Dear Coverage Pointers Subscribers:
Neither snow nor rain nor heat nor gloom of night stays these couriers from swift completion of their appointed rounds
Motto, US Postal Service
Neither 20 inches of snow nor damage to virtually every tree in the City nor power outages have that continued to plague thousands of residents nor flooded basements stays the publication of Coverage Pointers.
Motto, Dan the Taskmaster
We're a tough lot here.
Welcome to this week's issue of Coverage Pointers, Hurwitz & Fine's bi-weekly presentation of insurance coverage cases. We were really overwhelmed by the positive response to last week's banner issue and welcome some 20 new subscribers to the CP family, one for each inch of snow. But the snow has melted, most of the power has been restored and the courts have been very busy.
The first three cases reported in the attached edition come from New York's highest court, the Court of Appeals. In the September 22 edition of this publication, we advised you that the Court was considering at least two significant coverage decisions this term, one of which has now been decided and is reported below. The Court dealt with the very complicated but important questions relating to the interrelationship of indemnity agreements with insurance-procurement agreements in the context of a New York statute which prohibits certain kinds of indemnity agreements. You'll find an extensive discussion of that case but set out in a way that should make it easier to follow and understand.
Then you'll find the usual potpourri of coverage cases, serious injury offerings and Audrey's Angels on No Fault (which has become an immensely popular column, based on our fan mail). This week's issue includes the following:
From the New York Court of Appeals
· Indemnity Agreements Requiring Tenant to Indemnity Landlord are Enforceable if (a) They Don't Require Indemnity for the Sole Negligence of the Tenant and (b) the Indemnity is Supported by an Insurance Policy.
· State Can Mandate Health Insurance Coverage for Contraceptive Drugs -- "It does burden their exercise of religion - but that alone cannot call the validity of a generally applicable and neutral statute into question." (From the Majority Opinion)
· Expert Proof -- New York is still a non-Daubert State; Foundation Failure rather than Frye Found to Take Toxic Tort to Task
FROM THE APPELLATE DIVISION
· Two Wrongs Don't Make it Right: Carrier's Failure to Time Deny Coverage Serves to Waive the Right to Do So. In Any Event, Citing "Unusual Circumstances," Court Would Have Excused Insured's Late Notice Even Where its Building Was Sinking
· "Ordinance and Law Endorsement" -- Number One Reason to Not Test the Integrity of Your Building Systems: No Coverage
· When is Excess Carrier Entitled to Notice? Note to Excess Insurer: Those Exaggerated Claims of Damages and Tall Tales of Serious Injuries May Not Be Enough to Trigger Insured's Duty to Notify You
· From the Mountaintop, The Polis Sees a Broad Expanse of Defended Land Deregulation Sounds Good, Until You Need the Regulation: Insurance Reg Allows Denial of Benefit Reimbursement
· Another "Bad Faith" Case Bites the Dust - No Separate Tort of Bad Faith Failure to Pay Policy Proceeds. No Punitive Damage Claim Allowed With Establishing Pattern of Conduct Aimed at Public
· Carrier's Obligation to Deny Coverage Quickly, Based on Statute, Does Not Apply to Property Damage Cases, Only Personal Injury and Wrongful Death. However, Better You Do Today, Instead of Waiting Until Tomorrow - In Property Damage Case, Late Disclaimer Fatal, Only if Insured is Prejudiced
· Is "(i)t is better to offer no excuse than a bad one"? (George Washington).
· Lack of Reasonable Excuse Keeps Default Judgment Intact
· In 9/11 Case, Business Income Loss Coverage Extends to Point Where Business Resumes, Not When Pre-Loss Income is Attained
The Serious (Injury) Side of New York No-Fault
· Jury No Cause Affirmed on Failure to Prove Causation
· In this Agath (e) Christie Novella, the Mystery is Why Doesn't the Defendant Provide Objective Testing
· This Case Has Nothing to Do with the Fabian Society (their Annual Meeting is November 4th in London by the way), However the Jury Could Award Pain and Suffering on a 90/180 Category Case
· Should We Really Expect the Plaintiff's Complaint to Be Reinstated with No Recent Exam, No Knowledge of Previous Injury and a Failure to Address Degenerative Changes?
Audrey's Angle on No-Fault
· An Insurer Cannot Issue A Denial Of Claim Based Upon The Applicant's Failure To Timely Submit A Verification Response As There Is No Prescribed Time Frame To Respond To Verification Requests.
· Disc Herniations And Surgery Recommendations Alone Do Not Establish A Prima Facie Case Of Medical Necessity For Chiropractic Treatment.
· Health Insurance Premiums Are Not Reimbursable Under No-Fault.
· Electrodiagnostic Providers, Medical Equipment Suppliers, Laboratories, And Radiological Facilities Have To Establish Medical Necessity When Rebutted By the Insurer.
· Follow up on Previous Reported Arbitration, Awarding Reimbursement of EMG/NCV Testing by a Physical Therapist
Enjoy and keep those e-mails coming in.
Dan
Dan D. Kohane
E-Mail: [email protected]
10/19/06
Great N. Ins. Co. v Interior Constr. Corp.
New York State Court of Appeals
Indemnity Agreements Requiring Tenant to Indemnity
Landlord are Enforceable if (a) They Don’t Require Indemnity for the Sole
Negligence of the Landlord and (b) the Indemnity is Supported by an Insurance
Policy.
Indemnity Me, Sayeth the Landlord
New Water, the landlord, leased a portion of the 28th floor of a
building it owned in New York City to Depository Trust, the tenant. Depository
agrees to indemnify the landlord, with the lease containing this indemnification
agreement:
"Tenant shall indemnify and hold harmless Landlord . . . from and against any and all claims arising from or in connection with (A) the conduct or management of the Premises or of any business therein, or any work or thing whatsoever done, or any condition created (other than by Landlord) in or about the Premises during the term of this Lease . . .; (B) any act, omission or negligence of Tenant or any of its subtenants or licensees . . . or contractors; (C) any accident, injury or damage whatsoever (unless caused solely by Landlord's negligence) occurring in, at or upon the Premises; and (D) any breach or default by Tenant in the full and prompt payment and performance of Tenant's obligation under this Lease . . . ." (emphasis added).
And Provide Me With Insurance …
The lease further obligated the tenant, at its expense, to maintain a comprehensive general liability insurance policy naming the landlord as an additional insured with coverage to be no less than $5 million "combined single limit per occurrence for bodily injury and property damage liability" and obtain mutual waivers of subrogation in their respective insurance policies. Depository, the tenant, procured the specified insurance coverage, and New Water, the landlord, also maintained a separate insurance policy for the building.
What Happened and Who was Damaged?
The tenant hired a contractor to renovate a portion of its leased property (Interior). Interior subcontracted with a sprinkler company (Mechanical) to do work on the existing sprinkler system. During the construction a flood occurred, resulting from the failure to drain the pipes before beginning the sprinkler work, causing damage to property leased to Neuberger, a tenant on the floor below.
Imagine, a Lawsuit
Neuberger’s property insurer paid for the damage and then commenced a subrogation action against landlord and tenant. The landlord then cross-claimed against the tenant for contractual indemnification. The subrogation action was settled for $200,000 and all claims and cross claims among the parties were resolved, except for New Water's indemnification claim against the tenant, Depository. As part of the settlement, the parties stipulated that if the case had been tried by a jury, 90% of the liability would have been allocated to the landlord, New Water and 10% to Interior. After the settlement, New Water moved for summary judgment against Depository on its claim for contractual indemnification.
Can the Landlord, 90% Responsible, Secure Contractual Indemnification from its Tenant?
The Lease was Clear
The tenant argued that the indemnity agreement was clear that the tenant had to indemnify the landlord in this case and, even if it were, the lease was in violation of General Obligations Law § 5-321 because it obligates a tenant to indemnify a landlord for the landlord's own negligence. The Court held that the indemnity provisions were clear that the tenant was to indemnify the landlord so long as the landlord was not 100% responsible. Here the parties agreed that the landlord was only 90% responsible so it was enforceable by its terms.
Does the General Obligations Law Cause this Indemnity Agreement to be Unenforceable?
The General Obligations Law section provides that indemnity agreements between landlord and tenants are unenforceable if they require a tenant to indemnify a landlord for the landlord’s negligence. So, argued the tenant. However the Court of Appeals held that this section of the General Obligations Law only applies where the “lessor” is exempted from liability to the victim for the landlord’s negligence.
Here, the landlord is not exempting itself from negligence; it merely allocated the risk of liability to another party using the asset of insurance coverage. Here:
· Two sophisticated parties negotiated a lease;
· The lease contained a broad indemnification provision;
· The lease contained a insurance procurement provision;
· The arrangement afforded Neuberger, the victim, with adequate recourse for the damages it sustained;
· The tenant’s insurer and not the tenant will bear responsibility for the indemnification payment.
10/19/06 Catholic Charities of the Diocese of Albany v. Serio
New York Court of Appeals
State Can Mandate Health Insurance Coverage for Contraceptive Drugs -- “It does burden their exercise of religion — but that alone…cannot call the validity of a generally applicable and neutral statute into question.” (From the Majority Opinion)
Catholic Charities challenged the validity of legislation (Women's Health and Wellness Act) requiring health insurance policies that coverage for prescription drugs must include coverage for contraception on the grounds that the legislative provisions violate their rights under the religion clauses of the federal and state constitutions. The Court holds that the legislation as applied to these plaintiffs is valid and not in violation of the Federal and State Constitutions. The Court holds that
The burden the WHWA places on plaintiffs' religious practices is a serious one, but the WHWA does not literally compel them to purchase contraceptive coverage for their employees, in violation of their religious beliefs; it only requires that policies that provide prescription drug coverage include coverage for contraceptives. Plaintiffs are not required by law to purchase prescription drug coverage at all. They assert, unquestionably in good faith, that they feel obliged to do so because, as religious institutions, they must provide just wages and benefits to their employees. But it is surely not impossible, though it may be expensive or difficult, to compensate employees adequately without including prescription drugs in their group health care policies.
10/17/06 Parker v. Mobil Oil Corporation
New York Court of Appeals
Expert Proof -- New York is still a non-Daubert State; Foundation Failure Rather than Frye Found to Take Toxic Tort to Task
At issue in this case is the admissibility of Parker's experts' opinions that alleged exposure to toxins caused injury. The parties disputed whether the opinions should be analyzed under Frye test. The introduction of novel scientific evidence calls for a determination of its reliability. Thus, the Frye test asks "whether the accepted techniques, when properly performed, generate results accepted as reliable within the scientific community generally. Frye holds that "while courts will go a long way in admitting expert testimony deduced from a well-recognized scientific principle or discovery, the thing from which the deduction is made must be sufficiently established to have gained general acceptance in the particular field in which it belongs". It "emphasizes 'counting scientists' votes, rather than on verifying the soundness of a scientific conclusion'
The Court reminds us that the Frye inquiry is separate and distinct from the admissibility question applied to all evidence — whether there is a proper foundation — to determine whether the accepted methods were appropriately employed in a particular case. Here, there was a question as to whether the methodologies employed by Parker's experts lead to a reliable result — specifically, whether they provided a reliable causation opinion without using a dose-response relationship and without quantifying Parker's exposure. There was no particular novel methodology at issue for which the Court needed to determine whether there is general acceptance. Thus, the inquiry here was whether there is an appropriate foundation for the experts' opinions, rather than whether the opinions are admissible under Frye.
The Court rejected the Appellate Division's requirement that the amount of exposure need be quantified exactly by the experts, however upheld the Appellate Division’s preclusion of the experts and properly deemed them insufficient to defeat summary judgment. The experts, although undoubtedly highly qualified in their respective fields, failed to demonstrate that exposure to benzene as a component of gasoline caused Parker's injuries.
The Court avoided the opportunity to consider adopting a Daubert standard, instead of Frye, since the parties to the lawsuit hadn’t ask for that consideration.
10/19/06 151 East 26th Street Associates v. QBE Insurance Company
Appellate Division, First Department
Two Wrongs Don’t Make it Right: Carrier’s Failure to Time Deny Coverage Serves to Waive the Right to Do So. In Any Event, Citing “Unusual Circumstances,” Court Would Have Excused Insured’s Late Notice even where its Building Was Sinking
Defendant never issued a written disclaimer of coverage citing the failure of plaintiff to give "prompt" notice in accordance with the requirement of the policy, and, indeed, did not raise the lack-of-prompt-notice defense until more than three years after receiving plaintiff's notice of claim. The Court finds that under the “unusual circumstances” presented, in which serious structural infirmity in plaintiff's apartment building necessitated emergent and extensive shoring to stabilize the building and assure the safety of its tenants, many of whom refused to evacuate their apartments, plaintiff's notice of claim, sent to defendant shortly after the emergency shoring had been completed but before substantial long-term remedial measures had been undertaken, has not been shown to be untimely as a matter of law.
10/19/06 Park City Estates Tenants Corp v. Gulf Insurance Company
Appellate Division, First Department
“Ordinance and Law Endorsement” -- Number One Reason to Not Test the Integrity of Your Building Systems: No Coverage
In this action to recover on an all-risk commercial property insurance policy issued to the insured an "Ordinance or Law" endorsement in the policy specifically excluded coverage for losses related to "integrity testing" on the building's plumbing and gas systems. After a gas pipe ruptured in the apartment of a tenant in plaintiff's building, integrity testing of the system was performed, in accordance with the Building Code. When the gas pipes and risers failed to withstand the pressure from this testing, the system required more than $600,000 worth of repairs. This loss was a cost associated with the enforcement of [an] ordinance or law (i.e. the Building Code), which required the insured to “test plumbing, gas or other building systems for integrity," and was specifically excluded from coverage.
10/17/06 Morris Park Contracting Corp v. National Union Fire Insurance
Appellate Division, Second Department
When is Excess Carrier Entitled to Notice? Note to Excess Insurer: Those Exaggerated Claims of Damages and Tall Tales of Serious Injuries May Not Be Enough to Trigger Insured’s Duty to Notify You
In this case, notice to the excess liability carrier was the issue. In these cases, the focus is on when the insured reasonably should have known that the claim against it would likely exhaust its primary insurance coverage and trigger its excess coverage, and whether any delay between acquiring that knowledge and giving notice to the excess carrier was reasonable under the circumstances.
Morris Park's counsel sent a report to the primary insurer listing various injuries and damages claimed by the injured party in a second supplemental bill of particulars served in a related action against several municipal defendants. However, while that report constituted some evidence that Morris Park may have had sufficient information at that time to alert National Union to a possible excess coverage claim. The Court finds a question of fact on the record. Indeed, the second supplemental bill of particulars upon which the report is based was served in a separate action and did not purport to attribute any fault or assert any claims for the specified injuries against Morris Park. Additionally, Morris Park presented evidence that it was actively engaged in a good faith investigation into the happening of the accident, the injuries that resulted there from, Morris Park's potential liability (if any) therefore, and even the injured worker's eligibility to recover some elements of the damages sought. Morris Park further averred that only when it was served with the bill of particulars dated January 22, 2003, asserting 42 additional injuries over and above those claimed against the municipal defendants in the related action, did it become reasonably clear that the excess coverage might be implicated in the action.
In view of the commonplace practice of exaggerating damages requests in personal injury actions, the ad damnum clause alone was not sufficient to require the giving of notice to National Union. Rather, it is the combination of the ad damnum figure and evidence regarding the seriousness of the injuries which triggers that obligation. The Court finds a question of fact as to when the insured reasonably knew the excess coverage could be reached.
10/17/06 Bravo Realty Corp. v. Mt. Hawley Insurance Company
Appellate Division, First Department
From the Mountaintop, The Polis Sees a Broad Expanse of Defended Land
The duty to defend is exceedingly broad and the insurer will be required to defend the insured whenever the allegations of the complaint suggest a reasonable possibility of coverage (see Automobile Ins. Co. of Hartford v Cook, 7 NY3d 131 (2006). Here, the complaint in the underlying action sought recovery, at least in part, on the theory that negligence on the part of plaintiff insureds proximately caused the alleged damages and, as such, alleged conduct falling within the ken of the Mt. Hawley policy’s coverage.
10/12/06 Allstate Insurance Company v. Belt Parkway Imaging, P.C.
Appellate Division, First Department
Deregulation Sounds Good, Until You Need the Regulation: Insurance Reg Allows Denial of Benefit Reimbursement
Appellate Division affirms the Lower Court order that permitted Allstate to withhold payments for claims that the imaging center had made before April 4, 2002 and dismissed plaintiffs' causes of action for fraud and unjust enrichment regarding payments made before that date insofar as such causes of action were based on defendants' improper corporate form and not in compliance with Insurance Department regulation related to claims for Personal Injury Protection Benefits states (§ 65-3.16[a][12]). That regulation provides that "A provider of health care services is not eligible for reimbursement under section 5102(a)(1) of the Insurance Law if the provider fails to meet any applicable New York State or local licensing requirement necessary to perform such service in New York “(Reg implementation date: 4/4/02). The bills that Allstate did not pay were properly denied as the clear import of § 65-3.16(a)(12) is that as of April 4, 2002, defendants were no longer eligible to be paid, even if they had already performed services. The very word "reimbursement," used in the regulation, implies that the services had already been provided.
10/10/06 Johnson v. Allstate Insurance Company
Appellate Division, Second Department
Another “Bad Faith” Case Bites the Dust – No Separate
Tort of Bad Faith Failure to Pay Policy Proceeds. No Punitive Damage Claim
Allowed With Establishing Pattern of Conduct Aimed at Public
In a first party case, plaintiff brings a claim for “bad faith” alleging insurer
failed to pay benefits. Court dismisses that cause of action. There is no
separate tort for bad faith refusal to comply with an insurance contract.
Further, to recover punitive damages, conduct must be alleged which is part of a
pattern directed at the public generally, which was not alleged here.
10/10/06 Legum v Allstate Insurance Company
Appellate Division, Second Department
Carrier’s Obligation to Deny Coverage Quickly, Based on Statute, Does Not Apply to Property Damage Cases, Only Personal Injury and Wrongful Death. However, Better You Do Today, Instead of Waiting Until Tomorrow – In Property Damage Case, Late Disclaimer Fatal, Only if Insured is Prejudiced
Contrary to the plaintiff's contention, Insurance Law § 3420(d) was inapplicable to this case since the underlying claim did not involve death or bodily injury, but a property damage claim. Thus, the defendant's delay - even assuming it was unreasonable - will not estop the insurer from disclaiming unless the insured has suffered prejudice by virtue of the insurer's conduct. Here, the insured failed to make the requisite prima facie showing of prejudice.
10/10/06 Lemberger v. Congregation Yetev Lev D'Satmar, Inc.
Appellate Division, Second Department
Is “(i)t is better to offer no excuse than a bad one”? (George Washington).
Lack of Reasonable Excuse Keeps Default Judgment Intact
The bare allegations of the Zurich claims manager that the summons and complaint were immediately forwarded to an unnamed insurance broker, without an adequate explanation for the approximately four-month gap that followed before Zurich allegedly received them, was insufficient to constitute a reasonable excuse for the insured’s default. Zurich claimed that "because Zurich had no record of the claim being logged into our system, Zurich never assigned counsel to answer the complaint" did not constitute a reasonable excuse (see CPLR 5015[a][1]. In view of the lack of a reasonable excuse, the Lower Court abused its discretion in vacating the default judgment.
10/10/06 9174 Royal Indemnity Company v. Retail Brand Alliance, Inc.
Appellate Division, First Department
In 9/11 Case, Business Income Loss Coverage Extends to Point Where Business Resumes, Not When Pre-Loss Income is Attained
The Court affirms the Lower Court finding that the property insurance policies extended only to defendant insured's business income loss during the time needed to reopen the subject store, plus an additional 30 days. The Business Income Loss provision of the Local Policy issued by Royal US provided that in addition to the requirement that the "suspension must be caused by direct physical loss of or damage to property at or within 500 feet of insured Premises and Location(s),'" which triggers coverage, there must be "actual loss of Business Income . . . due to the necessary suspension of your operations' . . . during the period of restoration.'" Once the store resumed operations on September 12, 2002, a year after the terrorist attack on the World Trade Center, the Business Income coverage terminated, regardless of whether the insured's income was back up to pre-loss levels. It was undisputed that the store reopened on September 12, 2002 and was in continuous operation ever since. The Court holds that it was clear that destruction of the World Trade Center has not "prevented" the use of or access to the store after it reopened. While the insured claims that access was hindered because, among other things, one entrance was closed and there was scaffolding on the building, there is no proof that the entrance that remained open was insufficient to accommodate all customer needs. Thus, while the World Trade Center is no longer in existence, there is no indication that its absence hampered or delayed anyone's ability to enter the store and make a purchase, or prevented suppliers from delivering merchandise.
The Serious (Injury) Side of New York No-Fault
10/19/06 Files v. Ken Goewey Dodge, Inc
Appellate Division, Third Department
Jury No Cause Affirmed on Failure to Prove Causation
Plaintiff appeals, arguing that the need for spinal surgery was the only evidence that he had sustained a serious injury and the surgery's essential role meant that the jury's finding of no causal relationship was inconsistent with its finding of a significant limitation of use. The Court disagrees. The jury's findings clearly addressed two discrete issues and were neither inconsistent nor against the weight of the evidence.
In its instructions to the jury, the Supreme Court emphasized that the jury had to assess the seriousness of the condition of plaintiff's cervical spine and did not mention that it had to be causally related to the accident. As a result, the jury's affirmative answer to this interrogatory confirmed only that it found the condition of plaintiff's spine to constitute a significant limitation of use (see Insurance Law § 5102 [d]), without regard to the cause of that condition. In other words, if the spinal surgery were causally related to the accident, the testimony of plaintiff's medical expert as to his limited range of motion and the necessity of the surgery would be sufficient to establish a qualifying serious injury.
10/17/06 Agathe v. Wang
Appellate Division, Second Department
In this Agath (e) Christie Novella, the Mystery is Why Doesn’t the Defendant Provide Objective Testing
Defendants' examining orthopedic surgeon set forth a single range of motion finding with respect to the plaintiff's left knee, but failed to compare that finding to what was considered to be the normal range of motion. The defendants' examining neurologist merely noted that the plaintiff had "excellent" range of motion of the neck and lower back, and he failed to set forth the objective testing performed to arrive at his conclusion that the plaintiff did not suffer from any limitations in movement in those regions.
10/12/06 Obdulio v. Fabian
Appellate Division, First Department
This Case Has Nothing to Do with the Fabian Society (their Annual Meeting is November 4th in London by the way), However the Jury Could Award Pain and Suffering on a 90/180 Category Case
Once a prima facie case of serious injury has been established and the trier of fact determines that a serious injury has been sustained, plaintiff is entitled to recover for all injuries incurred as a result of the accident, including both past and future pain and suffering. Accordingly, plaintiff was not foreclosed from recovering damages for future pain and suffering on the ground that he did not sustain a serious injury under the significant limitation or permanent consequential injury categories. While the jury determined that plaintiff did not sustain a significant limitation injury or a permanent consequential injury, it did find that plaintiff sustained a serious injury under the 90/180-day category, and awarded plaintiff damages for both past and future pain and suffering.
10/10/06 D'Alba v. Yong-Ae Choi
Appellate Division, Second Department
Should We Really Expect the Plaintiff’s Complaint to Be Reinstated with No Recent Exam, No Knowledge of Previous Injury and a Failure to Address Degenerative Changes?
The findings contained in the affirmed medical report of the plaintiff's examining physician were not based on a recent examination of the plaintiff. The plaintiff's examining physician also failed to indicate an awareness that the plaintiff was involved in another accident which occurred two months after the instant one, in which he hurt his neck, lower back, and shoulder. Nor did the plaintiff's examining physician address the defendants' examining radiologist's finding attributing the condition of the plaintiff's cervical spine to degenerative processes. Thus, the findings of the plaintiff's examining physician that his cervical and lumbar spine and right shoulder injuries were caused by the subject accident are based on speculation.
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.
10/13/06 In the Matter of the Arbitration between the Applicant and Respondent
Arbitrator Thomas J. McCorry, Esq. (Erie County)
An Insurer Cannot Issue A Denial Of Claim Based Upon The Applicant’s Failure To Timely Submit A Verification Response As There Is No Prescribed Timeframe To Respond To Verification Requests.
Here is the Angle: In this case, the insurer received a timely lost wage claim and sought verification from the eligible injured person. When the eligible injured person did not respond within 90 days of the request the insurer denied the lost wage claim based upon the 90 day rule to submit proof of a lost wage claim. The insurer is reminded that it cannot place and the regulation does not place a timeframe on responses to verification. Accordingly, the fact that the verification was not returned within 90 days from being sent does not provide any basis to deny the claim under the regulation’s 90 day rule.
The Analysis: Applicant sought $12,000 in lost wages as a result of a September 9, 2003, motor vehicle accident. The Applicant was a truck driver before the accident. The insurer did not dispute the medical necessity of the Applicant lost wage claim. The insurer did not dispute that the Applicant provided timely notice of a lost wage claim. Rather, it denied lost wages on the basis that the Applicant violated the 90 day rule but he failed to timely submit verification requested regarding medical disability as well as tax returns.
Arbitrator McCorry indicates that the denial was not proper. He stated that with regard to a proper denial:
It seems to me that a proper denial of claim must include the information called for in the prescribed denial of claim form (See 11 NYCRR 65-3.4(c)(11) and must properly advise the claimant with a high degree of specificity of the ground or grounds on which the disclaimer is predicated.
As was stated in the case of Nyack Hospital v State Farm Mutual Auto Insurance Company ‘A timely denial alone does not avoid preclusion, where said denial is factually insufficient, conclusory, vague or otherwise involves a defense which has no merit as a matter of law.
Here, the insurer’s denial based upon the Applicant’s failure to timely submit verification was inappropriate as the insurer is not permitted to impose timeframes on return of verification requests or denial a claim without receiving all verification requested. Arbitrator McCorry cited to an August 22, 2006, Insurance Department General Counsel Opinion Letter which stated that an insurer that requests verification cannot prescribe or unilaterally establish a timeframe for receipt of the requested verification from the application and thereafter denial the claim for failure to adhere to the timeframe.
Further, in this case the insurer failed to submit any proof that the verification requests were sent and sent in a timely fashion. The Applicant did submit documentation of his monthly wages together with a letter from a physician rendering his disabled as a result of the accident. Accordingly, the Applicant was awarded the demanded lost wages.
10/11/06 In the Matter of the Arbitration between the Applicant and Respondent
Arbitrator Veronica K. O’Connor, Esq. (Erie County)
Disc Herniations And Surgery Recommendations Alone Do Not Establish A Prima Facie Case Of Medical Necessity For Chiropractic Treatment.
Here is the Angle: The Applicant in this case apparently lost focus on what the claim was and thought that a barrage of evidence of MRIs revealing multiple disc herniations throughout the spine and surgical recommendations would win the day. Yet, the Applicant did not submit any evidence that chiropractic care, which was what the Applicant sought to recover, was medically necessary.
The Analysis: The Applicant, eligible injured person, was involved in a January 6, 2005, motor vehicle accident sustaining injury to his spine. The Applicant commenced chiropractic care three times per week. Then the treating chiropractor referred the Applicant for MRIs of the cervical, thoracic, and lumbar spine. In each MRI there were multiple disc herniations with minimal impingements of the thecal sac.
The Applicant was referred to Dr. Andrew Matteliano, a physiatrist, wherein Dr. Matteliano diagnosed Applicant with a permanent partial disability due to his injuries. The Applicant was advised to continue chiropractic care.
Then Applicant was referred to Dr. William Capicotto, an orthopedic surgeon. Dr. Capicotto concluded that Applicant’s cervical, thoracic, and lumbar spine condition was 100% casually related to the accident. He further stated that the Applicant has “a number of wear and tear changes in his spine which should not be considered part of his injury.” Dr. Capicotto recommended cervical spine surgery which was scheduled a number of times but postponed indefinitely by Applicant.
On June 28, 2005, the insurer had the Applicant examined by John Gaiser, D.C. for a chiropractic re-evaluation. Mr. Gaiser’s report revealed that upon examination there were no objective findings that necessitated further chiropractic care. He did note that subjectively chiropractic care did not make a significant improvement to the Applicant’s symptoms.
Based upon Mr. Gaiser’s report, the insurer denied chiropractic benefits.
Despite the Applicant’s evidence that he faced a surgical recommendation and had multiple disc herniations throughout his entire spine, the Applicant failed to submit any evidence that refuted Mr. Gaiser’s report. Accordingly, Arbitrator O’Connor determined that Applicant failed to establish a prima face case of medical necessity for chiropractic treatment.
10/10/06 In the Matter of the Arbitration between the Applicant and Respondent
Arbitrator Veronica K. O’Connor, Esq. (Erie County)
Health Insurance Premiums Are Not Reimbursable Under No-Fault.
Here is the Angle: Health Insurance Premiums are not reimbursable under No-Fault. Insurers should review what their practice is as the Insurance Department indicated that health insurance is a fringe benefit and not reimbursable under No-Fault.
The Analysis: The Applicant, eligible injured person, was involved in a December 23, 2004, motor vehicle accident. The Applicant made a claim for lost wages as a result of the accident. Interestingly, though it was not the typical lost wage claim. The Applicant sought payment of health insurance premiums he had to pay be medical and dental coverage under COBRA because he was terminated due to a six month disability.
The insurer issued a timely denial to the Applicant stating that it was denying the lost wage claim as medical and dental coverage are a fringe benefit provided by the employer and not reimbursable under No-Fault.
The insurer argued at the arbitration that not only were the health insurance premiums not reimbursable under No-Fault, but also that the Respondent only submitted one claim for the premium in accordance with the regulations’ time requirements. We note that the Applicant sought $3,664.41 and Respondent indicated that it only received a claim for $833.81.
Arbitrator O’Connor stated that 11 NYCRR §65-1.1 requires proof of claim of work loss no later than 90 days after the work loss is incurred. Further, the Insurance Department’s September 2, 2004, Opinion Letter indicated that an applicant for benefits is obligated to timely submit a claim even after the insurer has issued a denial for the claim and for all future claims. Arbitrator O’Connor determined that the Applicant failed to submit the claims timely in accordance with the regulation.
Next, Arbitrator O’Connor determined that the Applicant was not entitled to reimbursement of health insurance premiums. Arbitrator O’Connor referenced an Insurance Department response to inquiry entitled “No-Fault – Reimbursement of Health Insurance Premiums” which stated:
It has been the long standing position of the Insurance Department that health insurance coverage is considered a fringe benefit offered by an employer and is not included in lost earnings and therefore not reimbursable under No-Fault. To the best of our knowledge, no court has ruled otherwise.
The Applicant did not submit any case law or regulation to refute the opinion and the claim was denied.
9/29/06 West Tremont Med. Diagnostic, P.C. A/A/O Janett Lamb-McCleod v. Geico Ins. Co., 2006 NY Slip Op 51871(U) (2d Dept.)
Electrodiagnostic Providers, Medical Equipment Suppliers, Laboratories, And Radiological Facilities Have To Establish Medical Necessity When Rebutted By the Insurer.
Here is the Angle: We have seen and heard from others of providers that only perform MRI, x-rays, CT scans, or supply a medical device prevailing on cases by merely presenting the denial and the insurance claim form. While carriers were arguing peer review reports and IME reports rebutting the issue of medical necessity many were being told that these providers did not have to establish medical necessity as they were only performing a service requested by a treating physician. This decision from the Second Department is well reasoned and does not excuse these types of providers from having to demonstrate medical necessity when challenged.
The Analysis: The Plaintiff, MRI facility, sought reimbursement of MRIs of the brain, lumbosacral spine, and cervical spine, performed on the eligible injured person. At trial, the plaintiff established a prima facie case of medical necessity which was rebutted by the defendant through a peer review with expert testimony. The plaintiff never addressed the peer review and the expert testimony. The trial court entered judgment in favor of the plaintiff reasoning that since the plaintiff was a diagnostic center only performing MRIs pursuant to the treating physician’s instructions without the ability to physically examine the eligible injured person, the plaintiff could not, as a matter of law, be denied first party benefit based upon lack of medical necessity. The Appellate Division reversed.
The Appellate Division provided a useful set of burdens of proof for use in electrodiagnostic testing cases. A plaintiff bears the initial burden of proving a prima facie case of medical necessity. The plaintiff can meet that burden by submitting completed claim forms that indicate that amount of loss sustained and that payment of No-Fault benefits are overdue. The burden shifts to the defendant, insurer, to come forward with sufficient evidence that there is a lack of medical necessity. Finally, the burden shifts back to the plaintiff to present is own evidence of medical necessity.
In other words, the plaintiff need only submit the completed claim form with the amount of the loss together with a denial of claim to meet its initial burden. The insurer then, if it issued a timely denial, can set forth evidence in the form of testimony from its expert peer reviewer or independent medical examiner that there is lack of medical necessity for the testing. If the insurer submits sufficient evidence demonstrating lack of medical necessity, the plaintiff must submit some evidence refuting the insurer’s expert opinion.
In this case, the plaintiff failed to call any physician to testify to refute the insurer’s expert witness.
The Appellate Division rejected the trial court’s reasoning that since the electrodiagnostic provider merely performed testing and could not examine the patient for medical necessity beforehand the provider could not be denied the first party benefit. The Appellate Division, upon review of Insurance Law §5102(a)(1) and 11 NYCRR §65-1.1(b) (definition of “medical expenses”) concluded that neither the statute nor implementing regulations suggested that an electrodiagnostic provider, medical equipment supplier, laboratories, or radiological facility, which rely upon referrals from treating medical providers, are exempt from the requirement that services be “medically necessary.”
Moreover, the Court indicated that the basis for this requirement was to ensure that fraudulent practices were avoided:
While it may be argued that a diagnostic center is in no position to establish the medical necessity of a prescribed MRI, it is well settled that the assignee stands in no better position than its assignor, and has no more right or claim than the assignor. If the claim is not assigned, and is submitted to the insurer directly by the eligible injure person, the insurer may assert a defense of lack of medical necessity which, if established, will shift the burden to the eligible injured person to provide his or her own evidence of medical necessity. If the defense may be asserted against the eligible injured person, it follows that it may be asserted against the provider as well. Moreover ‘[t]o permit medical providers to receive reimbursement even when the insurer has proven that the service provided was not medically necessary would encourage fraud, rather than combat it….In fact, the construction urged by plaintiff would require insurers pay for MRIs of the entire spine when the insured suffered a broken toe, or for full body scans for broken arms.’
The Court held that plaintiff was not entitled to judgment and judgment should be entered in favor of the defendant dismissing the action.
FOLLOW UP ON PREVIOUS REPORTED ARBITRATION, AWARDING REIMBURSEMENT OF EMG/NCV TESTING BY A PHYSICAL THERAPIST.
In our last edition we reported on a decision from Arbitrator Theiss wherein she awarded reimbursement to a physical therapist for performing EMG/NCV testing. We have been in touch with counsel for the insurer on this case to see if the decision will be appealed to Master Arbitration. We were apprised that the insurer followed up with Workers’ Compensation Board to ascertain if the Board ever accepted the Education Department’s opinion letter. The Workers’ Compensation Board responded that it has recognized the opinion and assigned the following CPT codes for physical therapists in the Board’s internal system:
95860
95961
95863
95864
95900
95904
95934
We strongly advise insurers that in the event you receive a VALID claim from a physical therapist that conducted an EMG/NCV test that it be paid according to the aforementioned CPT codes. In the previously reported arbitration, the physical therapist was reimbursed a rate higher than a neurologist for the same testing as no CPT code could be assigned. Also, we cannot stress this point enough; the insurer should make sure that the physical therapist is actually qualified to perform this type of invasive testing.
Across Borders
Visit the Hot Cases section of the Federation of Defense & Corporate Counsel website, www.thefederation.org ranked among the top five legal research websites in an article published in Litigation News, a publication of the Litigation Section of the American Bar Association. Dan Kohane serves as the FDCC’s Website Editor Emeritus.
10/16/06
Hartford Accident & Indemnity v. Beaver
U.S. Court of Appeals, Eleventh Circuit
The Pivotal Issue in a Duty to
Defend Case is Whether the Complaint Sets Forth Facts that "fairly and
potentially" Fall within Policy Coverage
The United States Court of Appeals for the Eleventh Circuit recently
reversed a District Court's decision, which granted summary judgment to
defendant insurance company. The insured filed suit after the insurance company
sought declaratory judgment that there was no duty to defend against a class
action suit in which the class had not yet been certified by the state court and
the only potentially covered claims were by putative class members. The district
court held that the duty to defend would only arise if a class had been
certified. The Court of Appeals held that the central inquiry in a duty to
defend matter is whether the complaint "alleges facts that fairly and
potentially bring the suit within policy coverage." Because the complaint
alleged some information about the insured's wrongful acts, and any doubt
regarding duty to defend should be resolved in favor of requiring the insurer to
defend, the decision is reversed.
Submitted by: Submitted by: Ralph Zappala (Lewis Brisbois Bisgaard & Smith)
10/13/06
Bosley, et al. v. Great Northern Ins. Co.
U.S. Court of Appeals, Fifth Circuit
Insurer Can Waive Limitations
Clause In Policy By Action
The insurance policy at issue contained a limitations clause which
imposed a one-year limitation on all legal actions against the insurer. The
lower court granted summary judgment in favor of the insurer and held that the
insured’s suit for damages was untimely filed pursuant to the policy’s
limitation clause. The insured appealed. Under Louisiana law, an insurer can
waive a time limitation contained in its policy [citation omitted]. Such a
waiver can be express or tacit, such as where the insurer continues negotiations
with the insured and thereby induces the insured to believe that a settlement
will be reached. The Fifth Circuit found that the insured’s receipt of a check
from the insurer identified as “partial,” and the testimony of the insurer’s
adjuster which acknowledged that the insurer still owed the insured money for
his claim, suggested that there was a material issue of fact as to whether the
insurer had waived the limitations clause. Based thereon, the Fifth Circuit
reversed the lower court’s decision and remanded the case.
Submitted by: Bruce D. Celebrezze & Michelle M. Hancharik [Sedgwick, Detert, Moran & Arnold LLP]
10/13/06
Travelers Property Casualty Co. of America v. General Casualty Ins. Cos.
U.S. Court of Appeals, Eighth Circuit
No Duty to Defend Where
Individual Not Acting in Insured Capacity
Paine, the head golf professional of a Minnesota golf course and a
member of the PGA, entered into a verbal agreement with a school to teach a
physical education course on golf at the school each morning for three months.
During one of the P.E. sessions, a student was struck in the head by a golf ball
and suffered a severe and permanent brain injury. The injured student’s parents
commenced a lawsuit against the school and Paine. Paine tendered his defense to
the golf course’s insurer, Regent. Regent denied Paine’s tender on the ground
that he was not an insured under the policy at the time of the accident because
he was not acting within the scope of his employment with the golf course, or
performing duties related to its business. Paine also tendered his defense to
Travelers, from whom Paine had obtained a general and excess liability policy
through a PGA members’ policy. Travelers agreed to loan Paine sufficient funds
to defend and resolve the personal injury suit against him under an agreement
which provided that Paine would not be personally liable to Travelers, and that
Travelers’ right to repayment was limited to its potential recovery from Regent.
Paine and Travelers brought an action against Regent seeking a declaratory
judgment that Regent had a duty to defend Paine, and seeking indemnity on the
ground that Paine was an insured under the Regency policy which provided primary
coverage. Under Minnesota law, the Eighth Circuit held that the extrinsic
evidence presented was insufficient to show that Paine was an employee of the
golf course while he was teaching the P.E. class during which the accident
occurred. As such, Regent had no duty to defend Paine against the personal
injury action and the lower court’s decision in favor of Regent was affirmed.
Submitted by: Bruce D. Celebrezze & Michelle M. Hancharik [Sedgwick, Detert, Moran & Arnold LLP]
10/10/06
Progressive Gulf Ins. Co. v. We Care Day Care Center, Inc., et al.
Mississippi Court of Appeals
Automobile Exclusion Re
Transportation for Compensation or a Fee Capable of Two Reasonable
Interpretations
The issue on appeal was whether an automobile insurance policy issued by
Progressive Gulf Insurance Company to an individual afforded coverage for an
accident that occurred while the individual’s vehicle was being utilized by a
day care business to transport one of its clients. Progressive argued that an
exclusion contained in its policy which, in pertinent part, precludes coverage
for bodily injury arising out of the use of the insured vehicle while being used
to carry persons for compensation or for a fee, applied to exclude coverage for
the accident. The trial court observed that Mississippi courts had not yet
construed an exclusionary clause like the one at issue, and ultimately
determined that the language in the exclusion was ambiguous as applied to the
facts of the case before it. As such, the exclusion was construed in favor of
the insured. Progressive appealed. The appellate court identified that both
parties concentrated on the meaning and clarity of the words “fee” and
“compensation,” and the phrase in which they are used, to argue that the
exclusion was or was not ambiguous. Looking to other jurisdictions for guidance,
the appellate court concluded that the exclusion was capable of two equally
reasonable interpretations. Thus, the court construed the exclusion in the
context most favorable to the insured and found that coverage was afforded for
the accident.
Submitted by: Bruce D. Celebrezze & Michelle M. Hancharik [Sedgwick, Detert, Moran & Arnold LLP]
Hurwitz & Fine, P.C. is a full-service law firm
providing legal services throughout the State of New York.
Newsletter Editor
Scott C. Billman
[email protected]
Insurance Coverage Team
Dan D. Kohane, Team Leader
[email protected]
Michael F. Perley
Scott C. Billman
Audrey A. Seeley
Vivian Perry Roché
Fire, First-Party and
Subrogation Team
Andrea Schillaci, Team Leader
[email protected]
Jody E. Briandi
Philip M. Gulisano
No-Fault/SUM Arbitration Team
Dan D. Kohane, Team Leader
[email protected]
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Appellate Team
Scott C. Billman, Team Leader
[email protected]
Dan D. Kohane
Scott M. Duquin
Johnson v. Allstate Insurance Company
Feldman, Rudy, Kirby & Farquharson, P.C., Westbury, N.Y.
(Gerald F. Kirby of counsel), for appellant.
Goldman & Goldman (Arnold E. DiJoseph, P.C., New York,
N.Y. [Norman I. Lida] of counsel),
for respondents.
DECISION & ORDER
In an action to recover damages for breach of an insurance contract, the defendant appeals, as limited by its brief, from so much of an order of the Supreme Court, Nassau County (Brennan, J.), dated November 21, 2005, as granted the plaintiffs' cross motion for leave to serve an amended complaint.
ORDERED that the order is reversed insofar as appealed from, on the law, with costs, and the cross motion is denied.
The first cause of action in the original complaint sought compensatory damages of $5,000,000 for breach of an insurance policy, and the second cause of action sought compensatory and punitive damages in the sum of $5,000,000 for malicious intent, undue hardship, and bad faith refusal to honor the plaintiffs' rights and remedies under the insurance policy.
The defendant moved to dismiss the second cause of action and the plaintiff cross-moved for leave to amend that cause of action to allege an intentional refusal to pay benefits "maliciously and . . . [in] wanton disregard of the rights of the plaintiffs." The court granted the cross motion for leave to serve an amended complaint on the ground that there was no prejudice to the defendant (see CPLR 3025). [*2]
Since the cross motion was made in response to a motion to dismiss pursuant to CPLR former 3211(e), the plaintiffs were required to establish a "good ground" for granting leave to replead (Carle Place Union Free School Dist. v BAT-JAC Constr., 28 AD3d 596). We note that recent amendments to CPLR 3211(e) do not apply to this case because those amendments apply only to actions commenced after January 1, 2006 (see L 2005, ch 616; Andux v Woodbury Auto Park, 30 AD3d 362).
The amended second cause of action is duplicative of the first cause of action. There is no separate tort for bad faith refusal to comply with an insurance contract. Thus, both the first cause of action and the amended second cause of action sound in breach of contract (see Zawahir v Berkshire Life Ins. Co., 22 AD3d 841; Continental Cas. Co. v Nationwide Indem. Co., 16 AD3d 353). Further, to recover punitive damages, conduct must be alleged which is part of a pattern directed at the public generally, which was not alleged here (see New York Univ. v Continental Ins. Co., 87 NY2d 308, 316).
Accordingly, the proposed
amendment failed to state a cause of action and the plaintiffs' cross motion
should have been denied.
FLORIO, J.P., GOLDSTEIN, MASTRO and FISHER, JJ., concur.
ENTER:
James Edward Pelzer
Clerk of the Court
Edward Vilinsky, Brooklyn, N.Y. (Jeffrey Stern of counsel), for appellant. Cheven, Keely & Hatzis, New York, N.Y. (William B. Stock of counsel), for respondents.
DECISION & ORDER
In an action to recover damages for personal injuries, the plaintiff appeals from an order of the Supreme Court, Queens County (Price, J.), dated April 1, 2005, which granted the defendants' motion for summary judgment dismissing the complaint on the ground that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d).
ORDERED that the order is modified, on the law and in the exercise of discretion, by deleting the provision thereof granting that branch of the defendants' motion which was for summary judgment dismissing the second cause of action and substituting therefor a provision denying that branch of the motion; as so modified, the order is affirmed, without costs or disbursements, and the plaintiff is directed to serve, within 10 days of service upon him of a copy of this decision and order, an amended bill of particulars specifying the injuries, if any, he allegedly sustained as a result of the alleged assault and battery.
The defendants made a prima facie showing, via their submissions, that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject car accident in August 2002 (see Toure v Avis Rent A Car Sys., 98 NY2d 345; Gaddy v Eyler, 79 NY2d 955; Giraldo v Mandanici, 24 AD3d 419). In opposition, the plaintiff failed to raise a triable issue of fact. The findings contained in the affirmed medical report of the plaintiff's examining physician were not based on a recent examination of the plaintiff (see Murray v Hartford, [*2]23 AD3d 629; Farozes v Kamran, 22 AD3d 458; Batista v Olivo, 17 AD3d 494; Constantinou v Surinder, 8 AD3d 323; Kauderer v Penta, 261 AD2d 365, 366). The plaintiff's examining physician also failed to indicate an awareness that the plaintiff was involved in another accident which occurred two months after the instant one, in which he hurt his neck, lower back, and shoulder. Nor did the plaintiff's examining physician address the defendants' examining radiologist's finding attributing the condition of the plaintiff's cervical spine to degenerative processes. Thus, the findings of the plaintiff's examining physician that his cervical and lumbar spine and right shoulder injuries were caused by the subject accident are based on speculation (see Franchini v Palmieri, 1 NY3d 536, 537; Giraldo v Mandanici, supra; Allyn v Hanley, 2 AD3d 470, 471; Ifrach v Nieman, 306 AD2d 380; Lorthe v Adeyeye, 306 AD2d 252, 253; Pajda v Pedone, 303 AD2d 729, 730; Ginty v MacNamara, 300 AD2d 624, 625).
Furthermore, neither the plaintiff nor his treating physician adequately explained why the plaintiff ceased therapeutic treatment in October 2002 (see Pommells v Perez, 4 NY3d 566). The plaintiff also failed to proffer competent medical evidence that he was unable to perform substantially all of his daily activities for not less than 90 of the first 180 days subsequent to the accident (see Mohamed v Siffrain, 19 AD3d 561, 562; Sainte-Aime v Ho, 274 AD2d 569; DiNunzio v County of Suffolk, 256 AD2d 498). Therefore, the court properly dismissed the plaintiff's first cause of action alleging serious injury as a result of the subject car accident.
However, the plaintiff's second
cause of action to recover damages for assault and battery, which allegedly
occurred immediately after the subject car accident, should not have been
summarily dismissed (cf. Pajda v Pedone, supra; McCauley v Ross,
298 AD2d 506, 507; Yaraghi v Zeller, 286 AD2d 765).
SCHMIDT, J.P., CRANE, KRAUSMAN, SKELOS and LUNN, JJ., concur.
ENTER:
Legum v Allstate Insurance Company
In an action, inter alia, to recover under an insurance policy in connection with a claim of damage to the plaintiff's automobile, the plaintiff appeals, as limited by her brief, from so much of an order of the Supreme Court, Nassau County (Martin, J.), dated November 18, 2005, as, upon reargument, adhered to its prior determination denying her prior motion for summary judgment on the issue of liability with respect to the second and third causes of action.
ORDERED that the order is affirmed insofar as appealed from, with costs.
Contrary to the plaintiff's contention, "[I]nsurance Law § 3420(d) is inapplicable to this case since the underlying claim does not involve death or bodily injury" (Incorporated Vil. of Pleasantville v Calvert Ins. Co., 204 AD2d 689, 690; see Fairmont Funding v Utica Mut. Ins. Co., 264 AD2d 581). Thus, the defendant's delay - even assuming it was unreasonable - will not estop the insurer from disclaiming unless the insured has suffered prejudice by virtue of the insurer's conduct (see Corcoran v Abbott Sommers, Inc., 143 AD2d 874, 876; Fairmont Funding v Utica Mut. Ins. Co., supra at 581-582).
On this record, we agree with the Supreme Court's determination that the plaintiff failed to make the requisite prima facie showing of prejudice (see Vecchiarelli v Continental Ins. Co., 277 AD2d 992; United States Fid. & Guar. Co. v Weiri, 265 AD2d 321; Fairmont Funding [*2]v Utica Mut. Ins. Co., supra; compare with State Farm Ins. Co. v O'Brien, 242 AD2d 381) and, therefore, was not entitled to judgment as a matter of law (see Ayotte v Gervasio, 81 NY2d 1062).
In light of our determination,
we do not reach the parties' remaining contentions.
FLORIO, J.P., GOLDSTEIN, MASTRO and FISHER, JJ., concur.
ENTER:
James Edward Pelzer
Clerk of the Court
Lemberger v. Congregation Yetev Lev D'Satmar, Inc.
Harry I. Katz, P.C., Fresh
Meadows, N.Y. (Shayne, Dachs, Stanisci, Corker & Sauer [Norman H. Dachs] of
counsel), for appellant. Cartafalsa, Slattery & Metaxas, New York, N.Y. (David
R.
Beyda of counsel), for respondents.
DECISION & ORDER
In an action to recover damages for personal injuries, the plaintiff appeals from an order of the Supreme Court, Kings County (Kurtz, J.), dated February 17, 2006, which granted the motion of the defendants Congregation Yetev Lev D'Satmar, Inc., and United Talmudical Academy Torah V'Yirah Rabbinical, Inc., inter alia, to vacate a judgment of the same court (Rosenberg, J.) entered December 9, 2005, upon their default in appearing or answering the complaint.
ORDERED the order is reversed, on the law and as a matter of discretion, with costs, and the motion is denied.
On or about August 11, 2005, the plaintiff commenced this action against the defendants Congregation Yetev Lev D'Satmar, Inc. (hereinafter Congregation), United Talmudical Academy Torah V'Yirah Rabbinical, Inc. (hereinafter United), and Tirnower Kosher Catering, Inc. The plaintiff moved for leave to enter a default judgment against these defendants and on December 9, 2005, a judgment was entered against them upon their default in appearing or answering the complaint. In February 2006, Congregation and United (hereinafter the respondents) moved to vacate the default against them and to direct the plaintiff to accept their late answer. The Supreme Court granted the motion. The plaintiff appeals.
A defendant seeking to vacate its default in appearing or answering the complaint must provide a reasonable excuse for the default and demonstrate a meritorious defense to the action [*2](see CPLR 5015[a][1]; Gray v B.R. Trucking Co., 59 NY2d 649, 650; Weinberger v Judlau Contr., 2 AD3d 631; Kaplinsky v Mazor, 307 AD2d 916; Ennis v Lema, 305 AD2d 632; O'Shea v Bittrolff, 302 AD2d 439). While the determination of what constitutes a reasonable excuse lies within the sound discretion of the Supreme Court (see Matter of Gambardella v Ortov Light., 278 AD2d 494), a general excuse that the default was caused by delays occasioned by the defendants' insurance carrier is insufficient (see Juseinoski v Board of Educ. of City of New York, 15 AD2d 353; Campbell v Ghafoor, 8 AD3d 316, 317; Weinberger v Judlau Contr., supra; Franklin v Williams, 2 AD3d 400; Kaplinsky v Mazor, supra; Hazen v Bottiglieri, 286 AD2d 708; Miles v Blue Label Trucking, 232 AD2d 382, 383; Martyn v Jones, 166 AD2d 508; Peters v Pickard, 143 AD2d 81).
Contrary to the respondents' contention, the bare allegations of United's administrator and the claims manager of Zurich Insurance Company (hereinafter Zurich), the respondents' insurance carrier, that the summons and complaint were immediately forwarded to an unnamed insurance broker, without an adequate explanation for the approximately four-month gap that followed before Zurich allegedly received them, was insufficient to constitute a reasonable excuse for their default. The explanation proffered by Zurich's claims manager that "because Zurich had no record of [the claim] being logged into our system, Zurich never assigned counsel to answer the complaint" did not constitute a reasonable excuse (see CPLR 5015[a][1]; Gray v B.R. Trucking Co., supra; Weinberger v Judlau Contr., supra; Kaplinsky v Mazor, supra; Ennis v Lema, supra; O'Shea v Bittrolff, supra). In addition, the unsubstantiated affidavit of Congregation's administrator, denying that Congregation had an office where the summons and complaint were served, was insufficient to rebut the presumption of proper service created by the affidavit of service and other documentary proof provided by the appellant (see Carrenard v Mass, 11 AD3d 501; Truscello v Olympia Constr., 294 AD2d 350, 351; De La Barrera v Handler, 290 AD2d 476).
In view of the lack of a reasonable excuse, it is unnecessary to consider whether the respondents sufficiently demonstrated a meritorious defense. Accordingly, the Supreme Court improvidently exercised its discretion in granting the respondents' motion to vacate the default judgment.
The respondents' remaining
contentions are without merit.
SCHMIDT, J.P., SANTUCCI, SKELOS and COVELLO, JJ., concur.
ENTER:
James Edward Pelzer
Clerk of the Court
Allstate Insurance Company v. Belt Parkway Imaging, P.C.
Morvillo, Abramowitz, Grand, Iason, Anello & Bohrer, P.C., New York (Edward M. Spiro of counsel), for appellants-respondents/appellants. Cadwalader, Wickersham & Taft LLP, New York (William J. Natbony of counsel), for respondents-appellants/respondents.
Order, Supreme Court, New York County (Karla Moskowitz, J.), entered January 26, 2006, which permitted plaintiffs to withhold payments for claims that defendants-appellants had made before April 4, 2002 and dismissed plaintiffs' causes of action for fraud and unjust enrichment regarding payments made before that date insofar as such causes of action were based on defendants' improper corporate form, and order, same court and Justice, entered March 3, 2006, which denied defendants-appellants' motion to strike plaintiffs' affirmative defenses to defendants' counterclaims insofar as said defenses were based on defendants' improper corporate form, unanimously affirmed, without costs.
The Insurance Department regulation [11 NYCRR] on claims for Personal Injury Protection Benefits states (§ 65-3.16[a][12]) that "A provider of health care services is not [*2]eligible for reimbursement under section 5102(a)(1) of the Insurance Law if the provider fails to meet any applicable New York State or local licensing requirement necessary to perform such service in New York." This regulation was initially promulgated to take effect on September 1, 2001, but implementation was stayed by court order until April 4, 2002. Relying on this regulation, the Court of Appeals has held that "insurance carriers may withhold payment for medical services provided by fraudulently incorporated enterprises to which patients have assigned their claims" (State Farm Mut. Auto. Ins. Co. v Mallela (4 NY3d 313, 319 [2005]), and that "no cause of action for fraud or unjust enrichment would lie for any payments made by the carriers before . . . April 4, 2002" (at 322).
Mallela is dispositive as to plaintiffs' fraud and unjust enrichment claims. Even if the quoted excerpt was dictum, we would find it highly persuasive. Plaintiffs' attempt to distinguish Mallela by saying that their claims rest on the common law, not just on § 65-3.16(a)(12), is unconvincing; in any event, the claims would not be cognizable (see Oxford Health Plans [NY] v BetterCare Health Care Pain Mgt. & Rehab, 305 AD2d 223 [2003]).
With respect to the bills that plaintiffs have not yet paid, the clear import of § 65-3.16(a)(12) is that as of April 4, 2002, defendants were no longer eligible to be paid, even if they had already performed services. The very word "reimbursement," used in the regulation, implies that the services had already been provided. Moreover, Mallela involved pre-April 4, 2002 claims, so it would be illogical to read that case as applying only to claims submitted on or after April 4, 2002 (see e.g. Metroscan Imaging P.C. v GEICO Ins. Co., 8 Misc 3d 829, 834 [NYC Civ Ct 2005], affd 2006 NY Misc LEXIS 2150, 2006 WL 2333130 [App Term]).
We do not find this allegedly retroactive application of the regulation problematic. "Ameliorative or remedial legislation . . . should be given retroactive effect in order to effectuate its beneficial purpose" (Matter of Marino S., 100 NY2d 361, 370-371 [2003], cert denied 540 US 1059 [2003]). The purpose of the regulations of which § 65-3.16(a)(12) is a part was to combat fraud (see Matter of Medical Socy. of State of N.Y. v Serio, 100 NY2d 854, 862 [2003]). Indeed, the notice of adoption stated that "The Insurance Department is taking this action in order to implement a new regulation which will ensure that the public receives the benefits of reduced fraud and abuse provided by the proposed regulation at the earliest possible moment" (NY State Register, May 9, 2001, at 19).
Contrary to defendants' argument, we do not find that § 65-3.16(a)(12) impaired vested rights or created a new right. The law prior to Mallela was unclear, so defendants did not have a vested right to reimbursement (see Matter of Versailles Realty Co. v New York State Div. of Hous. & Community Renewal, 76 NY2d 325, 330 [1990]). Because there were decisions going both ways before Mallela, that case did not create a "new" right that had never before existed.
We are not persuaded by defendants-appellants' claim that the allegedly retroactive application of § 65-3.16(a)(12) would violate article I, section 10, clause 1 of the U.S. [*3]Constitution. There was no contract between defendants and plaintiffs; defendants' right to reimbursement from plaintiffs was purely a creature of regulation, viz., 11 NYCRR § 65-3.11.
9174 Royal Indemnity Company v. Retail Brand Alliance, Inc.
.
Order, Supreme Court, New York County (Helen E. Freedman, J.), entered February 27, 2006, which granted plaintiff Royal Indemnity (Royal US) and third-party defendant Royal & Sun Alliance (Royal UK) partial summary judgment declaring that coverage under the respective Master and Local property insurance policies extended only to defendant insured's business income loss during the time needed to reopen the subject store, plus an additional 30 days, unanimously affirmed, with costs.
The unambiguous language of the Business Income Loss provision of the Local Policy issued by Royal US provides that in addition to the requirement that the "suspension must be caused by direct physical loss of or damage to property at or within 500 feet of insured Premises and Location(s),'" which triggers coverage, there must be "actual loss of Business Income . . . due to the necessary suspension of your operations' . . . during the period of restoration.'" Once the store resumed operations on September 12, 2002, a year after the terrorist attack on the World Trade Center, the Business Income coverage terminated, regardless of whether the insured's income was back up to pre-loss levels (see 54th St. Ltd. Partners v Fidelity & Guar. Ins. Co., 306 AD2d 67 [2003]; Madison Maidens v American Mfrs. Mut. Ins. Co., 2006 US Dist LEXIS 39633, *7-9, 2006 WL 1650689, *2-4 [SD NY]). The motion court correctly rejected defendant's argument that Business Income coverage should continue until the World Trade Center is or should have been rebuilt (see Streamline Capital v Hartford Cas. Ins. Co., 2003 US [*2]Dist LEXIS 14677, *23-27, 2003 WL 22004888, *8 [SD NY]).
The Master Policy issued by Royal UK provides Extended Business Income coverage beginning on "the date property . . . is actually repaired rebuilt or replaced and Operations are resumed and ends [subject to a 36-month cap] on the date the Business could have been restored with reasonable speed to the condition that would have existed if no Incident had occurred." However, coverage is unambiguously subject to the limitation that the "Loss of Business Income must be caused by an Incident at the Premises," which is defined in the Master Policy as "loss or destruction of or damage to property used by the Insured at the Premises for the purpose of the Business." Here, the insured seeks coverage based on damage to the World Trade Center, property belonging to a nonparty to this action, and the motion court correctly declared this was beyond the scope of the Extended Business Income coverage.
The Master Policy also provides coverage for "Restriction of Access and Loss of Attraction," i.e., loss "resulting from interruption of or interference with the Business in consequence of loss destruction or damage to property" in the vicinity of the premises which shall "prevent or hinder the use of the Premises or access thereto," or, subject to a 12-month cap, "cause a fall in the number of customers attracted to the vicinity of the Premises." The "Indemnity Period" begins "when the Incident occurs" and ends "when the results of the business cease to be affected in consequence" thereof.
It is undisputed that the store reopened on September 12, 2002 and has been in continuous operation ever since. Thus, it is clear that destruction of the World Trade Center has not "prevented" the use of or access to the store after it reopened. While the insured claims that access was hindered because, among other things, one entrance was closed and there was scaffolding on the building, there is no proof that the entrance that remained open was insufficient to accommodate all customer needs. Thus, while the World Trade Center is no longer in existence, there is no indication that its absence hampered or delayed anyone's ability to enter the store and make a purchase, or prevented suppliers from delivering merchandise. Furthermore, insofar as the insured casts its claim as a "classic" loss of attraction, that coverage has a 12-month cap, and here the store reopened a year and a day after the September 11, 2001 attacks.
We have considered the insured's other arguments and find them without merit.
Order, Supreme Court, Bronx County (Alison Y. Tuitt, J.), entered April 26, 2005, which, insofar as appealed from, granted that aspect of defendants' motion seeking to set aside the award of $164,580 for future pain and suffering on the ground that the evidence was legally insufficient to support such an award, and vacated said award, unanimously reversed, on the law, the facts and in the exercise of discretion, without costs, the motion denied and a new trial on the issue of damages for future pain and suffering ordered, unless plaintiff, within 30 days of service of a copy of this order with notice of entry, stipulates to reduce the award for future pain and suffering to $25,000 and to entry of a judgment in accordance therewith.
Plaintiff was injured in a motor vehicle accident when the vehicle he was driving was struck by a vehicle driven by defendant Berto Fabian and owned by defendant Abraham Guzman. At trial, plaintiff's expert witness opined that plaintiff sustained a herniated disk that resulted in cervical radiculopathy, and a bulging disk that resulted in lumbar radiculopathy. Defendants' expert disagreed with plaintiff's expert's conclusion, opining that plaintiff sustained neither a herniated nor a bulging disk.
The jury was asked to determine whether plaintiff sustained a "serious injury" pursuant to Insurance Law § 5102(d) under one or more of the following categories: significant limitation of the use of a body function or system, permanent consequential limitation of the use of a body organ or member, and medically determined injury or impairment of a nonpermanent nature which prevented plaintiff from performing substantially all of the material acts which constituted his usual and customary daily activities for not less than 90 days during the 180 days immediately following the injury. While the jury determined that plaintiff did not sustain a significant limitation injury or a permanent consequential injury, it did find that plaintiff sustained a serious injury under the 90/180-day category, and awarded plaintiff damages for both past and future pain and suffering.
Defendants moved to, among other things, set aside the award for future pain and suffering. Supreme Court granted that aspect of the motion and vacated the award. The court reasoned that the evidence was legally insufficient to sustain the award, noting that the jury rejected plaintiff's contention that he sustained either a significant limitation or permanent [*2]consequential injury, and that plaintiff had ceased seeking medical care for his injuries several months after the accident. This appeal by plaintiff ensued.
"Once a prima facie case of serious injury has been established and the trier of fact determines that a serious injury has been sustained, plaintiff is entitled to recover for all injuries incurred as a result of the accident" (Rizzo v DeSimone, 6 AD3d 600, 601 [2004] [internal quotation marks omitted]; see Gallagher v Samples, 6 AD3d 659 [2004]; Deyo v Laidlaw Tr., 285 AD2d 853 [2001]; Bebry v Farkas-Galindez, 276 AD2d 656 [2000]). Accordingly, plaintiff was not foreclosed from recovering damages for future pain and suffering on the ground that he did not sustain a serious injury under the significant limitation or permanent consequential injury categories.
Plaintiff's testimony established that, at the time of trial, he occasionally experienced pain, which he controlled with Motrin, and that his ability to engage in certain recreational activities was curtailed. Plaintiff also established that therapeutic measures (e.g., stretching, taking hot baths) provided temporary relief from the pain he experienced but did not completely alleviate the pain. In light of this evidence, a valid line of reasoning and permissible inferences supports the jury's conclusion that plaintiff was entitled to recover damages for future pain and suffering (see Cohen v Hallmark Cards, Inc., 45 NY2d 493 [1978]). Accordingly, Supreme Court erred in determining that the evidence was legally insufficient to support such an award. Moreover, the jury's conclusion in this regard, which indicates that plaintiff's testimony was credited, rested on a fair interpretation of the evidence and we decline to set it aside as contrary to the weight of the evidence (see McDermott v Coffee Beanery, Ltd., 9 AD3d 195, 206 [2004]).
Although the court erroneously
charged on the issue of future damages, limiting such an award to a finding of
permanency, plaintiff failed to object and this erroneous charge became the law
applicable to the determination of the case (see Up-Front Indus., Inc.
v U.S. Indus., Inc., 63 NY2d 1004 [1984]). We reach the issue of the
erroneous charge in the exercise of discretion and allow an award for future
pain and suffering. The jury's award in this regard, however, deviated
materially from what is reasonable compensation under the circumstances to the
extent indicated (see CPLR 5501[c]; see also Picon v Moore, 15
AD3d 188 [2005]; Donatiello v City of New York, 301 AD2d 436 [2003];
Newman v Aiken, 278 AD2d 115 [2000]; cf. Skow v Jones, Lang & Wooton
Corp., 240 AD2d 194 [1997], lv denied 94 NY2d 758 [1999]).
THIS CONSTITUTES THE DECISION
AND ORDER
OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.
ENTERED: OCTOBER 12, 2006
Bravo Realty Corp. v. Mt. Hawley Insurance Company
Order, Supreme Court, New York County (Shirley Werner Kornreich, J.), entered August 11, 2005, which, inter alia, granted plaintiffs' motion for partial summary judgment declaring that defendant insurer is obligated to defend plaintiffs, its insureds, in the underlying action, unanimously affirmed, with costs.
The duty to defend is "exceedingly broad" and an insurer will be required to defend its insured whenever the allegations of the complaint suggest a reasonable possibility of coverage (see Automobile Ins. Co. of Hartford v Cook, 7 NY3d 131, 137 [2006]). Here, the complaint in the underlying action seeks recovery, at least in part, on the theory that negligence on the part of plaintiff insureds proximately caused the alleged damages and, as such, alleges conduct falling within the subject policy's coverage. The allegations of negligence are not necessarily based on violations of lease obligations, as defendant argues (see Duane Reade v SL Green Operating Partnership, LP, 30 AD3d 189 [2006]). That the underlying complaint also seeks recovery on theories alleging intentional conduct and breach of contract arguably not within the coverage, does not, given the allegations that do fall within the coverage, avail defendant insurer insofar as it seeks to avoid providing its insureds a defense (Technicon Elec. Corp. v Am. Home Ins. Co., 74 NY2d 66, 73-74 [1998]). Nor has defendant insurer shown that the allegations of the complaint cast the pleading " solely and entirely within the policy exclusions'" it invokes (see Automobile Ins. Co. of Hartford, 7 NY3d 131, 137 [2006], quoting Allstate Ins. Co. v Mugavero, 79 NY2d 153, 159 [1992]). The record does not permit us to conclude, as a matter of law, that the damages claimed in the underlying action are barred by the policy's exclusions for known loss, expected or intended property damage, or discrimination, and we find defendant's interpretation of the policy's breach of contract exclusion untenably broad (see Hotel Des Artistes, Inc. v Gen. Acc. Ins. Co. of Am., 9 AD3d 181, 189-193 [2004], lv dismissed 4 NY3d 739 [2004]). [*2]
We have considered defendant's remaining arguments and find them unavailing.
THIS CONSTITUTES THE DECISION
AND ORDER
OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.
ENTERED: OCTOBER 17, 2006
CLERK
Parker v. Mobil Oil Corporation
CIPARICK, J.:
Plaintiff Eric Parker commenced this action in 1999 against Mobil Oil Corporation, Island Transportation Corporation and Getty Petroleum Marketing, Inc., alleging that exposure to benzene in gasoline caused him to develop acute myelogenous leukemia (AML). Parker had worked as a gas station attendant for 17 years and had been exposed to benzene through inhalation of gasoline fumes and through dermal contact with gasoline. There is no [*2]dispute that benzene is a known carcinogen.
Parker worked at several full-service stations between March 1981 and August 1998. As part of his duties, he pumped gasoline for customers, exposing him to gasoline vapors; the pumps were not fitted with vapor recovery systems to reduce exposure to fumes until the early 1990s. He was also exposed to fumes upon receipt of deliveries of gasoline and upon daily gauging of gasoline levels in the tanks and he was responsible for cleaning up gasoline spills, occasioning it to remain on his hands and clothing throughout the day. Defendants did not warn him of the dangers of benzene exposure or provide him with safety or protective gear. It should be noted that Parker was also exposed to therapeutic radiation.
Prior to the completion of discovery, and before the exchange of expert reports, defendant Mobil Oil and several third-party defendants moved to preclude Parker's expert testimony on the issue of medical causation. Defendants argued that the expert testimony was scientifically unreliable and should be excluded under Frye v United States (293 F 1013 [DC Cir 1923]). Further, defendants moved for summary judgment dismissing all claims, arguing that they lacked the necessary support in the absence of appropriate causation evidence.
In support of the motion, defendants introduced the opinions of two experts prepared for other litigations. The first, Dr. Gerhard K. Raabe — an epidemiologist and Director of Medical Information Health Risk Assessment for Mobil — acknowledged that there is an increased risk of AML for service station employees exposed to large amounts of benzene ("typically over 100 PPM TWA")[FN1] over an extended period of time, but concluded that the low levels of benzene exposure resulting from gasoline service station work are "below the practical threshold for the dose necessary to initiate the leukemia process." Raabe cited to a National Institute for Occupational Safety and Health (NIOSH) study of benzene exposure for service station employees [the maximum concentration of benzene in gasoline was 2% with the greatest level of exposure 0.19 ppm TWA, which is less than the 1 ppm occupational standard set by the Occupational Safety and Health Administration (OSHA)]; to a study of petroleum workers exposed to gasoline with a concentration of 2-3% benzene that did not show any additional risk of AML from exposure to gasoline; and to a European study of service station workers exposed to gasoline that was 3-5% benzene that did not find an elevated risk of AML. Defendants also [*3]provided a letter from Raabe responding to an expert opinion in another litigation citing a study he co-authored, which found an increased risk of AML for those exposed to "increasing cumulative doses of benzene above 200 ppm-years . . . [and] no excess risk for AML for doses below" that level.
Defendants also offered the affidavit of Richard D. Irons, Ph.D., a toxicologist — likewise prepared for other litigation. Irons explained that the dose-related relationship was a unifying concept in the medical sciences and a cornerstone of pharmacology and toxicology; that there is usually a threshold below which no effect can be observed; and that the evidence of an association between chronic exposure to benzene and AML became less reliable as the dosage decreased; and that there was "virtually no reliable evidence to indicate that a causal relationship exists between chronic exposure to benzene at 10 ppm or lower and the development of AML." In order to determine causation, according to Irons, it is necessary to know the amount of benzene sufficient to cause AML and the amount of benzene to which the particular plaintiff was exposed. He noted that the plaintiff's expert in that case did not quantify the benzene exposure and did not address studies finding no increased risk of AML in service station or petroleum distribution workers. Irons also pointed out that AML has been known to develop in those who have been exposed to the drugs and chemicals used in chemotherapy.
In opposition to defendants' motion, Parker argued that whether benzene can cause AML is not novel scientific evidence subject to Frye review, and that there is a difference of opinion in the scientific community as to what level of benzene exposure causes leukemia. To support his arguments, he produced reports from two experts. Philip J. Landrigan, M.D., a board-certified physician in occupational medicine and fellow of the American College of Epidemiology, detailed Parker's medical history as well as his exposure to benzene as a component of gasoline. Landrigan noted that Parker had received radiation treatment for a prior illness. The doctor also observed that, during his service station employment, Parker frequently had cuts or abrasions on his hands that would have increased the absorption of benzene directly into his blood stream. Further, there was at least one instance where Parker was doused with gasoline but continued to work in his gasoline-saturated clothing for the remainder of the day.
Landrigan cited several studies that linked benzene exposure to leukemia. He noted that a NIOSH study of rubber plant workers in Ohio found a relationship between increasing cumulative benzene exposure and leukemia mortality. He concluded that the study showed a risk of mortality from leukemia of about "150 times above background" over a 40-year working lifetime from exposure to benzene at 10 ppm. At 5 ppm, the risk was 12 times over background and at 1 ppm (or 40 ppm-years) the risk was doubled. The expert went on to explain that "[e]xtensive mathematical modeling was conducted to determine the shape of this positive [*4]dose-response relationship. These analyses found that a linear model best explained the association. No evidence was found for a threshold level below which no leukemia occurs."
Landrigan further noted several studies that found an increased risk of leukemia in petroleum refinery workers and pointed out that the studies that did not find an increased risk of leukemia considered all refinery workers rather than specifically addressing only those exposed to benzene. He also stated that, in recognition of the carcinogenic nature of benzene, OSHA lowered the previous workplace standard from 10 ppm to 1 ppm. Landrigan found it unlikely that Parker would have contracted AML without his specific occupational exposure to benzene and therefore concluded "to a reasonable degree of medical certainty that Mr. Parker contracted his [AML] as a result of his personal occupational exposure to benzene."
Parker also submitted a two-page report from Bernard D. Goldstein, M.D., an expert in toxicology and epidemiology. Dr. Goldstein stated that Parker had greater levels of exposure to benzene than the workers in the refinery studies, as modern refineries function within the 1 ppm workplace standard and "[g]asoline has been approximately 2% benzene (i.e., 20,000 ppm)." He also noted that although a study of British refinery workers found no increased risk of leukemia, a "nested case-control study . . . [found] more than a doubling in the likelihood that those who did die of leukemia had been exposed to higher levels of benzene than appropriate controls." Finally, he observed that there was evidence that Parker's medical history — having received radiation treatment — made him more susceptible to leukemia from exposure to benzene. While Goldstein did give a number in ppm of how much benzene is in gasoline, neither of Parker's experts quantified Parker's exposure to benzene from gasoline.
Without conducting a Frye hearing (which neither party had requested), Supreme Court denied defendants' motion to preclude Parker's expert testimony. The court identified the issue as whether the causal relationship between benzene in gasoline and AML has general acceptance in the scientific community — particularly whether the experts used generally accepted principles and methodologies in arriving at their conclusions. The court recognized that Parker's experts did not cite to studies linking AML to exposure to benzene in gasoline or quantify Parker's exposure, but concluded that the experts distinguished the studies finding no increased risk of leukemia and that, while the failure to quantify exposure might require a hearing in some cases where there was less exposure, it was not necessary here.
Finally, the court determined that plaintiff's experts followed generally accepted principles and methodologies by detailing Parker's exposure, demonstrating the link between benzene and leukemia and presenting a dose-response relationship of 40 ppm-years (or the theory that there is no threshold of exposure under which there will be no negative effects to health). The court also found that Landrigan "track[ed]" the process of generating an opinion on [*5]causation in toxic tort cases recommended by the World Health Organization (WHO) and National Academy of Sciences (NAS).[FN2]
The Appellate Division reversed and dismissed the complaint, framing the issue as "to what extent the plaintiff was required to establish the precise level of his exposure to benzene in order to establish that his AML was caused by it through a scientifically-reliable methodology" (16 AD3d 648, 651 [2005]). The court noted that neither of Parker's experts quantified his exposure to benzene — in particular, neither provided a time-weighted average in parts per million. Even if the experts had established a threshold, they could not show that Parker's exposure exceeded it, and any conclusions as to the amount of Parker's exposure or whether the exposure caused his AML were therefore speculative.
The court also rejected Landrigan's position that there is no threshold below which leukemia would not occur as "the scientific reliability of th[at] methodology has flatly been rejected as merely a hypothesis" (16 AD3d at 653). The court noted that the experts did not use the three-step process approved by the WHO/NAS and that although they used studies demonstrating a link between benzene and AML, they did not prove the causal connection between the exposure to benzene in gasoline. We now affirm.
Discussion
At issue in this case is the admissibility of Parker's experts' opinions. The parties dispute whether the opinions should be analyzed under Frye. The introduction of novel scientific evidence calls for a determination of its reliability. Thus, the Frye test asks "whether the accepted techniques, when properly performed, generate results accepted as reliable within the scientific community generally" (People v Wesley, 83 NY2d 417, 422 [1994]; see also People v Wernick, 89 NY2d 111, 115-116 [1996]). Frye holds that "while courts will go a long way in admitting expert testimony deduced from a well-recognized scientific principle or discovery, the thing from which the deduction is made must be sufficiently established to have gained general [*6]acceptance in the particular field in which it belongs" (Frye, 293 F at 1014)[FN3]. It "emphasizes 'counting scientists' votes, rather than on verifying the soundness of a scientific conclusion' " (Wesley, 83 NY2d at 439 [citation omitted (Kaye, Ch. J., concurring)]).
The Frye inquiry is separate and distinct from the admissibility question applied to all evidence — whether there is a proper foundation — to determine whether the accepted methods were appropriately employed in a particular case (Wesley, 83 NY2d at 429). "The focus moves from the general reliability concerns of Frye to the specific reliability of the procedures followed to generate the evidence proffered and whether they establish a foundation for the reception of the evidence at trial" (Wesley, 83 NY2d at 429).
Here, there is a question as to whether the methodologies employed by Parker's experts lead to a reliable result — specifically, whether they provided a reliable causation opinion without using a dose-response relationship and without quantifying Parker's exposure. There is no particular novel methodology at issue for which the Court needs to determine whether there is general acceptance. Thus, the inquiry here is more akin to whether there is an appropriate foundation for the experts' opinions, rather than whether the opinions are admissible under Frye.
As with any other type of expert evidence, we recognize the danger in allowing unreliable or speculative information (or "junk science") to go before the jury with the weight of an impressively credentialed expert behind it. But, it is similarly inappropriate to set an insurmountable standard that would effectively deprive toxic tort plaintiffs of their day in court. It is necessary to find a balance between these two extremes.
One problem with establishing causation in toxic tort cases is that, often, a plaintiff's exposure to a toxin will be difficult or impossible to quantify by pinpointing an exact numerical value. Here, for example, defendants did not monitor the level of benzene in the air at the service stations. Nor were they required to do so by law or regulation. Further complicating the process of arriving at a specific quantification in this case is that a significant portion of Parker's benzene exposure was through dermal contact — a factor that would not be addressed in the air-based ppm-years standard.
It is well-established that an opinion on causation should set forth a plaintiff's [*7]exposure to a toxin, that the toxin is capable of causing the particular illness (general causation) and that plaintiff was exposed to sufficient levels of the toxin to cause the illness (specific causation) (see e.g. McClain v Metabolife Intl., Inc., 401 F3d 1233, 1241 [11th Cir 2005]; Wright v Williamette Indus., Inc., 91 F3d 1105, 1106 [8th Cir 1996]). Where we depart from the Appellate Division is that we find it is not always necessary for a plaintiff to quantify exposure levels precisely or use the dose-response relationship, provided that whatever methods an expert uses to establish causation are generally accepted in the scientific community.
The argument that precise
quantification is not necessary finds support in case law from other
jurisdictions. For example, the Fourth Circuit has noted that
"while precise information concerning the exposure necessary to cause specific
harm to humans and exact details pertaining to the plaintiff's exposure are
beneficial, such evidence is not always available, or necessary, to demonstrate
that a substance is toxic to humans given substantial exposure and need not
invariably provide the basis for an expert's opinion on causation"
(Westberry v Gislaved Gummi AB, 178 F3d 257, 264 [4th Cir 1999] quoting
Federal Judicial Center, Reference Manual on Scientific Evidence 187 [1994]);
see also Heller v Shaw Indus., Inc., 167 F3d 146, 157 [3d Cir
1999], Hardyman v Norfolk & W. Ry. Co., 243 F3d 255, 265-266 [6th Cir
2001])[FN4].
Some cases requiring an expert to establish the dosage at which a substance is
toxic and the amount of exposure a plaintiff actually experienced also appear to
recognize that an exact number may not be necessary (see Wright,
91 F3d at 1107 ["We do not require a mathematically precise table equating
levels of exposure with levels of harm, but there must be evidence from which a
reasonable person could conclude that a defendant's emission has probably caused
a particular plaintiff the kind of harm of which he or she complains"];
McClain, 401 F3d at 1241 n 6).
There could be several other ways an expert might demonstrate causation. For instance, amici note that the intensity of exposure to benzene may be more important than a cumulative dose for determining the risk of developing leukemia. Moreover, exposure can be estimated through the use of mathematical modeling by taking a plaintiff's work history into account to estimate the exposure to a toxin. It is also possible that more qualitative means could be used to express a plaintiff's exposure. Comparison to the exposure levels of subjects of other studies could be helpful provided that the expert made a specific comparison sufficient to show [*8]how the plaintiff's exposure level related to those of the other subjects. These, along with others, could be potentially acceptable ways to demonstrate causation if they were found to be generally accepted as reliable in the scientific community.
Turning to the opinions offered by Parker's experts, although we reject the Appellate Division's requirement that the amount of exposure need be quantified exactly, we nonetheless conclude that the Appellate Division properly precluded them and properly deemed them insufficient to defeat summary judgment. The experts, although undoubtedly highly qualified in their respective fields, failed to demonstrate that exposure to benzene as a component of gasoline caused Parker's AML. Dr. Goldstein's general, subjective and conclusory assertion — based on Parker's deposition testimony — that Parker had "far more exposure to benzene than did the refinery workers in the epidemiological studies" is plainly insufficient to establish causation. It neither states the level of the refinery workers' exposure, nor specifies how Parker's exposure exceeded it, thus lacking in epidemiologic evidence to support the claim.
Dr. Landrigan's submissions were likewise insufficient. He reported that Parker was "frequently" exposed to "excessive" amounts of gasoline and had "extensive exposure . . . in both liquid and vapor form," which — even given that an expert is not required to pinpoint exposure with complete precision — cannot be characterized as a scientific expression of Parker's exposure level. Moreover, Landrigan concentrates on the relationship between exposure to benzene and the risk of developing AML — an association that is not in dispute. Key to this litigation is the relationship, if any, between exposure to gasoline containing benzene as a component and AML. Landrigan fails to make this connection perhaps because, as defendants claim, no significant association has been found between gasoline exposure and AML. Plaintiff's experts were unable to identify a single epidemiologic study finding an increased risk of AML as a result of exposure to gasoline. In addition, standards promulgated by regulatory agencies as protective measures are inadequate to demonstrate legal causation. Thus, the experts' opinions were properly excluded.
Parker's remaining contentions are without merit.
Accordingly, the order of the Appellate Division should be affirmed, with costs. * * * * * * * * * * * * * * * * *
Order affirmed, with costs.
Opinion by Judge Ciparick. Chief Judge Kaye and Judges Rosenblatt, Graffeo, Read
and R.S. Smith concur. Judge Pigott took no part.
Decided October 17, 2006
Footnotes
Footnote 1: PPM means parts per million — here, 100 parts benzene per one million parts of air. The TWA, or time-weighted average, is the average amount of a substance to which an individual is exposed over an 8-hour work shift. This measurement can also be expressed in ppm-years.
Footnote 2: Those steps are: 1) determining the plaintiff's exposure to the particular toxin; 2) general causation, which is proof that the toxin in question can in fact cause the illness, and the amount of exposure required to cause the illness (the dose-response relationship); and 3) specific causation — meaning the likelihood that plaintiff's illness was caused by the toxin, including eliminating other potential causes of the disease (see Mancuso v Consolidated Edison Co. of New York, Inc., 56 F Supp 2d 391, 399 [SD NY 1999]).
Footnote 3: Although some amici urge the Court to adopt the federal standard (or some portions of it) as expressed in Daubert v Merrell Dow Pharmaceuticals, Inc. (509 US 579, 589-590 [1993] [requiring that scientific testimony be relevant and reliable in order to assist the trier of fact under Federal Rule of Evidence 702]), the parties make no such argument and acknowledge that Frye is the current standard in New York.
Footnote 4: We recognize that these cases employ a Daubert
analysis. However, they are instructive to the extent that they address the
reliability of an expert's methodology.
Catholic Charities of the Diocese of Albany v. Serio, Superintendent of Insurance
R. S. Smith, J.:
Plaintiffs challenge the validity of legislation requiring health insurance policies that provide coverage for prescription drugs to include coverage for contraception. Plaintiffs assert that the provisions they challenge violate their rights under the religion clauses of the [*2]federal and state constitutions. We hold that the legislation, as applied to these plaintiffs, is valid.
The Challenged Legislation
In 2002, the Legislature enacted what is known as the "Women's Health and Wellness Act" (WHWA), mandating expanded health insurance coverage for a variety of services needed by women, including mammography, cervical cytology and bone density screening (L 2002, ch 554). At issue here are provisions of the WHWA requiring that an employer health insurance contract "which provides coverage for prescription drugs shall include coverage for the cost of contraceptive drugs or devices" (Insurance Law § 3221 [l] [16], § 4303 [cc]).
The legislative history makes clear that the WHWA in general, and the provisions relating to contraception in particular, were designed to advance both women's health and the equal treatment of men and women. The Legislature was provided with extensive information showing the need for the legislation.
For example, the Legislature had before it a study showing that women paid 68% more than men in out-of-pocket expenses for health care, and that the cost of reproductive health services was a primary reason for the discrepancy. The American College of Obstetricians and Gynecologists advised the Legislature that better access to contraception would mean fewer abortions and unplanned pregnancies, and that the ability to time and space pregnancies was important to women's health. These conclusions are supported by studies contained in the record of this litigation, showing among other things that unintended pregnancies are often associated with delayed prenatal care; that such conditions as diabetes, hypertension, arthritis and coronary artery disease can be aggravated by pregnancy; that children born from unintended pregnancies are at risk of low birth weight and developmental problems; and that there are 3 million unintended pregnancies in the United States each year, of which approximately half end in abortion.
At the heart of this case is the statute's exemption for "religious employers." Such an employer may request an insurance contract "without coverage for . . . contraceptive methods that are contrary to the religious employer's religious tenets" (Insurance Law § 3221 [l] [16] [A]; § 4303 [cc] [1]). Where a religious employer invokes the exemption, the insurer must offer coverage for contraception to individual employees, who may purchase it at their own expense "at the prevailing small group community rate" (Insurance Law § 3221 [l] [16] [B] [1]; § 4303 [cc] [1] [A]). A "religious employer," as defined in the statute, is:
"an entity for which each of the following is true:
[*3]
"(a) The inculcation of religious values is the purpose of the entity.
"(b) The entity primarily employs persons who share the religious tenets of the entity.
"(c) The entity serves primarily persons who share the religious tenets of the entity.
"(d) The entity is a nonprofit organization as described in Section 6033 (a) (2) (A) i or iii, of the Internal Revenue Code of 1986, as amended."
(Insurance Law § 3221 [l] [16] [A] [1]; see § 4303 [cc] [1] [A] [i] - [iv]). Plaintiffs say that this definition is unconstitutionally narrow.
The Legislature debated the scope of the "religious employer" exemption intensely before the WHWA was passed. A broader exemption was proposed, one that would have been available to any "group or entity . . . supervised or controlled by or in connection with a religious organization or denominational group or entity" (2001 Senate Bill S 3, § 14). Supporters of this version of the exemption argued, as do plaintiffs here, that religious organizations should not be forced to violate the commands of their faith. Those favoring a narrower exemption asserted that the broader one would deprive tens of thousands of women employed by church-affiliated organizations of contraceptive coverage. Their view prevailed.
This Action
Plaintiffs are 10 faith-based social service organizations that object to the contraceptive coverage mandate in the WHWA. Eight plaintiffs are affiliated in some way with the Roman Catholic Church: of these, three are large entities that provide a variety of social services, including immigrant resettlement programs, affordable housing programs, job development services, and domestic violence shelters; three primarily operate health care facilities, such as hospice centers, nursing homes and rehabilitative care facilities; and two operate schools. The other two plaintiffs are affiliated with the Baptist Bible Fellowship International: one of them offers a variety of social services to the public, including prison ministry, crisis pregnancy centers, job placement and homeless services; the other operates a K-12 school and provides day-care, pre-school and youth services.
None of the plaintiffs qualifies as a "religious employer" under the WHWA. This is essentially because plaintiffs are not, or are not only, churches ministering to the faithful, but are providers of social and educational services. Each of the plaintiffs asserts that its purpose is [*4]not, or is not only, the inculcation of religious values; most of the plaintiffs acknowledge that they employ many people not of their faiths; all of the plaintiffs serve people not of their faiths; and only three of the plaintiffs are exempt from filing tax returns under Internal Revenue Code § 6033 (a) (2) (A) i or iii, provisions applicable to churches and religious orders.
Plaintiffs believe contraception to be sinful, and assert that the challenged provisions of the WHWA compel them to violate their religious tenets by financing conduct that they condemn. The sincerity of their beliefs, and the centrality of those beliefs to their faiths, are not in dispute.
Contending that they are constitutionally entitled to be exempt from the provisions of the WHWA providing for coverage of contraceptives, plaintiffs brought this action against the Superintendent of Insurance, seeking a declaration that these portions of the WHWA are invalid, and an injunction against their enforcement. The complaint asserts broadly that the challenged provisions are unconstitutional, but plaintiffs do not argue that they are unenforceable as to employers having no religious objections to contraception; in substance, plaintiffs challenge the legislation as applied to them. Supreme Court rejected the challenge, and granted summary judgment dismissing plaintiffs' complaint and declaring the legislation valid. The Appellate Division affirmed, with two Justices dissenting. We now affirm.
Discussion
Plaintiffs argue that the provisions of the WHWA requiring coverage of contraception violate the Free Exercise Clauses of the New York and United States Constitutions, and the Establishment Clause of the United States Constitution. Plaintiffs' strongest claim is under the New York Free Exercise Clause, but our analysis of that claim may be clearer if we discuss the federal Free Exercise Clause first.
I
The First Amendment to the United States Constitution provides that "Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof." By virtue of the Fourteenth Amendment, this provision is binding on the states as well as the federal government (Cantwell v Connecticut, 310 US 296, 303 [1940]).
The United States Supreme Court's decision in Empl. Div. v Smith (494 US 872 [1990]) bars plaintiffs' federal free exercise claim. In Smith, the Court interpreted its First Amendment decisions as holding "that the right of free exercise does not relieve an individual of the obligation to comply with a 'valid and neutral law of general applicability on the ground that the law proscribes (or prescribes) conduct that his religion prescribes (or proscribes)'" (id. at 879) (quoting United States v Lee, 455 US 252, 263 n 3 [1982] [Stevens, J., concurring]). The Court [*5]held that where a prohibition on the exercise of religion "is not the object . . . but merely the incidental effect of a generally applicable and otherwise valid provision, the First Amendment has not been offended" (494 US at 878).
By that test, the First Amendment has not been offended here. The burden on plaintiffs' religious exercise is the incidental result of a "neutral law of general applicability," one requiring health insurance policies that include coverage for prescription drugs to include coverage for contraception. A "neutral" law, the Supreme Court has explained, is one that does not "target[] religious beliefs as such" or have as its "object . . . to infringe upon or restrict practices because of their religious motivation" (Church of the Lukumi Babalu Aye, Inc. v City of Hialeah, 508 US 520, 533 [1993]). Religious beliefs were not the "target" of the WHWA, and it was plainly not that law's "object" to interfere with plaintiffs' or anyone's exercise of religion. Its object was to make broader health insurance coverage available to women and, by that means, both to improve women's health and to eliminate disparities between men and women in the cost of health care.
The fact that some religious organizations — in general, churches and religious orders that limit their activities to inculcating religious values in people of their own faith — are exempt from the WHWA's provisions on contraception does not, as plaintiffs claim, demonstrate that these provisions are not "neutral." The neutral purpose of the challenged portions of the WHWA — to make contraceptive coverage broadly available to New York women — is not altered because the Legislature chose to exempt some religious institutions and not others. To hold that any religious exemption that is not all-inclusive renders a statute non-neutral would be to discourage the enactment of any such exemptions — and thus to restrict, rather than promote, freedom of religion. As the California Supreme Court explained, in a decision upholding a statute nearly identical to the WHWA:
"The high court has never prohibited statutory references to religion for the purpose of accommodating religious practice. To the contrary, the court has repeatedly indicated that 'it is a permissible legislative purpose to alleviate significant governmental interference with the ability of religious organizations to define and carry out their religious missions'"
(Catholic Charities of Sacramento, Inc. v Superior Ct., 32 Cal 4th 527, 551, 85 P3d 67, 83 [2004], quoting Corp. of Presiding Bishop of Church of Jesus Christ of Latter-Day Saints v Amos, 483 US 327, 335 [1987]).
Nor can plaintiffs escape the force of the Supreme Court's decision in Smith by [*6]relying on the so-called "hybrid rights" exception. The notion of "hybrid rights" is derived from a dictum in which the Smith Court distinguished certain of its previous cases by saying:
"The only decisions in which we have held that the First Amendment bars application of a neutral, generally applicable law to religiously motivated action have involved not the Free Exercise Clause alone, but the Free Exercise Clause in conjunction with other constitutional protections, such as freedom of speech and of the press, or the rights of parents . . . to direct the education of their children"
(494 US at 881 [internal citations omitted]).
Assuming that the above language does create an exception to the general rule of Smith, the exception does not apply here, for this is not a case that involves free exercise "in conjunction with other constitutional protections." Plaintiffs claim that the challenged legislation interferes with their rights of free speech and association, but the claim is insubstantial. The legislation does not interfere with plaintiffs' right to communicate, or to refrain from communicating, any message they like; nor does it compel them to associate, or prohibit them from associating, with anyone (see Rumsfeld v Forum for Academic and Institutional Rights, Inc., ___ US ___, 126 S. Ct. 1297, 1309-1313 [2006]). It does burden their exercise of religion — but that alone, under Smith, cannot call the validity of a generally applicable and neutral statute into question.
Plaintiffs also suggest that an exception to the holding of Smith can be derived from the doctrine of church autonomy, which prevents states from interfering in matters of internal church governance (Serbian E. Orthodox Diocese v Milivojevich, 426 US 696, 709-710 [1976]; Kedroff v St. Nicholas Cathedral, 344 US 94, 107-108 [1952]) or determining ecclesiastical questions (Presbyterian Church v Mary Elizabeth Blue Hull Mem. Presbyterian Church, 393 US 440, 447 [1969]). But church autonomy is not at issue in this case. The Legislature has not attempted through the WHWA to "lend its power to one or the other side in controversies over authority or dogma" (Empl. Div. v Smith, 494 US at 877, citing Presbyterian Church, 393 US at 445-452, Kedroff, 344 US at 95-119, and Serbian E. Orthodox Diocese, 426 US 708-725). The WHWA merely regulates one aspect of the relationship between plaintiffs and their employees.
Relying on the church autonomy cases, some lower federal courts have recognized a "ministerial exception" which exempts religious institutions from complying with Title VII of the Civil Rights Act with respect to their ministers (see e.g. EEOC v Roman Catholic Diocese, 213 F3d 795, 800 [4th Cir 2000]; Alicea-Hernandez v Catholic Bishop of Chicago, 320 F3d 698, 702-703 [7th Cir 2003]). But the ministerial exception has no bearing here; this case does not [*7]involve the right of a church to determine who it will employ to carry out its religious mission. The existence of a limited exemption for ministers from anti-discrimination laws does not translate into an absolute right for a religiously-affiliated employer to structure all aspects of its relationship with its employees in conformity with church teachings. The ministerial exception has been applied only to employment discrimination claims, and only to "ministers," broadly defined. This case involves neither.
In short, no exception to Smith is applicable in this case. Smith is an insuperable obstacle to plaintiffs' federal free exercise claim.
II
Article I, § 3 of the New York Constitution provides:
"The free exercise and enjoyment of religious profession and worship, without discrimination or preference, shall forever be allowed in this state to all humankind; and no person shall be rendered incompetent to be a witness on account of his or her opinions on matters of religious belief; but the liberty of conscience hereby secured shall not be so construed as to excuse acts of licentiousness, or justify practices inconsistent with the peace or safety of this state."
In interpreting our Free Exercise Clause we have not applied, and we do not now adopt, the inflexible rule of Smith that no person may complain of a burden on religious exercise that is imposed by a generally applicable, neutral statute. Rather, we have held that when the state imposes "an incidental burden on the right to free exercise of religion" we must consider the interest advanced by the legislation that imposes the burden, and that "[t]he respective interests must be balanced to determine whether the incidental burdening is justified" (La Rocca v Lane, 37 NY2d 575, 583 [1975], citing People v Woodruff, 26 AD2d 236, 238 [1966], affd 21 NY2d 848 [1968]). We have never discussed, however, how the balancing is to be performed. Specifically, we have not said how much, if any, deference we will give to the judgments of the Legislature when the result of those judgments is to burden the exercise of religion. We now hold that substantial deference is due the Legislature, and that the party claiming an exemption bears the burden of showing that the challenged legislation, as applied to that party, is an unreasonable interference with religious freedom. This test, while more protective of religious exercise than the rule of Smith, is less so than the rule stated (though not always applied) in a number of other federal and state cases. Before Smith, the leading United States Supreme Court case involving burdens imposed on religious exercise by generally applicable laws was Sherbert v Verner, in which the Court held that justification of "any incidental burden on the free [*8]exercise of . . . religion" requires "a 'compelling state interest in the regulation of a subject within the State's constitutional power to regulate'" (374 US 398, 403 [1963], quoting NAACP v Button, 371 US 415, 438 [1963]). This test has been characterized as "strict scrutiny" (e.g., Catholic Charities of Sacramento, 32 Cal 4th at 548, 85 P3d at 81), and it might be thought that few laws would pass the test. However, after upholding a claim of free exercise against a neutral and generally applicable statute in Wisconsin v Yoder (406 US 205 [1972]), the Supreme Court "rejected every claim for a free exercise exemption to come before it" for 18 years (McConnell, The Origins and Historical Understanding of Free Exercise of Religion, 103 Harv. L. Rev. 1409, 1417 [1990]). During that period, many thought the Court's claim to be applying strict scrutiny — a claim finally abandoned when Smith was decided in 1990 — less than convincing (e.g., United States v Lee, 455 US 252, 262-263 [1982] [Stevens, J. concurring]).
Since Smith, a number of state courts have interpreted their states' constitutions to call for the application of strict scrutiny (e.g., Smith v Fair Empl. and Hous. Commn., 12 Cal 4th 1143, 913 P2d 909 [1996]; Swanner v Anchorage Equal Rights Commn., 874 P2d 274 [Alaska 1994]; Attorney General v Desilets, 418 Mass 316, 636 NE2d 233 [1994]). Often, however, as in the California and Alaska cases just cited, the courts rejected claims to religious exemptions, and it is questionable whether the scrutiny applied by those courts is really as strict as their statement of the rule implies. Justice Brown of the California Supreme Court, dissenting in Catholic Charities of Sacramento (32 Cal 4th at 583, 85 P3d at 105), remarked:
"Strict scrutiny is not what it once was. Described in the past as 'strict in theory and fatal in fact' (Gunther, Foreword: In Search of Evolving Doctrine on a Changing Court: A Model for Newer Equal Protection (1972) 86 Harv. L. Rev. 1, 8), it has mellowed in recent decades . . . .
"If recent precedent is any guide, a state's interest is compelling if the state says it is."
The apparent reluctance of some courts to pay more than lip service to "strict scrutiny" may be an implicit recognition of what we now explicitly decide: Strict scrutiny is not the right approach to constitutionally-based claims for religious exemptions. Where the State has not set out to burden religious exercise, but seeks only to advance, in a neutral way, a legitimate object of legislation, we do not read the New York Free Exercise Clause to require the State to demonstrate a "compelling" interest in response to every claim by a religious believer to an exemption from the law; such a rule of constitutional law would give too little respect to [*9]legislative prerogatives, and would create too great an obstacle to efficient government. Rather, the principle stated by the United States Supreme Court in Smith — that citizens are not excused by the Free Exercise Clause from complying with generally applicable and neutral laws, even ones offensive to their religious tenets — should be the usual, though not the invariable, rule. The burden of showing that an interference with religious practice is unreasonable, and therefore requires an exemption from the statute, must be on the person claiming the exemption.
The burden, however, should not be impossible to overcome. As Professor (now Judge) McConnell has pointed out, a rule that the Constitution never requires a religious exemption from generally applicable laws could lead to results plainly inconsistent with basic ideas of religious freedom:
"Under the no-exemptions view . . . religious believers and institutions cannot challenge facially neutral legislation, no matter what effect it may have on their ability or freedom to practice their religious faith. Thus, a requirement that all witnesses must testify to facts within their knowledge bearing on a criminal prosecution . . . if applied without exception, could abrogate the confidentiality of the confessional. Similarly, a general prohibition of alcohol consumption could make the Christian sacrament of communion illegal, uniform regulation of meat preparation could put kosher slaughterhouses out of business, and prohibitions of discrimination on the basis of sex or marital status could end the male celibate priesthood."
(The Origins and Historical Understanding of Free Exercise of Religion,
103 Harv. L. Rev. at 1418-19).
We find these hypothetical laws to be well beyond the bounds of constitutional acceptability. And we by no means exclude the possibility that, even in much less extreme cases, parties claiming an exemption from generally applicable and neutral laws will be able to show that the state has interfered unreasonably with their right to practice their religion. We conclude, however, that plaintiffs here fall short of making such a showing.
The burden the WHWA places on plaintiffs' religious practices is a serious one, but the WHWA does not literally compel them to purchase contraceptive coverage for their employees, in violation of their religious beliefs; it only requires that policies that provide prescription drug coverage include coverage for contraceptives. Plaintiffs are not required by law to purchase prescription drug coverage at all. They assert, unquestionably in good faith, that they feel obliged to do so because, as religious institutions, they must provide just wages and benefits to their employees. But it is surely not impossible, though it may be expensive or difficult, to [*10]compensate employees adequately without including prescription drugs in their group health care policies.
It is also important, in our view, that many of plaintiffs' employees do not share their religious beliefs. (Most of the plaintiffs allege that they hire many people of other faiths; no plaintiff has presented evidence that it does not do so.) The employment relationship is a frequent subject of legislation, and when a religious organization chooses to hire non-believers it must, at least to some degree, be prepared to accept neutral regulations imposed to protect those employees' legitimate interests in doing what their own beliefs permit. This would be a more difficult case if plaintiffs had chosen to hire only people who share their belief in the sinfulness of contraception.
Finally, we must weigh against plaintiffs' interest in adhering to the tenets of their faith the State's substantial interest in fostering equality between the sexes, and in providing women with better health care. The Legislature had extensive evidence before it that the absence of contraceptive coverage for many women was seriously interfering with both of these important goals. The Legislature decided that to grant the broad religious exemption that plaintiffs seek would leave too many women outside the statute, a decision entitled to deference from the courts. Of course, the Legislature might well have made another choice, but we cannot say the choice the Legislature made has been shown to be an unreasonable interference with plaintiffs' exercise of their religion. The Legislature's choice is therefore not unconstitutional.
III
Plaintiffs' final claim is that the challenged sections of the WHWA violate the Establishment Clause of the federal Constitution. We find this claim to be without merit.
The claim rests essentially on a misreading of a single United States Supreme Court case, Larson v Valente (456 US 228 [1982]). Larson held that the Establishment Clause was violated by a statute designed to exempt from certain regulatory requirements all religious faiths except a disfavored one, the Unification Church. The Court found the statute to violate the Establishment Clause's "clearest command": "that one religious denomination cannot be officially preferred over another" (id. at 244). Nothing of the kind has happened in this case. It cannot be convincingly argued that the WHWA was designed to favor or disfavor Catholics, Baptists or any other religion. The statute is, as we explained above, generally applicable and neutral between religions.
Plaintiffs contend that the legislation is invalid under Larson because it distinguishes between religious organizations that are exempt from the contraception requirements and those that are not. But this kind of distinction — not between denominations, but between religious organizations based on the nature of their activities — is not what Larson [*11]condemns. Plaintiffs' theory would call into question any limitations placed by the Legislature on the scope of any religious exemption — and thus would discourage the Legislature from creating any such exemptions at all. But, as we pointed out above, legislative accommodation to religious believers is a long-standing practice completely consistent with First Amendment principles. A legislative decision not to extend an accommodation to all kinds of religious organizations does not violate the Establishment Clause.
IV
Accordingly, the order of the Appellate Division should be affirmed with costs.
* * * * * * * * * * * * * * * * *
Order affirmed, with costs.
Opinion by Judge R.S. Smith.
Chief Judge Kaye and Judges Ciparick, Rosenblatt, Graffeo and Read concur. Judge
Pigott took no part.
Decided October 19, 2006
DECISION & ORDER
In an action to recover damages for personal injuries, the plaintiff appeals, as limited by her brief, from so much of an order of the Supreme Court, Kings County (Ruchelsman, J.), dated July 11, 2005, as granted the defendants' cross motion for summary judgment dismissing the complaint on the ground that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d).
ORDERED that the order is reversed insofar as appealed from, on the law, with costs, and the cross motion is denied.
The defendants failed to
satisfy their burden of establishing, prima facie, that the plaintiff did not
sustain a serious injury within the meaning of Insurance Law § 5102(d) (see
Toure v Avis Rent A Car Sys., 98 NY2d 345; Gaddy v Eyler, 79 NY2d
955). The defendants' examining orthopedic surgeon set forth a single range of
motion finding with respect to the plaintiff's left knee, but failed to compare
that finding to what is considered to be the normal range of motion, as is
required (see Yashayev v Rodriguez, 28 AD3d 651, 652; Sullivan v Dawes,
28 AD3d 472; Browdame v Candura, 25 AD3d 747, 748; Paulino v Dedios,
24 AD3d 741; Kennedy v Brown, 23 AD3d 625, 626; Baudillo v Pam Car &
Truck Rental, 23 AD3d 420). The defendants' examining neurologist merely
noted that the plaintiff had "excellent" range of motion of the neck and lower
back, and he [*2]failed to set forth the
objective testing performed to arrive at his conclusion that the plaintiff did
not suffer from any limitations in movement in those regions (see Ilardo v
New York City Tr. Auth., 28 AD3d 610, 611; Kelly v Rehfeld, 26 AD3d
469, 470; Nembhard v Delatorre, 16 AD3d 390, 391; Black v Robinson,
305 AD2d 438, 439). Since the defendants thus failed to establish their
entitlement to judgment as a matter of law, it is unnecessary to consider
whether the papers submitted by the plaintiff in opposition to the cross motion
were sufficient to raise a triable issue of fact (see Ilardo v New York City
Tr. Auth., supra at 611; Nembhard v Delatorre, supra at 391).
FLORIO, J.P., CRANE, LUCIANO, SPOLZINO and COVELLO, JJ., concur.
ENTER:
James Edward Pelzer
Clerk of the Court
Morris Park Contracting Corp v. National Union Fire Insurance
DECISION & ORDER
In an action for a judgment declaring that the defendant must defend and indemnify the plaintiff in an underlying action entitled Cabrera v Abatement Asbestos and Lead Specialists Corp., pending in the Supreme Court, Kings County, under Index No. 29034/02, the defendant appeals, as limited by its brief, from so much of an order of the Supreme Court, Kings County (Kramer, J.), dated March 8, 2005, as denied its motion for summary judgment dismissing the complaint, and the plaintiff cross-appeals from so much of the same order as denied its cross motion for summary judgment declaring that the defendant is obligated to provide excess insurance coverage to it in the underlying action.
ORDERED that the order is affirmed, without costs or disbursements.
Contractual obligations of an insured to provide notice of a claim to its liability insurer as soon as practicable and to promptly forward legal papers to the carrier serve as conditions precedent to coverage (see White v City of New York, 81 NY2d 955, 957; Steinberg v Hermitage Ins. [*2]Co., 26 AD3d 426, 427; New York Mut. Underwriters v Baumgartner, 19 AD3d 1137, 1139; Steadfast Ins. Co. v Sentinel Real Estate Corp., 283 AD2d 44, 54). Such provisions have been construed to require compliance within a reasonable time under all of the attendant circumstances (see Mighty Midgets v Centennial Ins. Co., 47 NY2d 12, 19; Security Mut. Ins. Co. of N.Y. v Acker-Fitzsimons Corp., 31 NY2d 436, 441; Power Auth. of State of N.Y. v Westinghouse Elec. Corp., 117 AD2d 336, 339; Olin Corp. v Ins. Co. of North Am., 743 F Supp 1044, 1053; affd 929 F2d 62). Furthermore, notice requirements are to be liberally construed in favor of the insured (see Greenburgh Eleven Union Free School Dist. v National Union Fire Ins. Co. of Pittsburgh, PA, 304 AD2d 334, 335-336; General Elec. Capital Corp. v Royal Ins. Co. of Am., 205 AD2d 396; Yaccarino v St. Paul Fire & Mar. Ins. Co., 150 AD2d 771, 772; D.C.G. Trucking Corp. v Zurich Ins. Co., 81 AD2d 990, 991), and " [w]here an excuse or explanation is offered for delay in furnishing notice, the reasonableness of the delay and the sufficiency of the excuse are matters to be determined at trial'" (Travelers Ins. Co. v Volmar Constr. Co., 300 AD2d 40, 42, quoting Hartford Acc. & Indem. Co. v CNA Ins. Cos., 99 AD2d 310, 313; see Deso v London & Lancashire Ind. Co. of America, 3 NY2d 127, 129 ["the reasonableness of a delay . . . is usually for the jury"]; C.C.R. Realty of Dutchess v New York Cent. Mut. Fire Ins. Co., 1 AD3d 304, 305 ["a failure to give notice may be excused when an insured has a reasonable belief of nonliability. The burden is on the insured to show the reasonableness of its belief, and whether that belief is reasonable is ordinarily a question for the trier of fact"][citations omitted]; City of Utica v Genesee Mgt., 934 F Supp 510, 520 ["the question of whether notice has been given within a reasonable time is ordinarily for the jury"]). Where, as in this case, notice to an excess liability carrier is in issue, the focus is on when the insured reasonably should have known that the claim against it would likely exhaust its primary insurance coverage and trigger its excess coverage, and whether any delay between acquiring that knowledge and giving notice to the excess carrier was reasonable under the circumstances (see Reynolds Metal Co. v Aetna Cas. & Sur. Co., 259 AD2d 195, 201-203; Paramount Communications v Gibraltar Cas. Co., 204 AD2d 241, 241-242; Olin Corp. v Ins. Co. of North Am., 743 F Supp 1044, 1054). The resolution of such questions of reasonableness is "heavily dependent on the factual contexts in which they arise" (Mighty Midgets v Centennial Ins. Co., supra at 19).
Upon our consideration of the foregoing principles and all of the relevant circumstances presented, we conclude that, in response to the motion of the defendant excess insurer National Union Fire Insurance Company of Pittsburgh, PA (hereinafter National Union), for summary judgment, the plaintiff insured, Morris Park Contracting Corp. (hereinafter Morris Park), succeeded in raising triable questions of fact with regard to the timeliness of the notice it provided to National Union. The record demonstrates that Morris Park was served in the underlying personal injury action with a complaint dated July 22, 2002. As National Union and our dissenting colleague accurately observe, that complaint contained an ad damnum clause seeking $10,000,000 in damages, a figure far in excess of Morris Park's $1,000,000 in primary coverage. However, the complaint contained only vague and generalized allegations of injury without any particularity or substantiation. In view of the commonplace practice of exaggerating damages requests in personal injury actions, the ad damnum clause alone was not sufficient to require the giving of notice to National Union. Rather, it is the combination of the ad damnum figure and evidence regarding the seriousness of the injuries which triggers that obligation (see e.g. Rekemeyer v State Farm Mut. Auto Ins. Co., 7 AD3d 955, 957, mod on other grounds 4 NY3d 468; United States Liability Ins. Co. v Winchester Fine Arts Servs., 337 F Supp2d 435, 444-445).
Following receipt of the complaint, Morris Park served an answer and discovery demands dated October 11, 2002. Morris Park avers that it thereafter actively investigated the claim [*3]by requesting information regarding the occurrence of the injured party's accident (of which Morris Park had no previous knowledge) and the nature and extent of his injuries. This ongoing investigation led to the service of a bill of particulars dated January 22, 2003 upon Morris Park, setting forth a lengthy list of serious injuries for which the injured party for the first time claimed Morris Park was legally responsible. It is undisputed that Morris Park notified National Union of the claim eight days later on January 30, 2003.
Notwithstanding the foregoing, both National Union and our dissenting colleague maintain that Morris Park was fully aware of the extent of the claimed injuries, and of the probability that its excess coverage policy with National Union would be implicated in the action, by November 27, 2002, at the latest. On that date, Morris Park's counsel sent a report to the primary insurer listing various injuries and damages claimed by the injured party in a second supplemental bill of particulars served in a related action against several municipal defendants. However, while that report constitutes some evidence that Morris Park may have had sufficient information at that time to alert National Union to a possible excess coverage claim, we are unable to reach such a conclusion as a matter of law on this record. Indeed, the second supplemental bill of particulars upon which the report is based was served in a separate action and did not purport to attribute any fault or assert any claims for the specified injuries against Morris Park. Moreover, as previously noted, Morris Park presented evidence that it was actively engaged in a good faith investigation into the happening of the accident, the injuries that resulted therefrom, Morris Park's potential liability (if any) therefor, and even the injured worker's eligibility to recover some elements of the damages sought. Morris Park further averred that only when it was served with the bill of particulars dated January 22, 2003, asserting 42 additional injuries over and above those claimed against the municipal defendants in the related action, did it become reasonably clear that the excess coverage might be implicated in the action. Accordingly, Morris Park succeeded in raising issues of fact and credibility regarding whether any period of delay in notifying National Union of the claim was based on its initial reasonable, good-faith belief that the excess insurance would not be triggered in this case (see generally Nails 21st Century Corp. v Colonial Coop. Ins. Co., 21 AD3d 1069; Reynolds Metal Co. v Aetna Cas. & Sur. Co., supra; Seemann v Sterling Ins. Co., 234 AD2d 672; G.L.G. Contr. Corp. v Aetna Cas. & Sur. Co., 215 AD2d 821; E.T. Nutrition v Central Mut. Ins. Co., 201 AD2d 451).
In view of the foregoing, and
upon consideration of all of the evidence presented, we find that a question
also exists with regard to whether National Union's disclaimer, which was
premised on the alleged late notice of the claim, was itself untimely (see
generally First Fin. Ins. Co. v Jetco Contr. Corp., 1 NY3d 64, 70;
Hartford Ins. Co. v County of Nassau, 46 NY2d 1028, 1030; see e.g. Pawley
Interior Contr. v Harleysville Ins. Cos., 11 AD3d 595, 596; M & N Mgt.
Corp. v Nationwide Mut. Ins. Co., 307 AD2d 257, 258; Colonial Coop. Ins.
Co. v Desert Storm Constr. Corp., 305 AD2d 363, 363-364).
PRUDENTI, P.J., MASTRO and SPOLZINO, JJ., concur.
DILLON, J., dissents in part and concurs in part and votes to reverse the order
insofar as appealed from and affirm the order insofar as cross-appealed from,
within the following memorandum:
I respectfully dissent in part and concur in part. While I agree with the majority that [*4]the plaintiff, Morris Park Contracting Corp. (hereinafter Morris Park), was not entitled to summary judgment, I believe that, pursuant to applicable case law, summary judgment should have been granted to the defendant, National Union Fire Insurance Company of Pittsburgh, PA (hereinafter National Union).
The majority panel affirms the denial of summary judgment to National Union on the ground that there is an issue of fact as to whether Morris Park had a good faith belief that the claim in the underlying action would not implicate excess insurance. However, the Supreme Court should have granted summary judgment in favor of National Union, and its failure to do so warrants reversal insofar as appealed from by National Union.
On August 31, 1999, Manual Cabrera was injured when he fell from a scaffold in the course of his employment at a construction site in Brooklyn. Cabrera commenced an action on or about July 22, 2002, in the Supreme Court, Kings County, entitled Cabrera v Abatement Asbestos and Legal Specialists Corp., under Index No. 29034/02, seeking damages from the defendants named therein for personal injuries as a result of their alleged negligence and violations of Labor Law §§ 200, 240, and 241(6). The ad damnum clause in Cabrera's complaint sought a judgment in the sum of $10,000,000.
One of the defendants named in the Cabrera action is Morris Park, alleged to be the construction manager, general contractor, or prime contractor at the construction site. Cabrera's summons and verified complaint were served upon Morris Park on August 5, 2002, and an answer was interposed on Morris Park's behalf with affirmative defenses, cross claims, and discovery demands all dated October 11, 2002. Morris Park was insured for one million dollars by its primary general liability carrier, Investors Insurance Company (hereinafter Investors), and for an additional seven million dollars in excess coverage by National Union. Initially, Morris Park notified Investors, but not National Union, of Cabrera's suit. National Union received its first notice of Cabrera's suit by letter dated January 30, 2003, almost six months after service upon Morris Park of Cabrera's summons and complaint.
National Union disclaimed coverage on February 27, 2003, on two separate but related grounds; namely, untimely notice of the occurrence in alleged material breach of Article VI F(2) of the policy conditions, and failure to immediately forward suit papers in alleged material breach of VI F(3)(a) of the policy conditions. National Union's disclaimer letter dated February 27, 2003, which was sent approximately 3 ½; weeks after it learned of Cabrera's lawsuit, was timely (see Steinberg v Hermitage Ins. Co., 26 AD3d 426, 428). As a result of the coverage disclaimer, Morris Park commenced the instant action seeking a judgment declaring that National Union is obligated to insure, defend and indemnify its excess insured in the underlying Cabrera action. The Supreme Court denied National Union's motion for summary judgment.
Morris Park maintains that it had no duty to notify its excess insurance carrier of Cabrera's claim until it knew, or should have known, that there was a reasonable possibility that the claim would trigger the excess insurer's coverage (see Security Mut. Ins. Co. of N.Y. v Acker-Fitzsimons Corp., 31 NY2d 436, 441; 875 Forest Ave. Corp. v Aetna Cas. & Sur. Co., 37 AD2d 11, 12-13, affd 30 NY2d 726; Reynolds Metal Co. v Aetna Cas. & Sur. Co., 259 AD2d 195, 199-200) and that accordingly, its notice of the suit was timely. Morris Park specifically argues that it was not aware Cabrera's damages could exceed its primary coverage until receipt of Cabrera's bill of particulars dated January 22, 2003, wherein Cabrera itemized damages as, among other things, disc [*5]herniations at L4/5 and L5/S1, two disc surgeries, future surgery, projected rehabilitation expenses of between $1.5 and $1.9 million, and future lost wages of $2.5 million. Notice of the suit was transmitted to National Union eight days later in the correspondence dated January 30, 2003. However, Morris Park's arguments in this regard are refuted by the record, and unavailing as a matter of law, for three separate but related reasons.
First, in order for Morris Park to argue that it believed, in good faith, that its excess policy would not be reached, it must establish that the timing of its notice to the excess carrier was a result of a deliberate determination to that effect (see Long Is. Light. Co. v Allianz Underwriters Ins. Co., 24 AD3d 172, 173). Here, the record is devoid of any evidence that Morris Park, despite receipt of a complaint with a $10 million ad damnum and relevant discovery materials in the fall of 2002, ever made any deliberate determination that National Union did not need to be notified of Cabrera's suit based upon an assessment that the excess insurance was not reasonably likely to be reached. For this reason, Morris Park's good faith argument is legally unavailing (see Long Is. Light. Co. v Allianz Underwriters Ins. Co., supra) and its burden of proof cannot be met on this record (see Great Canal Realty Corp. v Seneca Ins. Co., 5 NY3d 742, 744; Modern Cont. Constr. Co. v Giarola, 27 AD3d 431).
Second, the record undeniably refutes Morris Park's assertion that it was unaware of the extent of Cabrera's damages until January 22, 2003. Cabrera had commenced in Supreme Court, Kings County, a separate personal injury action arising out of the same work site accident entitled Cabrera v Board of Educ. under Index No. 12766/00. Cabrera served in that action a second supplemental verified bill of particulars dated September 18, 2002, setting forth the same itemization of physical injuries, surgeries, rehabilitation expenses, and lost wages as later set forth in the January 22, 2003, bill of particulars. Morris Park received a copy of the September 18, 2002, particulars some time in the fall of 2002, as its contents were specifically summarized by Morris Park's counsel in correspondence to Investors dated November 27, 2002. By that date, clearly, Morris Park not only knew that Cabrera's complaint contained an ad damnum clause nine million dollars in excess of Investor's primary coverage, but also, that Cabrera had itemized in verified form (see CPLR 3044) damages that exceeded the limit of the primary coverage by multiples. It could no longer believe in good faith, by November 27, 2002, that National Union's excess coverage was not involved in the suit (see Rekemeyer v State Farm Mut. Auto. Ins. Co., 7 AD3d 955, 957 [large ad damnum and description of significant injuries provided knowledge, or reason to know, that timely notice was required to claim underinsured motorist benefits], mod on other grounds 4 NY3d 468). There is no question of fact as to Morris Park's awareness of the details and severity of Cabrera's damages claims, as its counsel's letter of November 27, 2002, constitutes the documentary "smoking gun" evidencing such awareness, and that the injuries claimed therein arose out of the same underlying workplace accident. Yet, while Morris Park deemed the damages itemized in the September 18, 2002, bill of particulars to be of sufficient importance to summarize to the primary carrier in the correspondence of November 27, 2002, notice of the suit to National Union continued to be withheld for almost nine additional weeks.
In this regard, the provisions of the excess policy are of importance. As the majority correctly notes, an insured's violation of notice requirements, without justification, constitutes a failure to comply with a condition precedent that vitiates the insurance contract (see Great Canal Realty Corp. v Seneca Ins. Co., supra at 743; Argo Corp. v Greater N.Y. Mut. Ins. Co., 4 NY3d 332, 339; White by White v City of New York, 81 NY2d 955, 957). Article VI, Paragraph F(2) of the policy provides that if a claim is made or a suit is brought against the insured that is "reasonably [*6]likely to involve this policy," the insured is contractually obligated to notify National Union of the claim or suit in writing "as soon as practicable." Article VI, Paragraph F(3)(a) contains seemingly stricter language, that the insured "immediately" transmit to National Union copies of "any demands, notices, summonses or legal papers received in connection with the claim or suit." The parties disputed at oral argument whether Paragraphs F(2) and F(3)(a) are separate and independent obligations of the insured, as urged by National Union, or conflicting contractual provisions that create an ambiguity as to when the notice requirement is triggered and whether such notice must be "immediate" or "as soon as practicable," as argued by Morris Park. Giving Morris Park the benefit of all reasonable favorable inferences, it knew that its excess insurance was "involved" in the suit by November 27, 2002 at the latest, when Cabrera's claimed damages, far in excess of primary insurance coverage, were summarized to the primary carrier, and the obligation to notify National Union was then triggered if not "immediately" under Article VI, Paragraph F(3)(a), then at least "as soon as practicable" thereafter under Article VI, Paragraph F(2).
The third reason that summary judgment should have been granted to National Union involves a question that flows from the foregoing; namely, whether a delay of almost nine weeks in providing notice to an excess insurance carrier, measured from November 27, 2002, constitutes untimeliness as a matter of law.
The reasonableness of a delay
in giving notice is ordinarily a question of fact for trial (see Travelers
Ins. Co. v Volmar Constru. Co., 300 AD2d 40, 42), as correctly stated by the
majority of the panel. However, where there is no excuse for the delay and
mitigating considerations are absent, the issue of the timeliness of notice to
an insurer may be disposed of as a matter of law (see Power Auth. of State of
N.Y. v Westinghouse Elec. Corp., 117 AD2d 336, 339-340). Relatively short
periods of unexcused delay under "as soon as practicable" circumstances have
been found to be unreasonable as a matter of law (see Deso v London &
Lancashire Ind. Co. of America, 3 NY2d 127 [51 days]; Power Auth. of
State of N.Y. v Westinghouse Elec. Corp., supra [53 days]; Steinberg v
Hermitage Ins. Co., 26 AD3d 426 [57 days from awareness of incident];
Sayed v Macari, 296 AD2d
396 [nearly 3-months delay]; Safer v Government Empls. Ins. Co., 254 AD2d
344 [delay between one and two months from insured's receipt of process];
Matter of Government Employees Ins. Co. v Elman, 40 AD2d 994 [29 days];
Reina v United States Casualty Co., 228 AD 108 [26 days]).
While "as soon as practicable" language has been held by the Court of Appeals to be elastic and not immediate, what is practicable must be examined in light of the facts and circumstances of the case at hand (see Mighty Midgets v Centennial Ins. Co., 47 NY2d 12, 19; Deso v London & Lancashire Ind. Co. of America, supra at 129). Here, since Cabrera's extensive damages merited detailed discussion to Investors in the correspondence of November 27, 2002, then it certainly would have been "practicable" for Morris Park to notify National Union of the suit at or about the same time. Morris Park's delay in transmitting notice to its excess carrier until January 30, 2003, constitutes, under the peculiar circumstances of this case, a breach of not only the immediacy requirement of Article VI F(3)(a) of the parties' excess insurance policy (see Steadfast Ins. Co. v Sentinel Real Estate Corp., 283 AD2d 44, 54), but also, the "as soon as practicable" requirement of Article VI, Paragraph F(2). A breach of either provision vitiates the coverage.
Morris Park argues that the need for notice is greater for a primary insurer than for an excess insurer, as excess carriers are only interested in those particular cases serious enough to involve the excess policy (see Olin Corp. v Ins. Co. of North Am., 743 F Supp 1044, 1054, affd 929 [*7]F2d 62). This argument does not, however, obviate Morris Park's contractual obligation to provide notice to its excess insurer of potential excess claims in accordance with the terms of the policy. The Southern District's language in Olin Corp. does not suggest that notice to an excess insurer can be delayed more than notice to a primary insurer, but only that the "trigger event" for excess notice is the knowledge of circumstances that a claim is reasonably likely to involve the excess coverage. Indeed, the Court of Appeals has specifically recognized "that excess carriers have the same vital interest in prompt notice as do primary insurers" (American Home Assur. Co. v International Ins. Co., 90 NY2d 433, 443), given their legitimate interests in monitoring the defense of the insured by primary counsel, conducting investigation, participating in settlement discussions, setting appropriate reserves, and in some instances, assuming the insured's defense upon its tender by the primary carrier. Accordingly, the timing of "immediate" or "as soon as practicable" notice measured from November 27, 2002, is the same for National Union as would be expected for initial corresponding notice to a primary insurer.
Morris Park's contentions regarding the inapplicability of provisions of the Labor Law are largely without merit insofar as the excess insurance issues are concerned. Likewise, Morris Park's contentions that National Union has not demonstrated prejudice from the timing of its notice are without merit, as prejudice need not be shown here to sustain a timely disclaimer of excess coverage based on untimely notice (see Great Canal Realty Corp. v Seneca Ins. Co., supra at 743; Argo Corp. v Greater N.Y. Mut. Ins. Co., supra at 340; American Home Assurance Company v International Insurance Company, supra at 443; 319; McKibben St. Corp. v General Star Natl. Ins. Co., 245 AD2d 26, 28).
For all of the foregoing reasons, I would grant National Union's motion for summary judgment on the ground that Morris Park breached its contractual obligation to provide timely notice, thereby vitiating the excess coverage.
ENTER:
James Edward Pelzer
Clerk of the Court
Great Northern Insurance Company v. Interior Construction Corp.
GRAFFEO, J.
At issue in this case is the enforceability of an indemnification provision in a [*2]commercial lease. We conclude that the indemnification clause, which was coupled with an insurance procurement provision, obligates the tenant to indemnify the landlord for its share of liability, and that such a lease provision does not violate General Obligations Law § 5-321. We therefore affirm the order of the Appellate Division so holding.
New Water Street Corporation
leased a portion of the 28th floor of its building located at 55 Water Street in
New York City to Depository Trust & Clearing Corporation. The lease required
Depository to indemnify New Water as follows:
"Tenant shall indemnify and hold harmless Landlord . . . from and against any
and all claims arising from or in connection with (A) the conduct or management
of the Premises or of any business therein, or any work or thing whatsoever
done, or any condition created (other than by Landlord) in or about the Premises
during the term of this Lease . . .; (B) any act, omission or negligence of
Tenant or any of its subtenants or licensees . . . or contractors; (C) any
accident, injury or damage whatsoever (unless caused solely by Landlord's
negligence) occurring in, at or upon the Premises; and (D) any breach or default
by Tenant in the full and prompt payment and performance of Tenant's obligation
under this Lease . . . ."
The lease further obligated Depository, at its expense, to maintain a comprehensive general liability insurance policy naming New Water as an additional insured with coverage to be no less than $5 million "combined single limit per occurrence for bodily injury and property damage liability." Another lease term directed New Water and Depository to obtain mutual waivers of subrogation in their respective insurance policies. Depository procured the specified insurance coverage, and New Water also maintained a separate insurance policy for the building.
After entering into the lease, Depository hired Interior Construction Corporation to renovate a portion of its premises. Interior subcontracted with TM & M Mechanical Corporation to perform work on an existing sprinkler system as part of the project. In August 1999, during construction, a flood occurred, causing property damage to the premises of Neuberger & Berman, LLC, a tenant on the floor below. The water damage resulted from the failure to drain the pipes properly before beginning the sprinkler work.
Great Northern Insurance Company — Neuberger's insurer — commenced a subrogation action against New Water, Depository and Interior in June 2001 to recover the [*3]monies it had paid to Neuberger on its property damage claim [FN1]. As relevant to this appeal, New Water interposed a cross claim against Depository for contractual indemnification. In 2004, the subrogation action was settled for $200,000 and all claims and cross claims among the parties were resolved, except for New Water's indemnification claim against Depository [FN2]. As part of the settlement, the parties stipulated that if the case had been tried by a jury, 90% of the liability would have been allocated to New Water and 10% to Interior. After the settlement, New Water moved for summary judgment against Depository on its claim for contractual indemnification. Supreme Court denied the motion. The Appellate Division initially affirmed but later granted reargument and reversed, thereby granting New Water's motion. We granted Depository leave to appeal.
Depository advances two arguments to support its position that New Water is not entitled to contractual indemnification. First, Depository asserts that the language of the lease provision at issue does not unmistakably require indemnification under the circumstances of this case. Alternatively, even if interpreted to entitle New Water to indemnification, Depository urges that the lease provision is unenforceable and contrary to public policy under General Obligations Law § 5-321 because it obligates a tenant to indemnify a landlord for the landlord's own negligence. We address each contention in turn.
Courts will construe a contract
to provide indemnity to a party for its own negligence only where the
contractual language evinces an "unmistakable intent" to indemnify (see Levine v
Shell Oil Co., 28 NY2d 205, 212 [1971]). As we have explained:
"When a party is under no legal duty to indemnify, a contract assuming that
obligation must be strictly construed to avoid reading into it a duty which the
parties did not intend to be assumed. The promise should not be found unless it
can be clearly implied from the language and purpose of the entire agreement and
the surrounding facts and circumstances" (Hooper Assoc. v AGS Computers, 74 NY2d
487, 491-492 [1989] [citations omitted]; see also Rodrigues v
[*4]
N & S Bldg. Contrs., 5 NY3d 427, 433 [2005]).
Here, subsection (C) of the indemnification clause in the lease required Depository to indemnify New Water for "any" accident occurring in Depository's premises "unless caused solely by [New Water's] negligence." This broadly drawn provision unambiguously evinced an intent that Depository indemnify New Water for the latter's own negligence, provided New Water was not 100% negligent. In this case, the parties stipulated that New Water was 90% at fault and Depository's contractor was 10% responsible for the water damage. Hence, New Water was not solely liable under the terms of the stipulation and the clear language of the lease unmistakably affords indemnification under the circumstances of this case [FN3].
Having concluded that the
indemnification provision was triggered, we next consider Depository's
contention that the provision is nevertheless unenforceable in light of General
Obligations Law § 5-321. That statute provides:
"Every covenant, agreement or understanding in or in connection with or
collateral to any lease of real property exempting the lessor from liability for
damages for injuries to person or property caused by or resulting from the
negligence of the lessor, his agents, servants or employees, in the operation or
maintenance of the demised premises or the real property containing the demised
premises shall be deemed to be void as against public policy and wholly
unenforceable."
The controlling precedent regarding application of General Obligations Law § 5-321 is Hogeland v Sibley, Lindsay & Curr Co. (42 NY2d 153 [1977]). In Hogeland, a customer sustained injuries when she tripped on a sidewalk outside the tenant's store. The jury awarded [*5]damages in the ensuing personal injury action, allocating 60% of the fault to the landlord and 40% to the tenant. The landlord then sought contractual indemnification for its share of the damages from the tenant based on a clause in the lease obligating the tenant to indemnify the landlord for all claims arising from accidents "in or about the Tenant's demised premises" (id. at 157). Significantly, the lease also contained an insurance procurement provision, directing the tenant to name the landlord as an additional insured on the tenant's liability insurance policy if the landlord so requested, provided the landlord bore any increase in premium costs.
Recognizing at the outset that
the lease in Hogeland was negotiated at arm's length by two sophisticated
business entities, we determined that the contested clause required the tenant
to indemnify the landlord for its own negligence. We then addressed the impact
of General Obligations Law § 5-321, if any, on the landlord's right to recover,
and observed that the statute's invalidation of agreements "exempting" lessors
from liability for damages resulting from their own negligence "strongly
suggests that it was directed primarily to exculpatory clauses in leases whereby
lessors are excused from direct liability for otherwise valid claims which might
be brought against them by others" (id. at 160). We held that General
Obligations Law § 5-321 did not preclude the landlord's indemnification claim,
reasoning:
"It is against this background of declared purpose that the indemnification
clauses before us must be considered. So analyzed, [the landlord] is not
exempting itself from liability to the victim for its own negligence. Rather,
the parties are allocating the risk of liability to third parties between
themselves, essentially through the employment of insurance. Courts do not, as a
general matter, look unfavorably on agreements which, by requiring parties to
carry insurance, afford protection to the public" (id. at 161).
There is no meaningful distinction between Hogeland and the case before us. As in Hogeland, this case presents a commercial lease negotiated between two sophisticated parties who included a broad indemnification provision, coupled with an insurance procurement requirement. That arrangement afforded Neuberger, the tenant who sustained water damage, adequate recourse for the damages it suffered. Additionally, Depository's insurer — not Depository itself — will bear ultimate responsibility for the indemnification payment, which is precisely the result contemplated by the parties when they entered into the lease. Where, as here, a lessor and lessee freely enter into an indemnification agreement whereby they use insurance to allocate the risk of liability to third parties between themselves, General Obligations Law § 5-321 [*6]does not prohibit indemnity [FN4].
Finally, we decline Depository's invitation to overrule Hogeland. Under the doctrine of stare decisis, we do not lightly depart from our precedents, particularly those involving contractual rights or statutory interpretation — both are at stake in this case (see Maxton Bldrs. v Lo Galbo, 68 NY2d 373, 381 [1986]; Matter of Higby v Mahoney, 48 NY2d 15, 19 [1979]). Commercial landlords and tenants have relied on Hogeland for close to 30 years in negotiating their contractual relationships and the Legislature has not seen fit to alter this rule.
Accordingly, the order of the
Appellate Division should be affirmed, with costs.
Order affirmed, with costs. Opinion by Judge Graffeo. Chief Judge Kaye and
Judges Ciparick, Rosenblatt, Read and R.S. Smith concur. Judge Pigott took no
part.
Decided October 19, 2006
Footnotes
Footnote 1: Great Northern later amended the complaint to add TM & M
as a defendant.
Footnote 2: Interior agreed to pay $20,000 and TM & M agreed to pay
$6,700 under the settlement. New Water and Depository, through their insurers,
each paid $86,650. Accordingly, New Water seeks $86,650 from Depository (to be
paid by Depository's insurer) under its contractual indemnification claim.
Footnote 3: Since we find that New Water is entitled to
indemnification under subsection (C) of the clause, our decision does not turn
on other subsections of that provision. Furthermore, we are unpersuaded by
Depository's claim that subsection (A) of that clause negates the coverage
specially provided by subsection (C). Even if, as Depository asserts, all four
subsections must be read together, the subsection (A) reference to "conditions"
created by New Water — to the extent such conditions contemplate negligence
principles — would necessarily be qualified by subsection (C)'s "sole
negligence" language. As such, New Water would be entitled to indemnification
for damages resulting from a condition it created unless the condition arose
solely through its own negligence, which all parties agree was not the situation
here.
Footnote 4: Nor do we find the absence of a contractual provision
expressly limiting New Water's recovery to Depository's insurance coverage fatal
(cf. Colosi v RATL, LLC, 7 AD3d 558, 559 [2d Dept 2004]). Here, Depository's
insurance policy afforded coverage of $5 million to New Water as an additional
insured. The liability at issue in this case amounted to $86,650. The question
of whether a landlord may seek indemnification in excess of insurance limits is
therefore not before us and we do not reach it.
151 East 26th Street Associates v. QBE Insurance Company
Order, Supreme Court, New York County (Jane S. Solomon, J.), entered August 9, 2005, which, inter alia, denied defendant's motion for summary judgment dismissing the complaint, unanimously affirmed, with costs.
In this action alleging wrongful refusal by defendant to pay a claim for the loss of property insured by it under a policy issued to plaintiff, defendant has waived disclaimer predicated on untimely notice of claim. Defendant never issued a written disclaimer of coverage citing the failure of plaintiff to give "prompt" notice in accordance with the requirement of the policy, and, indeed, did not raise the lack-of-prompt-notice defense until more than three years after receiving plaintiff's notice of claim (see Hotel des Artistes, Inc. v Gen. Acc. Ins. Co. of Am., 9 AD3d 181, 193 [2004], appeal dismissed 4 NY3d 739 [2004]). In any case, under the unusual circumstances presented, in which serious structural infirmity in plaintiff's apartment building necessitated emergent and extensive shoring to stabilize the building and assure the safety of its tenants, many of whom refused to evacuate their apartments, plaintiff's notice of claim, sent to defendant shortly after the emergency shoring had been completed but before substantial long-term remedial measures had been undertaken, has not been shown to be untimely as a matter of law. Nor has defendant made a persuasive showing in support of the alternative grounds advanced by it for summary judgment predicated upon the contention that it was denied a meaningful opportunity to inspect the premises so as to ascertain for itself the cause and extent of the loss at issue. Indeed, it appears from the record that such an opportunity was in fact provided. [*2]
We have considered defendant's remaining arguments and find them unavailing.
Files v. Ken Goewey Dodge, Inc
MEMORANDUM AND ORDER
Rose, J.
Appeal from an order of the Supreme Court (Cannizarro, J.), entered July 25, 2005 in Albany County, which, inter alia, granted defendant's motion to set aside the verdict.
In this personal injury action arising out of a motor vehicle accident, plaintiff alleged that he sustained a serious injury within the meaning of Insurance Law § 5102 (d) because the accident so aggravated a preexisting degenerative condition of his cervical spine that he ultimately required spinal fusion surgery. At trial, the parties presented conflicting expert medical evidence as to whether the spinal surgery was causally related to the accident. In its jury charge and interrogatories, Supreme Court asked the jury to determine first whether defendant had been negligent, second whether plaintiff sustained a significant limitation of use of his cervical spine, third whether his spinal fusion surgery was causally related to the accident and finally the amount of damages to be awarded.
The jury initially returned an inconsistent verdict finding that defendant had not been negligent, yet finding serious injury and awarding damages. After further instruction, the jury returned a second verdict finding that defendant had been negligent, plaintiff sustained a significant limitation of use, but his spinal fusion surgery was not causally related to the accident. Although the jury again awarded damages, neither party challenged the verdict as inconsistent [*2]before the jury was discharged. Defendant later moved pursuant to CPLR 4404 to set the verdict aside. Plaintiff cross-moved for the same relief and to obtain a new trial. Supreme Court denied plaintiff's cross motion, granted defendant's motion and dismissed the action.
Plaintiff appeals, arguing that the need for spinal surgery was the only evidence that he had sustained a serious injury, and the surgery's essential role meant that the jury's finding of no causal relationship was inconsistent with its finding of a significant limitation of use. We disagree. The jury's findings clearly addressed two discrete issues and were neither inconsistent nor against the weight of the evidence.
In its instructions regarding the second interrogatory, Supreme Court emphasized that the jury had to assess the seriousness of the condition of plaintiff's cervical spine and did not mention that it had to be causally related to the accident. As a result, the jury's affirmative answer to this interrogatory confirmed only that it found the condition of plaintiff's spine to constitute a significant limitation of use (see Insurance Law § 5102 [d]), without regard to the cause of that condition. In other words, if the spinal surgery were causally related to the accident, the testimony of plaintiff's medical expert as to his limited range of motion and the necessity of the surgery would be sufficient to establish a qualifying serious injury (see e.g. Horton v Warden, 32 AD3d 570, 574 [2006]).
The third interrogatory addressed whether that injury was caused by defendant's negligence (see Wallace v Terrell, 295 AD2d 840, 841 [2002]; Maisonet v Kelly, 228 AD2d 780, 782 [1996]). In finding that the jury's answer to the third interrogatory was not against the weight of the evidence, we agree with Supreme Court that the record contains conflicting expert testimony as to the cause of the surgery, allowing the jury to resolve this issue against plaintiff (see Siegel v Wank, 270 AD2d 573, 576 [2000]; Jaquay v Avery, 244 AD2d 730, 731 [1997]). Thus, the jury's finding of no causal relationship was neither inconsistent nor against the weight of the evidence, and Supreme Court properly denied plaintiff's cross motion.
Nor did Supreme Court err in granting defendant's motion to set the second verdict aside, for once the jury found no causal relationship, it should not have proceeded to consider the issue of damages. Although there is nothing in the record indicating that the jury was instructed to stop and return its verdict if it answered "No" to any of the first three interrogatories, it is clear that each had to be answered "Yes" in order for plaintiff to be entitled to recover damages. Because the jury's answers to the first three interrogatories were consistent with one another, but inconsistent with a damages award, Supreme Court could ignore the award as having no legal effect and simply enter judgment pursuant to the jury's answers rather than order a new trial (see CPLR 4111 [c]; Marine Midland Bank v John E. Russo Produce Co., 50 NY2d 31, 40 [1980]; Mayer v Goldberg, 241 AD2d 309, 312 [1997]; Peters v Port Auth. Trans-Hudson Corp., 234 AD2d 205, 206 [1996], lv denied 90 NY2d 802 [1997]; see also Leal v Simon, 147 AD2d 198, 206 [1989]).
Mercure, J.P., Crew III, Spain and Mugglin, JJ., concur.
ORDERED that the order is affirmed, with costs.
Park City Estates Tenants Corp v. Gulf Insurance Company
Order, Supreme Court, New York County (Herman Cahn, J.), entered November 30, 2005, which granted defendant's motion for summary judgment dismissing the complaint and denied plaintiff's cross motion for partial summary judgment on the issue of liability, unanimously affirmed, without costs.
In this action to recover on an all-risk commercial property and general liability insurance policy issued to plaintiff, the "Ordinance or Law" endorsement in the insurance policy specifically excluded coverage for losses related to "integrity testing" on the building's plumbing and gas systems. After a gas pipe ruptured in the apartment of a tenant in plaintiff's building, integrity testing of the system was performed, in accordance with the Building Code (Administrative Code of City of NY) § 27-922. When the gas pipes and risers failed to withstand the pressure from this testing, the system required more than $600,000 worth of repairs. This loss was a "cost associated with the enforcement of [an] ordinance or law which require[d the] Insured or others to test plumbing, gas or other building systems for integrity," and was thus specifically excluded from coverage under the policy (see e.g. 61 Jane St. Tenants Corp. v Great Am. Ins. Co., 2001 US Dist LEXIS 265, 2001 WL 40774 [SD NY]).
In light of this determination, we need not reach the issue of whether the loss is covered under defendant's "wear and tear" exclusion as a matter of law.
THIS CONSTITUTES THE DECISION
AND ORDER
OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.
ENTERED: OCTOBER 19, 2006
CLERK
