine of law of the case, from raising the issue of serious injury on this appeal (see Beresford v Waheed, 302 AD2d 342; cf. Zecca v Riccardelli, 293 AD2d 31).

Since the plaintiff was neither a former nor present client of the law firm of Brand & Brand, he did not have standing to seek its disqualification from dual representation of the two defendants (see Broadway Equities v Metropolitan Elec. Mfg. Co., 306 AD2d 426; Ogilvie v McDonald's Corp., 294 AD2d 550).

Baker Residential Limited Partnership, v. Travelers Insurance Company


Order, Supreme Court, New York County (Rosalyn Richter, J.), entered March 9, 2004, which, upon the parties' respective motions for summary judgment, declared that defendant insurer is not obligated to defend and indemnify plaintiffs real estate developers in an underlying action brought by a residential condominium association arising out of plaintiffs' development of a condominium, unanimously affirmed, with costs.

The subject commercial general liability policies cover "bodily injury" or "property damage" caused by an "occurrence," the latter defined as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions which resulted in bodily injury or property damage neither expected nor intended from the standpoint of the insured." Insofar as pertinent, the underlying action alleges that plaintiffs delivered and installed defective structural beams that have deteriorated from water penetration due to improper installation, flashing and waterproofing. The motion court, aptly characterizing the underlying action as "a classic faulty workmanship/construction contract dispute," correctly held that the damages sought therein did not arise from an "occurrence" resulting in damage to property distinct from plaintiffs' own work product, as contemplated by the policy (see Fuller Co. v United States Fid. & Guar. Co., 200 AD2d 255 [1994], lv denied 84 NY2d 806 [1994]; Pavarini Constr. Co. v Continental Ins. Co., 304 AD2d 501 [2003]). We have considered plaintiffs' other arguments and find them unavailing.

Agway Insurance Company as Subrogee of Tillotson v. P and R Truss Company, et al

 

The order denied the motion of Paul E. Tillotson for permission to intervene.

 

It is hereby ORDERED that the order so appealed from be and the same hereby is unanimously affirmed without costs.

 

Memorandum: Supreme Court properly denied the motion of Paul E. Tillotson seeking permission to intervene in this action pursuant to CPLR 1012 (a) (2) “and/or” 1013. Plaintiff commenced this action as subrogee of Tillotson to recover Tillotson’s insured loss in the approximate amount of $68,000 resulting from the collapse of a barn roof.

 

After the scheduled trial date was postponed, Tillotson made the instant motion to intervene as a party plaintiff in order to assert a cause of action for uninsured business losses of over $500,000 arising from the allegedly defective construction of the roof. The court properly concluded that Tillotson’s cause of action is time-barred.

 

Although the relationship between Tillotson and defendants arises from the underlying contract, the proposed cause of action seeks damages that are not recoverable based on breach of contract because such damages were not within the contemplation of the parties when they entered into the contract (see Kenford Co. v County of Erie, 108 AD2d 132, 135, affd 67 NY2d 257; Route 7 Mobil v Machnick Bldrs., 296 AD2d 809, 810, lv denied 99 NY2d 501). The proposed cause of action is thus subject to the three-year limitations period of CPLR 214 (4), and the motion to intervene was made five months after that period expired. We reject Tillotson’s contention that the proposed cause of action relates back to the interposition of plaintiff’s subrogation claims pursuant to CPLR 203 (f) (see Insurance Co. of N. Am. v Hellmer, 212 AD2d 665, 666). Even assuming, arguendo, that the proposed cause of action is not time-barred, we further conclude that Tillotson’s motion to intervene under CPLR 1012 (a) (2) “and/or” 1013 is not timely. Tillotson “should have taken steps to protect [his] interests in a more timely fashion and he has not articulated any reasonable excuse for his delay” (B.U.D. Sheetmetal v Massachusetts Bay Ins. Co., 248 AD2d 856, 857; see Rectory Realty Assoc. v Town of Southampton, 151 AD2d 737, 737-738; Matter of Fink v Salerno, 105 AD2d 489, 490, lv dismissed and appeal dismissed 63 NY2d 907).

 

Blinco v. Preferred Mutual Insurance Company

 

 

Appeal from an order of the Supreme Court, Niagara County (Ralph A. Boniello, III, J.), entered March 12, 2003. The order granted defendant’s motion to dismiss pursuant to CPLR 3211 for failure to comply with the terms of the insurance policy and denied plaintiffs’ cross motion seeking a protective order to limit the scope of an examination under oath.

 

It is hereby ORDERED that the order so appealed from be and the same hereby is unanimously reversed on the law without costs, the motion is denied, the complaint is reinstated and the matter is remitted to Supreme Court, Niagara County, for further proceedings in accordance with the following Memorandum:

 

Supreme Court erred in granting the preanswer motion of defendant insurer to dismiss based on the alleged willful noncooperation of Thomas R. Blinco (plaintiff) with defendant’s investigation of plaintiffs’ alleged loss. In order to meet its burden on the motion, defendant was required to establish “(1) that it acted diligently in seeking to bring about [plaintiff’s] cooperation, (2) that the efforts employed by [defendant] were reasonably calculated to obtain [plaintiff’s] cooperation, and (3)that the attitude of [plaintiff], after his cooperation was sought, was one of willful and avowed obstruction” (Physician’s Reciprocal Insurers v Keller, 243 AD2d 547, 547-548). “Willful noncooperation has been found to exist when there is a pattern of noncompliance for which no reasonable excuse can be offered ..., or where the failure to cooperate is persistent” (Levy v Chubb Ins., 240 AD2d 336, 337).

 

In this case, plaintiffs’ alleged loss occurred at some time between October 27, 2000 and November 7, 2000 and, despite prompt notification by plaintiffs of the alleged loss, defendant did not notify plaintiff that it wished to examine him under oath until defendant’s counsel sent a letter dated September 23, 2002 offering plaintiff five dates in October in which to attend the examination.

 

By letter dated September 25, 2002, defendant’s counsel notified plaintiff that he was required to produce at the examination, inter alia, his tax returns for the last three years and documentation concerning “any and every claim” made by plaintiff or on his behalf “to or against an insurance company.” Plaintiffs’ counsel objected thereto.

 

Defendant’s “burden of proving willfulness is a heavy one” (id.), and we conclude herein that defendant failed to meet that burden. Plaintiffs’ objection to the broad scope of documentation required by defendant was not unreasonable and, indeed, plaintiffs cross-moved in this action for a protective order with respect to that documentation in response to defendant’s motion to dismiss the action.

 

Thus, defendant did not establish the requisite willful noncooperation by plaintiff, nor did defendant establish that it “acted diligently in seeking to bring about [plaintiff’s] cooperation” (Physician’s Reciprocal Insurers, 243 AD2d at 547). We therefore reverse the order, deny defendant’s motion, and reinstate the complaint, and we remit the matter to Supreme Court to determine plaintiffs’ cross motion for a protective order.

 

New York Central Mutual Fire Ins. Co. v, Guarino



It is hereby ORDERED that the order so appealed from be and the same hereby is unanimously reversed on the law with costs and the application is denied.

Memorandum: Petitioner commenced this proceeding pursuant to CPLR article 75, seeking a permanent stay of arbitration of respondents' claim for supplementary uninsured motorist (SUM) benefits based on the failure of respondents to provide the requisite written notice of their claim "[a]s soon as practicable," in accordance with the automobile policy issued by petitioner to respondents. We previously reversed an order of Supreme Court (Joslin, J.) referring petitioner's application for a stay of arbitration to an arbitrator, and we remitted the matter to Supreme Court for a hearing to determine whether respondents provided timely notice (Matter of New York Cent. Mut. Fire Ins. Co. [Guarino], 283 AD2d 982). Respondents appeal from an order of Supreme Court (Fricano, J.) that, following the hearing, granted petitioner's application for a permanent stay of arbitration based on respondents' failure to provide timely notice. We reverse.

Respondent Sue Guarino (claimant) was injured in a rear-end motor vehicle accident on March 8, 1997. Although claimant immediately consulted with various medical providers for treatment of her back and neck injuries, all indications at the time were that claimant had not sustained a serious injury as defined by Insurance Law § 5102 (d). A report of an MRI performed in October 1997 recited that claimant had a "minimal right C5-6 disc bulge causing no apparent compromise" to the nerve and that claimant's cervical spine was "otherwise normal." Moreover, according to the report of a neurologist who performed an independent medical evaluation (IME) of claimant on March 17, 1998 on behalf of petitioner, claimant did not sustain a herniated disc in her neck or a cervical radiculopathy as a result of the accident. Instead, the IME physician concluded that claimant had sustained only cervical and lumbar strains, which are "soft tissue injuries [that] would be expected to heal in a matter of weeks to months," and in any event the IME physician could not "clearly relate her ongoing discomforts to the motor vehicle accident." On the basis of that IME report, petitioner in March 1998 denied claimant's application for no-fault benefits. We note that it is both inconsistent and inequitable, in light of that denial of no-fault benefits, for petitioner now to contend that claimant was then on notice that she had a viable claim for SUM benefits.

The record establishes that it was not until mid-July 1998, at the earliest, that claimant was on notice that she had sustained a serious injury as a result of the accident. At that time, claimant received the report of her orthopedic surgeon, who indicated that the October 1997 MRI might have been misread and might in fact show a disc herniation at C5-6. Claimant was referred for another MRI that, according to a second report of the surgeon issued one month later, showed "a right-sided paracentral herniation at C5-6 with extrusion" as well as a "bulging of the annulus fibrosis at L5-S1... [that] may be due to an annular tear." Within six weeks of the issuance of that second report, respondents gave petitioner written notice of the SUM claim.

Based on the foregoing, we conclude that the court erred in determining that respondents did not give timely notice of the claim and in granting petitioner's application to stay arbitration on that ground. We conclude that claimant acted with due diligence in ascertaining the medical facts underlying her SUM claim, and that respondents established that the overall 19-month delay in notifying petitioner of the SUM claim was reasonable (see Medina v State Farm Mut. Auto. Ins. Co., 303 AD2d 987, 988-989; Matter of Nationwide Ins. Co. [Bellreng], 288 AD2d 925; Matter of Allstate Ins. Co. [Earl], 284 AD2d 1002, 1004; Matter of Nationwide Ins. Enter. [Leavy], 268 AD2d 661, 662-663; see also Matter of Travelers Ins. Co. [DeLosh], 249 AD2d 924, 925-926).

Lyell Party House v. Travelers Indemnity Company



Appeal from a judgment (denominated order) of the Supreme Court, Monroe County (Harold L. Galloway, J.), entered April 28, 2003. The judgment granted defendant's motion for summary judgment in a declaratory judgment action.

It is hereby ORDERED that the judgment so appealed from be and the same hereby is unanimously modified on the law by vacating the provision dismissing the complaint and as modified the judgment is affirmed without costs.

Memorandum: Contrary to the contention of Lyell Party House, doing business as The Diplomat Party House (plaintiff), Supreme Court properly granted defendant's motion for summary judgment and declared that defendant is not required to defend or indemnify plaintiff in the underlying personal injury action brought against plaintiff by a patron who slipped and fell as she exited plaintiff's premises. The commercial general liability policy at issue requires plaintiff to notify defendant "as soon as practicable of an 'occurrence'[, i.e., accident, that] ... may result in a claim." Although plaintiff was aware of the accident and the injury when it occurred, it did not notify defendant until it was served with the summons and complaint in the underlying action, approximately eight months after the accident. We reject the contention of plaintiff that it had a good-faith belief in nonliability and that its delay in notifying defendant is therefore excusable. "At issue is not whether the insured believes [it] will ultimately be found liable for the injury, but whether [it] has a reasonable basis for a belief that no claim will be asserted against [it]" (SSBSS Realty Corp. v Public Serv. Mut. Ins. Co., 253 AD2d 583, 584; see Dryden Mut. Ins. Co. v Greaser, 269 AD2d 792, 793). Here, plaintiff failed to raise an issue of fact whether it had a reasonable basis for a belief that the injured patron would not assert a claim against it (see Paramount Ins. Co. v Rosedale Gardens, 293 AD2d 235, 241-242). We note, however, that the court erred in dismissing the complaint in this declaratory judgment action (see Boyd v Allstate Life Ins. Co. of N.Y., 267 AD2d 1038, 1039), and we therefore modify the judgment by vacating the provision dismissing the complaint.

C-Kitchen Associates, Inc. v. The Travelers Insurance Company




Appeal from an order of the Supreme Court, Erie County (Patrick H. NeMoyer, J.), entered June 25, 2003. The order, insofar as appealed from, denied in part defendant's motion for summary judgment dismissing the complaint.

It is hereby ORDERED that the order so appealed from be and the same hereby is unanimously modified on the law by granting that part of the motion with respect to the claim for punitive damages and dismissing that claim and as modified the order is affirmed without costs.

Memorandum: Supreme Court erred in denying that part of defendant's motion for summary judgment dismissing the claim for punitive damages, and we therefore modify the order accordingly. Where, as here, plaintiffs seek punitive damages in a breach of contract action, defendant's conduct must be actionable as an independent tort (see New York Univ. v Continental Ins. Co., 87 NY2d 308, 315-316; Rocanova v Equitable Life Assur. Socy. of U.S., 83 NY2d 603, 613). We conclude that defendant established that there was no tort independent of the alleged breach of the insurance contract, and plaintiffs failed to raise an issue of fact (see generally Zuckerman v City of New York, 49 NY2d 557, 562). Contrary to plaintiffs' contention, defendant established as a matter of law that there was no independent tort of fraud. The written terms of the insurance contract directly conflict with defendant's alleged misrepresentation, and thus plaintiffs cannot be said to have justifiably relied on the alleged misrepresentation (see Stone v Schulz, 231 AD2d 707, 707-708; Matter of North Hills Off. Serv. v Bevona, 222 AD2d 245, lv denied 87 NY2d 810; Penney v Beckwith, 202 AD2d 767, 768-769).

Plaintiffs' contention that defendant committed a prima facie tort is asserted for the first time on appeal and therefore is not preserved for our review (see generally Killeen v Crosson, 284 AD2d 926, 927).

In the Matter of Government Employees Insurance Company v. Burrel and State Farm Mutual Automobile Ins. Co.

 

In a proceeding pursuant to CPLR article 75, inter alia, to permanently stay arbitration of a claim for underinsured motorist benefits, State Farm Mutual Automobile Ins. Co. appeals from an order of the Supreme Court, Queens County (Thomas, J.), dated October 1, 2003, which, in effect, granted the petition without a hearing and permanently stayed arbitration.

ORDERED that the order is reversed, on the law, with one bill of costs, and the matter is remitted to the Supreme Court, Queens County, for a new determination after an evidentiary hearing on the issue of whether State Farm Mutual Automobile Ins. Co. validly disclaimed underinsured motorist coverage.

The petitioner, Government Employees Insurance Company (hereinafter GEICO), commenced this proceeding, inter alia, to permanently stay arbitration of its insured's claim for underinsured motorist benefits. According to GEICO, at the time of the accident, the vehicle operated by its insured was insured by State Farm Mutual Automobile Ins. Co. (hereinafter State [*2]Farm) under a policy of insurance which provided underinsured motorist benefits. GEICO claimed that its insured had to first proceed against State Farm. State Farm opposed the petition, claiming that it disclaimed coverage, among other things, because the notice of the underinsured motorist claim was "improper and untimely." The Supreme Court, in effect, granted the petition, without a hearing, upon finding that State Farm's disclaimer was invalid.

Under the facts of this case, an evidentiary hearing on the issue of whether State Farm validly disclaimed underinsured motorist coverage is necessary. Thus, we reverse the order and remit the matter to the Supreme Court, Queens County, for a new determination after such a hearing.
FLORIO, J.P., LUCIANO, SCHMIDT and RIVERA, JJ., concur.

 

Quality Investors, Ltd., v. Lloyd's London, England

 

In an action to recover under an insurance policy, the plaintiffs appeal from an order of the Supreme Court, Orange County (Peter Patsalos, J.), dated August 18, 2003, which granted the defendant's motion for summary judgment dismissing the complaint.

ORDERED that the order is affirmed, with costs.

The requirement that an insured comply with the notice provision of an insurance policy operates as a condition precedent to coverage (see Security Mut. Ins. Co. of N.Y. v Acker-Fitzsimons Corp., 31 NY2d 436, 440; Viggiano v Encompass Ins. Co./Fireman's Ins. Co. of Newark, N.J., 6 AD3d 695; Travelers Ins. Co. v Volmar Constr. Co., 300 AD2d 40, 42; Power Auth. of State of N.Y. v Westinghouse Elec. Corp., 117 AD2d 336, 339). Absent a valid excuse, the failure to comply with the notice requirement vitiates the policy, and an insurer need not demonstrate prejudice before it asserts the defense of noncompliance (see Security Mut. Ins. Co. of N.Y. v Acker-Fitzsimons Corp., supra; Blue Ridge Ins. Co. v Jiminez, 7 AD3d 652, 654; Viggiano v Encompass Ins. Co./Fireman's Ins. Co. of Newark, N.J., supra; Power Auth. of State of N.Y. v Westinghouse Elec. Corp., supra at 339).

The plaintiffs' insurance policy required them to notify the defendant immediately [*2]of "any happening likely to give rise to a claim." The defendant demonstrated that the plaintiffs did not give notice for more than three months, and perhaps for as long as 11 months. In opposition to this prima facie establishment of entitlement to judgment as a matter of law, the plaintiffs failed to raise a triable issue of fact as to their failure to provide the defendant with timely notice. Accordingly, the Supreme Court properly granted the defendant's motion for summary judgment dismissing the complaint.

In view of the foregoing, we do not reach the plaintiffs' remaining contention.
FLORIO, J.P., MASTRO, RIVERA and FISHER, JJ., concur.

ENTER:

James Edward Pelzer

Clerk of the Court

The Insurance Corporation of New York, v. U.S. Underwriters Insurance Company

Order, Supreme Court, New York County (Joan A. Madden, J.), entered February 20, 2004, which, inter alia, upon the parties' respective motions for summary judgment, declared that defendant-respondent U.S. Underwriters Insurance Company is not obligated to defend and indemnify plaintiff-appellant Insurance Corporation's insured, third-party defendant-appellant general contractor Ginsburg, in an underlying action for personal injuries brought by an employee of U.S. Underwriters' insured, defendant subcontractor Gamma Builders, unanimously affirmed, with one bill of costs.

Insurance Corporation seeks a declaration that U.S. Underwriters, by reason of the policy it issued to subcontractor Gamma Builders, is obligated to defend and indemnify general contractor Ginsburg in an underlying action for personal injuries brought by Gamma's employee. The motion court declared to the contrary on the ground that Ginsburg was not an additional insured on U.S. Underwriters' policy. We reject Insurance Corporation's claim that such finding was made sua sponte, or improperly based on an argument raised by U.S. Underwriters for the first time in reply papers (see Sanford v 27-29 W. 181st St. Assn., 300 AD2d 250, 251 [2002]). On the merits, the certificate of insurance naming Ginsburg as an additional insured is not, by itself, sufficient to raise a factual issue as to the existence of coverage (see Glynn v United House of Prayer for All People, 292 AD2d 319, 322 [2002]). Nor is U.S. Underwriters' inclusion of the certificate in the certified copies of its policy it produced in disclosure and on these motions (assertedly clerical errors) the type of additional factor favoring coverage
contemplated by Horn Maintenance Corp. v Aetna Cas. & Sur. Co. (225 AD2d 443, 444 [1996]).

We have considered appellants' other arguments and find them unavailing.

.

Andoh v. Milano, et al

Order, Supreme Court, Bronx County (Patricia Anne Williams, J.), entered September 18, 2003, which, in a third-party action involving insurance coverage of a leased truck, upon the parties' respective motions for summary judgment, inter alia, declared that the lessee's policy is primary and the lessor's policy is excess, unanimously affirmed, with costs.

The lessee's $1 million policy plainly states that it is primary insurance for any vehicles leased by the named insured, i.e., the lessee, from the additional insured, i.e., the lessor. In contrast, the lessor's policy, which insures the lessor for $1 million and the lessee in the "step-down" amount of $10,000, plainly states that it is to be excess of any other collectible insurance obtained for the lessor's benefit pursuant to a lease agreement. Thus, the plain terms of the two policies show a clear intent that the lessee's policy is to be primary (see State Farm Fire & Cas. Co. v LiMauro, 65 NY2d 369, 373 [1985]). Since the lessee's policy is primary, the lessor's insurer is not responsible even for the $10,000 step-down amount. The lessor is not relying on [*2]the indemnification clause, which, if invoked, would require the lessor's payment of the statutory minimum (see ELRAC, Inc. v Ward, 96 NY2d 58 [2001]).

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