Coverage Pointers - Volume VII, No. 17
Balbuena v. IDR Realty LLC
New York Court of Appeals
New York Allows Recovery of Lost Wages by Undocumented Aliens in Lawsuits for Construction-Site Accidents
In a 6-2 decision, the Court followed the Second Department's Majlinger decision, allowing the recovery of lost wage damages by undocumented aliens in personal injury cases arisng out of accidents at contruction sites. The Court did not want to discourage safe workplace practices and thought that disallowing wage recoveries, as a blanket rule, would encourage owners and contractors to be lax in their safety practices when employing undocument aliens. The Court focused upon the state's police power to enforce workplace safety laws, i.e. Labor Law secs 200, 240, and 241. The same analyses would not appear necessarily be applicable in cases arising from other torts, like trip and fall or motor vehicle accidents. Nevertheless, the Court said that the plaintiff's immigration status may be presented to the jury as a factor to be considered.
Brisson v. County of Onondaga
New York Court of Appeals
New York High Court Makes it Clear: Workers Compensation Carrier Must Explicitly Reserve its Right to Future Offsets or it Will Not Receive Compensation Holiday
A self-insured employer or workers' compensation carrier must preserve its right to any offset expressly and unambiguously when consenting to settlement of a third-party action, regardless of whether there is an existing lien against the claimant's recovery. Failure to do so will preclude payment holiday. To preserve its rights in this case, the comp carrier or self insured employers must make a clear statement of its reservation of this right or it will not be entitled to any offset of workers' compensation benefits against the third party settlement paid to claimant. Note that here, the self-insured employer used the words: "we can take credit against net third party proceeds" but didn’t specifically say it was preserving its rights to future offsets. The finding of the Workers Compensation Board that the statement was insufficient to preserve rights was not disturbed by the Court.
Country Wide Insurance Company v. National Railroad Passenger Corp.
New York Court of Appeals
If Owner and Operator of Car Agree that the Driver Did Not Have Permission to Use the Car, Can Anyone Prove Otherwise? Sometimes, says the Court of Appeals
For those familiar with New York automobile law, Section 388 of the Vehicle & Traffic Law is as familiar as the Second Amendment is to gun owners. It is the section that imposes vicarious liability on the owner of a vehicle owner for the negligence of a permissive operator. Unlike the law in some states, the owner is held liable for the driver’s conduct without limitation. [The only real exception was that carved out by federal law last year for rental and leasing companies].
The question posed by the Second Circuit Court of Appeals to New York’s highest court, though, was an interesting one. If the owner and the driver both agree that the driver was operating a car without the owner’s permission, is owner always entitled to be freed from liability on summary judgment? The Court responded with an unqualified “almost always.” [Yea, we know “almost always” can’t be unqualified.]
The uncontradicted statements of both the owner and the driver that the driver was operating the vehicle without the owner's permission will not necessarily warrant a court in awarding summary judgment for the owner. In most circumstances, they will, but not as an absolute or invariable rule. In short, whether summary judgment is warranted depends on the strength and plausibility of the disavowals, and whether they leave room for doubts that are best left for the jury. Here, the Court noted that the contemporaneously filed accident report, the fact that the driver accepted punishment for taking a vehicle without authority, and the lack of any evidence to the contrary, was enough to convince the court that permission was not granted. However, the Court left open the possibility that proof could be submitted that would make the issue of permission a jury question, even if the owner and driver submitted evidence both denying permission.
Appellate Division First Department
Two Plaintiffs, Two Exposure Times, One Occurrence
Each of the two infant plaintiffs resided in the same apartment and suffered injury as a result of exposure to lead. Allstate insured the building owner under a homeowner's policy with coverage limit "per occurrence" of $200,000. Is Allstate liable in the aggregate for $200,000 or $400,000?
The policy provided:
Regardless of the number of insured persons, injured persons, claims, claimants or policies involved, our total liability under the Coverage X -Family Liability Protection for damages resulting from one occurrence will not exceed the limit shown on the Policy Declarations. All bodily injury and property damage resulting from continuous or repeated exposure to the same general conditions is considered the result of one occurrence.
The Appellate Division affirms the Lower Court based on the above clause. Despite the fact that plaintiffs may have ingested the lead at different times, the exposure was to the same lead hazard in the same apartment. This constituted only one occurrence subject to the $200,000 policy limit. Nor did the clause suggest that it was intended only to prevent multiple recoveries by a single claimant where policies have been renewed as in Hiraldo v Allstate Ins. Co., 5 NY3d 508 (2005). See Coverage Pointers November 4, 2005 Edition for commentary on Hiraldo.
Appellate Division First Department
Issues of Fact as to Whether Notice Was Required that Property was either Uninsured or Underinsured
The court properly found that plaintiff's breach of contract claim was not barred by the statute of limitations. The error constituting the alleged breach by Alliance occurred in 1997, when Alliance undertook to value plaintiff's property for purposes of obtaining replacement cost insurance. That the same error may have been earlier made by Alliance in connection with different coverage procured by it for plaintiff, did not entail an earlier accrual date for the presently asserted contract claim relating to Alliance's brokerage of the replacement cost policy. The court found a triable factual issue was raised as to whether Alliance's representative should have been put on notice that either not all of the property plaintiff sought to insure was insured, or that the portion which was insured was underinsured. Issues of fact also exist as to whether plaintiff was prevented from fulfilling the condition precedent of repair or replacement, by reason of the inadequate coverage.
2/21/06 Jimenez v. Rojas
Appellate Division First Department
Lack of Objective Proof of Physical Limitations Results in Dismissal on Serious Injury Grounds
Plaintiffs commenced this action alleging that the accident caused permanent cervical spine and right shoulder injury. Defendants moved for summary judgment on the ground that the injured party had not sustained a "serious injury" within the meaning of Insurance Law § 5102(d). Defendants satisfied their initial burden of no serious injury through the submission of affirmed reports by two doctors detailing the objective tests performed and the findings thereof, thus shifting to plaintiffs the burden of coming forward with sufficient admissible evidence to raise a triable question of fact. The plaintiffs produced no objective basis for concluding that the present physical limitations and continuing pain are attributable to the subject accident rather than to the degenerative condition discovered in the hospital x-rays. In the absence of objective evidence as to how these disabilities and pain were causally related to the accident, as opposed to degenerative changes in the body, the motion for summary dismissal was properly granted.
Appellate Division First Department
Question of Fact as to First Notice of Claim to Broker Allows Amended Complaint
Insured moves to serve an amended complaint to allege that the insurance broker, Sobel, breached its contract with the insureds and was negligent in failing to timely forward notice of the subject claims to Landmark. Although Sobel contended that the causes asserted in the proposed amendments were time-barred, it failed to meet its burden conclusively to demonstrate that affirmative defense. The record was unclear as to the date when Sobel first received notice of the underlying claims. Consequently, it does not permit a conclusion as to whether that claim is time-barred. Particularly in view of the circumstance that the proposed negligence claim accrued not at the time of the alleged breach of duty but, subsequently, at the time of injury (see Kronos, Inc. v AVX Corp., 81 NY2d 90, 94 ), when Landmark disclaimed, that claim too was properly sustained as against the defense of untimeliness.
Appellate Division Second Department
Failure of Either Insured or Injured Party to Provide Prompt Notice Grounds for Disclaimer
Plaintiffs' decedent (claimant) was injured when she tripped and fell on the front steps of the apartment building in which she lived. Claimant's attorney notified the carrier’s insured, which owned the building, of the claimant's injuries, and suggested that the insured forward the letter to its insurance carrier "so that [its] rights may be protected." The insured did not do so, purportedly because it believed that it had no potential liability for the claimant's alleged injuries. The carrier disclaimed coverage on the ground of late notice by both the insured and the injured party.
The Court finds that the carrier established its entitlement to judgment as a matter of law by demonstrating that the insured did not provide it with notice of the occurrence for 57 days after it had become aware of the incident that gave rise to the claim.
While Insurance Law § 3420(a)(3) provides an injured party with an independent right to provide an insurance carrier with written notice of an accident, the injured party is required, in order to rely upon that provision, to demonstrate that he or she acted diligently in attempting to ascertain the identity of the insurer, and thereafter expeditiously notified the insurer. The plaintiffs' failure to provide any explanation for the five-month delay in notifying the carrier of the incident precludes any such showing here.
Appellate Division Second Department
No Private Right of Action Against Broker for Failure to Warn of Unauthorized Insurer
A broker procured a general commercial liability insurance policy on behalf of the plaintiffs from Reliance Insurance Company of Illinois (Reliance), a carrier not authorized to engage in the insurance business in New York. The plaintiffs suffered a loss during the effective period of the policy, but were unable to recover under the policy because Reliance was placed in liquidation. Contrary to the plaintiffs' contention, the broker's alleged violation of 11 NYCRR 27.18(a), which requires prompt delivery to the insured of an insurance policy bearing a legend warning the insured that the policy has been issued by an unauthorized insurer, does not give rise to a private right of action.
2/21/06 Spirig v. Evans
Appellate Division Second Department
Defendant Not Estopped from Raising Untimely Commencement of Suit on Basis of Carrier Delay
Plaintiff argued that timely commencement of the action was delayed by the investigation conducted by the insurance carrier and thus Defendant was equitably estopped from raising a statute of limitations defense. The Appellate Court reverses the Lower Court and dismisses the complaint. The plaintiff's unsubstantiated claim of ongoing settlement negotiations with the carrier, even if true, did not give rise to an estoppel. As there was no evidence in the record of any conduct on the part of the insurance carrier that induced or misled the plaintiff into commencing the action in an untimely fashion, the Supreme Court erred in denying that branch of the appellants' motion to dismiss the complaint as time-barred.
2/14/06 Mullings v. Huntwork
Appellate Division First Department
Serious Injury Threshold not met in Absence of Explanation of Degenerative Changes and Treatment Gap
The Court reverses the Lower Court and finds plaintiff did not sustain a "serious injury" as defined in Insurance Law § 5102(d). Defendant submitted the report of an x-ray taken two days after the accident and a radiologist report that found "[n]o evidence of acute bony injury and no change since (August 1998)”. The earlier x-ray report indicated "[d]egenerative arthritic changes" of the cervical spine. Also submitted was the report of a physical examination conducted at defendant's request by a neurologist, who diagnosed plaintiff's condition as cervical and thoraco-lumbar strain/sprain and concluded that her "spinal condition requires no further physiatric treatment and/or therapy." An examination conducted by defendant's orthopedic surgeon confirmed preexisting degenerative arthritic changes of the cervical and thoracic spine, finding no objective evidence of neck or back injury of any significance as a result of the accident.
In opposition, plaintiff only submitted a report based on a review of medical records from the months following the accident, not on a contemporaneous physical examination. The report did not address the "[d]egenerative arthritic changes" noted in the x-ray report from August 1998 but stated that plaintiff's condition was attributable to the accident, without any attempt to demonstrate how the disc herniation was caused by such a minor collision. In addition, plaintiff's expert failed to explain the gap in treatment following the cessation of physical therapy in May 2002.
Appellate Division Second Department
Late Notice Case: Court Chokes
on Plain Language Homeowners Policy, Who are “We” Anyway?
Jeffrey purchased an insurance policy from Allcity Insurance Company (hereinafter Allcity) through a broker. The policy required Jeffrey to notify "the Company providing this Insurance" in the event of an "occurrence, claim or suit . . . as soon as practicable." On October 17, 2000, Jeffrey learned from a tenant that Patricia Brown had injured her ankle at the insured property the previous day. He called her telephone number, but was not able to speak with Brown or learn anything further about the accident. Three months after the accident, and again in August 2001, he notified his broker, Global Coverage, Inc., upon learning that he was about to be sued by Brown. Jeffrey did not notify Allcity directly, and Allcity established that it first received notice of the claim on March 7, 2002, 16 months after the accident. Sounds like “late notice” to us. In New York, the insurer need not demonstrate prejudice to deny coverage based on late notice.
But not so in this case. Jeffrey successfully argued that the notice provision was ambiguous because it used the pronouns "we," "us," and "our" to describe who should be notified without clearly identifying Allcity as the party to whom those terms applied, and that, given the ambiguity, the contract should be interpreted to allow notice to his broker.
Now this decision really bothered us. The principles of policy interpretation indicate that policy terms should be construed by giving the words their plain meaning. See broker is normally the agent of the insured. See Security Mutual Insurance Company of New York, Appellant, v. Acker-Fitzsimons, 31 N.Y.2d 436 (1972). But, here despite the standard recitation in the policy of pronoun use, the Court still found it ambiguous and notice to the broker sufficient. Why? Well, we dug a little into this case and contacted the successful Respondent’s counsel, Steven Seener of Seener & Seener in New York. Here’s the difference. The declaration page listed Allcity Insurance Company as the carrier and Global Coverage Inc. as the broker. The cover page of the policy listed Empire Insurance Group with no mention of Allcity. Who is the company "providing this Insurance"? The Court finds the policy ambiguous as to that answer and, therefore, the insured’s notice to his own broker is considered prompt notice under the policy.Furthermore, notice to the insured’s broker normally does not constitute the notice contemplated by the policy since a
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.
Three Recent Decisions Reveal How Arbitrators Try To Harmonize the Tension Between the Arbitration System and the Court System as to What Constitutes a Prima Facie Case of Medical Necessity
Here is the Angle: The following three arbitration decisions attempt to harmonize the rift between the arbitration system and the court system as to what constitutes a prima facie case of medical necessity. These downstate arbitrators adopted the court decisions that an applicant meets her burden of medical necessity by submitting proof of claim which was mailed and received by the insurer and that no-fault benefits are overdue. Thereafter, the insurer must demonstrate that the treatment was not medically necessary.
There are some lessons learned from these three arbitration decisions. The first is how this burden of proof structure operates in the case of an untimely or defective denial. Initially, we note that in these decisions that arbitrators themselves are scrutinizing the denials to ascertain whether they are late or defective. In one of the below decisions the fact that statutory language was not inserted in the denial regarding late proof of claim rendered the denial defective. Also, in the case of an untimely denial the arbitrator, as well as the insurer, should scrutinize whether the applicant submitted a properly completed proof of claim form. This begs the question what is a properly completed proof of claim form.
The second lesson is how this burden of proof structure operates in the case of a timely denial. One thing that can be taken from these decisions is that perhaps the applicant submitting a properly completed proof of claim form is not enough to win. Rather, medical documentation to establish medical necessity, in light of the arbitrator considering the insurer’s IME report or peer review may be required.
2/22/06 In the Matter of the Arbitration between the Applicant and Respondent
Arbitrator James J. Skelton, Esq. (New York County)
The issue before Arbitrator Skelton was whether Applicant’s proof established a prima facie case of medical necessity.
Arbitrator Skelton’s decision provides an apt discussion regarding the controversy and contention between the arbitration system and the court system as to what constitutes a prima facie case of medical necessity. Initially, a thorough analysis of Arbitrator Glen Wiener, Algar Medical Supplies a/a/o Bernadette Yerrell, AAA. Case no. 412003061159 (April 12, 2004), which cites Mary Immaculate Hosp. v. Allstate Ins. Co., 2004 NY Slip Op. 02359 (2d Dept. 2004) and Amaze Med. Supply v. Eagle Ins., is provided.
In Algar Medical, Arbitrator Wiener discussed the Second Department cases, Mary Immaculate Hosp. v. Allstate Ins. Co., 2004 NY Slip Op. 02359 and Amaze Medical Supply v. Eagle Ins., wherein the applicant demonstrated a prima facie case of medical necessity and judgment as a matter of law after submitting evidentiary proof of the prescribed statutory billing forms being mailed and received by the insurer and that the payment of no-fault benefits was overdue. Furthermore, when a proof of claim is submitted to the insurer the insurer has the ability to challenge it by timely requesting additional verification in the form of an NF-3. Accordingly, when verification is requested and the applicant submits the properly completed and duly executed NF-3 the applicant meets his burden of proof of establishing medical necessity. The burden then shifts to the insurer to demonstrate, with acceptable proof, that the service was not medically necessary.
In the arbitration system, it is arbitrator’s duty to act as the trier of fact and determine if the quantum or nature of proof is sufficient to refute medical necessity where timely denials are issued. Here, the arbitrator found that the applicant met his burden. Applicant’s proof was found to be more credible than Respondent’s proof.
2/22/06 In the Matter of the Arbitration between the Applicant and Respondent
Arbitrator Pamela H. Hirschhorn, Esq. (Nassau County)
The issue before Arbitrator Hirschhorn was whether the applicant demonstrated a prima facie case of medical necessity for acupuncture services.
Arbitrator Hirschhorn adopted the same standard articulated by Arbitrator Skelton regarding the applicant’s burden:
The Appellate Division, Second Department has held that claimant “made a prima facie showing of their entitlement to judgment as a matter of law by submitting evidentiary proof that the prescribed statutory billing forms had been mailed and received and that payment of no-fault benefits were overdue.” See, Mary Immaculate Hospital v. Allstate Insurance Co., 5 AD3d 742 (2d Dept. 2004). Similarly, in Amaze Medical Supply v. Eagle Insurance, 2 Misc. 3d 128 [A], 2003 Slip Op 51701 [U] App Term, 2d & 11th Jud Dists] the Appellate Term found that “a properly completed claim form, which suffices on its face to establish the particulars of the nature and extent of the injuries and health benefits received and contemplated and proof and fact of the loss sustained is all that is needed at the claim stage to establish the health benefits medical necessity.”
Herein, applicant utilized the statutory claim form as proof of claim in this case which this arbitrator has reviewed and deems facially valid.
Accordingly, the burden shifted to the insurer who has submitted its IME report in its defense to claim. While the insurer’s denial was timely and it could rely upon its IME report, Arbitrator Hirschhorn deemed the report as not probative regarding the issue of medical necessity as the IME physician was not a licensed acupuncturist.
2/22/06 In the Matter of the Arbitration between the Applicant and Respondent
Arbitrator Kenneth Horwitz, Esq. (New York County)
The issues before Arbitrator Horwitz was whether Applicant set forth a prima facie case of medical necessity for acupuncture and whether the insurer properly denied based on violation of the 45-day rule.
The applicant must establish a prima facie case of medical necessity. Arbitrator Horwitz begins with a discussion of Presbyterian Hospital v. Maryland Casualty Co., 90 NY2d 274 (1997), where the Court precluded the respondent from asserting a statutory affirmative defense when the respondent did not properly preserve it in a timely fashion. Arbitrator Horwitz notes that Presbyterian Hospital is devoid of addressing applicant’s initial burden of establishing a prima facie case.
However, in Amaze, the same case cited by Arbitrators Skelton and Hirschhorn, the burden was set forth, which Arbitrator Horwitz notes is in harmony with The State Insurance Department’s January 11, 2000, opinion letter. In that opinion letter, the Superintendent of Insurance did not adopt a single prima facie case standard but did agree with the Court’s holding in Presbyterian Hospital, that an insurer that fails to timely issue a denial is precluded from asserting that defense. However, the Superintendent did recognize that the applicant still bears the burden of meeting the statutory requisite of making a prima facie case.
Arbitrator Horwitz also points to Vinings Spinal Diagnostic, PC v. Liberty Mutual Ins. Co., 186 Misc.2d 287 (1st Dist. Ct., Nassau Cty. 2000), wherein the plaintiff established a prima facie case by demonstrating that insurance existed; a facially valid claim was presented; and the claim was not timely denied. Thereafter, he states that “clearly, then, the framers of the No-Fault Laws intended that the NF-3, the prescribed No-Fault claim form be the ‘….proper proof of claim’ and act as the prima facie showing of a no-fault claim.”
Furthermore, in the case of a showing of an untimely denial or the denial is defective, under Presbyterian Hospital, the insurer is precluded from asserting the defense, and under Amaze, the provider is not required to present or serve any further documentation to prevail on the merits. HOWEVER, the untimely denial does not automatically convert the applicant’s proof of claim as a showing of a prima facie case. The arbitrator and the court are not precluded from scrutinizing whether the NF-3 or proof of claim is in proper form.
On the other hand, where the denial is timely, Arbitrator Horwitz concludes that issue is joined and the Arbitrator must determine the issue of medical necessity. “In this regard, other medical documentation may be necessary to be served by applicant in order [sic] support its position.”
Ultimately, Arbitrator Horwitz found in favor of the applicant as the insurer issued a defective denial. The defect – failure to insert language, as required by 11 NYCRR §65-3.3(e), that when an untimely claim is submitted the denial must advise the applicant and contain the phrase “that late notice will be excused if the applicant can provide reasonable justification of its failure to give timely notice.”
2/21/06 In the Matter of the Arbitration between the Applicant and Respondent
Arbitrator Thomas J. McCorry, Esq. (Erie County)
Insurer’s Denial Based Upon Applicant’s Failure To Appear For An Independent Medical Examination Upheld When Applicant Failed To Advise Insurer Of Address Change.
Here is the Angle: Generally, it is difficult to prevail on a denial of no-fault benefits based upon the eligible injured party’s (“EIP”) failure to appear for an independent medical examination (“IME”). However, in this case where the insurer sent the IME notices to the EIP’s address listed on the application for no-fault benefits and the EIP failed to provide the insurer with her new address the denial was appropriate.
The Analysis: The insurer issued a denial to the Applicant, EIP, on the grounds that the EIP violated a policy condition by failing to appear for IMEs the insurer noticed. The EIP contended that she never received the IME notices and admitted that, as a result, she did not appear for the IMEs. However, upon learning of the insurer’s request for her attendance at the IMEs, the EIP testified that she was willing to attend the IMEs. The EIP also admitted that in the year after the motor vehicle accident she changed her residence twice. There was no evidence that the EIP advised the insurer of her address change.
The insurer argued that it sent the IME notices to the EIP’s address listed in her application for no-fault benefits.
Accordingly, the EIP’s claim was denied for breaching the policy conditions for failure to appear for scheduled IMEs.
2/21/06 In the Matter of the Arbitration between the Applicant and Respondent
Arbitrator Thomas J. McCorry, Esq. (Erie County)
Applicant’s Failure to Demonstrate Overall Improvement from Chiropractic Care Renders Treatment Not Medically Necessary.
Here is the Angle: The Applicant’s medical documentation in support of chiropractic care together with the insurer’s chiropractic IME demonstrated that her physical symptoms remained unchanged; that electrodiagnostic testing was normal; and that the eligible injured person did not improve with the treatment thereby rendering the chiropractic treatment not medically necessary.
The Analysis: The eligible injured person (“EIP”) was involved in two motor vehicle accidents - January 24, 1999 and March 5, 1999. Applicant argued that the EIP’s chiropractic treatment was “needed due to the January 24, 1999 accident.” In support of Applicant’s position S.O.A.P. notes from the treating chiropractor, Kevin E. Chichocki, D.C. were provided, which revealed that the EIP treated for nearly one year, 2-3 times per week. The notes further revealed that the EIP’s chief complaint every time was headache as well as neck and arm pain. Moreover, the EIP stated that either her headache or neck pain remained unchanged or stayed more or less the same.
The insurer denied chiropractic treatment based upon the results of a chiropractic independent medical examination (“IME”) conducted by Richard Gerow, D.C. Mr. Gerow found that the EIP’s MRI revealed no disc herniation and that the upper extremity electrodiagnostic studies were normal. Mr. Gerow opined that based upon his serial examinations that further chiropractic care was not necessary.
Arbitrator McCorry denied Applicant’s claim on the basis that the Applicant did not demonstrate medical necessity for the chiropractic care. Moreover, the documents submitted demonstrated no overall improvement because of the chiropractic care and Mr. Gerow noted lack of improvement from the chiropractic care.
2/17/06 In the Matter of the Arbitration between the Applicant and Respondent
Arbitrator Mary Anne Theiss, Esq. (Onondaga County)
MRI and EMG/NCS Testing Found Not To Be Medically Necessary When Eligible Injured Person Had Clearly Established Diagnosis And There Was No Diagnostic Ambiguity.
Here is the Angle: The medical records submitted to the arbitrator, together with the peer review, demonstrated that the EIP has a clearly established diagnosis and there was no evidence of a diagnostic ambiguity warranting a cervical spine MRI and nerve conduction studies.
The Analysis: At issue in this arbitration was a December 12, 2003, cervical spine MRI and EMG/NCS study.
The EIP was in a May 21, 2003, high speed rear-end motor vehicle accident wherein her vehicle was totaled. The EIP’s air bag did not deploy and her car seat was broken and bent. The EIP briefly lost consciousness and was transported via ambulance to the hospital.
On May 25, 2003, the EIP returned to the emergency room with complaints of stabbing left shoulder pain radiating down her arm to her thumb.
On May 29, 2003, the EIP first treated with Dr. Robillard. She had limited range of motion in her neck due to muscle spasms. She also complained of pain down her back on the right side and into the left shoulder. The EIP could not adduct beyond 80 degrees and experienced upper extremity weakness. Dr. Robillard referred the EIP to an orthopedist for additional treatment.
On June 19, 2003, the EIP saw Dr. Robillard noting some improvement of her range of motion. She was in physical therapy. Dr. Robillard diagnosed the EIP with a C4/5, C5/6 disc herniation causally related to the May 21, 2003, motor vehicle accident, with poor pain control.
Dr. Robillard treated the EIP on July 3, 2003, and noted that the EIP was progressing with physical therapy and had an improved range of motion in her neck.
On July 24, 2003, Dr. Robillard noted that the EIP was increasing her activity levels. However, she had a new complaint of bilateral wrist and hand pain.
On August 5, 2003, the EIP, upon Dr. Robillard’s referral, treated with Dr. Gadipudi complaining of neck and back pain as well as a headache. The EIP reported neck pain radiating bilaterally into her arms with numbness and tingling. She also reported back pain radiating into her right leg to her foot. Dr. Gadipudi noted that the EIP’s cervical spine MRI revealed a disc herniation at an unspecified level. The EIP was undergoing physical therapy. Dr. Gadipudi opined that the EIP had a cervical sprain/strain and ruled out cervical radiculopathy, lumbar sprain/strain. He wanted to rule out right-sided sciatica and carpal tunnel syndrome. Dr. Gadipudi recommended that the EIP undergo a lumbar spine MRI to rule out lumbar radiculopathy; an EMG/NCS of the upper extremities to rule out radiculopathy; and to continue with physical therapy.
Dr. Gadipudi’s September 5, 2003, note indicated that the lumbar spine revealed degenerative changes at L4/5 and L5/S1. The EMG/NCS test did not reveal any denervation.
On September 15, 2003, Dr. Robillard referred the EIP to a neurosurgeon, Dr. Saeed Bajwa. The EIP complained of right buttock and right leg pain. She also complained of neck pain radiating bilaterally into her upper extremities with bilateral hand numbness and weakness. Dr. Bajwa’s review of the EIP’s cervical and lumbar spine MRIs revealed no gross abnormalities. Dr. Bajwa recommended pain management and noted that the EIP was not a surgical candidate.
Dr. Gadipudi treated the EIP in November 2003, wherein the EIP demonstrated positive straight leg raise.
On December 10, 2003, Dr. Gadipudi performed lumbar electrodiagnostic testing which was suggestive of L5/S1 radiculopathy.
On December 12, 2003, Dr. Bajwa recommended a cervical spine MRI as the EIP complained of increased neck pain. The cervical spine MRI was normal. Dr. Bajwa also opined that the EIP had neck pain with bilateral shoulder pain which was most likely musculoskeletal.
The insurer conducted a peer review on October 11, 2003, by Dr. Marlon Seliger. Dr. Seliger opined that the cervical spine MRI performed on December 12, 2003, and the nerve conduction studies were not medically necessary because there was no diagnostic ambiguity and that the EIP had a clearly established diagnosis.
Ultimately, Arbitrator Theiss denied the claim agreeing that the testing was not medically necessary.
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.
2/17/06 Donegal Insurance Co. v. Baumhammers
Pennsylvania Superior Court
PA Court Reached a “Multiple
In 2000, Richard Baumhammers went on a shooting spree in which he killed five people and seriously injured one person. Baumhammers was convicted of five counts of first degree murder and other crimes. Litigation was commenced seeking damages from Baumhammers and his parents. The parents were allegedly negligent in failing to take Baumhammers’ gun and failing to advise authorities of his violent propensities. The parents sought coverage under their homeowners policy issued by Donegal Mutual Ins. Co. and their umbrella policy issued by United Services Automobile Association (“USAA”). Both insurers commenced declaratory judgment actions claiming that they had no duty to defend or indemnify the parents. Addressing the consolidated declaratory judgment actions, the lower court determined inter alia that: (1) USAA had no duty to defend or indemnify parents; (2) Donegal had a duty to defend and indemnify parents; and, (3) the allegations implicated six (6) occurrences under the Donegal policy. Appeals to the Pennsylvania Superior Court followed. The Pennsylvania Superior Court first addressed whether parents’ alleged negligence - which facilitated their son’s injury-producing intentional acts - constitutes an “occurrence.” The Donegal policy defines “occurrence” as “an accident, including continuous, repeated exposure to substantially the same general harmful conditions.” The court specifically rejected its prior holding in Britamco Underwriters, Inc. v. Grzeskewicz, 433 Pa. Super. 55 (1994) (finding no “accident” when insured’s negligence results in injury-producing intentional act) and adopted the Third Circuit’s rationale in Nationwide Mutual Fire Ins. Co. v. Pipher, 140 F.3d 222 (3d Cir. 1998). The Pipher court held that “negligence leading to intentional acts may nevertheless be considered an ‘accident’.” The court found that coverage exists for the parents’ alleged negligence, notwithstanding that the injuries were caused by Baumhammers’ intentional acts. The court then addressed the number of occurrences implicated under the Donegal policy. Applying the “cause of loss” approach, “an inquiry is directed into whether there was ‘but one proximate, uninterrupted, and continuing cause which resulted in all of the injuries and damage’.” Citing Gen. Accident Ins. Co. v. Allen, 708 A.2d 828, 833 (Pa. Super. 1998). The court noted that there were two proximate causes for the injuries: (1) Baumhammers’ attacks and (2) his parents’ negligence. Due to the lack of Pennsylvania authority on multiple causes, the court reviewed decisions from other jurisdictions. Presented with a split in authority, the court was persuaded by the rationale set forth by courts finding “multiple occurrences.” Those courts focused on the “immediate cause of the harm, the cause that ultimately triggered the liability of the insured.” Citing Koikos v. Travelers Ins. Co., 849 So. 2d 263 (Fla. 2003). In Koikos, a restaurant’s allegedly negligent security resulted in the shooting of several people. Focusing on the injury-producing act, the Koikos court found “multiple occurrences.” The shootings gave rise to the injuries, not the insured’s negligence. The injury-producing act is seen an as “intervening cause which breaks the chain of causation allowing for more than one occurrence.” Citing H.E. Butt Grocery Co. v. Nat’l Union Fire Ins. Co., 150 F.3d 526 (5th Cir. 1998) (Applying Texas Law). Adopting this rationale, the court determined that there were multiple “occurrences” under the Donegal policy. Although the “accident” was the parents’ negligence, the shootings ultimately caused the injuries. The court rejected Donegal’s argument that parents’ negligence constituted a “continuous or repeated exposure to the same general harmful conditions” because the victims were not “exposed” to parents’ negligence. The court also distinguished Appalachian Ins. Co. v. Liberty Mut. Ins. Co., 676 F.2d 56 (3d Cir. 1982) because it did not concern a multiple causation situation. Although Appalachian concerned allegations of employment discrimination by a number of female employees, all of the alleged harm stemmed directly from the “implementation of the discriminatory policy” without any “intervening cause.” Due to Baumhammers’ intervening intentional acts, Parents’ negligence gave rise to six separate occurrences. Given Donegal’s $300,000 per occurrence limit of liability, the potential indemnity exposure is $1.8 Million. The court also addressed coverage under the USAA umbrella policy. The USAA policy excludes damages for bodily injury: (1) caused by the intentional act of any insured, and/or (2) arising out of any criminal act of any insured. (Emphasis added). The court determined that these exclusions precluded coverage -- even for the parents -- under the USAA policy. The court, emphasizing that the “clear and unambiguous” policy provisions will control, rejected a number of arguments advanced by the parents. The court issued three notable holdings with regard to the USAA policy. First, because Baumhammers is an insured under the USAA policy and the exclusions reference “any insured,” Baumhammers’ intentional, criminal acts preclude any coverage for the parents. These clear and unambiguous exclusions are not contrary to the parents’ reasonable expectation of coverage. Second, the exclusions are applicable despite parents’ argument that USAA failed to notify them of the changes to their policy and failed to properly explain the exclusions to them. Citing Standard Venetian Blind v. American Empire Ins. Co., 503 Pa. 300 (1983). The court rejected the parents’ argument and noted the “conspicuous, capital lettering” regarding the changes, the specific instruction to “read the changes carefully,” and the separate “Notice of Policy Changes” form. Third, the parents could not challenge Baumhammers’ intent in order to avoid the exclusions. Psychiatric testimony cannot be introduced to challenge the insured’s intent. See Germantown Ins. Co. v. Martin, 407 Pa. Super. 326, 333, 334 (1991).
Submitted by: Jennifer Wojciechowski (White and Williams, 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
Joseph D. Nohavicka, for appellant.
William G. Ballaine, for respondent.
The United States Court of Appeals for the Second Circuit has certified to us questions relating to section 388 of the Vehicle and Traffic Law. That section holds vehicle [*2]owners vicariously liable for the negligence of those whom they allow to drive their vehicles (Tikhonova v Ford Motor Co., 4 NY3d 621, 623 ). The certification relates to the circumstances in which, for summary judgment purposes, a driver may be said to have operated a vehicle without the owner's permission.
On February 27, 2000, Alex D. Sanchez, an Amtrak employee, was working at the company's Sunnyside Yard facility. Just before his shift began, he realized that he did not have the Amtrak-issued radio he needed for work. Although he had no valid driver's license, Sanchez took an Amtrak pick-up truck and drove home to get the radio. Driving back on the Gowanus Expressway in Brooklyn, he struck the plaintiffs' car.
Plaintiffs sued National Railroad Passenger Corporation (Amtrak) in state court [FN1]. Amtrak removed the case from Kings County Supreme Court to the United States District Court for the Eastern District of New York. In its motion for summary judgment, Amtrak argued that it cannot be held vicariously liable under Vehicle and Traffic Law § 388 (1) because Sanchez had neither express nor implied permission to take the pick-up truck. That section reads as follows:
"Every owner of a vehicle used or operated in this state shall be liable and responsible for death or injuries to person or property resulting from negligence in the use or operation of such vehicle, in the business of such owner or otherwise, by any person using or operating the same with the permission, express or implied, of such owner. . ."
In support of its motion, Amtrak offered the affidavit of David Zwolinski, stating that he was acting Assistant Supervisor at the Sunnyside facility and that Sanchez took the vehicle and "drove it off the premises without advising anyone, without requesting or receiving my permission, and without obtaining authorization of anyone at Amtrak." This unauthorized use of the vehicle, Zwolinski added, did not occur during Sanchez's shift and was not within the scope of his employment.
Amtrak also submitted internal documents supporting its claim of unauthorized use, including an incident report and a letter directing Sanchez to appear for a formal Amtrak [*3]investigation, in which he was charged with using the vehicle without authorization. In addition, Amtrak submitted its accident report stating that Sanchez's use of the truck was "non-authorized," a two-paragraph statement by Sanchez and a "Waiver of Hearing" by which he accepted discipline, which included $ 17,600 in restitution and docked wages. In the statement, Sanchez admitted taking the vehicle to retrieve his radio but did not speak to the question of permission. In the waiver, however, he accepted punishment based on charges that he took the vehicle without permission and we are prepared to construe this, as the Second Circuit evidently did, as an uncontradicted statement that he had no permission.
In opposition, Country-Wide offered no evidence of its own, and instead argued that Amtrak made no report of the event to any law enforcement agency, that Sanchez took the pick-up because he needed the radio to do Amtrak work, and that Amtrak's formal investigation did not begin until weeks after the incident. Thus, according to Country-Wide, a trier of fact could reasonably conclude that the use was authorized.
In discussing § 388 of the Vehicle and Traffic Law, the District Court applied the presumption that Sanchez operated the truck with Amtrak's consent, but held that the presumption was rebutted by substantial evidence, and granted Amtrak summary judgment [FN2]. On appeal from the District Court judgment, the Second Circuit reviewed the pertinent case law — both its own and New York State appellate-level decisions — and expressed uncertainty as to whether, under New York law, summary judgment for the owner was warranted. The Court certified the following five questions:
"1.Under New York law, are uncontradicted statements of both the owner and the driver that the driver was operating the vehicle without the owner's permission sufficient to warrant a court in awarding summary judgment to the owner?
"2.If the answer to question # 1 is 'no,' is additional circumstantial evidence such as contemporaneous accident reports submitted by the owner sufficient to tip the balance and warrant a court in awarding summary judgment despite the interested nature of the source?
"3.Is the uncontradicted testimony of driver and owner that the driver was operating the vehicle without permission, even if not sufficient to warrant summary judgment, sufficient at a trial to overcome the statutory presumption of permissive use, thereby placing the burden on plaintiff to prove permissive use?
"4.If the answer to question # 3 is 'no,' is the addition of such further evidence as contemporaneous accident reports by the owner sufficient to rebut the presumption of permissive use at trial?
"5.Does New York law allow the absence of a report of unauthorized use of a vehicle to law enforcement to count as evidence of permissive use sufficient, alone or together with other evidence, to defeat summary judgment?"
We appreciate the Second Circuit's invitation to adjust the questions in a way that best enables us to answer them. Because we cannot answer the first question with an unvarying "yes" or "no," and the second question comes into play only if the answer to the first question is "no," we are combining the first two questions, along with the fifth, which is germane to our response to the first two.
We can best respond by stating that uncontradicted statements of both the owner and the driver that the driver was operating the vehicle without the owner's permission will not necessarily warrant a court in awarding summary judgment for the owner. In most circumstances — including the circumstances of this case — they will, but not as an absolute or invariable rule. Our decisional law reflects as much.
In St. Andrassy v Mooney (262 NY 368 ), the owner, his wife and their chauffeur testified that the chauffeur had no consent, express or implied, to take the car and that he took it unlawfully and in defiance of his employer's commands. The court laid down a rule that still governs the issue: "If the evidence produced to show that no permission has been given has been contradicted or, because of improbability, interest of the witnesses or other weakness, may reasonably be disregarded by the jury, its weight lies with the jury" (id. at 372). The Court recognized that the owner may be considered interested, but there were no grounds on which to [*5]discredit his testimony, and so the presumption of permission was overcome.[FN3]
Similarly, in Barrett v McNulty (27 NY2d 928 ), there was uncontradicted evidence that the driver had no permission to operate the vehicle; he had pleaded guilty to theft of the vehicle, and, most critically, there was no competent evidence from which permission could be inferred. We held that the trial court properly dismissed the complaint against the owner at the close of the evidence.
Most recently, in Manning v Brown (91 NY2d 116 ), the driver and the owners stated in their depositions that the driver neither asked for nor received permission from the owners to drive the car. The driver pleaded guilty to car theft, and we ruled that the trial court properly granted summary judgment to the owners. The owners, we held, produced sufficient evidence to rebut the presumption, leaving no triable issue of fact as to the question of consent.
These cases have a common theme: both the owner and the driver disclaimed consent, and the plaintiff produced no competent evidence from which consent could be inferred. As a corollary, however, disavowals by both the owner and the driver, without more, should not automatically result in summary judgment for the owner. Where the disavowals are arguably suspect, as where there is evidence suggesting implausibility, collusion or implied permission, the issue of consent should go to a jury. Two cases illustrate this point.
In Winnowski v Polito (294 NY 159 ), the owner parked his car on a busy thoroughfare, leaving the key in the ignition switch and his 14-year-old son in the car. A police officer ordered the youth to move the car, notwithstanding his protest that he had neither the permission nor the competence to drive it. The father confirmed that he expressly forbade his son to drive the car at any time. We reversed the Appellate Division's dismissal of the complaint against the owner, holding that the trial court was within its prerogative as the trier of facts in concluding that the son had implied permission, based on the reasonable expectation that an emergency or other necessity might arise, that would require the car to be moved (see also Piwowarski v Cornwell, 273 NY 226 ).
Motor Vehicle Accident Indemnification Corp. v Cont'l Nat'l American Group Company (35 NY2d 260 ) is another instance in which summary judgment to the owner [*6]was not warranted though the owner had undeniably withheld its express consent to the driver. The owner, a rental car company, leased the car to a customer who agreed that he would not let anyone else drive it without the company's permission. In spite of the agreement, the customer allowed a third person to drive the car and an accident ensued. We held that, despite the restrictions in the rental contract, the rental company gave "constructive consent" to the third person based on the likelihood that customers would allow others to drive rental cars. While MVAIC was based on public policy grounds, it illustrates that summary judgment for the owner will not necessarily be granted even though both the owner and driver acknowledge that the owner did not give the driver consent to operate the car (and, indeed, expressly prohibited operation).
In Mandelbaum v United States (251 F2d 748 [2d Cir 1958]), the Second Circuit recognized that there are New York cases indicating that "even where the owner and driver testify without contradiction as part of the defendant's case that the driver had no permission or was out of the scope of employment, the case should still go to the trier of fact and if that evidence of interested witnesses is disbelieved the presumption has not been overcome" (id. at 751).
In certifying the present case to us, however, the Second Circuit questioned whether Mandelbaum is an accurate reflection of New York law. We conclude that it is, insofar as it recognizes that summary judgment for the owner will not inexorably follow whenever the owner and driver disavow consent. Mandelbaum should not be understood, however, as suggesting or mandating that summary judgment must be denied even where the absence of consent is emphatic and unimpeachable. In short, whether summary judgment is warranted depends on the strength and plausibility of the disavowals, and whether they leave room for doubts that are best left for the jury.
Thus the answer to a combination of questions 1 and 2 -- will uncontradicted statements by the owner and driver that the driver was without permission, bolstered by such additional evidence as accident reports, warrant a court in awarding summary judgment to the owner? -- is, as a general matter: "Usually, but not always." On the specific facts of this case, they would.
Here, the disavowals were as firm and unassailable as they were in St. Andrassy and Manning and were reinforced by Amtrak's contemporaneous accident reports. Sanchez accepted a punishment based on a written allegation that he took the truck without authority. In view of the evidence that overcame the presumption of consent, with nothing on the other side of [*7]the scale, summary judgment for Amtrak is consistent with New York law.[FN4]
In our Court, Country-Wide argued, in addition to its other points, that Amtrak failed to report the unauthorized use of the vehicle to a law enforcement agency. While, in answer to certified question five, New York law allows that failure to be considered, it should not alone defeat a grant of summary judgment to the owner, where, as here, the proof against permission is strong and uncontested, with nothing (apart from speculation) to cast doubt on its plausibility.
We note that the third and fourth questions relate to proof at trial. We are prohibited by our rules from answering those questions because our answers would not be determinative (see Court of Appeals Rules of Practice [22 NYCRR] § 500.27 [a]; NY Const, art VI, § 3 [b] ). Moreover, in light of our response to questions one, two and five, questions three and four become academic.
Accordingly, the certified
questions should be answered in accordance with this Opinion.
* * * * * * * * * * * * * * * * *
Following certification of questions by the United States Court of Appeals for the Second Circuit and acceptance of the questions by this Court pursuant to section 500.27 of the Rules of Practice of the New York State Court of Appeals, and after hearing argument by counsel for the parties and consideration of the briefs and the record submitted, certified questions answered in accordance with the opinion herein. Opinion by Judge Rosenblatt.
Chief Judge Kaye and Judges G.B. Smith, Ciparick, Graffeo and R.S. Smith concur. Judge Read took no part. [*8]
Decided February 14, 2006
Footnote 1: Plaintiffs also sued Country-Wide Insurance Company, asserting that as the carrier for one of the plaintiffs it would be liable under the policy's underinsurance provision if Sanchez drove Amtrak's vehicle without its consent. In this posture, Country-Wide has argued that the Federal District Court should not have granted Amtrak summary judgment. Plaintiffs did not participate in the Federal court proceedings nor have they appeared in this Court.
Footnote 2: The presumption is not contained in the statute but is part of our decisional law (see e.g. Murdza v Zimmerman, 99 NY2d 375, 380 ); Leotta v Plessinger, 8 NY2d 449, 461 ; Winnowski v Polito, 294 NY 159, 161 ).
Footnote 3: St. Andrassy was decided under former § 59 of the Vehicle and Traffic Law, which, in turn, was derived from § 282-e of the Highway Law (L 1924, ch 534), the original statute by which owners were held vicariously responsible for the negligence of drivers whom they allowed to drive their vehicles.
Footnote 4: We are mindful that the final determination of this appeal is of course the role of the Second Circuit, not of this Court (Rooney v Tyson, 91 NY2d 685, 690 ; Engel v CBS, Inc., 93 NY2d 195, 207 ), and that it is not our task to apply the Federal Rules of Civil Procedure. The first certified question, however, does not admit of a straightforward "Yes" or "No" answer, and we therefore think it is necessary, in order to provide the certifying court with the guidance it seeks, to state whether we believe that the District Court's decision was consistent with New York law.
Brisson v. County of Onondaga
George Wolff, for appellant.
Jennifer Grace Miller, for respondent Workers'
We hold that a self-insured employer or workers' compensation carrier must preserve its right to any offset expressly and unambiguously when consenting to settlement of a third-party action, regardless of whether there is an existing lien against the claimant's recovery. We further conclude that substantial evidence supports the Workers' Compensation Board's finding that the self-insured employer in this case did not do so.
On November 4, 1998, claimant Alan J. Brisson, who worked in Onondaga County's Department of Transportation, was injured when struck from behind by a van while he was picking up a "Men Working" sign from the shoulder of a road. Claimant sought workers' compensation benefits and, in July 2000, a Workers' Compensation Law Judge (WCLJ) issued a [*2]decision concluding that he had suffered a compensable injury to his lower back, and made awards for his periods of disability.
Claimant also filed a
third-party action against the driver and owner of the van. When asked by
claimant's attorney to consent to settlement of this third-party action for
$50,000, RMSCO, Inc., the third-party administrator for claimant's self-insured
employer, Onondaga County, responded on August 17, 2001 as follows: "On behalf
of [the County], consent is given to the third party settlement of $50,000. We
are assuming that this is the policy limit. We need to know the net third party
proceeds." Claimant's attorney on August 20, 2001 wrote RMSCO that
"I am in receipt of your letter granting this firm consent to settle [claimant's] third party claim. It is our understanding that, based on the dollar amount of [claimant's] third party settlement, you have no lien as well as no right to a [payment] holiday. If you have a different understanding, please contact this office within five business days or we will proceed with this third party settlement based on our understanding."
In an undated letter, RMSCO replied that
"[t]his letter is in response to yours of 08/20/2001. You indicate that you believed we have no right to a [payment] holiday. This is not entirely correct. Once lost wages and medical exceed basic economic loss, then we can take credit against net third party proceeds. For example, once lost wages are paid on or after 11/04/2001, we can take credit against net third party proceeds."
The third-party action was, in fact, settled for $50,000 on September 24, 2001. After payment of taxable costs, disbursements and attorneys' fees, claimant netted $32,958.73.
On October 5, 2001, RMSCO sent claimant a "Notice that Payment of Compensation has been Stopped or Modified." The Notice stated that claimant's benefits would cease on the three-year anniversary of the accident, November 4, 2001, and would not resume for 168.2 weeks, or until January 24, 2005, so as to offset net settlement proceeds.
Claimant protested the suspension of his benefit payments at a hearing before a WCLJ on January 24, 2002. Another WCLJ concluded in a decision issued on July 10, 2002 that the County was, in fact, not entitled to offset claimant's future workers' compensation payments. While the County had indisputably consented to the settlement, "[t]here was no specific reservation [of the County's] right to claim credit [for the settlement]." The WCLJ relied upon Matter of Hilton v Truss Systems, 82 AD2d 711 (3rd Dept ), affd for the reasons stated [*3]below 56 NY2d 877 ) for the proposition that "an employer must unambiguously preserve its offset rights against future benefits, or such rights will be deemed waived."
On August 9, 2002, the County asked the Board to review the WCLJ's decision, disputing the WCLJ's reading of Hilton and arguing that "[b]ecause, in consenting to the settlement . . . , the self-insured employer neither waived nor compromised a workers' compensation lien, there was no requirement that the self-insured employer expressly reserve its offset rights." Alternatively, the County contended that the correspondence between RMSCO and claimant's attorney, in fact, reserved its offset rights.
In its decision issued on November 18, 2002, the Board rejected the County's arguments, and agreed with the WCLJ that a self-insured employer must "unambiguously preserve its offset rights" when consenting to settlement "or such rights will be deemed waived." The Board further concurred with the WCLJ that
"the self insured employer failed to unambiguously reserve its right to an off set [sic] against future awards when it consented to the third party settlement. To preserve its rights in this case, the self insured employer's first correspondence on this issue should have contained a clear statement of its reservation of this right or the second correspondence should have withdrawn the consent, issued in the first, pending the resolution of the issue raised in the claimant's attorney's correspondence."
Accordingly, the County was "not entitled to any offset of workers' compensation benefits against the third party settlement paid to claimant."
Upon the County's appeal, the Appellate Division affirmed, turning down the County's argument that Hilton mandates only that carriers with existing liens must preserve the right to offset future benefit payments plainly and unambiguously. The Appellate Division also observed that "whether the employer adequately preserved its right to a future offset in a particular case is a factual issue for the Board, and [its] decision will be upheld if supported by substantial evidence," which the court found in this case (12 AD3d 976, 977-978 [3rd Dept 2004]). We granted the County permission to appeal, and now affirm.
Under Workers' Compensation Law § 29(1), a claimant may pursue a legal action against a third party for damages arising out of the accident underlying the workers' compensation claim, but the self-insured employer or carrier has a lien on any recovery to the extent of compensation and medical expenses already disbursed. Workers' Compensation Law § 29(4) gives the employer or carrier a corollary right to offset a claimant's future compensation benefits with the proceeds of any recovery. Subdivision 1-a of section 29, however, precludes a [*4]lien under Workers' Compensation Law § 29(1) for benefits paid in lieu of first party benefits which another insurer would have otherwise been obligated to pay under New York's No-Fault Law, and correspondingly limits the credit or offset provision in Workers' Compensation Law § 29(4) (see Matter of Fellner v County Wide Ins., 95 AD2d 106 [3rd Dept 1983]). The term "first party benefits" refers to "basic economic loss," or up to $50,000 per person consisting of certain medical and other reasonable and necessary expenses as well as lost earnings for three years from the date of the accident (Insurance Law §§ 5102[a],[b]; see Matter of Johnson v Buffalo & Erie County Private Indus. Council, 84 NY2d 13 ). Finally, a claimant who compromises a third-party action for an amount less than the compensation benefits paid or payable under the Workers' Compensation Law must first obtain the written consent of the entity liable to pay the benefits, or an order on notice from the court within three months of its approval of the settlement (Workers' Compensation Law § 29).
Here, claimant's third-party action settled a little over one month before the three-year anniversary of the automobile accident in which he suffered his compensable injury. By operation of Workers' Compensation Law § 29(1-a), therefore, there was no existing lien under Workers' Compensation Law § 29(1) and the County could not yet enforce a payment holiday under Workers' Compensation Law § 29(4) because the benefits paid to claimant up to the point of settlement were all in lieu of first party benefits. According to the County, the absence of an existing lien that might have been compromised or waived takes this case entirely outside Hilton, thereby relieving it of any obligation to reserve future offset rights explicitly when it consented to the settlement pursuant to Workers' Compensation Law § 29(5).
In Hilton, a worker injured his spine when he fell from a train and was rendered paraplegic. As part of settlement negotiations in a third-party action, the workers' compensation carrier agreed to waive its then existing lien of approximately $70,000. At issue was whether or not the carrier had waived not only the lien, but also its right to offset the net proceeds of claimant's third-party recovery against his future compensation benefits. The Appellate Division held that if a carrier or employer desires to preserve its offset rights when consenting to a settlement, "it is obliged to plainly and unambiguously so state. Doing so has the salutary effect of affording a claimant the opportunity to examine a proposed settlement from a proper perspective, for it enables him to weigh this offer against a potential loss of future compensation benefits" (Hilton, 82 AD2d at 712 [citation omitted]). We affirmed for these reasons.
In the County's reading, however, Hilton hinges entirely on the existence of a lien because a carrier can not dispel the inference that its waiver induced settlement absent an explicit reservation of future offset rights. The Board and the Appellate Division did not read Hilton so narrowly, and neither do we. [*5]
As the Appellate Division noted, claimants are unable to assess the ramifications of a settlement unless they know the status of the employer's or carrier's claims against settlement proceeds. Moreover, regardless of lien status "a carrier or self-insured employer and claimant are deemed to be involved in . . . settlement negotiations, [and] ambiguities [will] be resolved against the carrier" (Brisson, 12 AD3d at 977 [citation and quotation marks omitted]). Further, Workers' Compensation Law § 29(5) does not distinguish between those instances where an employer or carrier has both an existing lien and prospective offset rights at the time of settlement and those cases, such as this one, where the employer or carrier possesses only the latter. In either circumstance, failure to secure the employer's or carrier's consent results in forfeiture of the claimant's future compensation benefits (see Johnson, 84 NY2d at 19). Correspondingly, unless an employer or carrier unambiguously and expressly reserves a lien or the right to offset when giving consent, the lien or offset is waived.
Finally, whether an employer adequately preserved its right to a future offset is a factual issue for the Board (Matter of Whitcomb v Xerox Corp., 246 AD2d 947 [3d Dept 1998]). A finding of fact made by the Board "is considered conclusive on the courts if supported by substantial evidence" (Matter of Gates v McBride Transp., 60 NY2d 670, 671  [citation omitted]). Where such evidence exists, the Board's decision may not be disturbed (Matter of Pfeffer v Parkside Caterers, 42 NY2d 59, 60 ).
In this case, claimant's attorney informed the County that he did not believe that the County had either a lien or a right to a payment holiday. In response, the County merely stated that claimant's attorney was "not entirely correct": the County did not withdraw its consent to the settlement; the County did not explicitly reserve its right to an offset as required by Hilton. Thus, substantial evidence supports the Board's factual determination.
Accordingly, the order of the
Appellate Division should be affirmed, with costs.
Matter of Alan J. Brisson v County of Onondaga, et al.
R. S. Smith, J. (dissenting):
I join, with some misgivings, in the Court's main holding, that a compensation carrier or employer that consents to settlement of a third-party claim must expressly reserve its offset rights or lose them, even where it has no existing lien. I have misgivings because it is not completely clear to me where this requirement is to be found in the statute. I join nevertheless, because the Court establishes a clear, easy-to-follow rule in an area where clarity is much to be desired; workers' compensation claimants who settle third-party claims should never be left in doubt about how much of the settlement will go to them and how much to the compensation [*6]carrier.
cannot join the majority's application of the rule to this case. Surely the
employer's reservation of its offset rights here was clear as day. The words "we
can take credit against net third party proceeds" are as unambiguous a statement
as can be imagined that the employer retained its offset right, and the
employer's letter to claimant's counsel said those words twice.
* * * * * * * * * * * * * * * * *
Order affirmed, with costs. Opinion by Judge Read. Chief Judge Kaye and Judges G.B. Smith, Ciparick, Rosenblatt and Graffeo concur. Judge R.S. Smith dissents and votes to reverse in an opinion.
Decided February 16, 2006
Faust Goetz Schenker & Blee LLP, New York (Mary Joseph of
counsel), for appellant.
Lutfy & Santora, Staten Island (Anthony T. Santora of counsel),
Order, Supreme Court, Bronx County (Patricia Anne Williams, J.), entered November 30, 2004, which denied defendant's motion for summary judgment dismissing the complaint on the ground that plaintiff did not sustain a "serious injury" as defined in Insurance Law § 5102(d), unanimously reversed, on the law, without costs, and the motion granted. The Clerk is directed to enter judgment in favor of defendant dismissing the complaint.
On August 13, 2001, plaintiff was seated in her 1991 Mazda 323 while parked at Omni Health & Fitness in Pelham Manor, New York. Her vehicle was struck from behind by defendant while backing his 1990 Pontiac Grand Am out of a parking spot at about five miles an hour. After several minutes, plaintiff left her vehicle, spoke to defendant and went inside the gym, where she sat on a bench for half an hour before leaving for home. Her vehicle sustained no damage. Plaintiff, who was retired at the time of the accident, first sought medical treatment the following morning from her personal physician. Several days later, she began physical therapy, which continued until May 2002, when she began receiving acupuncture. Subsequently, back surgery was recommended. At her examination before trial, held in March 2003, plaintiff complained of difficulty walking due to pain in the lower back and hips.
In support of his motion for summary judgment, defendant submitted the report of an x-ray taken two days after the accident. The radiologist found "[n]o evidence of acute bony injury and no change since 8/5/98." The earlier x-ray report indicated "[d]egenerative arthritic changes" of the cervical spine. Also submitted was the report of a physical examination conducted at defendant's request by a neurologist, who diagnosed plaintiff's condition as cervical and thoraco-lumbar strain/sprain and concluded that her "spinal condition requires no further physiatric treatment and/or therapy." An examination conducted by defendant's orthopedic surgeon confirmed preexisting degenerative arthritic changes of the cervical and thoracic spine, finding no objective evidence of neck or back injury of any significance as a result of the accident. A radiologist who reviewed the x-ray of the thoracic spine taken in 2001, MRI studies of the cervical and lumbar spine conducted in 2001 and a CT scan of the thoracic spine concluded, "All of the studies demonstrate extensive chronic degenerative change."
In opposition, plaintiff submitted the July 2004 report of Albert Graziosa, M.D., an orthopedic surgeon who saw her in August and September 2001. Based upon a review of [*2]medical records from the six-month period following the accident, the doctor noted disc bulging and herniations in the cervical and lumbar regions. He opined that plaintiff's injuries were "serious" and that they were the direct result of the collision, not chronic or degenerative in nature.
Defendant has made out his prima facie entitlement to summary judgment, relying on diagnostic imaging and reports by plaintiff's treating physicians to establish that her injuries are not causally related to the accident and, thus, do not satisfy the serious injury threshold of Insurance Law § 5102(d) (Franchini v Palmieri, 1 NY3d 536 ). Plaintiff failed to satisfy her evidentiary burden to submit, in opposition to the motion, "objective medical proof of a serious injury causally related to the accident in order to survive summary dismissal" (Pommells v Perez, 4 NY3d 566, 574 ). Defendant furnished ample proof establishing preexisting arthritic degenerative changes to plaintiff's spine that account for her discomfort and restricted mobility. In opposition, plaintiff submitted only a report based on a review of medical records from the months following the accident, not on a contemporaneous physical examination (see Toure v Avis Rent A Car Sys., 98 NY2d 345, 350  [medical expert's qualitative assessment must have objective basis and compare plaintiff's limitations to normal function]). The report does not address the "[d]egenerative arthritic changes" noted in the x-ray report from August 1998 but states, in conclusory fashion, that plaintiff's condition is attributable to the accident, without any attempt to demonstrate how herniation of intervertebral discs might have been caused by such a minor collision (see Pommells, 4 NY3d at 574). Thus, the report fails to raise a triable issue of fact as to causation (see Shaw v Looking Glass Assoc., 8 AD3d 100  [failure to address preexisting chronic degenerative disc disease and its impact upon diagnosis]).
In addition, plaintiff's expert fails to explain the gap in treatment following the cessation of physical therapy in May 2002. Since Dr. Graziosa last saw plaintiff some eight months prior to this time, his suggestion that she had reached maximum medical improvement is purely speculative. Nor has plaintiff submitted an affidavit to explain why she continued to receive acupuncture treatments and consulted with a back surgeon throughout the remainder of 2002 or why she decided to forgo recommended surgery (see Pommells, 4 NY3d at 574).
THIS CONSTITUTES THE DECISION
OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.
ENTERED: FEBRUARY 14, 2006
Gilroy Downes Horowitz & Goldstein, New York, N.Y.
(Thomas Dillon and Michael Horowitz of counsel), for appellant.
Seener & Seener, Melville, N.Y. (Steven Seener of counsel),
In an action for a judgment declaring that Allcity Insurance Company is obligated to defend and indemnify Royston Jeffrey in an action entitled Brown v Jeffrey, pending in the Supreme Court, Kings County, under Index Number 30090/2001, the defendant Allcity Insurance Company appeals from an order of the Supreme Court, Kings County (Schneier, J.), dated February 28, 2005, which denied its motion for summary judgment dismissing the complaint insofar as asserted against it, granted the plaintiff's cross motion for summary judgment and, in effect, directed the entry of a judgment declaring that it is obligated to defend and indemnify Royston Jeffrey in the underlying action.
ORDERED that the order is affirmed, with costs.
Royston Jeffrey purchased an insurance policy from Allcity Insurance Company (hereinafter Allcity) through a broker. The policy required Jeffrey to notify "the Company providing this Insurance" in the event of an "occurrence, claim or suit . . . as soon as practicable." On October 17, 2000, Jeffrey learned from a tenant that Patricia Brown had injured her ankle at the insured property the previous day. He called her telephone number, but was not able to speak with Brown or learn anything further about the accident. Jeffrey did not report the accident to his insurer or broker. Three months after the accident, and again in August 2001, he notified his broker, Global Coverage, Inc., upon learning that he was about to be sued by Brown. Jeffrey did not notify Allcity [*2]directly, and Allcity established that it first received notice of the claim on March 7, 2002, 16 months after the accident.
An insurance policy provision requiring the insured to notify the insurance company of a covered occurrence is a condition precedent to the company's duty to defend or indemnify claims against the insured (see Empire City Subway Co. v Greater N.Y. Mut. Ins. Co., 35 NY2d 8; Centrone v State Farm Fire & Cas., 275 AD2d 728). "Absent a valid excuse, a failure to satisfy the notice requirement vitiates the policy" (Security Mut. Ins. Co. of N.Y. v Acker-Fitzsimons Corp., 31 NY2d 436, 440). In this case, Jeffrey correctly argues that the notice provision was ambiguous because it used the pronouns "we," "us," and "our" to describe who should be notified without clearly identifying Allcity as the party to whom those terms applied, and that, given the ambiguity, the contract should be interpreted to allow notice to his broker.
We also conclude that Jeffrey complied with the provisions requiring notice "as soon as practicable." Accordingly, the Supreme Court properly denied Allcity's motion for summary judgment and granted Jeffrey's cross motion for summary judgment.
Allcity's remaining contentions
are without merit.
H. MILLER, J.P., CRANE, SKELOS and DILLON, JJ., concur.
James Edward Pelzer
Clerk of the Court
Balbuena v. IDR Realty LLC
Case No. 19: Michael T. Altman, for appellants. Caitlin J. Halligan, for intervenor-appellant. Reed M. Podell, for third-party respondent. Francesca E. Connolly, for respondents. The Defense Association of New York, Inc. et al.; Washington Legal Foundation, [*2]et al.; National Employment Law Project, et al.; James Atleson, et al.; Associated Corset & Brassiere Manufacturers, Inc., et al.; Albany/Capital District Chapter of the Labor Council for Latin American Advancement; The Emerald Isle Immigration Center et al., amici curiae.
Case No. 49 SSM 1: Submitted by Reed M. Podell, for appellants Cassino Contracting Corp. and Veterans Property, Inc. Submitted by Beth J. Goldmacher, for appellant D & Sons Construction Corp. Submitted by Scott T. Horn, for appellants Celebration LLC, Jack Thaon and New York City Housing Development Fund Company. Submitted by Brian J. Isaac, for respondent. Submitted by Daniel Smirlock, for intervenor-respondent.
Plaintiffs, who are not United States citizens or lawfully admitted resident aliens, allege that they were injured while working on construction sites and have commenced personal injury litigation predicated on defendants' purported violations of the state Labor Law. The issue before us is whether plaintiffs' status as aliens who are not legally authorized to work in the United States precludes their recovery of lost earnings.
Balbuena v IDR Realty LLC et al.
Gorgonio Balbuena is a native of Mexico who entered the United States without the permission of federal immigration authorities. In April 2000, he was employed as a construction worker by third-party defendant Taman Management Corp. on a site owned and managed by defendants IDR Realty LLC and Dora Wechler. According to Balbuena, he fell from a ramp while pushing a wheelbarrow, sustaining severe head trauma and other debilitating injuries that have rendered him incapacitated and unable to work.
Balbuena and his wife sued defendants [FN1] for common-law negligence and violations of Labor Law §§ 240(1) and 241 (6), seeking various categories of damages, including past wages from the time of the accident until a verdict and the future loss of earnings (collectively referred to as lost wages). During discovery, Taman sought documentation from Balbuena demonstrating that he had obtained the necessary authorization to work in the United States as required by federal law. After Balbuena objected to this request and failed to produce such documentation, Taman moved for a court order resolving the immigration and work authorization issues. Taman also sought partial summary judgment dismissing Balbuena's claim for lost wages, relying on the United States Supreme Court's decision in Hoffman Plastic Compounds Inc. v National Labor Relations Bd. (535 US 137 ), which held that an [*3]undocumented alien who provided fraudulent work papers in violation of federal law could not be awarded back pay for work not performed as a result of an employer's unfair labor practice. Taman argued that state tort law is preempted by federal law, as construed in Hoffman and, hence, an award of lost wages to Balbuena would undermine national immigration policies. In opposition to the motion, Balbuena admitted that he did not possess work authorization documents but argued that Hoffman was distinguishable from his legal claims and did not bar recovery for state Labor Law violations.
Supreme Court denied defendants' motion for partial summary judgment, concluding that state law allows an undocumented alien to recover lost wages and that Hoffman did not apply to tort actions brought under state law. The Appellate Division, First Department, modified by granting Taman's motion for partial summary judgment dismissing Balbuena's claim for lost earnings to the extent it sought damages based on wages plaintiff might have earned in the United States. Relying on its decision in Sanango v 200 E. 16th St. Hous. Corp. (15 AD3d 36 [1st Dept 2005]), the Court determined that Hoffman precludes an alien who has not obtained work authorization from claiming lost wages derived from income earned in the United States, but may seek wages based on income that could be earned in the alien's home country. A dissenting Justice voiced a contrary view, finding that federal immigration law did not prohibit past and future wage claims under state law. The Appellate Division subsequently permitted the Attorney General to intervene in the case, denied reargument and granted leave to appeal to this Court.
Majlinger v Cassino Constr. Corp.
Stanislaw Majlinger came to the United States in November 2000 from Poland on a travel visa, but remained in this country to work after his visa expired. In January 2001, he was employed as a construction worker by J & C Home Improvement, a subcontractor on a building project being developed by the various defendants in this case in their capacity as property owners, contractors or their agents. Like Gorgonio Balbuena, Majlinger never received authorization from federal immigration authorities to work in the United States.
Majlinger alleges that he was installing siding on the exterior of a building while standing on a scaffold approximately 15 feet off the ground when the scaffold suddenly collapsed, causing him to sustain serious physical injuries. Majlinger initiated a lawsuit, claiming defendants were liable under Labor Law §§ 200, 240 (1) and 241 (6). Among other damages, Majlinger sought earnings lost as a result of his purported inability to work. In response to discovery requests by defendants Cassino Contracting Corp. and Veteran Properties Inc., Majlinger conceded that he had not acquired the necessary work authorization documentation. Cassino and Veteran, together with other defendants and a third-party defendant, moved for partial summary judgment dismissing Majlinger's claim for lost wages based on his status as an undocumented alien pursuant to Hoffman, federal immigration law and preemption [*4]principles.
Court granted partial summary judgment to defendants and dismissed Majlinger's
claim for lost wages "[o]n constraint of Hoffman." After granting the
Attorney General permission to intervene, the Appellate Division, Second
Department, reversed and reinstated the damages claim for lost wages.
Disagreeing with the First Department's decisions in Balbuena and
Sanango, the Second Department concluded that state tort law is not
preempted by federal immigration law because neither federal statutes nor
Hoffman prohibit an undocumented alien from recovering lost wages in a
personal injury action. The Appellate Division granted leave to appeal to this
The central issue in these appeals, stated broadly, is whether an undocumented alien injured at a work site as a result of state Labor Law violations is precluded from recovering lost wages due to immigration status. Defendants [FN2] here contend that an award of past and future wages to an undocumented alien worker expressly conflicts with federal immigration law and implicitly undermines the objectives that Congress sought to achieve when it adopted the nation's current immigration policies. Our analysis begins with the text and history of relevant federal immigration statutes, proceeds to the impact of the United States Supreme Court's decision in Hoffman, and concludes with preemption principles derived from the Supremacy Clause and the policy objectives of the New York Legislature underlying the relevant sections of state Labor Law.
The Federal Immigration and Nationality Act
Under the United States Constitution, the power to regulate immigration rests exclusively with the federal government (see US Const, art I, § 8 ; De Canas v Bica, 424 US 351, 354 ; Takahashi v Fish & Game Commn., 334 US 410, 419 ). Pursuant to this authority, in 1952 Congress enacted the Immigration and Nationality Act (INA) (see Pub L 414, 66 Stat 163, as amended 8 USC §§ 1101 et seq. ) as a "comprehensive federal statutory scheme for regulation of immigration and naturalization" (De Canas v Bica, 424 US at 353). The purpose of the INA was to delineate "the terms and conditions of admission to the country and the subsequent treatment of aliens lawfully in this country" (id. at 359). This congressional Act, however, expressed only a "peripheral concern" regarding the employment of illegal aliens (id. at 360); the INA did not make it "unlawful for an employer to hire an alien who is present or working in the United States without appropriate authorization" or for "an alien to accept employment after entering this country illegally" (Sure-Tan Inc. v National Labor Relations Bd., [*5]467 US 883, 893 ). As a result, the United States Supreme Court ruled that the exclusive authority of Congress to regulate immigration did not prevent the States from enacting labor laws that forbid the employment of illegal aliens (see De Canas v Bica, 424 US at 365).
Because the INA did not make it a crime to employ an illegal alien or be employed as an alien lacking work authorization, the Supreme Court subsequently held that the provisions of the National Labor Relations Act (NLRA), the purpose of which is to protect employees and provide remedies against illegal actions by employers, could be applied to employment practices that affect illegal aliens (see Sure-Tan Inc. v National Labor Relations Bd., 467 US at 892). Rejecting the argument that application of the NLRA would conflict with the purposes of the INA, the Supreme Court concluded that enforcement of the federal labor relations statutes was "compatible" with immigration law:
"A primary purpose in restricting immigration is to preserve jobs for American workers; immigrant aliens are therefore admitted to work in this country only if they 'will not adversely affect the wages and working conditions of the workers in the United States similarly employed.' . . . . Application of the NLRA helps to assure that the wages and employment conditions of lawful residents are not adversely affected by the competition of illegal alien employees who are not subject to the standard terms of employment. If an employer realizes that there will be no advantage under the NLRA in preferring illegal aliens to legal resident workers, any incentive to hire such illegal aliens is correspondingly lessened. In turn, if the demand for undocumented aliens declines, there may then be fewer incentives for aliens themselves to enter in violation of the federal immigration laws. The Board's enforcement of the NLRA as to undocumented aliens is therefore clearly reconcilable with and serves the purposes of the immigration laws" (id., 467 US at 893-894).[FN3]
The Federal Immigration Reform and Control Act of 1986
Despite the policy objectives of the INA, the United States faced steadily increasing waves of aliens entering the United States illegally. After many years of bipartisan [*6]efforts to update federal immigration laws,[FN4] in 1986 Congress adopted the Immigration Reform and Control Act (IRCA) (see Pub L 99-603, 100 Stat 3359, as amended 8 USC §§ 1324a et seq. ). Both Congress and the President expressed the view that "[t]he principal means of closing the back door, or curtailing future illegal immigration, [wa]s through employer sanctions" (HR Rep 99-682, part I, 99th Cong, 2d Sess, at 46, reprinted in 1986 US Code Cong Admin News at 5650) that were intended to "remove the incentive for illegal immigration by eliminating the job opportunities which draw illegal aliens" into the country (PL 99-603, Statement of President Upon Signing S. 1200, 22 Weekly Comp Pres Docs 1534 [Nov. 10, 1986], reprinted in 1986 US Code Cong Admin News at 5856-1). To attain this goal, the most important component of the IRCA scheme was the creation of a new "employment verification system" designed to deter the employment of aliens who are not lawfully present in the United States and those who are lawfully present, but not authorized to work (see 8 USC § 1324a [b]).
Under this system, aliens legally present and approved to work in the United States are issued formal documentation of their eligibility status by federal immigration authorities (see 8 USC § 1324a [b]  [B], [C]), usually in the form of a "green card," a registration number or some other document issued by the Bureau of Citizenship and Immigration Services (see Immigration & Naturalization Serv. v National Ctr. for Immigrants' Rights, 502 US 183, 195-196 ; 8 CFR 274a.12 [a]). Before hiring an alien, an employer is required to verify the prospective worker's identity and work eligibility by examining the government-issued documentation. If the required documentation is not presented, the alien cannot be hired (see 8 USC § 1324a [a] ). An employer who knowingly violates the employment verification requirements, or who unknowingly hires an illegal alien but subsequently learns that an alien is not authorized to work and does not immediately terminate the employment relationship, is subject to civil or criminal prosecution and penalties (see 8 USC § 1324a [a] , , [f] ).
In addition to the provisions relating to the responsibilities of employers, IRCA also declares that it is a crime for an alien to provide a potential employer with documents falsely acknowledging receipt of governmental approval of the alien's eligibility for employment (see 8 USC § 1324c [a]). Similar to the INA, however, IRCA does not penalize an alien for attaining employment without having proper work authorization, unless the alien engages in fraud, such as presenting false documentation to secure the employment. In order to preserve the national [*7]uniformity of this verification system and the sanctions imposed for violations, Congress expressly provided that IRCA would "preempt any State or local law imposing civil or criminal sanctions (other than through licensing and similar laws) upon those who employ, or recruit or refer for a fee for employment, unauthorized aliens" (8 USC § 1324a [h] ).
The Impact of Hoffman
It was against this federal statutory backdrop that the United States Supreme Court decided Hoffman Plastic Compounds Inc. v National Labor Relations Bd. (535 US 137). The issue was whether an illegal alien who, in violation of IRCA, gained employment by presenting false work authorization documents could be awarded back pay by the National Labor Relations Board (NLRB) after the worker was impermissibly terminated for engaging in union-organizing activities. The Supreme Court concluded that such an award was prohibited because it would conflict with the purpose of IRCA. The Court observed that "[u]nder the IRCA regime, it is impossible for an undocumented alien to obtain employment in the United States without some party directly contravening explicit congressional policies. Either the undocumented alien tenders fraudulent identification . . . or the employer knowingly hires the undocumented alien in direct contradiction of its IRCA obligations" (id. at 148).
The Court emphasized that the salient factor in the case was that "Congress has expressly made it criminally punishable for an alien to obtain employment with false documents" and that the alien had, in fact, committed this crime (id. at 149). Thus, the Court determined that "awarding back pay in a case like this not only trivializes the immigration laws, it also condones and encourages future violations" because the alien would qualify for an NLRB award "only by remaining inside the United States illegally" and could not "mitigate damages . . . without triggering new IRCA violations, either by tendering false documents to employers or by finding employers willing to ignore IRCA and hire illegal workers" (id. at 150-151).
The implications of Hoffman underlie the controversies in the two appeals before this Court. The main thrust of defendants' arguments is that IRCA, as construed by Hoffman, precludes an undocumented alien from recovering lost wages in a state personal injury action. According to defendants, such an award is a penalty upon the employer that is expressly preempted by IRCA, specifically 8 USC § 1324a (h) (2). Defendants also assert that the doctrine of "field preemption" prohibits an award of past or future earnings because the federal government has exclusive authority to regulate immigration and Congress has exercised that power by enacting the comprehensive schemes established in the INA and IRCA. Finally, defendants claim that permitting an undocumented alien to recover lost wages is in contravention of the purposes and objectives of IRCA in that it condones past transgressions of immigration laws and encourages future violations.
Joined by the Attorney General as intervenor, plaintiffs argue that an undocumented alien should be allowed to recover for earning capacity lost as a result of [*8]defendants' failure to adhere to the work place safety requirements established in the state Labor Law. The primary rationale for their conclusion that IRCA does not preempt state law is that precluding a lost wages claim would make it more financially attractive to hire illegal aliens, thereby undercutting the central goal of the federal Act, and would provide less of an incentive to comply with state labor requirements, contrary to the purposes of Labor Law §§ 200, 240 (1) and 240 (6). Plaintiffs and the Attorney General also contend that the doctrines of express and field preemption are inapplicable because neither the text of IRCA nor its legislative history indicates that Congress intended to affect workplace protections provided by the States.
In order to evaluate the efficacy of the parties' arguments, we first must examine principles of federal preemption derived from the United States Constitution.
The Supremacy Clause and Preemption Principles
The Supremacy Clause, in article VI of the Constitution, "may entail pre-emption of state law either by express provision, by implication, or by a conflict between federal and state law" (New York State Conference of Blue Cross & Blue Shield Plans v Travelers Ins. Co., 514 US 645, 654 ). It is "never assumed lightly that Congress has derogated state regulation, but instead [courts] have addressed claims of pre-emption with the starting presumption that Congress does not intend to supplant state law" (id.; see Nealy v US Healthcare HMO, 93 NY2d 209, 217 ). The presumption against preemption is especially strong with regard to laws that affect the states' historic police powers over occupational health and safety issues (see De Canas v Bica, 424 US at 356-357) and is overcome only if it "'was the clear and manifest purpose of Congress'" to supplant state law (New York State Conference of Blue Cross & Blue Shield Plan v Travelers Ins. Co., 514 US at 655, quoting Rice v Santa Fe El. Co., 331 US 218, 230 ).
Several distinct preemption doctrines have evolved under the Supremacy Clause. "Express preemption" applies where Congress explicitly declares that a federal law is intended to supersede state law (see e.g. Sprietsma v Mercury Marine, 537 US 51, 62-63 ). "Implied preemption" takes two forms. The first, referred to as "field preemption," occurs "if federal law so thoroughly occupies a legislative field 'as to make reasonable the inference that Congress left no room for the States to supplement it'" (Cipollone v Liggett Group Inc., 505 US 504, 516 , quoting Fidelity Fed. Sav. & Loan Assn. v De la Cuesta, 458 US 141, 153  [internal quotation marks omitted]). The second type, "conflict preemption," establishes that "a state statute is void to the extent that it actually conflicts with a valid federal statute. A conflict will be found where compliance with both federal and state regulations is a physical impossibility . . . or where the state law stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress" (Ray v Atlantic Richfield Co., 435 US 151, 158  [internal citations and quotation marks omitted]; see also Silkwood v Kerr-McGee Corp., 464 US 238, 256 ; Florida Lime & Avocado Growers Inc. v Paul, 373 US 132, 142-143 ; [*9]Guice v Charles Schwab & Co., 89 NY2d 31, 39 , cert denied 520 US 1118 ).
Contrary to defendants' contention, IRCA does not contain an express statement by Congress that it intended to preempt state laws regarding the permissible scope of recovery in personal injury actions predicated on state labor laws. As relevant to these cases, Congress expressly preempted only state and local laws that impose "civil or criminal sanctions" on employers of undocumented aliens (8 USC § 1324a [h] ). A sanction is generally considered a "penalty or coercive measure" (Black's Law Dictionary at 1368 [8th ed]), such as a punishment for a criminal act or a civil fine for a statutory or regulatory violation. The plain language of section 1324a (h) (2) appears directed at laws that impose fines for hiring undocumented aliens, such as the California statute at issue in De Canas v Bica (424 US 351). The legislative history of IRCA confirms this interpretation, as the preemption language in section 1324a (h) (2) was intended to apply only to civil fines and criminal sanctions imposed by state or local law (see HR Rep 99-682, part 1, 99th Cong, 2d Sess, at 58, reprinted in 1986 US Code Cong & Admin News at 5662). In contrast, the primary purpose of civil recovery in a personal injury action premised on state Labor Law provisions is not to punish the tortfeasor but to compensate the worker for injuries proximately caused by negligence or the violation of statutory safety standards.
We are similarly unpersuaded by defendants' field preemption argument. Certainly IRCA and related statutes throughly occupy the spectrum of immigration laws. But there is nothing in those provisions indicating that Congress meant to affect state regulation of occupational health and safety, or the types of damages that may be recovered in a civil action arising from those laws. To the contrary, the legislative history of IRCA shows that the Act was not intended "to undermine or diminish in any way labor protections in existing law" (id.).
The more difficult issue is whether an award for lost wages to an undocumented immigrant injured as a result of a responsible party's violation of the Labor Law would conflict with or otherwise erode the objectives of IRCA in a manner sufficient to surmount the strong presumption against preemption. We recognize that questions regarding the reach of Hoffman have generated a spirited debate and a variety of judicial and academic opinions.[FN5] [*10]
The Supreme Court has recognized that, notwithstanding the federal government's exclusive control over immigration and naturalization, the "States possess broad authority under their police powers to regulate the employment relationship to protect workers within the State," which includes the power to enact "laws regulating occupational health and safety" (De Canas v Bica, 424 US at 356) — issues that have been "primarily, and historically, a matter of local concern" (Hillsborough County, Fl v Automated Med. Labs. Inc., (471 US 707, 719 ). In the Labor Law context, we have noted that "the legislative history of the Labor Law, particularly sections 240 and 241, makes clear the Legislature's intent to achieve the purpose of protecting workers by placing 'ultimate responsibility for safety practices at building construction jobs where such responsibility actually belongs, on the owner and general contractor' (1969 NY Legis Ann, at 407), instead of on workers, who 'are scarcely in a position to protect themselves from accident'" (Zimmer v Chemung County Performing Arts Inc., 65 NY2d 513, 520 , quoting Koenig v Patrick Constr. Co., 298 NY 313, 318 ). The Labor Law, therefore, applies to all workers in qualifying employment situations — regardless of immigration status — and nothing in the relevant statutes or our decisions negates the universal applicability of this principle (see generally Abbatiello v Lancaster Studio Assocs., 3 NY3d 46, 50-51 )[FN6].
Additionally, limiting a lost wages claim by an injured undocumented alien would lessen an employer's incentive to comply with the Labor Law and supply all of its workers the safe workplace that the Legislature demands (cf. Continental PET Tech. Inc. v Palacias, 269 Ga [*11]App 561, 562-563, 604 SE2d 627, 630 [Ga App 2004] [IRCA and immigration regulations "do not purport to intrude into the area of what protections a State may afford these aliens"], cert denied 546 US ___, 126 S Ct 362 ). Given the clear statement in IRCA's legislative history that the Act was not intended "to undermine or diminish in any way labor protections in existing law" (HR Rep 99-682, part I, 99th Cong, 2d Sess, at 58, reprinted in 1986 US Code Cong & Admin News at 5662), we are unpersuaded that IRCA requires such a diminution in the force and effect of state workplace safety mandates. To the contrary, in order to further the laudable purposes of IRCA and our Labor Law, "tort deterrence principles provide a compelling reason to allow an award of such damages against a person responsible for an illegal alien's employment when that person knew or should have known of that illegal alien's status" (Rosa v Partners in Progress Inc., 152 NH at 13, 868 A2d at 1000).
As the Second Department cogently observed, a different conclusion would not only diminish the protections afforded by the Labor Law, it would also improvidently reward employers who knowingly disregard the employment verification system in defiance of the primary purposes of federal immigration laws. An absolute bar to recovery of lost wages by an undocumented worker would lessen the unscrupulous employer's potential liability to its alien workers and make it more financially attractive to hire undocumented aliens (see generally Patel v Quality Inn South, 846 F2d 700, 704 [11th Cir 1988], cert denied 489 US 1011 ; Dowling v Slotnik, 244 Conn 781, 796, 712 A2d 396, 404 [Conn 1998]; Nizamuddowlah v Bengal Cabaret Inc., 69 AD2d 875, 876 [2d Dept 1979], lv dismissed 48 NY2d 609, 48 NY2d 883 ). This, coupled with the fact that illegal aliens are willing to work in jobs that are more dangerous and undesirable — and for less money — than their legal immigrant and citizen counterparts, would actually increase employment levels of undocumented aliens, not decrease it as Congress sought by its passage of IRCA (see Sure-Tan Inc. v National Labor Relations Bd., 467 US at 893-894; see also HR Rep 99-682, part I, 99th Cong, 2d Sess, at 58, reprinted in 1986 US Code Cong & Admin News at 5662).[FN7] [*12]
Aside from the compatibility of federal immigration law and our state Labor Law, plaintiffs here — unlike the alien in Hoffman — did not commit a criminal act under IRCA. Whereas the undocumented alien in Hoffman criminally provided his employer with fraudulent papers purporting to be proper federal work documentation, there is no allegation in these cases that plaintiffs produced false work documents in violation of IRCA or were even asked by the employers to present the work authorization documents as required by IRCA. Notably, IRCA does not make it a crime to work without documentation. Hoffman is dependent on its facts, including the critical point that the alien tendered false documentation that allowed him to work legally in this country (see Hoffman, 535 US at 149). This was a clear violation of IRCA. We see no reason to equate the criminal misconduct of the employee in Hoffman to the conduct of the plaintiffs here since, in the context of defendants' motions for partial summary judgment, we must presume that it was the employers who violated IRCA by failing to inquire into plaintiffs' immigration status or employment eligibility (see Wishnie, Emerging Issues for Undocumented Workers, 6 U Pa J Lab & Emp L at 512).[FN8]
recognize, of course, that plaintiffs' presence in this country without
authorization is impermissible under federal law. Standing alone, however, this
transgression is insufficient to justify denying plaintiffs a portion of the
damages to which they are otherwise entitled. Under our precedent, civil
recovery is foreclosed "if the plaintiff's conduct constituted a serious violation of the law and the injuries for which he seeks recovery were the direct result of that violation" (Barker v Kallash, 63 NY2d 19, 24 ). Although recoveries have been denied to parties who have engaged in illegal activities, in those cases it was the work being performed that was outlawed (see e.g. Spivak v Sachs, 16 NY2d 163, 168 ; see also Berg v Wilpon, 271 AD2d 629, 629-630 [2d Dept 2000]; Murray v Interurban St. Ry. Co., 118 App Div 35, 37 [1st Dept 1907]), whereas [*13]here, the construction work itself was entirely lawful. Moreover, neither IRCA nor any other federal or state statute makes it a crime to be an employed but undocumented alien, unless the alien secured employment through the use of false work authorization documentation. We also find it significant that the records here do not indicate that administrative proceedings or criminal prosecutions have been initiated against plaintiffs based on their presence or employment in this country.
Nor do we believe that the issue of mitigation of damages creates a conflict between state labor law and federal immigration law. Under our common-law doctrine of mitigation of damages, recovery for future lost earnings is subject to reduction by the amount of compensation that the injured party could have earned despite the injuries inflicted by the tortfeasor (see generally Matter of Bello v Roswell Park Cancer Inst., 5 NY3d 170, 173 ). Mitigation of damages is not implicated when a worker's injuries are so serious that the worker is physically unable to work. Here, plaintiffs have alleged serious, permanent injuries that impede their ability to be employed, allegations we must presume to be true at this preliminary stage of the litigation. Their situations are therefore readily distinguishable from the alien worker in Hoffman, who was not physically injured and could have sought new employment in violation of IRCA by tendering the same false documents that allowed him to work in the first place.
In any event, any conflict with IRCA's purposes that may arise from permitting an alien's lost wage claim to proceed to trial can be alleviated by permitting a jury to consider immigration status as one factor in its determination of the damages, if any, warranted under the Labor Law (see e.g. Madeira v Affordable Hous. Found. Inc., 315 F Supp 2d at 507-508). An undocumented alien plaintiff could, for example, introduce proof that he had subsequently received or was in the process of obtaining the authorization documents required by IRCA and, consequently, would likely be authorized to obtain future employment in the United States. Conversely, a defendant in a Labor Law action could, for example, allege that a future wage award is not appropriate because work authorization has not been sought or approval was sought but denied. In other words, a jury's analysis of a future wage claim proffered by an undocumented alien is similar to a claim asserted by any other injured person in that the determination must be based on all of the relevant facts and circumstances presented in the case [FN9].
In light of these considerations, defendants have not overridden the presumption [*14]against preemption afforded by the Supremacy Clause. In the context of Labor Law claims, a per se preclusion of recovery for lost wages would condone the employers' conduct in contravention of IRCA's requirements and promote unsafe work site practices, all of which encourages the employment of undocumented aliens and undermines the objectives that both IRCA and the state Labor Law were designed to accomplish. Moreover, there is no evidence in the records before us that plaintiffs (like the alien worker in Hoffman) tendered false documentation in violation of IRCA or that their employers satisfied their duty to verify plaintiffs' eligibility to work. In addition, plaintiffs have allegedly suffered physical injuries that have limited their ability to be employed, unlike the alien worker in Hoffman who suffered no bodily injury whatsoever. We therefore hold, on the records before us in these Labor Law §§ 200, 240 (1) and 241 (6) cases, and in the absence of proof that plaintiffs tendered false work authorization documents to obtain employment, that IRCA does not bar maintenance of a claim for lost wages by an undocumented alien.
in Balbuena, the order of the Appellate Division should be reversed, with
costs, the order of Supreme Court reinstated and the certified question answered
in the negative. In Majlinger, the order of the Appellate Division should
be affirmed, with costs, and the certified question answered in the affirmative.
R. S. Smith, J. (dissenting):
The Court holds today that New York courts may award damages to compensate a plaintiff for the loss of an opportunity to work illegally. I would hold that such a recovery is barred by the rule of New York law that the courts will not aid in achieving the purpose of an illegal transaction. I would also hold that, if New York law does permit such a recovery, it is preempted by federal immigration law as interpreted in Hoffman Plastic Compounds, Inc. v NLRB (535 US 137 ).
The arrangements Balbuena and Majlinger made with their employers violated the Immigration Reform and Control Act of 1986 (IRCA), and so long as they remain undocumented aliens, any arrangements they make with other employers in this country will be illegal also. The central purpose of IRCA was to keep people who entered the United States illegally, like Balbuena, or who entered legally but without authorization to work here, like Majlinger, from having jobs in the United States. As the United States Supreme Court made clear in Hoffman:
"Under the IRCA regime, it is impossible for an undocumented alien to obtain employment in the United States without some party directly contravening explicit congressional policies. Either the undocumented alien tenders fraudulent identification, which subverts the cornerstone of IRCA's enforcement mechanism, or the employer knowingly hires the undocumented alien in direct contradiction of [*15]its IRCA obligations."
(535 US at 148.)
Such violations are subject to civil or criminal prosecution and penalties under federal law (see 8 USC §§ 1324a [a], [e], [f], 1324c [a], [d]; 18 USC § 1546 [b]). The Court in Hoffman left no doubt that prohibiting the employment of undocumented aliens is the "critical" policy of the statute (535 US at 151). Many may disagree with that policy or regret the statute's consequences, but IRCA is Congress's chosen means of dealing with a national problem of huge importance. It is the duty of the courts, state as well as federal, to give effect to that policy choice and to recognize that the arrangements by which undocumented aliens are employed are illegal.
The New York courts have long held that they will not award a plaintiff the benefit of an illegal bargain. We have referred to "the familiar rule that illegal contracts, or those contrary to public policy, are unenforceable and that the courts will not recognize rights arising from them" (Szerdahelyi v Harris, 67 NY2d 42, 48 ). Thus in Szerdahelyi we held, applying a statute we found to be declaratory of the common law, that a lender who charged usurious interest could not recover her principal. In Spivak v Sachs (16 NY2d 163 ), we held that a lawyer not licensed in New York could not collect a fee for legal work done in New York. In Stone v Freeman (298 NY 268 ), we held that a vendor could not recover from a broker money that the broker was supposed to have given illegally to an employee of the purchaser, saying: "It is the settled law of this State (and probably of every other State) that a party to an illegal contract cannot ask a court of law to help him carry out his illegal object, nor can such a person plead or prove in any court a case in which he, as a basis for his claim, must show forth his illegal purpose" (id. at 271 [citations omitted]). In Surgical Design Corp. v Correa (290 AD2d 435 [2d Dept 2002]), the Appellate Division held that an employer could not enforce a notice-of-termination clause in an employment contract, where the contract called for the employee to perform illegal activities. And in Murray v Interurban Street Railway Co. (118 App Div 35 [1st Dept 1907]), the Appellate Division held that the employee of a bookmaker could not recover the wages he lost as a result of his injury in a tort action against a third party.
Decisions like these are not based on a search for the equitable outcome of a particular case, or on a calculation of which result will most contribute, in an immediate and practical way, to the enforcement of a particular statute or public policy. Rather, they are based on the sound premise that courts show insufficient respect for themselves and for the law when they help a party to benefit from illegal activity. As Justice Brandeis explained: "The court's aid is denied . . . when he who seeks it has violated the law in connection with the very transaction as to which he seeks legal redress. . . . It is denied in order to maintain respect for law; in order to promote confidence in the administration of justice; in order to preserve the judicial process from [*16]contamination" (Olmstead v United States, 277 US 438, 484  [dissenting opinion; citations omitted]). Accordingly, in cases like these the courts do not ordinarily balance the benefit and harm, either to public or private interests, that will follow from an award, but simply dismiss the plaintiff's claim, though doing so may give a windfall to a defendant who has also acted illegally. "The law leaves the parties . . . where it finds them" (Szerdahelyi, 67 NY2d at 48 [citations omitted]).
Here, Balbuena and Majlinger are not quite seeking the enforcement of illegal contracts. But because the employment of Balbuena, Majlinger or others in their situation violates IRCA's prohibitions, their claims in tort actions for the loss of earnings from such employment are claims to obtain the benefit of illegal arrangements. Their claims thus put at risk the duty of courts in our legal system to avoid the promotion of illegality. This risk cannot be resolved by calculating the deterrence or incentive value of permitting recovery. Recovery is barred unless we are to hold that these cases are governed by an exception to the rule that courts do not award the benefit of illegal bargains.
That rule, important as it is, is not absolute: "'[w]here contracts which violate statutory provisions are merely malum prohibitum, the general rule does not always apply. If the statute does not provide expressly that its violation will deprive the parties of their right to sue on the contract, and the denial of relief is wholly out of proportion to the requirements of public policy . . . the right to recover will not be denied.'" (Lloyd Capital Corp. v Pat Henchar, Inc., 80 NY2d 124, 127 , quoting John E. Rosasco Creameries, Inc. v Cohen, 276 NY 274, 278 .) But while this exception might apply in some cases involving undocumented aliens, it does not apply here.
There would be a much better argument for allowing Balbuena and Majlinger to recover if they had done work for which their employers had refused to pay them, and they were suing for their wages. In such a case, the injustice of denying recovery — embodied both in the hardship to the workers and the enrichment of the employers — would be gross, and it could be strongly argued that "the denial of relief is wholly out of proportion to the requirements of public policy." In such a case, we might consider whether we would characterize IRCA violations as "merely malum prohibitum" (evil because prohibited) rather than malum in se (evil in themselves), and allow recovery. A number of decisions in this state (Nizamuddowlah v Bengal Cabaret, Inc., 69 AD2d 875 [2d Dept 1979]; Gomez v Falco, 6 Misc 3d 5 [App Term, 2d Dept 2004]; Ulloa v Al's All Tree Service, Inc., 2 Misc 3d 262 [Nassau County Dist Ct 2003]) and in federal courts (e.g., Flores v Amigon, 233 F Supp 2d 462 [ED NY 2002]) hold that undocumented aliens may recover at least some compensation for work they have actually performed, and I do not imply that we should hold otherwise.
But these cases are different. Neither Balbuena nor Majlinger is seeking compensation for work actually performed. In fact, neither is even suing his employer. Each of [*17]them is suing third parties — in Balbuena's case, the owners of the construction site and in Majlinger's several entities alleged to be site owners and/or general contractors — who had no involvement with any violation of the immigration laws. They claim that defendants are liable for personal injuries that plaintiffs suffered, and that defendants should pay damages including the amount that plaintiffs, but for their accidents, would have earned in their illegal employment. Balbuena's employer is named as a third party defendant, but it is not clear from the record whether defendants' claim over against the employer will succeed. Majlinger's employer is not a party at all.
Thus these are not cases, as some involving illegal arrangements are, in which to dismiss the claim is to give a windfall to a defendant at least as guilty of wrongdoing as the plaintiff, or in which to deny recovery is to leave a plaintiff uncompensated for work actually done. The wrong for which Balbuena and Majlinger seek compensation in the form of lost earnings is that their injuries have prevented them from working in the United States — exactly the result that IRCA was intended to accomplish. I do not see how, except by rejecting the policy on which IRCA is premised, we can say that denial of the remedy plaintiffs seek is out of proportion to the requirements of public policy.
When courts permit parties to recover on the basis of illegal transactions, the consequences can be unseemly. For example, the majority suggests telling a jury that it may "consider immigration status as one factor in its determination of the damages" (majority op at 23). But what does that instruction mean? Is the message: "The plaintiff's damages depend on his chances of getting caught; the more likely he is to evade the authorities, the more damages you may award"? Or, if the jury is supposed to decide how much weight to give to IRCA policies, then the message is: "A violation of the law is only as important as you want it to be." The only instruction that is not, at best, a bit embarrassing to the system is one that says in substance: "You may not award any damages for lost earnings in employment that would have violated the immigration laws." The Court today holds that such an instruction may not be given.
A still more vexing problem is presented by what is loosely called a plaintiff's "duty" to mitigate damages — more precisely, the rule that a plaintiff who does not mitigate will suffer a reduction in damages. Is a plaintiff in a case like these — who may be disabled, say, from construction work but not from less strenuous activity — required to mitigate by seeking alternative illegal employment? May he avoid a reduction in his damages by declaring that he has decided, belatedly, not to seek any job for which he may not lawfully be hired? It is surely unfair to defendants to hold that lost illegal wages may be recovered, but that only legal wages may be considered in mitigation; yet it also seems intolerable to hold that the law will punish a plaintiff for failing to violate the law. The majority tries to finesse the question by assuming, if I read its opinion correctly (see majority op at 23), that plaintiffs in these two cases are totally disabled from work. But they may not be so, and certainly not all plaintiffs who make such [*18]claims will be. The majority offers no clue as to how mitigation issues can be handled when they arise.
In sum, I would hold that an award of lost earnings based on employment prohibited by IRCA would carry out the purpose of an illegal transaction and is therefore impermissible under established principles of New York law. I would decline to follow the Appellate Division cases (Collins v New York City Health and Hospitals Corp., 201 AD2d 447 [2d Dept 1994]; Public Adm'r of Bronx County v Equitable Life Assur. Socy. of U.S., 192 AD2d 325 [1st Dept 1993]) that hold otherwise. Thus, I do not think it is necessary to reach the preemption issue.
The majority assumes with little discussion that New York law, if not preempted, would permit recovery of lost earnings in these cases, and devotes its analysis almost wholly to the federal preemption issue. I disagree, as I have explained, with the majority's view of New York law. I also disagree with the majority's decision on preemption.
The preemption issue, as all agree, depends on the interpretation of Hoffman, in which the Supreme Court held that a National Labor Relations Board award of back pay "to an undocumented alien who has never been legally authorized to work in the United States . . . . is foreclosed by federal immigration policy, as expressed by Congress in [IRCA]" (535 US at 140). Defendants in these cases argue that what is true of an NLRB back pay award must also be true of the awards for lost earnings that Balbuena and Majlinger seek. If one is "foreclosed by federal immigration policy," so is the other. Thus, defendants argue, State law, to the extent that it permits these plaintiffs to recover lost earnings, "stands as an obstacle to the accomplishment of the full purposes and objectives of Congress" and is therefore preempted (California Coastal Commn. v Granite Rock Co., 480 US 572, 581 ). I think this argument is correct.
The majority tries to distinguish Hoffman on the ground that the employee involved in Hoffman, unlike plaintiffs here, presented his employer with false documents that purported to authorize him to work. Hoffman, the majority says, "is dependent on its facts, including the critical point that the alien tendered false documentation . . . " (majority op at 20-21). I do not think this narrow reading of Hoffman is consistent with the Supreme Court's opinion read as a whole.
The Hoffman Court's statement of its holding at the outset of its opinion is the broad one I quoted above: an award of back pay "to an undocumented alien who has never been legally authorized to work in the United States . . . . is foreclosed by federal immigration policy . . ." (535 US at 140). Later, in explaining the reasons for its holding, the Court specifically refers to both of the possible ways in which an undocumented alien can obtain employment: "Either the undocumented alien tenders fraudulent identification . . . or the employer knowingly hires the undocumented alien in direct contradiction of its IRCA obligations" (535 US at 148). The Court [*19]makes clear that both of these "directly contraven[e] explicit congressional policies" (id.). The Court then again states its holding in broad terms: "We find . . . that awarding backpay to illegal aliens runs counter to policies underlying IRCA" (id. at 149). And again, near the end of its opinion: "We therefore conclude that allowing the Board to award backpay to illegal aliens would unduly trench upon explicit statutory prohibitions critical to federal immigration policy as expressed in IRCA" (id. at 151). The Court does mention, and at times emphasizes, the fact that the employee in Hoffman used false documentation, but the Court conspicuously fails to say that the case would, or might, come out the other way if that fact were not present.
I agree with the majority here that the conduct of the undocumented alien in Hoffman was worse than the conduct of Balbuena and Majlinger. He committed a crime, and they did not. If Balbuena and Majlinger were suing their employers — who, on the facts of these cases, may well have acted criminally in hiring them without demanding documentation from them — the difference in culpability might be relevant; as I suggested above, a case in which a lesser offender is suing a greater one may sometimes (though not always) qualify for an exception to the general rule that lawsuits based on illegal transactions will not be countenanced. But, as I said above, neither of these cases is such a case, and I find the majority's attempt to draw an analogy totally unpersuasive. The idea, suggested in the majority opinion (at 21 n 8), that the employers' violations of the immigration laws may be imputed to defendants here — the owners of the job-sites and the contractors who worked on them — under New York Labor Law §§ 240 (1) and 241 (6) seems to me to lack any support in the text of those statutes, in precedent or in common sense.
The preemption issue here depends not on whether Balbuena and Majlinger committed criminal violations of IRCA, but on whether awarding them lost earnings will undermine IRCA's policy. Hoffman makes very clear, I submit, that the policy behind IRCA is that undocumented aliens may not be employed in the United States, and that an award of back pay — from which an award of lost earnings is indistinguishable — undermines that policy. I would therefore hold that Hoffman controls this case, and that federal immigration law preempts any New York law which would otherwise permit a lost earnings award in these cases.
I would affirm the order of the Appellate Division in Balbuena v IDR Realty,
LLC, and would reverse the order in Majlinger v Cassino Constr. Corp..
* * * * * * * * * * * * * * * * *
Case No. 19: Order reversed, with costs, order of Supreme Court, New York County, reinstated and certified question answered in the negative. Opinion by Judge Graffeo. Chief Judge Kaye and Judges G.B. Smith, Ciparick and Rosenblatt concur. Judge R.S. Smith dissents and votes to affirm in an opinion in which Judge Read concurs.
[*20]Case No. 49 SSM 1: On review of submissions pursuant to section 500.11 of the Rules, order affirmed, with costs, and certified
question answered in the affirmative. Opinion by Judge Graffeo.
Chief Judge Kaye and Judges G.B. Smith, Ciparick and Rosenblatt concur. Judge R.S. Smith dissents and votes to reverse in an opinion in which Judge Read concurs.
Decided February 21, 2006
Footnote 1: The complaint originally named Taman, IDR Realty and Wechler as defendants. After the Workers' Compensation Board determined that Taman was Balbuena's employer, the claim against it was withdrawn, and IDR Realty and Wechler initiated a third-party action against Taman based on contractual indemnity.
Footnote 2: For purposes of this opinion, the term "defendants" refers collectively to all of the named defendants in both cases before us, as well as the remaining third-party litigants. The term "plaintiffs" refers to the injured, undocumented aliens.
Footnote 3: With regard to the remedies available to the NLRB, the Supreme Court determined that the Board could not award back pay or reinstate the workers at issue, who had left the United States and were not authorized to reenter the country (see Sure-Tan Inc. v National Labor Relations Bd., 467 US at 903-904).
Footnote 4: See HR Rep 99-682, part 1, 99th Cong, 2d Sess, at 45, 51-56, reprinted in 1986 US Code Cong & Admin News at 5649, 5655-5660. See also Pub L 99-603, State of President Upon Signing S 1200, 22 Weekly Compilation of Presidential Docs 1534 (Nov. 10, 1986), reprinted in 1986 US Code Cong & Admin News 5856-1, at 5856-4).
Footnote 5: See e.g. Rosa v Partners in Progress Inc., 152 NH 6, 868 A2d 994 (2005); Correa v Waymouth Farms Inc., 664 NW2d 324 (Minn 2003); Farmer Bros. Coffee v Workers' Compensation Appeals Bd., 133 Cal App 4th 533, 35 Cal Rptr 3d 23 (Cal Ct App 2005); Crespo v Evergo Corp., 366 NJ Super 391, 841 A2d 471 (NJ App Div 2004), cert denied 180 NJ 151, 849 A2d 184 (2004); Tyson Foods Inc. v Guzman, 116 SW3d 233 (Tx Ct Apps 2003); Cherokee Indus. Inc. v Alvarez, 84 P3d 798 (Ok Ct Civ Apps 2003); Madeira v Affordable Hous. Found. Inc., 315 F Supp 2d 504 (SD NY 2004); Veliz v Rental Serv. Corp. USA Inc., 313 F Supp 2d 1317 (MD Fla 2003); Hernandez-Cortez v Hernandez, US Dist Ct, D Kan, Marten, J., 01 Civ 1241, 2003 WL 22519678; Developments in the Law: Jobs & Borders, 118 Harv L Rev 2171, 2242 (2005); Wishnie, Emerging Issues for Undocumented Workers, 6 U Pa J Lab & Emp L 497, 512 (2004); Note, A Call to Revisit Sure-Tan v NLRB: Undocumented Workers and Their Right to Back Pay, 30 SW U L Rev 505 (2001).
Footnote 6: In the related context of workers' compensation statutes, also enacted for the benefit of employees, courts have found such statutes applicable to all persons within the State's borders, even those who are not entitled to be here (see e.g. Design Kitchen & Baths v Lagos, 388 Md 718, 733, 882 A2d 817, 826 ; Correa v Waymouth Farms, 664 NW2d at 329; Farmers Bros. Coffee v Workers' Compensation Appeals Bd., 133 Cal App 4th at 542, 35 Cal Rptr 3d at 29; Safeharbour Empl. Servs I Inc. v Velasquez, 860 So 2d 984, 986 [Fla App, 1st Dist, 2003], rev denied 873 So 2d 1224 [Fla 2004]; but see Tarango v State Indus. Ins. Syst., 117 Nev 444, 449, 25 P3d 174, 179 [Nev 2001]).
Footnote 7: Our dissenting colleagues conclude that public policy requires the dismissal of plaintiffs' claims as a matter of state law. We find their argument unpersuasive, as it fails to consider the spectrum of state concerns entwined in these cases, particularly the workplace safety standards long embodied in the Labor Law and the state's interest in ensuring that employers comply with those standards. Relatedly, the dissent does not acknowledge that Congress expressly indicated that IRCA was not intended to undermine existing statutory labor protections. The dissent's bar to an alien's recourse under the Labor Law actually rewards IRCA violations by employers and thereby promotes the employment of undocumented aliens. In the end, we believe that rewarding avoidance of the employment verification system under IRCA while at the same time denying relief to a worker injured as a result of a workplace violation of state labor laws constitutes that which is "unseemly" (dissenting opn at 7).
Footnote 8: The defendants in Majlinger assert that this observation should not apply to them since they did not employ Majlinger, but were the owners of the property, contractors or their agents. Although the dissent accepts this contention, it overlooks that Labor Law sections 240 (1) and 241 (6) impose a nondelegable safety duty even if the owner does not supervise or control the work site (see Gordon v Eastern Ry. Supply Inc., 82 NY2d 555, 560 ). Allowing defendants to avoid paying damages on the ground that it was the employer who violated IRCA would, in essence, partially relieve defendants of their nondelegable duty and thereby produce a result that is inconsistent with Labor Law statutes.
Footnote 9: Because we perceive no difference in the test that applies to lost wage recoveries by these distinct groups of individuals or the types of evidence that may be introduced by the litigants, we reject defendants' arguments premised on the Due Process and Equal Protection Clauses.
The Pagan Law Firm, P.C., New York (M. David Fonseca of
counsel), for appellants.
Epstein, McDonald & McCarthy, New York (John K. Corrigan
of counsel), for respondents.
Order, Supreme Court, New York County (Milton A. Tingling, J.), entered June 7, 2004, which granted defendants' motion for summary judgment dismissing the complaint, unanimously affirmed, without costs.
The injured plaintiff, a pedestrian, was struck by a van and was transported to a local hospital for examination, including x-rays and a CT brain scan, and emergency treatment to close a scalp wound, and was released the same day. The x-rays showed no fractures or dislocations, but did reveal a condition indicative of degenerative cervical spine disease, and osteophyte formation and degenerative sclerosis in the shoulder.
Plaintiffs commenced this action alleging that the accident caused permanent cervical spine and right shoulder injury. Defendants moved for summary judgment on the ground that the injured party had not sustained a "serious injury" within the meaning of Insurance Law § 5102(d). They satisfied their initial burden of making a prima facie showing of no serious injury through the submission of affirmed reports by two doctors detailing the objective tests performed and the findings thereof, thus shifting to plaintiffs the burden of coming forward with sufficient admissible evidence to raise a triable question of fact (see Gaddy v Eyler, 79 NY2d 955 ).
In opposition to the motion, plaintiffs presented an affidavit from a chiropractor who first saw the injured party two years after the accident and found him to be suffering from a permanent reduction in range of motion of the cervical spine, with muscle spasms in the cervical region, as well as tenderness in the right shoulder and rotator cuff, causing diminished rotation and abduction. However, since no objective findings of the injured plaintiff's purported loss of range of motion to his cervical spine were made until more than two years after the accident, there was a failure of proof relating to the range-of-motion restrictions in that region (see Thompson v Abbasi, 15 AD3d 95, 98-99 ).
In any event, since the x-rays performed on the injured party at the hospital immediately after the accident indicated preexisting degenerate cervical spine disease, plaintiffs were required to "rebut that evidence sufficiently to raise an issue of fact" (Pommells v Perez, 4 NY3d 566, 579 ). Consequently, there is no objective basis for concluding that the present physical limitations and continuing pain are attributable to the subject accident rather than to the [*2]degenerative condition discovered in the hospital x-rays. In the absence of objective evidence as to how these disabilities and pain were causally related to the accident, as opposed to degenerative changes in the body (see id. at 580), the motion for summary dismissal was properly granted.
THIS CONSTITUTES THE DECISION
OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.
ENTERED: FEBRUARY 21, 2006
Lustig & Brown, LLP, New York (Ellen Nimaroff of counsel),
Fitzgerald & Fitzgerald, P.C., Yonkers (John M. Daly of
counsel), for respondents.
Order, Supreme Court, New York County (Alice Schlesinger, J.), entered January 21, 2005, which, to the extent appealed from, granted plaintiffs' motion to serve an amended complaint, unanimously affirmed, without costs.
The proposed amendments,
alleging that defendant insurance broker Sobel Affiliates, Inc. (Sobel) breached
its contract with the insureds and was negligent in failing to timely forward
notice of the subject claims to the insureds' carrier, Landmark Insurance
Company, were properly permitted. Although Sobel contends that the causes
asserted in the proposed amendments are time-barred, it failed to meet its
burden conclusively to
demonstrate that affirmative defense (see CPLR 3018[b]; Martin v Edwards Labs., Div. of Am. Hosp. Supply Corp., 60 NY2d 417, 428 ; and see Viacom Intl., Inc. v Midtown Realty Co., 193 AD2d 45, 52 ). The record, which is unclear as to the date when Sobel first received notice of the underlying claims, affords no basis to conclude, as a matter of law, when the breach of contract claim against Sobel accrued (see National Life Ins. Co. v Frank B. Hall & Co. of New York, 67 NY2d 1021, 1023 ). Consequently, it does not permit a conclusion as to whether that claim is time-barred. Particularly in view of the circumstance that the proposed negligence claim accrued not at the time of the alleged breach of duty but, subsequently, at the time of injury (see Kronos, Inc. v AVX Corp., 81 NY2d 90, 94 ), i.e., in June 2001 when Landmark disclaimed, that claim too was properly sustained as against the defense of untimeliness. [*2]
We have considered Sobel's remaining claims and find them unavailing.
THIS CONSTITUTES THE DECISION
OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.
ENTERED: FEBRUARY 21, 2006
Schindel, Farman & Lipsius, LLP, New York, N.Y. (Ira S.
Lipsius of counsel), for appellants.
Gold, Stewart, Kravatz & Stone, LLP, Westbury, N.Y.
(Jeffrey B. Gold of counsel), for
In an action to recover the amount of a judgment obtained against the defendant's insured, the plaintiffs appeal from an order of the Supreme Court, Queens County (Hart, J.), dated October 14, 2003, which granted the defendant's motion for summary judgment dismissing the complaint and denied their cross motion for summary judgment.
ORDERED that the order is affirmed, with costs.
On October 14, 1996, the plaintiffs' decedent (hereinafter the claimant) was injured when she tripped and fell on the front steps of the apartment building in which she lived. By letter dated November 19, 1997, the claimant's attorney notified the defendant's insured, which owned the building, of the claimant's injuries, and suggested that the insured forward the letter to its insurance carrier "so that [its] rights may be protected." The insured did not do so, purportedly because it believed that it had no potential liability for the claimant's alleged injuries.
The claimant's attorney commenced an action against the insured shortly thereafter. The defendant received a copy of the summons and complaint in the action from its agent on January 20, 1998. By letter dated February 17, 1998, a copy of which was provided to the claimant's attorney, the defendant disclaimed coverage on the ground of late notice. The claimant's attorney [*2]did not provide notice of the occurrence to the defendant directly until August 13, 1998, after he had obtained a default judgment against the insured on July 24, 1998.
Where an insurance policy, such as the one in this case, requires an insured to provide notice of an accident or loss as soon as practicable, such notice must be provided within a reasonable time in view of all of the facts and circumstances (see Merchants Mut. Ins. Co. v Hoffman, 56 NY2d 799, 801-802; Travelers Indem. Co. v Worthy, 281 AD2d 411). "Providing an insurer with timely notice of a potential claim is a condition precedent, and thus [a]bsent a valid excuse, a failure to satisfy the notice requirement vitiates the policy'" (Sayed v Macari, 296 AD2d 396, 397, quoting Security Mut. Ins. Co. of N.Y. v Acker-Fitzsimons Corp., 31 NY2d 436, 440; see Argo Corp. v Greater N.Y. Mut. Ins. Co., 4 NY3d 332, 339).
The defendant established, prima facie, its entitlement to judgment as a matter of law by demonstrating that the insured did not provide it with notice of the occurrence for 57 days after it had become aware of the incident that gave rise to the claim (see Deso v London & Lancashire Indem. Co. of Am., 3 NY2d 127, 130; Rushing v Commercial Cas. Ins. Co., 251 NY 302, 304; Safer v Government Empls. Ins. Co., 254 AD2d 344, 345). The plaintiffs' opposition to the motion neither controverted the relevant facts asserted by the defendant nor offered a valid excuse for the delay, as it was required to do in order to avoid summary judgment dismissing the complaint (see Fischer v Centurion Ins. Co., 9 AD3d 381, 382; Viggiano v Encompass Ins. Co. Fireman's Ins. Co. of Newark, N.J., 6 AD3d 695, 696). The plaintiffs' claim that the delay was justified by the insured's "good faith belief" that it was not liable for the claimant's injuries is belied by evidence establishing that upon a reasonable investigation the insured should have realized that there was a reasonable possibility of liability (see C.C.R. Realty of Dutchess v New York Cent. Mut. Fire Ins. Co., 1 AD3d 304, 305; Sayed v Macari, supra at 397; Paramount Ins. Co. v Rosedale Gardens, 293 AD2d 235, 240-242).
Further, the defendant's disclaimer letter was, as a matter of law, issued within a reasonable time (see New York Cent. Mut. Fire Ins. Co. v Majid, 5 AD3d 447; Farmbrew Realty Corp. v Tower Ins. Co., 289 AD2d 284; State Farm Mut. Auto. Ins. Co. v Daniels, 269 AD2d 860) and the plaintiffs' argument that the defendant's disclaimer was insufficient is without merit. "[W]here the insured is the first to notify the carrier, even if that notice is untimely, any subsequent information provided by the injured party is superfluous for notice purposes and need not be addressed in the notice of disclaimer issued by the insurer" (Ringel v Blue Ridge Ins. Co., 293 AD2d 460, 462; see Rochester v Quincy Mut. Fire Ins. Co., 10 AD3d 417, 418; Massachusetts Bay Ins. Co. v Flood, 128 AD2d 683, 684). Here, the claimant's attorney did not directly notify the defendant of the accident until after the insured had done so. Thus, the defendant was not required to cite the claimant's failure to provide direct notice in the disclaimer letter it had already issued to the insured (see Travelers Indem. Co. v Worthy, supra at 412; Agway Ins. v Alvarez, 258 AD2d 487, 488).
While Insurance Law § 3420(a)(3) provides an injured party with an independent right to provide an insurance carrier with written notice of an accident, the injured party is required, in order to rely upon that provision, to demonstrate that he or she acted diligently in attempting to ascertain the identity of the insurer, and thereafter expeditiously notified the insurer (see General Acc. Ins. Group v Cirucci, 46 NY2d 862, 863-864; American Home Assur. Co. v State Farm Mut. Auto. Ins. Co., 277 AD2d 409, 410; Serravillo v Sterling Ins. Co., 261 AD2d 384, 385; Eveready Ins. Co. v Chavis, 150 AD2d 332, 333). The plaintiffs' failure to provide any explanation for the five-[*3]month delay in notifying the defendant of the incident precludes any such showing here (see Trepel v Asian Pac. Express Corp., 16 AD3d 405, 406; Ringel v Blue Ridge Ins. Co., supra at 461-462; American Home Assur. Co. v State Farm Mut. Auto. Ins. Co., supra at 410).
The plaintiffs' remaining
contentions are without merit.
PRUDENTI, P.J., ADAMS, SPOLZINO and COVELLO, JJ., concur.
William T. Barbera, Pelham, N.Y., for appellants.
Bidermann, Hoenig, Massamillo & Ruff, P.C., New York,
N.Y. (Tiffany L. Bauman of
counsel), for respondents.
In an action, inter alia, to recover damages for negligence in the procurement of insurance coverage, the plaintiffs appeal from an order of the Supreme Court, Westchester County (Barone, J.), dated October 7, 2004, which granted the defendants' motion for summary judgment dismissing the complaint and denied their cross motion for summary judgment on the issue of liability.
ORDERED that the order is affirmed, with costs.
The defendant insurance broker, then known as American Phoenix Corporation (hereinafter the broker), procured a general commercial liability insurance policy on behalf of the plaintiffs from Reliance Insurance Company of Illinois (hereinafter Reliance), a carrier that was not authorized to engage in the insurance business in New York. The plaintiffs suffered a loss during the effective period of the policy, but were unable to recover under the policy because Reliance was placed in liquidation. The plaintiffs were also unable to recover from the New York State Insolvency Fund because Reliance was not authorized to do business in New York. The plaintiffs commenced this action, alleging, inter alia, that the broker failed to properly advise them that Reliance was not an authorized insurer in New York. The Supreme Court granted the broker's motion for summary judgment dismissing the complaint, and denied the plaintiffs' cross motion for summary judgment on the issue of liability. We affirm. [*2]
Contrary to the plaintiffs' contention, the broker's alleged violation of 11 NYCRR 27.18(a), which requires prompt delivery to the insured of an insurance policy bearing a legend warning the insured that the policy has been issued by an unauthorized insurer, does not give rise to a private right of action (see Certain Underwriters at Lloyd's London v Plasmanet, Inc., 2002 US Dist LEXIS 14190 [SD NY, Aug. 1, 2002]; cf. 3405 Putnam Realty Corp. v Chubb Custom Ins. Co., 14 AD3d 310). In any event, the broker demonstrated that any violation of 11 NYCRR 27.18(a) was not a proximate cause of the plaintiffs' injury (see Dance v Town of Southampton, 95 AD2d 442, 445-446). Specifically, the broker produced an affidavit, executed by the plaintiffs' agent prior to the issuance of the insurance policy, in which the agent expressly acknowledged the plaintiffs' awareness that Reliance was not an authorized insurer in New York and that, in the event of Reliance's insolvency, the insurance evidenced by the policy would not be protected by the New York State Insolvency Fund. Moreover, the broker produced correspondence, the receipt of which the plaintiffs do not deny, which notified the plaintiffs of the same facts, using language substantially similar to that required by 11 NYCRR 27.18(a). In response, the plaintiffs failed to raise a triable issue of fact.
The plaintiffs' contention that
the broker violated Insurance Law § 2117(i) is without merit, as that provision
applies only to insurers that issue documents indicating a location within New
York at which they conduct their operations, and does not apply to brokers.
PRUDENTI, P.J., ADAMS, SPOLZINO and COVELLO, JJ., concur.
DeCicco, Gibbons & McNamara, P.C., New York, N.Y. (Philip
A. DeCicco and Robert P. Meyerson of counsel), for appellants.
Dario & Yacker, LLC, New York, N.Y. (Anthony R. Suarez
of counsel), for respondent.
In an action to recover damages for personal injuries, the defendants Gregory L. Giorgio and Elisa Gail Giorgio appeal, as limited by their brief, from so much of an order of the Supreme Court, Kings County (Lewis, J.), dated January 28, 2005, as denied that branch of their motion which was to dismiss the complaint insofar as asserted against them as time-barred.
ORDERED that the order is reversed insofar as appealed from, on the law, with costs, that branch of the motion which was to dismiss the complaint insofar as asserted against the appellants as time-barred is granted, the complaint is dismissed insofar as asserted against the appellants, and the action against the remaining defendants is severed.
In support of their motion,
inter alia, to dismiss the complaint insofar as asserted against them as
time-barred, the appellants submitted uncontroverted evidence demonstrating that
this action to recover damages for personal injuries was commenced one day after
the expiration of the relevant statute of limitations (see CPLR 214). The
plaintiff opposed the motion, contending that the appellants should be equitably
estopped from raising the statute of limitations as a defense. However, the
plaintiff's conclusory assertion that timely commencement of the action was
delayed [*2]by the investigation conducted by the
appellants' insurance carrier was insufficient to warrant the imposition of
equitable estoppel (see Minichello v Northern Assur. Co. of Am., 304 AD2d
731; Phillips v Dweck, 300 AD2d 969; Bennett v Metro-North Commuter
R.R., 231 AD2d 662). Similarly, the plaintiff's unsubstantiated claim of
ongoing settlement negotiations with the carrier, even if true, does not give
rise to an estoppel (see Dailey v Mazel Stores, 309 AD2d 661; Brauner
v Metro-North Commuter R.R., 227 AD2d 306; see also Dastech Intl. v
F.T.L. Intl., 2 AD3d 667). Accordingly, since there is no evidence in the
record of any conduct on the part of the insurance carrier that induced or
misled the plaintiff into commencing the action in an untimely fashion, the
Supreme Court erred in denying that branch of the appellants' motion which was
to dismiss the complaint insofar as asserted against them as time-barred (see
e.g. Dowdell v Greene County, 14 AD3d 750; Kiernan v Long Is. R.R.,
209 AD2d 588; Gallo v County of Westchester, 162 AD2d 584).
SCHMIDT, J.P., MASTRO, SPOLZINO and COVELLO, JJ., concur.
James Edward Pelzer
Clerk of the Court
Fitzpatrick & Fitzpatrick, Mineola (Elizabeth A. Fitzpatrick of
counsel), for appellants.
Shapiro, Beilly, Rosenberg, Aronowitz, Levy & Fox, LLP, New
York (Barry I. Levy of counsel), for respondent.
Order, Supreme Court, Bronx County (Kenneth L. Thompson, Jr., J.), entered April 11, 2005, which, upon the parties' respective motions for summary judgment, declared that defendant insurer is liable to the two infant plaintiffs in the aggregate amount of $200,000, or $100,000 each, unanimously affirmed, without costs.
Each of the two infant plaintiffs resided in the same apartment and suffered injury as a result of exposure to lead. Defendant insured the building owner under a homeowner's liability policy with coverage limit "per occurrence" of $200,000. The issue is whether defendant is liable in the aggregate for $200,000 or $400,000. In relevant part the policy provides:
"Regardless of the number of insured persons, injured persons, claims, claimants or policies involved, our total liability under the Coverage X -Family Liability Protection for damages resulting from one occurrence will not exceed the limit shown on the Policy Declarations. All bodily injury and property damage resulting from continuous or repeated exposure to the same general conditions is considered the result of one occurrence."
The IAS court correctly held that by reason of this clause, and notwithstanding that each plaintiff may have ingested the lead at different times, both plaintiffs' exposure to the same lead hazard in the same apartment constituted only one occurrence subject to the $200,000 policy limit. Nor is there anything about this clause to suggest that it was intended only to prevent [*2]multiple recoveries by a single claimant where policies have been renewed as in Hiraldo v Allstate Ins. Co. (__ NY3d __, 2005 NY LEXIS 2698).
THIS CONSTITUTES THE DECISION
OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.
ENTERED: FEBRUARY 23, 2006
Order, Supreme Court, New York County (Saralee Evans, J.), entered October 29, 2004, which, to the extent appealed from as limited by the briefs, denied the motion of Alliance Plus, Inc. (Alliance) for summary judgment dismissing plaintiff's breach of contract claim, and granted the motions of defendants The Treiber Group, LLC (Treiber) and Insurance Services Office, Inc. (ISO) for summary judgment, dismissing all claims and cross claims against them, unanimously affirmed, without costs.
The court properly found that plaintiff's breach of contract claim was not
barred by the statute of limitations. The error constituting the alleged breach
by Alliance occurred in 1997, when Alliance undertook to value plaintiff's
property for purposes of obtaining replacement cost insurance (see
Fortino v Hersh, 307 AD2d 899 ; Stevens v Hickey-Finn & Co., Inc.,
261 AD2d 300 ). That the same error may have been earlier made by Alliance
in connection with different coverage procured by it for plaintiff, does not
entail an earlier accrual date for the presently asserted contract claim
relating to Alliance's brokerage of the replacement cost policy
[*2](cf. Mauro v Niemann Agency, Inc., 303
AD2d 468 ; Hudson Envelope Corp. v Klausner, 249 AD2d 31 ).
As to the merits of the contract claim, a triable factual issue is raised as to
whether Alliance's representative should have been put on notice either that not
all of the property plaintiff sought to insure was insured, or that the portion
which was insured was underinsured. Issues of fact also exist as to whether
plaintiff was prevented from fulfilling the condition precedent of repair or
replacement, by reason of
the inadequate coverage (see Covia Partnership v Harp Travel Serv., 1994 US Dist LEXIS 4440, at *13-*14 [SD NY 1994]; Zaitchick v Am. Motorist Ins. Co., 554 F Supp 209, 215-216 [SD NY 1982], affd 742 F2d 1441 ).
Also proper was the dismissal of Alliance's cross claims against Treiber and ISO. The confidential survey report produced by ISO for the carrier's agent, Treiber, was expressly for underwriting purposes only. Thus, Alliance was foreclosed from relying on the report when recommending a level of insurance to plaintiff (see Coventry Coating v Verlan Fire Ins. Co., 303 AD2d 164 ). Finally, it was Alliance, not Treiber, which, by its conduct, assumed the duty to value the property for the purpose of advising plaintiff respecting how much coverage would be adequate (see Fortino v Hersh, 307 AD2d 899, 900 ). There is no evidence that Treiber assumed any such duty, either by agreement or by its conduct.
THIS CONSTITUTES THE DECISION AND ORDER
OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.
ENTERED: FEBRUARY 23, 2006