Coverage Pointers - Volume VII, No. 14
In the Matter of the Arbitration between Nationwide Mutual and Mackey
Appellate Division, Third Department
Insufficient Showing of Prejudice to Insurer on SUM Claim Results in Coverage
Nationwide argued that the insured failed to comply with a condition precedent to supplemental uninsured motorist (SUM) coverage when they allegedly did not return a "Proof of Claim" form as soon as practicable. The Court cites the recent Court of Appeals decision of Rekemeyer v State Farm Mut. Auto Ins. Co., 4 NY3d 468, 476(2005) for the principle that where an insured previously gives timely notice of the accident, the carrier must establish that it is prejudiced by a late notice of SUM claim before it may properly disclaim coverage. Here, Mackey’s attorney supplied prompt written notice of the accident, made a claim for no-fault benefits and indicated that SUM coverage was implicated. Written notice regarding a SUM claim was repeated at least twice over the ensuing six months and Mackey forwarded Nationwide the police accident report and pertinent medical records. As Nationwide failed to show any prejudice from the late return of the proof of claim form, Nationwide cannot disclaim coverage.
Appellate Division, Third Department
Failure to File Notice of Appeal to Final Judgment in SUM Arbitration is Fatal
Connolly was involved in a motor vehicle accident with a driver whose vehicle insurance could not be confirmed. Connelly served State Farm with a demand for uninsured motorist arbitration. When it was discovered that the driver was insured by Hudson Insurance, State Farm petitioned for a temporary stay of the arbitration, but failed to serve Connelly. So, Connelly argued he was entitled to a denial of the stay on that basis. By order dated February 17, 2005, Supreme Court granted petitioner's application to stay arbitration and respondent appealed from that order.
Then, Hudson’s Counsel sent correspondence to State Farm and Connelly advising that it conceded coverage, but not liability, as to the adverse vehicle involved in the accident. When the letter was received by the Supreme Court, the Court issued an order, dated May 12, 2005, finding the uninsured motorist arbitration no longer appropriate. No appeal was taken from this order.
Since the right to take a direct appeal from the intermediate order terminated upon the entry of the May 12, 2005 final judgment, the appeal from the order granting a temporary stay of arbitration was dismissed.
Appellate Division, First Department
Disclaimer not Ambiguous When One of Two Stated Grounds for Disclaimer was Valid
Utica’s initial disclaimer notice erroneously indicated that the insurance policy was not in effect at the time of the accident, but it also clearly advised that the denial was additionally premised on the policy's employee exclusion. The Court finds that the disclaimer was not ambiguous and was properly applied to bar coverage since the disclaimer provided two separate bases for denying coverage and defendant never sought to change its position to rely on a ground not set forth in its disclaimer. Therefore, the insurer’s reliance on the employee exclusion was never waived. Finally, Utica was not required to send a separate disclaimer notice to the party that actually sued the insured and was indemnified by Caruso. Once Utica was notified of additional potential claimants, it promptly responded by sending its disclaimer to that party’s insurer and attorneys.
1/10/06 Sheehan v. Grinshteyn
Appellate Division, First Department
Question of Fact as to Whether Plaintiff met 90/180 Category under Serious Injury
The medical affirmations submitted by defendants was insufficient to meet defendant’s burden on the issue of whether plaintiff was prevented from performing substantially all of his usual and customary daily activities for a period of not less than 90 days during the 180-day period following the accident as the medical examinations were conducted more than one year after the accident. Plaintiff's treating doctor also found that the accident exacerbated a previous minor condition of plaintiff's spine and that plaintiff was "totally disabled" from working for nearly one year and confined to "complete rest at home.” Court finds a question of fact.
1/10/06 Torres v. Safety Cab Corp.
Appellate Division, Second Department
Toure Reminder: “Defendant Needs Admissible Proof to Shift the Burden on the Serious Injury Motion
With all the successful defense appeals on “serious injury” threshold motions, we are still surprised to see defendants who fail to understand their obligations when making a motion under Toure or Pommels, The courts cannot be more clear on the defendant’s obligation: in this case, the defendant who fails to make out a “prima facie showing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d)” cannot obtain summary judgment. The affirmation of the defendants' examining physician failed to objectively demonstrate that the plaintiff did not sustain a permanent consequential or significant limitation of the use of her cervical or lumbar spine as a result of the subject accident. In light of the defendants' failure to meet their initial burden of establishing a prima facie case, it became unnecessary to consider whether the plaintiff's papers were sufficient to raise a triable issue of fact.
Appellate Division, First Department
Where Carrier Undertakes the
Defense of an Additional Insured Based on False Information About Existence of
Agreement to Provide Insurance, it is Not Estopped from Denying Coverage Once
the Truth is Uncovered
A liability insurer's 20-month pre-disclaimer defense of an insured without a reservation of rights is upheld, where the additional-insured-selected defense counsel falsely represented that the named insured had a contractual obligation to provide it with liability insurance. Once the truth was revealed, and it became clear that there was no such written contract in place; carrier could then walk away from the defense without impunity.
Shebar v Metropolitan Life Ins. Co.
Appellate Division, Third Department
Long Term Disability Carrier Faces Potential “Deceptive Acts” Claim
This case represents another in a palpable trend of cases challenging the claims-handling practices of certain long-term disability benefit carriers. The plaintiff sued the carrier, alleging “deceptive acts” in violation of General Business Law Section 349. Plaintiff alleged that despite promises to the contrary in its standard-form policy sold to the public, defendant made a practice of "not investigating claims for long-term disability benefits in good faith, in a timely fashion, and in accordance with acceptable medical standards . . . when the person submitting the claim . . . is relatively young and suffers from a mental illness." Defendant contends that these allegations do not sufficiently identify consumer-oriented conduct within the meaning of General Business Law § 349 and, as such, plaintiff's claim amounts to nothing more than a private contract dispute. The court held that the allegations were sufficiently specific to state a claim and to allow the claim to go forward.
1/5/06 Wilber v. Breen
Appellate Division, Third Department
In Order to Establish Serious Injury, Doctor Need Practice Medicine, Not Law
In opposition to a motion seeking to dismiss a soft-tissue injury case based on lack of serious injury, plaintiff’s doctor submitted a medical report using legal, not medical terms. The doctor opined that the plaintiff suffered "a significant limitation and/or loss of use of her neck, upper back and trapezius region," which "condition is more than mild or slight," the language mirroring some of the court decisions in the area. The Appellate Division held that under Toure conclusory allegations couched in legal terms are insufficient to establish the presence of a serious injury. Plaintiff's physician must either describe whatever limitations are found to exist and assign a numeric percentage to them or provide a qualitative assessment of plaintiff's condition and compare it to the normal function, purpose or use of the affected body, organ, member, function or system
Appellate Division, First Department
Where Insurance Policy Contained Clause Indicating that It Was Entire Contract, Conditions in Property Binder were Not Part of Policy; Also, Fraud Claims Dismissed
The policy clearly stated that the policy, together with the applications and endorsements, was the entire contract therefore, conditions precedent in binder of insurance were not part of contract. Similarly, alleged fraudulent statements made after application was submitted and binder was issued, did not make policy voidable where policy only references representations made in application.
Appellate Division, First Department
Car Rental Company Responsible for UM Coverage when it Failed to Secure Policy Customer had Agreed to Buy
On the eve of trial, Dollar advised plaintiff that while it had purchased the supplementary liability insurance that plaintiff had ordered at the time she rented the car, it neglected to purchase the uninsured/underinsured motorist (UM) insurance also ordered by plaintiff. It further appears that the car was being driven by plaintiff's daughter, who, appellant argues, was not an "authorized driver" under the rental agreement. The Appellate Division agreed that Dollar is liable to the customer for the UM insurance it failed to procure, that customer is not liable to car rental agency indemnification, because that would be subrogation against one’s own insured.
Audrey’s Angle on No-Fault
In this feature to the newsletter, we highlight recent no-fault arbitration awards. The compilation and publication of these awards is not at the same level as traditional reported case law. There is no single source to conduct comprehensive research in the area. This feature seeks out notable current awards and judicial determinations and provides them to our subscribers.
We encourage the submission of no-fault awards, including Master Arbitration awards that address interesting issues. These can be submitted to Audrey Seeley at [email protected]. With all submissions, we ask that you forward a redacted version of the award omitting the parties’ names and that the document be in PDF format. For copies of these decisions, contact Audrey.
1/12/06 In the Matter of the Arbitration between the Applicant and Respondent
Arbitrator Aladar G. Gyimesi, Esq. (New York County)
Durable Medical Equipment And Orthotic Not Medically Necessary As Treating Physician Failed To Provide Adequate Patient Specific Information And Contemporaneous, Credible Reports.
Here is the Angle: This is an interesting award regarding durable medical equipment and an orthotic as to how medical necessity can be demonstrated.
The Analysis: On September 20, 2002, the eligible injured person (“EIP”) was involved in a motor vehicle accident. He came under the care of the Applicant, chiropractor, who prescribed on September 23, October 23, and November 25, 2002, durable medical equipment supplies and an orthotic totaling $3,335.00. The insurer denied the durable medical equipment after conducting a peer review.
Dr. Lee Craig Magourney first treated the EIP on September 23, 2002, wherein the EIP complained of neck pain radiating into the right upper extremity as well as low back and left thigh pain. Dr. Magourney’s report failed to reveal that any cervical spine range of motion testing or orthopedic testing was performed on the EIP. A straight leg raise test was performed and was positive bilaterally. The EIP’s gait was normal. There were decreased deep tendon reflexes in the right triceps and Achilles bilaterally as well as sensory deficits in the L5 nerve root distribution. Dr. Magourney recommended multi-discipline consultations, imaging studies, “global electrodiagnostic testing” if his radicular symptoms persisted, and multi-modality physical therapy treatments. Finally, Dr. Magourney prescribed a cervical pillow, thermophore, lumbar cushion, and “D/L belt,” at issue in this arbitration.
The EIP, upon Dr. Magourney’s referral, also treated with Frank Anderson, D.C. Mr. Anderson reported that the EIP complained of neck pain radiating into the upper extremity as well as low back pain radiating into the buttock and left lower extremity. The EIP demonstrated restricted ranges of motion in all planes. The foraminal compression, Kemp’s, and Yeoman’s tests were positive. A neurological examination was not performed. Mr. Anderson recommended spinal adjustments and/or myofascial soft-tissue manipulation. He also prescribed neck traction with a head halter, at issue in this arbitration.
On October 22, 2002, the EIP underwent a cervical spine MRI that revealed a disc bulge at C4/5 and a herniated disc at C5/6 and C6/7.
On November 25, 2002, Dr. Magourney prescribed additional durable medical equipment at issue in this arbitration. However, the Applicant failed to submit any further treatment records other than the initial office visit. Arbitrator Gyimesi noted that the Applicant submitted four letters of medical necessity regarding all of the disputed items. Interestingly though the letters were signed by the Applicant’s president who had no known medical expertise or training. Furthermore, Arbitrator Gyimesi notes:
[I]t is lastly observed that the author thereof is in the unenviable position, in seeking to justify why these items were prescribed, of attempting to read the minds of the EIP’s treating health care providers insofar as the purpose of the items in issue as well as their function vis-à-vis the recommended course of treatment.
Arbitrator Gyimesi found that the cervical pillow, thermophore, and lumbar cushion were not medically necessary. The Applicant must demonstrate patient specific information as to how the device is necessary for the patient’s treatment within the context of a thoughtful treatment plan. He noted that a cervical pillow appears to be beneficial to anyone irrespective of involvement in a traumatic event. However, just because a piece of durable medical equipment is beneficial does not equate to medical necessity. In this case medical necessity was not demonstrated.
Likewise, with respect to the thermophore, there was no indication as why a heating pad, hot shower, or analgesics could not be used instead of this device.
Also, there was no indication as to why the EIP required a lumbar cushion. Arbitrator Gyimesi indicates that perhaps an indication that the EIP has a unique lifestyle or occupation that would warrant the device would demonstrate medical necessity.
Further, the cervical traction unit and head halter were not medically necessary. Arbitrator Gyimesi found the peer reviewer’s opinion persuasive that Mr. Anderson failed to indicate how the device would enhance the EIP’s clinical prognosis.
Arbitrator Gyimesi found overall that the Applicant, with respect to the aforementioned devices, failed to demonstrate medical necessity. More specifically, the Applicant prescribed the devices prematurely, absent proof that the devices were of beneficial use to the EIP during his conservative therapy treatments which may lead to beneficial use in the EIP’s home environment. In addition, the Applicant failed to submit contemporaneous, credible narrative reports, office records, and/or therapy records that would be probative in determining the issue of medical necessity.
1/12/06 In the Matter of the Arbitration between the Applicant and Respondent
Arbitrator Carolynn Terrell-Nieves, Esq. (Queens County)
SSEP Testing Found To Be Not Medically Necessary As Clinical Conditions For Testing Not Established.
Here is the Angle: SSEP testing is performed to assess central nervous system disorders. A peer review successfully demonstrated that, in this case, the eligible injured person did not have any of the clinical conditions present for this type of electrodiagnostic testing.
The Analysis: The eligible injured person (“EIP”) was involved in a June 25, 2004, pedestrian/motor vehicle accident. The EIP went, via ambulance, to the hospital where she was evaluated and released after receiving x-rays. She followed up with her primary care physician, who ordered cervical and lumbar spine MRIs as well as a right shoulder x-ray. The EIP was also referred to a neurologist, and later began physical therapy. Later, the EIP also began a course of acupuncture and chiropractic treatment. Eventually, the EIP underwent an upper and lower SSEP testing.
The insurer denied the SSEP testing based upon a peer review, by Dr. Simon. Arbitrator Terrell-Nieves, adopting the peer review, upheld the insurer’s denial stating:
SSEP studies are indicated for assessing disorders of the central nervous system. As Dr. Simon indicated, common diagnoses in electrodiagnostic medicine were SSEP testing has demonstrated usefulness include spinal cord trauma, subacute combined degeneration, multiple sclerosis, spinocerebellar degeneration, coma and intraoperative monitoring of spinal cord, brainstem and brain sensory tracts, but these clinical conditions were not pertinent to this case.
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.
1/6/06 Clendenin Bros. v. U.S. Fire Ins. Co.,
Maryland Court of Appeals
“Total” Pollution Exclusion Did Not Eliminate Insurer’s Duty to Defend Personal Injuries Caused Manganese Fumes
The Court of Special Appeals has declared in Clendenin Bros. v. U.S. Fire Ins. Co., 2006 WL 27432 (Md. App. January 6, 2006) that a “total” pollution exclusion did not eliminate an insurer’s duty to defend personal injuries caused by exposure to manganese fumes from the insured’s welding products. The court concluded that such exclusions were not intended to apply to claims involving noxious workplace fumes as, “welding fumes emitted during the normal course of business appears to be the type of harm intended to be included under coverage for routine commercial hazards.”
Submitted by: Michael F. Aylward (Morrison, Mahoney & Miller, LLP)
1/4/06 Towers v. Clarendon National Ins. Co.
Florida Court of Appeal, Second District
After Insurer Rescinded Policy,
Arbitration Provision Was Unenforceable
Plaintiff purchased a health insurance policy from Clarendon National Insurance Company in 2002, and subsequently made a claim under the policy. Clarendon denied plaintiff’s claim because the condition which formed the basis for plaintiff’s claim was a preexisting condition. Thereafter, Clarendon sent correspondence to plaintiff, one which included a return of her policy premium and informed her that no benefits would be paid under the policy because of her preexisting condition, and one which explained that her policy was being rescinded and that her coverage was “null and void.” Plaintiff filed an action against Clarendon, among others, which alleged breach of contract against Clarendon. Clarendon filed a motion to dismiss, or in the alternative, to stay the litigation and compel arbitration. The lower court denied Clarendon’s motion to dismiss, but granted its motion to compel arbitration. On appeal, plaintiff argued that the lower court erred, because there were no issues to arbitrate since Clarendon voided her coverage by rescinding her policy and returning her premium. The Appellate Court agreed and determined that, by returning plaintiff’s premium and voiding the contract between Clarendon and plaintiff, all of the contractual provisions contained in the policy, including the arbitration clause, were unenforceable.
Submitted by: Bruce D. Celebrezze & Michelle M. Hancharik [Sedgwick, Detert, Moran & Arnold LLP]
Hurwitz & Fine, P.C. is a full-service law firm
providing legal services throughout the State of New York.
Scott C. Billman
Insurance Coverage Team
Dan D. Kohane, Team Leader
Michael F. Perley
Scott C. Billman
Audrey A. Seeley
Fire, First-Party and Subrogation Team
Andrea Schillaci, Team Leader
Jody E. Briandi
Philip M. Gulisano
No-Fault/SUM Arbitration Team
Dan D. Kohane, Team Leader
Audrey A. Seeley
Scott C. Billman, Team Leader
Dan D. Kohane
Scott M Duquin
National Union Fire Insurance Company of
Pittsburgh, PA v. Xerox Corporation
Order, Supreme Court, New York County (Charles E. Ramos, J.), entered January 5, 2005, which, to the extent appealed from, granted in part defendants' motions to dismiss the complaint and denied plaintiff's motion to replead, unanimously affirmed, with costs.
The cause of action alleging
breach of a condition precedent contained in the binder issued to defendants was
properly dismissed. The binder and the policy here were two distinct
agreements (see Springer v Allstate Life Ins. Co. of New York, 94 NY2d 645, 651 ; World Trade Ctr. Props. L.L.C. v Hartford Fire Ins. Co., 345 F3d 154, 166 ; and see Insurance Law § 3203[a] and § 3204[a]), and the policy clearly stated that the policy, together with the applications and endorsements, was the entire contract. The condition precedent was not included in the policy, attached to it, or referenced by it, and the binder gave no indication that the condition precedent was meant to be included in the policy. Moreover, the condition precedent contained in the binder may not be used to void the policy. The policy covered acts and omissions occurring prior to the effective date of the policy, but the binder's condition precedent precluded such coverage if there were any change of risk.
Similarly, the court properly dismissed plaintiff's claims based on material misrepresentation and fraudulent inducement, grounded on defendant Xerox's filing of purportedly false financial statements during the time after issuance of the binder, but prior to the policy. In their respective settlements with the SEC, defendants did not admit guilt, and the consent agreements specifically precluded any collateral estoppel effect and did not preclude defendants from taking positions contrary to the settlements in any litigation in which the SEC was not a party. Thus, defendants did not admit the falsity of their financial statements for [*2]purposes of this litigation or any claim which might be brought regarding those financial statements. Furthermore, plaintiff could not reasonably rely on the allegedly false financial statements because the policy expressly stated that plaintiff relied on the statements and declarations in the application for coverage, and plaintiff has not alleged that the financial statements were contained in any such application (see In re Healthsouth Corp. Ins. Litig., 308 F Supp 2d 1253, 1281 ). Moreover, the policy is directly inconsistent with plaintiff's assertion that had it known that the financial statements were false, it would not have issued coverage, since plaintiff issued the policy covering the very act of filing false financial statements, unless such falsity is actually adjudicated to be deliberately fraudulent. Accordingly, the policy itself negates any claim that plaintiff reasonably relied on the insured's financial statements (see Sandcham Realty Corp. v Taub, 299 AD2d 220 ; Societe Nationale d'Exploitation Industrielle des Tabacs et Allumettes v Salomon Bros., 249 AD2d 232 ).
The court properly dismissed plaintiff's claim for breach of defendants' duty of good faith and fair dealing since it is merely a substitute for plaintiff's non-viable contract claims (see Triton Partners LLC v Prudential Secs., Inc., 301 AD2d 411 ). The covenant of good faith and fair dealing cannot be construed so broadly as to effectively nullify other express terms of the contract, or to create independent contractual rights (see Fesseha v TD Waterhouse Inv. Servs., Inc., 305 AD2d 268 ).
Defendant's claim for reimbursement or unjust enrichment, in the event that any derivative action brought by shareholders on behalf of Xerox results in recovery to Xerox, has no legal foundation. The payment made by plaintiff to the individual defendants here, officers and directors of Xerox, would be made pursuant to coverage afforded them, not Xerox, with no recovery if actual fraud is found.
The court also properly dismissed plaintiff's claim based on the known loss doctrine (see National Union Fire Ins. Co. of Pittsburgh, PA v Stroh Cos., 265 F3d 97, 106 ). At most, defendants knew of a risk, not a loss.
The court properly denied plaintiff's motion to replead, since plaintiff has not demonstrated that its amended pleadings would remedy the deficient claims, which have been dismissed on the basis of the plain language of the binder and the policy.
THIS CONSTITUTES THE DECISION
OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.
ENTERED: JANUARY 3, 2006
Luna v. Hyundai Motor America and Dollar Rent-A-Car Systems, Inc.
Order and judgment (one paper), Supreme Court, New York County (Karen S. Smith, J.), entered August 25, 2004, which, in an action for personal injuries sustained by plaintiff while a passenger in a car she had rented from defendant-appellant car rental company, insofar as appealed from, dismissed, prior to trial and as a matter of law, appellant's counterclaim against plaintiff for indemnification, unanimously affirmed, with costs.
Relying on Morris v Snappy Car Rental (84 NY2d 21 ), appellant took the position that plaintiff had covenanted not to sue it and that, under the rental agreement, plaintiff must indemnify it for any amount that she recovers against it in excess of the minimum amount of liability insurance that it was required to obtain under state law as owner of the car. In effect, appellant is disclaiming that portion of its liability under Vehicle and Traffic Law § 388 in excess of the statutory minimum liability insurance requirements (see id. at 28). It appears that on the eve of trial, appellant advised plaintiff that while it had purchased the supplementary liability insurance that plaintiff had ordered at the time she rented the car, it neglected to purchase the uninsured/underinsured motorist (UM) insurance also ordered by plaintiff. It further appears that the car was being driven by plaintiff's daughter, who, appellant argues, was not an "authorized driver" under the rental agreement, and that the issue of insurance coverage is the subject of a pending action that plaintiff brought in federal court in which appellant is not a party. After jury selection but before the commencement of the trial, the trial court, entertaining an oral in limine motion by plaintiff, orally ruled that appellant is liable to plaintiff for the UM insurance it failed to procure, that plaintiff is not liable to appellant for indemnification, and that plaintiff did not have to demand arbitration under a policy that was never procured.
We reject appellant's argument that considerations of comity and orderly procedure require that the coverage and indemnification issues it raised in this action be resolved in plaintiff's federal court action. Once appellant admitted that it did not procure the UM insurance, plaintiff's federal court action, which assumed the existence of a UM policy obtained [*2]by appellant through its insurance carriers and sought a declaration of UM coverage against such carriers, became moot. There being no such policy, there is simply no coverage issue to determine, at least against the carriers that would have issued the policy. Similarly, because the prior summary judgment motions involved this question of policy coverage mooted by appellant's admission, the doctrine of law of the case does not apply (see Smith v Metropolitan Transp. Auth., 226 AD2d 168, 168 , lv denied 89 NY2d 803 , cert denied 520 US 1186 ).
The trial court correctly ruled, as a matter of law, that appellant is responsible for providing the UM coverage it admittedly failed to procure (see Macon v Arnlie Realty Co., 207 AD2d 268, 270 ), notwithstanding that plaintiff's daughter was not an authorized driver under the rental agreement (see Murdza v Zimmerman, 99 NY2d 375, 380-381 ). In addition, since plaintiff is appellant's insured, the indemnification clause in the rental agreement is barred by the antisubrogation rule (see Ozturk v Taskiran, 245 AD2d 355 ). In Morris, the renter did not purchase additional insurance (84 NY2d at 30), and thus there was no issue of antisubrogation.
We reject appellant's argument that plaintiff's in limine motion was an improper substitute for a summary judgment motion. Appellant's admission effectively resolved the coverage issue, and the indemnification issue is a pure question of law that was raised by appellant itself, and as to which it had available all the documents necessary to articulate its theory of liability (CPLR 4401; see Levitt v Lenox Hill Hosp., 184 AD2d 427, 428 ).
We have considered appellant's other arguments and find them unavailing.
Federated Department Stores, Inc. v. Twin City ire Insurance Company, Defendant-Appellant, Specialty Risk Services, Inc., et al., Defendants.
Defendant Twin City Insurance
Company appeals from a judgment of the Supreme Court, New York County (Helen E.
Freedman, J.), entered November 24, 2004, insofar as it denied its motion for
summary judgment dismissing the complaint and granted plaintiffs' cross motion
for summary judgment declaring that Twin City is equitably estopped from denying
coverage to plaintiffs.
The issue on appeal is whether a liability insurer's 20-month pre-disclaimer defense of an insured without a reservation of rights is sufficient, without any further showing, to support a rejection, on the basis of equitable estoppel, of the insurer's disclaimer.
Defendant Twin City Fire Insurance Company issued a general liability insurance policy to defendant Jones Apparel Group, the parent company of Polo Jeans Company, for the period April 1, 1999 to April 1, 2000. The coverage question presented by this declaratory judgment action arises in the context of an underlying action against plaintiff Federated Department Stores, doing business as Macy's, for an accident that occurred on April 30, 1999 in a Macy's department store when a customer (the plaintiff in that action), attempted to remove a pair of Polo brand jeans from a shelf in a Polo Jeans "vendor shop" located within the store and was injured when the shelf collapsed onto her foot.
A vendor shop is a small specialty shop within a larger department store displaying merchandise furnished solely by the manufacturer or distributor of an established brand name. As the record demonstrates, there were a series of "arrangements" by Polo Jeans and Jones to install vendor shops in Federated stores. According to Federated/Macy's, at all relevant times, all of its vendor shops were subject to one of three forms of written agreements, each requiring that the vendor and/or its contractor procure insurance covering Federated/Macy's and indemnify it for any injuries arising out of the display. Under the Twin City policy issued to Jones, an additional insured is defined to include "any person or organization with whom you agreed, because of a written contract or agreement or permit, to provide insurance such as is afforded under this policy."
Upon the commencement of the underlying action, Federated/Macy's retained the law firm of Lester Schwab Katz & Dwyer to represent it. Initially, Lester Schwab mistakenly sent notice of the action to Polo/Ralph Lauren, which, having no relationship to Polo Jeans, forwarded the pleading to Jones with notice to Lester Schwab. The latter, after first communicating with Polo Jeans on January 25, 2001, wrote to Jones on February 7, 2001, requesting a defense and indemnification under its written agreement with Federated/Macy's as well as a copy of its liability policy. Under the purported Jones/Federated agreement, according to Lester Schwab, Jones was required to procure and maintain a liability policy naming Federated/Macy's as an additional insured. Jones forwarded the summons and complaint in the underlying action to defendant Specialty Risk Services (SRS), its claims administrator.
By letter dated February 12, 2001, SRS, on behalf of Twin City, accepted Lester Schwab's tender and, without any reservation of rights, agreed "to pay for the defense and indemnification of [Federated/]Macy's, contingent upon your office's cooperation." In the same letter, SRS requested copies of all pleadings and significant correspondence in Lester Schwab's file, and that it be furnished with copies of all future documentation, pleadings and correspondence. It also requested that Lester Schwab complete a "litigation strategy and budget form." In addition, SRS asked Lester Schwab to remain as defense attorneys in the underlying action, to which request the latter agreed with the understanding that "all future defense costs be billed to [SRS] for payment by [the insurer]."
On March 8, 2001, SRS wrote to Lester Schwab regarding a prior conversation about the institution of a third-party action against two specified contractors and advised, "[P]lease immediately take the appropriate steps to join both of those entities . . . into the litigation." As SRS explained, any potential liability should rest with the two contractors — the supplier and installer, respectively, of the shelves — and not Polo Jeans, which was, according to SRS, "merely a passive player in the chain of commerce." Twin City continued to provide a defense to Federated/Macy's, and for the next year and a half, through SRS, participated in the litigation.
According to Jones, despite repeated requests, Lester Schwab failed to provide SRS with the contracts containing Jones's purported agreement to procure insurance coverage for Federated/Macy's. In April 2001, Federated provided as evidence of such an agreement a copy of an August 18, 1998 letter from Polo Jeans to Macy's detailing the responsibilities connected with a store build-out. There is no reference in the letter to any insurance procurement obligation or indemnification agreement by Jones. On October 2, 2002, Lester Schwab forwarded two documents to SRS — a "Letter of Intent for 2000" and a second copy of the aforementioned August 18, 1998 letter — apparently purporting to evidence the contract between Jones and Federated/Macy's. The letter of intent did not contain the agreement claimed.
Noting that it had requested — and Federated had failed to produce — the contract requiring Polo to defend and indemnify Federated, Twin City, on October 18, 2002, disclaimed coverage and withdrew its defense of Federated/Macy's in the underlying action. In subsequent correspondence to Lester Schwab supplementing the disclaimer, SRS stated, "As you are aware, Twin City responded to the tender on February 12, 2001 [and agreed to coverage [b]ased upon Federated's express representations regarding the existence of an agreement between Federated and Polo." In addition, the letter stated, "On numerous occasions, Twin City has requested that Federated produce a copy of the purported agreement referenced in the January 25, 200l letter. Despite repeated requests, Federated has failed to produce this agreement. Moreover, our insured has been unable to locate any agreement and, in fact, is unaware of the existence of any such agreement."
Since the disclaimer, Lester Schwab has continued its representation of Federated/Macy's in the underlying action and, on behalf of Federated/Macy's, commenced this declaratory action against Twin City, SRS and Jones Apparel, asserting that Twin City is estopped from denying coverage to Federated/Macy's because it assumed its defense without a reservation of rights. The claim against Jones is based on its alleged breach of the indemnification provision of the purported contract with Federated/Macy's.
Twin City and SRS, as well as Jones, each moved for summary judgment dismissing the complaint. Twin City/SRS sought a declaration that the disclaimer was valid. In support of its motion, Jones submitted, inter alia, the affidavit of its Director of Business Analysis, who conducted a survey of Jones's records and concluded that "there exists no agreements [sic] that require Jones . . . to defend and/or indemnify [Federated/Macy's]" with respect to the underlying action. Federated/Macy's cross-moved for summary judgment declaring that Twin City was obliged to defend and indemnify it under the policy issued to Jones with respect to the underlying action.
Insofar as relevant to this appeal, Supreme Court denied the Twin City/SRS motion and granted the Federated/Macy's cross motion, finding that Twin City, having assumed Federated's defense without a reservation of rights, was equitably estopped from disclaiming coverage, and declaring that Twin City was obliged to defend and indemnify Federated/Macy's in the underlying action. In concluding that Twin City was equitably estopped from disclaiming coverage, the court held that prejudice to an insured may be presumed where an insurer assumes the defense and the insured, in reliance thereon, loses the right to control its own defense. Twin City appeals. We reverse.
It is well settled that "when an insurer defends an action on behalf of an insured, in his stead, with knowledge of facts constituting a defense to the coverage of the policy, it is thereafter estopped from asserting that the policy does not cover the claim" (O'Dowd v American Sur. Co. of N.Y., 3 NY2d 347, 355 ). By the same token, however, an insurer should not be charged with the obligation to reserve its rights against unknown policy defenses. As one commentator has noted,
A delay in giving notice of reservation of rights will be excused where it is traceable to the insurer's lack of actual or constructive knowledge of the available defense, especially where, in addition to such lack of knowledge, the insurer is misled by misrepresentations into defending the suit. Accordingly, where the insurer does not have knowledge of the insured's breach until after the insurer has commenced the defense of the action, there is no estoppel through delay where the insurer gives prompt notice upon obtaining such knowledge (Couch on Insurance § 202:60 [3d ed 2005]).
Here, there is no evidence in the record that Twin City was aware that Federated was not an additional insured under the Jones policy.
Insurers are not obligated to
speculate about each and every conceivable defense to coverage at the time a
defense is assumed in response to a tender. To impose such a burden would
necessarily require that every defense of an insured be a conditional one,
thereby thrusting unnecessary concern as well as initial expense upon the
insured, i.e., the retention of personal counsel, which, as subsequent events
might very well show, was
unwarranted [FN1]. Moreover, the imposition of such an obligation would take its toll on the insurer as well. In such a case, the insurer would lose control of the defense, a vital component of its policy protections, that is, the right to control its ultimate liability in any case (see Hoffman v Allstate Ins. Co., 21 Misc 2d 583, 585 ).
At the time Twin City accepted
the tender of Federated's defense, it did not know, nor could it have known,
that Federated was not an additional insured under its policy. It had no
[*5]reason to know that Lester Schwab's assertion
— that the Jones/Federated contract called for additional insured coverage for
Federated/Macy's — was incorrect, and it was entitled to rely on the
representations as to the existence of such a contract. The undocumented
assertions contained in correspondence from a purported insured are sufficient
to trigger the duty to defend without a corollary duty to investigate (Fitzpatrick
v American Honda Motor Co., 78 NY2d 61 ). The duty of good faith and
fair dealing implied in every contract is
an integral part of an insurance contract (see New York Univ. v Continental Ins. Co., 87 NY2d 308, 318 ). A policy's cooperation clause creates an obligation on the insured to provide correct information (see Lewis v Nationwide Mut. Ins. Co., 202 AD2d 816 ). Twin City did not have knowledge of facts justifying a disclaimer until Lester Schwab, for the second time, provided, as evidence of the contract, the patently insufficient August 18, 1998 letter from Polo Jeans to Macy's. Thus, Twin City learned that no contract existed between Federated/Macy's and Jones on or about October 2, 2000, after the second failed attempt by Federated/Macy's to provide the relevant contract, and promptly disclaimed coverage on October l8, 2002.
Even were we to accept the argument that Twin City had an obligation to reserve its rights when it assumed the defense of the underlying action, Federated/Macy's, contrary to Supreme Court's finding, is unable to establish a key element of common-law estoppel: prejudice caused by Twin City's allegedly belated disclaimer. The purpose of a reservation of rights is to prevent an insured's detrimental reliance on the defense provided by the insurer. The reservation is a sufficient preventative to reliance even if the insurer later disclaims on a basis different from the ground originally asserted in the reservation of rights (see Village of Waterford v Reliance Ins. Co., 226 AD2d 887 ). Here, even though no reservation of rights notice was given, SRS requested Federated/Macy's to provide a copy of the contract requiring Jones to procure insurance coverage for it, prompting Federated/Macy's to attempt, unsuccessfully on at least two occasions, to provide the purported contract. In fact, Federated/Macy's acknowledges on appeal that it has failed to provide the relevant contract. Thus, Federated/Macy's was always aware that Twin City required, and requested, formal documentation of its additional insured status under Twin City's policy, a status wholly dependent on the requested contract. Given such a background, Federated/Macy's could not have detrimentally relied on Twin City's defense.
Moreover, as a general rule, estoppel cannot be used to create coverage where none exists (Sedgwick Ave. Assoc. v Insurance Co. of State of Pa., 203 AD2d 93 ; see also Wassau Ins. Co. v Feldman, 213 AD2d 179  [equitable estoppel inapplicable where policy not in effect at the time of the alleged malpractice despite fact that insurer, through clerical error, defended purported insured for nine years]). Utica Mut. Ins. Co. v 215 W. 91st St. Corp. (283 AD2d 421 ), upon which Federated/Macy's relies, is not to the contrary. There, the insurer, which had defended an owner despite its non-listing in the policy's additional insured endorsement, was equitably estopped from disclaiming coverage. The key to that holding was that the insurer certainly was in a position to know the owner was not an additional insured.
In support of its ruling that "equitable estoppel can apply to create coverage which the terms of the policy do not afford, at least where the policy was in effect when the claimant [*6]suffered loss or injury," Supreme Court cited this Court's decision in General Acc. Ins. Co. of Am. v Metropolitan Steel Indus. (9 AD3d 254 ). There, the insured provided first-party coverage for damage to specified property, but not liability coverage for breach of contract claims. The insurer undertook the insured's defense when it was sued for breach of contract by a third party without any reservation of rights. General Accident is distinguishable on two bases: although not insuring third-party liability, the insurer did provide coverage to the insured, unlike here, where the purported insured is a stranger to the policy. Secondly, the insurer, with knowledge of the information upon which it subsequently disclaimed, undertook the defense. That is clearly not the case here.
Supreme Court based its finding of estoppel on the erroneous premise that because Twin City controlled Federated's defense in the underlying action, prejudice is presumed. In so holding, the court cited Bluestein & Sander v Chicago Ins. Co. (276 F3d 119, 122 [2d Cir 2002]). Prejudice, however, is not uniformly presumed in such circumstances, and estoppel will lie only if the insured has demonstrated prejudice by the insurer's actions (National Indem. Co. v Ryder Truck Rental, 230 AD2d 720 ; see also General Acc. Ins. Co. of Am. v Metropolitan Steel Indus., 9 AD3d 254, supra). Prejudice is established only where the insurer's control of the defense is such that the character and strategy of the lawsuit can no longer be altered (see e.g. United States Fid. & Guar. Co. v New York, Susquehanna & W. Ry. Corp., 275 AD2d 977 ).
Here, Lester Schwab represented Federated/Macy's before Twin City assumed responsibility for the defense. Lester Schwab continued the defense under Twin City and remained in control of the defense after its disclaimer. Indeed, as noted, even as Lester Schwab prosecutes the instant action on Federated/Macy's behalf, it continues the defense of the underlying action. Federated/Macy's shows no more than Twin City's requesting status reports, paying for a portion of its defense and authorizing the commencement of third-party claims to attempt to obtain indemnity from other parties — an effort that would benefit, not prejudice, Federated/Macy's. There is no showing of Twin City's control of the defense to the detriment of Federated/Macy's.
Contrary to Federated/Macy's claim, Twin City did not use confidential information acquired in its defense of the underlying action. Twin City discovered that there was no contract requiring Jones to procure liability insurance coverage through correspondence with Federated/Macy's, not through its defense of the underlying lawsuit. The non-existence of that contract was not a confidential matter but, rather, a factual matter Federated/Macy's was bound to disclose in order to establish its right to coverage, as well as its claim for indemnity against Jones.
Nor did Twin City's assumption
of Federated/Macy's defense in any way prejudice the latter's claim against
Jones. Federated/Macy's argues that Twin City's defense impeded the assertion of
a cross claim because of the bar of the antisubrogation rule (see
North Star Reins. Corp. v Continental Ins. Co., 82 NY2d 281, 294 ).
That argument is meritless. Federated/Macy's contractual indemnification claim
against Jones was fully litigated with the instant motions and dismissed based
on the lack of a showing of a contract. There can be no
[*7]claim of prejudice when Federated/Macy's had an opportunity to
litigate the issue fully and fairly. Moreover, the claim is exaggerated. The
antisubrogation rule applies only to the policy limit of the
common policy (see White v Hotel D'Artistes, 230 AD2d 657 ). Thus, Federated/Macy's could have brought a cross claim for a defense and indemnification against Jones for any amount over the Twin City policy limit or for any amount covered by a separate policy (id.; see Flowers v KG Land N.Y. Corp., 219 AD2d 579 ).
One further matter requires comment. In a post-argument submission, Federated/Macy's brings to our attention this Court's decision in Travelers Indem. Co. of Am. v Royal Ins. Co. of Am. (__ AD3d __, 802 NYS2d 125 ), which, on a motion for summary judgment, upheld a claim for coverage based on an oral agreement to procure insurance (for up to one year) on the basis of additional insured policy language similar to that involved herein. Even assuming the propriety of the proposition that the additional insured provision in question extends to an oral agreement — a concept that we reject,[FN2] as Twin City properly points out — this issue was never raised in the complaint or on the motion before Supreme Court. It is raised for the first time on appeal and is directly contrary to Federated/Macy's arguments to the motion court and this court. We reject it (see Pine v Coppola N.Y.C., 299 AD2d 227 ; Devlin v Video Servs. Acquisition, 188 AD2d 370 ).
For all of the foregoing reasons, the Federated/Macy's claim of equitable estoppel is without merit.
Accordingly, the judgment of the Supreme Court, New York County (Helen E. Freedman, J.), entered November 24, 2004, insofar as it denied the motion of defendant Twin City Fire Insurance Company for summary judgment dismissing the complaint and granted plaintiffs' cross motion for summary judgment declaring that Twin City is equitably estopped from denying coverage to plaintiffs, should be reversed, on the law, with costs and disbursements, the motion granted, the cross motion denied and a declaration made in favor of Twin City.
THIS CONSTITUTES THE DECISION
OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.
ENTERED: JANUARY 5, 2006
Footnote 1:Where an insurer defends under a reservation of rights, the insured is entitled to retain its own counsel (see Prashker v United States Guar. Co., 1 NY2d 584, 593 ; see also Public Serv. Mut. Ins. Co. v Goldfarb, 53 NY2d 392, 401 ; cf. Singh v New York City Tr. Auth., 17 AD3d 262 ).
Footnote 2:The policy language here is not identical to that in Travelers. The policy here included as additional insureds "any person or organization with whom you agreed, because of a written contract or agreement or permit to provide insurance . . ." This provision does not apply "[u]nless the written contract or agreement has been executed . . . prior to the [injury]." If nothing else, it is clear from the use of the word "executed" that a writing is required.
Appeal from an order of the Supreme Court (McCarthy, J.), entered February 18, 2005 in Albany County, which denied defendant's motion to dismiss the second cause of action.
Plaintiff was employed by the Office of the Comptroller (hereinafter the state) as the Director of Retirement Information and Outreach for New York State and Local Retirement Systems from 1993 through 2002. During that time, the state made available to certain employees, including plaintiff, short and long-term disability insurance. These insurance benefits were provided by defendant.
In 2002, plaintiff's doctor advised the state that plaintiff was no longer able to perform his job and required a medical leave of absence due to depression. Plaintiff submitted a claim to defendant for short-term disability benefits and received those benefits for the available six-month period. Upon expiration of the short-term benefits, plaintiff submitted a claim for long-term disability benefits, and received those benefits until July 2003, when the benefits were terminated upon notification from defendant. After defendant denied plaintiff's request that it reconsider its termination of his benefits, plaintiff commenced this action alleging breach of contract and that defendant engaged in deceptive acts or business practices in violation of General Business Law § 349. Thereafter, defendant moved pursuant to CPLR 3211 (a) (7) to dismiss the General Business Law § 349 claim for failure to state a cause of action. Supreme ]Court denied the motion and defendant now appeals.
We affirm. In his complaint, plaintiff alleged that despite promises to the contrary in its standard-form policy sold to the public, defendant made a practice of "not investigating claims for long-term disability benefits in good faith, in a timely fashion, and in accordance with acceptable medical standards . . . when the person submitting the claim . . . is relatively young and suffers from a mental illness." Defendant contends that these allegations do not sufficiently identify consumer-oriented conduct within the meaning of General Business Law § 349 and, as such, plaintiff's claim amounts to nothing more than a private contract dispute (see generally Oswego Laborers' Local 214 Pension Fund v Marine Midland Bank, 85 NY2d 20, 25-27 ). We disagree.
"[O]n a motion to dismiss for failure to state a claim, the court 'must afford the complaint a liberal construction, accept as true the allegations contained therein, accord the plaintiff the benefit of every favorable inference and determine only whether the facts alleged fit within any cognizable legal theory'" (Skibinsky v State Farm Fire & Cas. Co., 6 AD3d 975, 976 , quoting 1455 Washington Ave. Assoc. v Rose & Kiernan, 260 AD2d 770, 771 ). While factual allegations that are conclusory, vague or inherently incredible are not sufficient (see Matter of Niagara Mohawk Power Corp. v State of New York, 300 AD2d 949, 952 ), plaintiff alleged a specific deceptive practice on the part of defendant, directed at members of the public generally who purchased its standard-form policy, that amounted to a misrepresentation of the nature of the coverage being provided. Contrary to defendant's argument, these allegations are not limited to a challenge regarding coverage made on the basis of facts unique to this insured plaintiff, but relate to consumer-oriented conduct affecting the public at large (see Makuch v New York Cent. Mut. Fire Ins Co., 12 AD3d 1110, 1111 ; Joannou v Blue Ridge Ins. Co., 289 AD2d 531, 532 ; cf. Goldblatt v MetLife, Inc., 306 AD2d 217, 217 ; Security Mut. Life Ins. Co. of N.Y. v DiPasquale, 283 AD2d 182, 182 , lvs dismissed 97 NY2d 653 , 97 NY2d 700 ). Inasmuch as plaintiff asserts that this consumer-oriented conduct was deceptive, material and caused him injury, we conclude that "[a]t this early prediscovery phase, these allegations sufficiently plead violations of General Business Law § 349" (Skibinsky v State Farm Fire & Cas. Co., supra at 976; see Makuch v New York Cent. Mut. Fire Ins. Co., supra at 1111; Acquista v New York Life Ins. Co., 285 AD2d 73, 82-83 ; cf. Soule v Norton, 299 AD2d 827, 829 ; Walsh v Liberty Mut. Ins. Co., 289 AD2d 842, 843-844 ). Accordingly, Supreme Court properly denied defendant's motion to dismiss plaintiff's General Business Law § 349 claim, as well as plaintiff's claim for counsel fees, at this juncture (see General Business Law § 349 [h]; Skibinsky v State Farm Fire & Cas. Co., supra at 976).
MEMORANDUM AND ORDER
Calendar Date: November 14, 2005
Before: Cardona, P.J., Crew III, Peters, Spain and Kane, JJ.
Crew III, J.
Appeal from a judgment of the Supreme Court (Caruso, J.), entered December 10, 2004 in Schenectady County, which, inter alia, granted defendant's motion for summary judgment dismissing the complaint.
Plaintiff was involved in an automobile accident, as a result of which she brought the instant action seeking damages for the personal injuries she sustained during the course thereof. Following joinder of issue and discovery, defendant successfully sought summary judgment on the ground that plaintiff did not suffer a serious injury within the meaning of Insurance Law § 5102 (d). Plaintiff now appeals.
We begin by noting that defendant clearly established, prima facie, that plaintiff did not suffer a serious injury. At issue here then is whether plaintiff produced competent medical evidence raising a material issue of fact as to the existence of a serious injury (see Hayes v Johnston, 17 AD3d 853, 854 ). We think not.
The record reveals that plaintiff suffered a soft-tissue injury which, she claims, constitutes a "significant limitation of use of a body function or system" and a "permanent consequential limitation of use of a body organ or member," two of the categories encompassed [*2]in the definition of "serious injury" (Insurance Law § 5102 [d]). In support of her claim, plaintiff submitted the affirmation and office records of one of her treating physicians, Lynne Nicholson. Nicholson opined that plaintiff suffered a chronic lumbar strain, whiplash-type cervical strain and myofascial pain syndrome, which is permanent and will prevent plaintiff from engaging in many routine activities. She further opined (in the language of the statute and the case law interpreting it) that plaintiff suffered "a significant limitation and/or loss of use of her neck, upper back and trapezius region," which "condition is more than mild or slight." Such conclusory statements are not sufficient to raise a question of fact as to the seriousness of plaintiff's injuries. Rather, plaintiff's physician must either describe whatever limitations are found to exist and assign a numeric percentage to them or provide a qualitative assessment of plaintiff's condition and compare it to the normal function, purpose or use of the affected body, organ, member, function or system (see Toure v Avis Rent A Car Sys., 98 NY2d 345, 350 ). This Nicholson failed to do and, accordingly, Supreme Court properly granted defendant's motion.
Cardona, P.J., Peters, Spain and Kane, JJ., concur.
ORDERED that the judgment is affirmed, with costs.
Order, Supreme Court, New York County (Shirley Werner Kornreich, J.), entered August 25, 2004, which, inter alia, granted defendant's motion for summary judgment and dismissed the complaint, unanimously modified, on the law, to declare in defendant's favor that its disclaimer of coverage based on the subject policy's employee exclusion was proper, and otherwise affirmed, with costs in favor of defendant payable by plaintiff.
Although defendant's initial disclaimer notice erroneously indicated that the insurance policy was not in effect at the time of the accident, it also clearly advised that the denial of coverage was additionally premised on the policy's employee exclusion, which provided that the company would not pay for bodily injury to an employee of an insured if the injury was sustained in the course of employment. Accordingly, the disclaimer was not ambiguous and was properly applied to bar coverage (see Town of Massena v Healthcare Underwriters Mut. Ins. Co., 98 NY2d 435 ; cf. Consolidated Edison Co. of New York v Hartford Ins. Co., 203 AD2d 83 ). Since the disclaimer provided two separate bases for denying coverage and defendant never sought to change its position to rely on a ground not set forth in its disclaimer, defendant's reliance on the employee exclusion was never waived (cf. Mutual Redevelopment Houses, Inc. v Greater New York Mut. Ins. Co., 204 AD2d 145 , lv denied 86 NY2d 710 ).
As the court found, defendant was not required to send a separate disclaimer notice to The Estates, the party that actually sued the insured and was indemnified by plaintiff (see Ringel v Blue Ridge Ins. Co., 293 AD2d 460, 462a ; Excelsior Ins. Co. v Antretter Contr. Corp., 262 AD2d 124, 127 ). In any event, once defendant was notified of additional potential claimants, it promptly responded by sending its disclaimer to The Estates' insurer and attorneys.
We have considered plaintiff's remaining contentions and find them unavailing.
We modify only to declare in defendant's favor (see Lanza v Wagner, 11 NY2d 317, 334 , cert denied 371 US 901 ).
THIS CONSTITUTES THE DECISION
OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.
ENTERED: JANUARY 10, 2006
In an action to recover damages for personal injuries, the plaintiff appeals from an order of the Supreme Court, Queens County (Kitzes, J.), dated November 1, 2004, which granted the defendants' 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 denied, and the complaint is reinstated.
The defendants failed to make 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; cf. Gaddy v Eyler, 79 NY2d 955). The affirmation of the defendants' examining physician failed to objectively demonstrate that the plaintiff did not sustain a permanent consequential or significant limitation of the use of her cervical or lumbar spine as a result of the subject accident (see Black v Robinson, 305 AD2d 438, 439; see also Aronov v Leybovich, 3 AD3d 511; Zavala v DeSantis, 1 AD3d 354; Claude v Clements, 301 AD2d 554, 555; Gamberg v Romeo, 289 AD2d 525, 526; Junco v Ranzi, 288 AD2d 440). In light of the defendants' failure to meet their initial burden of establishing a prima facie case, it is unnecessary to consider whether the plaintiff's papers were sufficient to raise a triable issue of fact (see Coscia v 938 Trading Corp., 283 AD2d [*2]538; Mariaca-Olmos v Mizrhy, 226 AD2d 437, 438).
Accordingly, the Supreme Court erred in granting the defendants' motion for summary judgment.
Plaintiffs, as limited by their brief, appeal from that portion of an order of
the Civil Court, Bronx County (Julia I. Rodriguez, J.), entered February 17,
2005, which granted defendants' motion and cross-motion for summary judgment
dismissing their claim under the 90/180 day category of Insurance Law §5102(d).
Order (Julia I. Rodriguez, J.), entered February 17, 2005, reversed, with $10 costs, defendants' motion and cross-motion for summary judgment denied, and the complaint reinstated.
Defendants failed to make a prima facie case showing that plaintiff did not sustain a serious injury within the meaning of Insurance Law §5102[d]. The medical affirmations submitted by defendants cannot be considered as probative on the issue of whether plaintiff suffered a medically determined injury that prevented him from performing substantially all of the material acts which constituted his usual and customary daily activities for a period of not less than 90 days during the 180-day period immediately following the accident because the doctors' examinations were conducted more than one year after the accident (see Webb v Johnson, 13 AD3d 54 ).
Even assuming defendants did meet their initial burden, the affirmation of plaintiff's treating doctor, opining that the trauma from the vehicular accident exacerbated a previous minor condition of plaintiff's spine and that plaintiff was "totally disabled" from working for nearly one year and confined to "complete rest at home," together with other medical [*2]evidence and plaintiff's own affidavit, raised an issue of fact as to whether he sustained a serious injury under the 90/180 day category (see Woods v Tomayo, 5 AD3d 309 ; Manrique v Warshaw Woolen Assocs., 297 AD2d 519 ).
This constitutes the decision
and order of the court.
Decision Date: January 10, 2006
Appeal from an order of the Supreme Court (Hummel, J.), entered September 14, 2004 in Columbia County, which, inter alia, denied petitioner's application pursuant to CPLR 7503 to stay arbitration between the parties.
Petitioner argues that respondents failed to comply with a condition precedent to supplemental uninsured motorist (hereinafter SUM) coverage when they allegedly did not return a "Proof of Claim" form as soon as practicable. On June 8, 2003, 16-year-old respondent Deanna Delaney sustained serious injuries (including fractures requiring surgery) while a passenger in a vehicle that was involved in a single vehicle accident in Tennessee. Her mother, respondent Penny Mackey, was an insured under a policy issued by petitioner that included SUM coverage of $25,000 per person, $50,000 per accident. By letter dated July 1, 2003, respondents' attorney notified petitioner of a no-fault claim and a "potential uninsured/underinsured motorist claim" as a result of the accident. Respondents' attorney sent another letter dated July 15, 2003 enclosing a police report of the accident and indicating no coverage existed from any other policy in the household or from the vehicle involved in the accident.
In January 2004, respondents' attorney informed petitioner that a SUM claim would be pursued. Petitioner responded by letter dated January 8, 2004 in which it sought additional information and enclosed a "Proof of Claim" form that it requested the insured complete and return to its office. Copies of Delany's medical records were sent to petitioner in February 2004. On March 29, 2004, however, petitioner disclaimed coverage because it had not yet received the completed "Proof of Claim" form. The form, which ostensibly had been misplaced, was sent to petitioner on April 14, 2004, but petitioner stood by its disclaimer. In June 2004, respondents served a notice of arbitration regarding the SUM claim. Petitioner sought a permanent stay of the arbitration. Supreme Court denied the petition and this appeal ensued.
We affirm. The Court of Appeals has recently held that "where an insured previously gives timely notice of the accident, the carrier must establish that it is prejudiced by a late notice of SUM claim before it may properly disclaim coverage" (Rekemeyer v State Farm Mut. Auto Ins. Co., 4 NY3d 468, 476 ; see Matter of Brandon [Nationwide Mut. Ins. Co.], 97 NY2d 491, 496-497 ; cf. Argo Corp. v Greater N.Y. Mut. Ins. Co., 4 NY3d 332, 339-340 ). The rationale in Rekemeyer applies here, as respondents' attorney supplied prompt written notice of the accident, made a claim for no-fault benefits and indicated that SUM coverage was implicated. Written notice regarding a SUM claim was repeated at least twice over the ensuing six months. Respondents forwarded to petitioner the police accident report of the accident as well as the pertinent medical records. Petitioner does not deny receiving any of these various letters and documents from respondents. Petitioner failed to show any prejudice and, under the circumstances of this case, should not be permitted to disclaim SUM coverage.
Crew III, J.P., Peters and Spain, JJ., concur.
ORDERED that the order is affirmed, with costs.
Appeal from an order of the Supreme Court (Kavanagh, J.), entered February 25, 2005 in Ulster County, which granted petitioner's application pursuant to CPLR 7503 to temporarily stay arbitration between the parties.
Respondent Robert Connolly (hereinafter respondent) was involved in a motor vehicle accident with a driver whose vehicle insurance could not be confirmed at the time. Thereafter, respondent served petitioner, his insurance carrier, with a demand for uninsured motorist arbitration. When it was discovered that the driver was, in fact, insured by respondent Hudson Insurance Company, petitioner filed all necessary papers to commence this special proceeding for a stay of arbitration. Unfortunately, it failed to serve respondent. Respondent sought a denial of the stay on that basis and petitioner sought an extension of time for service based upon law office failure. By decision dated February 17, 2005, Supreme Court granted petitioner's application to stay arbitration and respondent appealed from that order.
Thereafter, counsel for Hudson corresponded with petitioner and respondent, by letter, [*2]advising that it conceded coverage, but not liability, for the adverse vehicle involved in this accident. When such letter was forwarded to Supreme Court, it issued an order, dated May 12, 2005, finding uninsured motorist arbitration no longer appropriate. No appeal was taken from this order.
Since the right to take a direct appeal from the intermediate order terminated upon the entry of the May 12, 2005 final judgment, the appeal from the order granting a temporary stay of arbitration must be dismissed (see Beretz v Diehl, 302 AD2d 808, 809 n 2 ; Dolan v Jaeger, 285 AD2d 844, 846 n 2 ; Rivera v Majuk, 256 AD2d 910, 911 ).
Crew III, J.P., Spain and Mugglin, JJ., concur.
ORDERED that the appeal is dismissed, without costs.