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Dear Coverage Pointers Subscribers:

 

Home Again, Home Again, Jiggety Jig

 

Humor is in short supply this morning as I'm working on about four hours sleep. I Left is a snowstorm yesterday to fly to NYC for a mediation in a construction lawsuit.  The marathon session lasted from 9:30 AM to 9:00 PM and my flight arrived back home at 12:30 AM  The good news is that the case has likely settled.  I thought the mediator, Gene Farber from White Plains, did a good job in a very difficult and multi-faceted case. 

 

A New Year

 

Happy New Year from your friends at Hurwitz & Fine, P.C.  We start another year of cutting edge reporting, bringing you both summaries and analysis of every New York State Court of Appeals and Appellate Division coverage decision throughout the year.

 

One of the nicest comments we get, with regularity, is that this publication differs from others because we do not use this as a puff piece, listing every motion we've won, successful trial outcomes and the like, seen in so many newsletters.  We will continue that tradition in the coming year.  This publication is meant to be educational, to provide our ever-growing readership with the most up-to-date review of New York insurance coverage law, with a taste of cases outside of the insurance arena and past the state's geographical boundaries.

 

For those who have joined our mailing list in the last few months and may not know us, we thought it might make sense to introduce H&F to our readership and let you know how we can be of service, not only as your counsel, but as a resource.

 

Where Do We Practice?

Our coverage, regulatory and bad faith/extra-contractual liability practice is statewide.  You will find us in the courthouses of this state's counties from Suffolk and Nassau to Chautauqua and Cattaraugus, from New York, Kings and Queens, to Broome, Otsego and Oswego, from Erie to Albany, from Onondaga to St. Lawrence, and all the counties in between.

 

Our coverage team provides top-notch, innovative and responsive counseling and representation for local, regional and national clients.  You'll find us in many of the major coverage cases throughout the state, from the New York City crane collapse, to World Trade Center litigation, to environmental clean up cases, to lead paint, CGL, D&O, E&O, personal and business auto and garage, homeowners, property and life, health and disability.  You will find us in leadership positions in national, state and regional organizations, such as the Federation of Defense & Corporate Counsel, DRI, International Association of Defense Counsel, The Harmonie Group, the Torts, Insurance and Compensation Law Section of the New York State Bar Association, the Defense Trial Lawyers Association of Western New York and others.  You'll hear us present at conferences sponsored by all those organizations as well as PLRB, LIRB, the New York State Bar Association and commercial CLE providers.

 

Being an adjunct Professor of Insurance Law at the Buffalo Law School, I also serve as a consultant and expert witness in matters through the United States, Canada and the UK.

 

What Makes Us Different?

We pride ourselves on responsiveness, creativity and practicality.  We also have a sense of humor!

 

What Do We Do?

Besides our coverage practice, we have a talented and diverse trial practice handling products liability, Labor Law, premises, trucking, auto and homeowners' defense and commercial litigation.  Our transactional team handles economic development matters, commercial real estate, tax, bankruptcy and work-outs, health and elder care law, estate and trust work and we team up with lawyers, throughout the state and nation, to provide our clients with what they need.

 

How Else Can We Help?

Use us as a national resource.  We do not practice in 50 states, but if you need help outside of New York, we can help you as well.  We know the best and the brightest through the US and Canada.

 

An example: just two weeks ago, a national carrier recognized a need for a team of national coverage lawyers in the states in which it sells policies and its insureds are sued.  We put together a team of lawyers from approximately 20 states, known well to us from our national relationships and now that carrier has a team of vetted law firms at the ready, to provide it with coverage advice, counseling and representation.

 

Thanks for listening.

 

One Hundred Years Ago Today:

How far we've come in 100 years:

 

January 9, 1909

Oelwein (Iowa) Daily Register

 

WOMAN INSURANCE OFFICIAL

Mrs. Rawson:  Vice-President of Iowa Life Company

 

New York .- Among the accredited representatives at the annual meeting of the Association of Life Insurance Presidents which closed its business in this city the other day, was a woman - the only woman in the world who is an officer of a life insurance company. She is Mrs. L. C. Rawson of Des Moines Iowa and she is vice-president of the Des Moines Life Insurance Company, a corporation which carries $27,000,000 in policies on its books.

 

Her husband is president of the company. "I have been in the Insurance business 20 years," said Mrs. Rawson to a reporter. "You wouldn't think it? Well, it's true, and please save your compliments. I'm the mother of two married daughters and both of them are the mothers of two of the sweetest families in the world."

 

"Yes; I don't mind telling you how I came to go into the insurance business. I had a little boy and he died and' - Mrs. Rawson's lips quivered for a moment. "My baby's death was a cruel blow. I thought I would go crazy. I brooded and finally I realized that I must do .something to occupy my mind or I would surely go mad. The doctors told my husband that I must occupy my mind in some way, but they made no suggestion that helped. Finally the idea came to me that I should like to be with Mr. Rawson more and I asked him to let me into his office. I started out as secretary of the company and gradually assumed control of the entire office force.

 

I put in eight hours a day at my desk, and sometimes longer, of course. I have told you about the family. They are grown up and so the home doesn't suffer by reason of my absence. A woman can come pretty near doing anything she pleases in this country, and I suppose that some day she will be able to vote, but I am not interested in any suffrage movement or anything of that kind. Neither do I want to be called a new woman. I'm not. I'm just a working woman and glad that I am able to work"

Editor's Note:  Des Moines Life Insurance stayed in business another three years and then merged into National Life of Chicago in 1912.  Louise (L.C.) Rawson died in April 1914, a rather wealthy woman, leaving an estate valued at $600,000 to her three children, assets received from the sale of the company.

 

Earl's Pearls

Pleadings?  Why should we care about pleadings?  Read Earl Cantwell's column to find out.

 

One Hundred Years Ago this Week: 

The newspapers across the world were reporting on the aftermath of the December 28, 1909 earthquake in Italy, the worst to hit Europe in modern times. Over 40% of the population of Messina and more than 25% of Reggio di Calabria were killed by the earthquake and tsunami, as well as by fires in some parts of Messina. Some estimates were as high as 110,000 killed and there was severe damage in large parts of Calabria and Sicily. Tsunami heights of 6-12 m (20-39 ft) were observed on the coast of Sicily south of Messina and heights of 6-10 m (20-33 ft) were observed along the coast of Calabria. Aftershocks continued into 1913.

 

Audrey's Angles:

From Audrey, the undisputed Queen of No Fault:

 

Happy New Year to you!  This year has begun slowly, but with important decisions.  The Appellate Division, Second Department issued an interesting decision on whether the plaintiff's motion for class certification was properly denied.  This case is a good review for those who would like to understand what the standard is to qualify (or not) for class certification.  The second case addressed payment of claims to a provider who asserts that the individual performing the treatment is an independent contractor.  In that case the Appellate Term, Second Department held that the insurer is not required to set it forth as a basis for denial.  The phrase used by the court was non-precludable.  Also, the court held that the plaintiff could not fix its error on its claim form when discovered or pointed out to it by the insurer during litigation.  I think you can deduce why they would be patently inequitable to the insurer.

 

We are beginning a new year and you may wish to have some refresher training.  Please let me know if you are interested and what topics you need refreshing in.  Send me an email at [email protected]

 

TRAINING AND CLE OPPORTUNITY

 

Finally, there is a GREAT program scheduled from April 1-3 in Chicago, specific to insurance coverage.  It is the Insurance Coverage and Claims Institute which is presented by DRI and has a number of great and timely topics. One interesting topic is a judicial perspective from the Honorable Timothy M. Tymkovich, a US Court of Appeals Judge from the 10th Circuit on insurance disputes and litigation.  Some of the other topics include duty to defend, defense costs in large exposure cases, jury selection techniques for coverage cases, and issues pertaining to increased fraud or arson claims because of the mortgage crisis. If you would like a copy of the full brochure, send me an email at [email protected] and I will send it to you in PDF form.

 

Audrey

 

Thanks Aud.

 

This Week's Offerings:

In this week's issue of Coverage Pointers, you'll find the following:

 

KOHANE'S COVERAGE CORNER

Dan D. Kohane

  • Obligation to Defend if Exclusions Not in Policy
  • Allegations that Lawyer was Involved in Criminal Enterprise does not Mean Claims Excluded from Professional Liability Policy under Criminal Act Exclusion 
  • Proof of Intention Failure to Cooperate Justified Denial of Coverage
  • Court Finishes Off the Year by Reversing Trial Court and Dismissing Bad Faith Claim against Carrier
  • Court Cannot Render Declaratory Relief in Absence of Declaratory Judgment Action with All Parties Present
  • In Lengthy and Well-Considered Opinion, First Department Refuses to Reopen Asbestos Policies to New Claims, Where "Completed Operations" and "Products Hazard" Aggregates Exhausted.  Insured Guilty of Laches and Claimant Bound by Insured's Guilt; No Proof of Injury in Fact
  • Again, the Lack of Investigation by the Insured of the Possibility of Liability Leads to a Finding that "Good Faith Believe in Non-Liability" Defense Cannot be Supported
  • Since Insurer Failed to Properly Advise Policyholder of Change in Coverage, Policy is Reformed to Include Coverage Insurer Tried to Remove
  • Non-owned Coverage Unavailable for Vehicle Rented and Available to Insured for 55 Days

MARGO'S MUSINGS ON SERIOUS INJURY UNDER NEW YORK NO FAULT

Margo M. Lagueras

 

  • Plaintiff's Deposition Testimony Defeats His 90/180 Day Claim
  • Upon Renewal, Summary Judgment Is Reversed Based On Post-Surgical Affidavit
  • Appeal Fails Where Plaintiff Fails to Submit Contemporaneous Competent Medical Evidence
  • "Certification" From Treating Physician Fails to Affirm Annexed Reports and Records
  • Recent Examination Is Necessary to Support Limitation of Use Categories of Serious Injury
  • Defendant's Reliance on Plaintiff's Reports That Indicate ROM Limitations Fails to Meet Prima Facie Burden
  • Affirmations of Plaintiff's Experts Raise Triable Issue Regarding Wrist Injury
  • Unexplained Lengthy Gap in Treatment Defeats Serious Injury Claim
  • Opposing Papers Are Not Considered Where Issue of Fact Remains
  • Jury Award That Deviates Materially From What Would Be Reasonable Is Modified

AUDREY'S ANGLES ON NO-FAULT

Audrey Seeley

Litigation

  • Independent Contractor Defense Need Not Be Asserted in Denial and Plaintiff Cannot Fix Upon Discovery in Litigation.
  • Class Certification Properly Denied as Representative Was Not Adequate for the Class

PEIPER ON PROPERTY (and POTPOURRI)

Steven E. Peiper 

Property

  • "Soft Costs" (i.e., business interruption costs) are not Time Barred from Subrogation where Damages were not Paid Until More than Three Years After the Initial Loss
  • Purported Expert's Conclusory Statement of No Evidentiary Value in this Property Damage Case
  • Replacement Cost vs. Fair Market Value Cost in a Property Theft Dispute

Potpourri

·         Always, Always, Always Confirm in Writing. Always!

  • Grave's Amendment does not Apply to Claims of Owner Negligence

EARL'S PEARLS

Earl K. Cantwell, II
[email protected]

 

A New "Plausible Pleading" Standard?

 

That's all folks.  See you in a couple of weeks.

 

Dan

 

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Hurwitz & Fine, P.C. is a full-service law firm
providing legal services throughout the State of New York

NEWSLETTER EDITOR
Dan D. Kohane
[email protected]

 

INSURANCE COVERAGE TEAM
Dan D. Kohane, Team Leader
[email protected]
Michael F. Perley
Audrey A. Seeley
Steven E. Peiper
Margo M. Lagueras

 

FIRE, FIRST-PARTY AND SUBROGATION TEAM
Andrea Schillaci, Team Leader
[email protected]
Jody E. Briandi
Steven E. Peiper

 

NO-FAULT/UM/SUM TEAM
Audrey A. Seeley, Team Leader

[email protected]
Tasha Dandridge-Richburg
Margo M. Lagueras

 

APPELLATE TEAM
Jody E. Briandi, Team Leader

[email protected]
 Scott M. Duquin

 

Index to Special Columns

 

Index to Special Columns

Kohane’s Coverage Corner

Margo’s Musings on “Serious Injury”

Audrey’s Angles on No Fault

Peiper on Property and Potpourri
Earl’s Pearls

Across Borders

Duquin -- The Duke of Lead

KOHANE’S COVERAGE CORNER

Dan D. Kohane

[email protected]

 

1/8/09              Silva v. F.R. Real Estate Development, Corp.

Appellate Division, First Department

Obligation to Defend if Exclusions Not in Policy

Exclusions relied upon by carrier had been removed from policy and accordingly were inapplicable.  However, insured is not permitted to recover costs in commencing and winning declaratory judgment action.

 

1/6/09              American Guaranty and Liability Insurance Company v. Moskowitz Appellate Division, First Department

Allegations that Lawyer was Involved in Criminal Enterprise does not Mean Claims Excluded from Professional Liability Policy under Criminal Act Exclusion 

Oxymorons of the world unite.

 

Moskowitz was counsel to a certain companies in which he owned stock and along with his clients was sued for fraud and racketeering. Those claims assert that he carried out that conduct in his capacity as a lawyer and, accordingly, his professional liability policy provides him with a defense.  The fact that he had served as "de facto in-house counsel" does not render him an officer, director or employee of a business enterprise whose coverage is negated by an exclusion. conclusory, unsupported allegation that Moskowitz was a member of a criminal enterprise does not place the claim within Exclusion A, which renders the policy inapplicable to any claim arising out of a criminal act by an insured.

Editor’s Note: So, there is an allegation that Moskowitz was a member of a criminal enterprise and there was an exclusion that removed claims for claims arising out of a criminal act by an insured.  Logic tells me that the exclusion would have some relevance, no?  So what allegation would lead to Exclusion A being applicable?  Inquiring minds want to know.

 

1/6/09              In re State Farm Indemnity Co., v. Moore

Appellate Division, First Department

Proof of Intention Failure to Cooperate Justified Denial of Coverage

We all know how difficult it can be to establish a lack of cooperation on the part of the insured.  This case comes up in the context of an application to stay an uninsured motorist arbitration where the carrier for the other vehicle had denied coverage for lack of cooperation.

 

The court restated the so-called Thrasher test which provides that an insure, to meet its "very heavy burden" in establishing lack of cooperation, must establish that it diligently acted in seeking the cooperation of the insured, that its efforts were reasonably calculated to bring about the insured's cooperation, and that the insured's attitude "was one of willful and avowed obstruction'".  The facts must support an inference that the failure to cooperate was deliberate," held the court.

 

Here, Central, the insurer, promptly commenced a detailed investigation and diligently followed up on it. In addition to numerous telephone calls being made to the number Perez provided in the subject insurance policy, letters via certified or registered mail were sent to the address provided by Perez, and Central provided evidence that Perez signed for one of the letters. Furthermore, visits were made to Perez's address and his mother maintained that she did not know his whereabouts. In light of these unsuccessful efforts that were reasonably calculated to obtain Perez's cooperation, the inference that Perez deliberately chose not to cooperate is compelling.

 

12/31/08          Kumar v. American Transit Insurance Company

Appellate Division, Fourth Department

Court Finishes Off the Year by Reversing Trial Court and Dismissing Bad Faith Claim against Carrier

We remember this case on a related issue.  We reported on it back in our April 4, 2008 issue and a lengthy review of the underlying case was provided in both the cover letter and the summary.

3/21/08            Kumar, as Assignees of Tisack v. Am. Transit Ins. Co

Appellate Division, Fourth Department

Can a Liability Carrier, Sued in Bad Faith, Maintain a Third-Party Action Against the Defense Firm it has Hired?

There was long and fascinating decision allowing an insurer to maintain, in certain circumstances, a claim for equitable subrogation against its defense counsel, if the carrier is found to be in bad faith.

What happened next, in this case, was that the lower court found that the carrier’s refusal to settle the underlying personal injury case was in fact, in bad faith.  That determination was appealed and in this decision, the Fourth Department reversed finding that the plaintiff had not established bad faith:

 

To prevail in such an action, a plaintiff must establish that the insured " lost an actual opportunity to settle the . . . [action]' . . . at a time when all serious doubts about [his or her] liability were removed" … and that "defendant insurer engaged in a pattern of behavior evincing a conscious or knowing indifference to the probability that an insured would be held personally accountable for a large judgment if a settlement offer within the policy limits were not accepted."

Editor’s Note:  That is the standard for bad faith under liability policies in New York, under Pavia and once again an attempt to squeeze extra-contractual damages out of an insurer has failed.

 

12/31/08          Unitrin Kemper Auto and Home v. Irizarry

Appellate Division, Fourth Department

Court Cannot Render Declaratory Relief in Absence of Declaratory Judgment Action with All Parties Present

This started out as an application to stay arbitration but at the end of the day, the lower court declared the primacy of policy coverage.  The Appellate Division vacated the decision because (a) there was no declaratory judgment action before the court and (b) the owner and driver of the car were not parties to the lawsuit.

Editor’s Note:  Bring everyone to the party if you seek declaratory relief.

12/30/08          Continental Casualty Co. v. Employers Insurance Co. of Wausau

Appellate Division, First Department

In Lengthy and Well-Considered Opinion, First Department Refuses to Reopen Asbestos Policies to New Claims, Where “Completed Operations” and “Products Hazard” Aggregates Exhausted.  Insured Guilty of Laches and Claimant Bound by Insured’s Guilt; No Proof of Injury in Fact

In asbestos litigation, the insurers seek a declaration that they do not have a duty to indemnify the now-defunct insured, Robert A. Keasbey Co. (Keasbey) in asbestos-related claims. Although the tort claims have not been yet resolved, the insurers seek the declaration that all the pending claims in the underlying complaints against Keasbey fall within the products hazard/completed operations coverage, subject to aggregate limits which were exhausted after the insurers paid out more than $110,000,000 in negotiated settlements on policies issued to Keasbey.

In May 2001, counsel for about 20,000 claimants informed Keasbey and CNA that these claimants would be pursuing a new theory of liability (non-products or "operations" coverage), which was not subject to aggregate limits, and thus opened up Keasbey and its insurers to "perpetual coverage."  Keasbey was an insulation contractor that installed, repaired, renovated and removed insulation at various sites in and around New York since the late 1800s. Until about 1972 those insulation materials contained asbestos. Keasbey stopped using asbestos-containing products in the 70’s.

There were 17 primary level comprehensive general liability (hereinafter referred to as "CGL") policies that were issued by CNA to Keasbey between February 1970 and February 1987, none of which had asbestos exclusions. The CNA policies have aggregate limits that apply only to claims that come within the definition of "products hazard" or "completed operations hazard." The products hazard aggregates range from $300,000 to $1,000,000 per policy, with combined aggregate limits of $8,700,000. Under the policies, "products hazard" "includes bodily injury [...] arising out of the named insured's products [...] but only if the bodily injury [...] occurs away from premises owned by or rented to the named insured and after physical possession of such products has been relinquished to others."

The completed operations hazard is defined as: "bodily injury and property damage arising out of operations [...] but only if the bodily injury or property damage occurs after such operations have been completed or abandoned and occurs away from premises owned by or rented to [...] the named insured."

The CNA policies contain no aggregate limits for claims that are not products hazards, such as "operations" claims. The only limitation for such coverage is the per occurrence provision in each policy. Between 1972-78 CNA additionally issued Keasbey five excess policies with aggregate limits totaling $50 million and the excess carriers participated in a settlement with CNA exhausting aggregate limits of $8,700,000. 

In May 2001, the attorneys for the majority of the remaining asbestos-injured claimants sent a letter to Keasbey's litigation counsel asserting that the remaining claims against Keasbey were "non-products" or "operations" hazard claims that were not subject to the products hazard aggregate limits.  

CNA commenced a declaratory judgment action declaring that it owed no duty to indemnify Keasbey for any of the pending asbestos-related bodily injury claims because all of the remaining claims were within the definition of products liability/completed operations coverage in the primary level policies that CNA had issued to Keasbey, that the limits of the subject policies had been exhausted.

The First Department held that:

·        Commencement of a declaratory judgment action can constitute a disclaimer;

·        CNA has the burden of proving that it is entitled to the declarations it seeks;

·        For CNA to obtain a declaratory judgment as to its obligation to indemnify in advance of trial, it must demonstrate as a matter of law that "there is no possible factual or legal basis on which the insurer may eventually be held liable under its policy."

·        Under § 3420, the rights of an injured claimant against the insurer are no less and no greater than those of the insured. All defenses available to an insurer against an insured are available also against injured claimants.

The issue properly framed is whether claimants can obtain coverage under a newly asserted theory of liability when the insured engaged in acts or omissions that would preclude that coverage had the insured brought this claim. In this case, the inequity would be particularly egregious. CNA would be in a position to owe "perpetual and virtually unlimited obligations to provide coverage for a never-ending torrent of asbestos claims" under a theory of coverage "never before asserted by Keasbey," and yet they would be "hampered in their ability to defend [...] because of the loss of evidence."

Ultimately, the prejudice in defending against a new theory of liability (see discussion below) that is particularly dependent on establishing facts for each individual claimant is obvious when witnesses have either died or are suffering from faded memories, and relevant documents have been lost.  Laches in this case is a valid affirmative defense against the claimants who stand in defendant Keasbey's shoes, and it bars the claim of the defendant class. Thus, there exists no legal basis on which the insurer may eventually be held liable for operations coverage under its policy.

Moreover an injury-in-fact test rests on when the injury, sickness, disease or disability actually began and, there is no proof of injury-in-fact during any particular policy period. 

CNA has demonstrated that there is no factual or legal basis for liability other than under the products/completed operation provisions of the policies, and so the declaration sought by plaintiffs that they have no duty to indemnify is warranted by the record.

12/30/08          All American Flooring, Ltd. v. The Sirius America Insurance Co.

Appellate Division, First Department

Again, the Lack of Investigation by the Insured of the Possibility of Liability Leads to a Finding that “Good Faith Believe in Non-Liability” Defense Cannot be Supported

The plaintiff's president was notified of the injured party's accident the day after it occurred, was aware that she was hurt but had refused an ambulance, and did not notify defendants of the possibility of a claim until more than six months later. This was unreasonable as a matter of law. Although a good-faith belief in nonliability may excuse the failure to provide timely notice, there is no indication that plaintiff attempted to ascertain the possibility of its liability for the accident.).
Editor’s Note: That trend continues.

 

12/22/08          Bloom v. St. Paul Travelers Companies, Inc.

Appellate Division, Second Department

Since Insurer Failed to Properly Advise Policyholder of Change in Coverage, Policy is Reformed to Include Coverage Insurer Tried to Remove

This is a class action seeking to recover damages under a umbrella policy and seeking reformation of the policy.  The lower court dismissed the complaint. This issue in the case is whether this “PLUS” policy carries underinsurance coverage (SUM -- Supplemental Uninsured Motorists coverage) and had been previously provided in a “SCOPE” umbrella policy.

Bloom purchased a "SCOPE" umbrella policy of insurance issued by the defendants which provided supplemental underinsured motorist (hereinafter SUM) coverage. In 2001 the St Paul substituted a "PLUS" umbrella policy, which did not provide SUM coverage, for the "SCOPE" policy. While the insurer mailed the policy holder a "Summary of Major Coverage Changes," the appellate court found that the “Summary” failed to comply with the state statute that required that “notice of intention to substitute a different policy form shall be accompanied by a full and clear comparison of the differences between the policy form last issued and the substitute policy form."

Since the defendant failed to provide the requisite notice, the policy holders are entitled to reform the "PLUS" policy to include SUM coverage in the amount of $25,000 because of bodily injury to or death of one or more persons in any one accident.

12/22/08          Elrac, Inc., d/b/a Enterprise Rent-A-Car v. GE Capital Insurance Company

Appellate Division, Second Department

Non-owned Coverage Unavailable for Vehicle Rented and Available to Insured for 55 Days

On November 18, 2003, Mazarese rented a car from Enterprise (Elrac).  Under the rental agreement, only Mazarese would drive the car and it would be returned in a month, on December 18.  It was not returned as promised.  On January 12, 2004, the car was involved in an accident while driven by Martinez, Mazarese’s cousin, who was using the car with the renter’s permission (in violation of the rental agreement).

A month later, the driver’s daughter, Tess Martinez (by her father, Joseph) sued Elrac, Martinez the driver and Mazarese.  Elrac settled the case on behalf of itself and Mazarese for $1.1 million.  Elrac then commenced an action against GE Capital Insurance (GE), Martinez the driver and Mazarese seeking indemnification from GE.  GE had issued an auto policy to Mazarese’s mother, Crocifissa.

The nonowned auto provision of the GE policy did not provide coverage for the subject accident. The nonowned auto provision stated that "[a]ny relative of [the named insured] who resides in your household is also protected when using a nonowned auto provided that . . . [t]he relative is using the nonowned auto with the owner's permission and for the purpose the owner intended." The term "nonowned auto" is defined in the subject policy as "an auto that is not owned by or registered to the [named insureds] or a resident of your household; and is not furnished or available to [the named insureds] or any resident of your household for regular use."

In his affidavit, Mazarese asserted, inter alia, that at the time of the accident, he did not own a motor vehicle, but the vehicle he used on a daily basis was a 2004 Mercury Mountaineer that was insured by nonparty Geico Insurance Company (hereinafter Geico). Mazarese had leased the rental vehicle from Elrac as a replacement vehicle while the Mercury Mountaineer was being repaired by the dealer. According to Mazarese, he used the rental vehicle "on an everyday basis."

The rental agreement demonstrated that Mazarese rented the vehicle on November 18, 2003, and he returned it on January 13, 2004, the day after the subject accident. Thus, the rental vehicle clearly was available for Mazarese's regular use for 55 days. Accordingly, under the circumstances of this case, the rental vehicle did not meet the definition of a nonowned vehicle under the GE policy.

Editor’s Note:  Elrac must be developing a complex as it is on the wrong side of virtually every appellate decision in which it is a party.

 

 

MARGO’S MUSINGS ON SERIOUS INJURY UNDER NEW YORK NO FAULT

Margo M. Lagueras

[email protected]

 

01/06/09          Taylor v. Vasquez

Appellate Division, First Department

Plaintiff’s Deposition Testimony Defeats His 90/180 Day Claim

The defendants win a reversal and the complaint is dismissed, in part because the plaintiff’s own deposition testimony that he was confined to home and bed for only one or two weeks following the accident.  On appeal, the court determined that this constitutes an admission that is sufficient to defeat the plaintiff’s claim.  Medical provider reports from two months after the accident stating that the plaintiff was able to carry out his normal activities also helped defeat the claim under the 90/180-day category.

 

The plaintiff also failed under the permanent or significant limitation of use categories.  The defendants submitted affirmed reports of a neurologist stating the plaintiff had full range-of-motion, describing the tests performed, and of a radiologist who reviewed the MRI taken a month after the accident showing a bony overgrowth which the radiologist opined was degenerative and could not have occurred in less than six months.  While the plaintiff submitted a medical affirmation stating he had a 20% range-of-motion loss, it did not specify what objective tests were performed or what the normal range-of motion should be.  The plaintiff also failed to submit any medical evidence to rebut the radiologist’s opinion concerning the bony overgrowth, or to explain his cessation of treatment after five months.  The court granted summary judgment not only to the filing defendant, but also to the non-filing co-defendant.

 

12/31/08          Christie v. Coady

Appellate Division, Fourth Department

Upon Renewal, Summary Judgment Is Reversed Based On Post-Surgical Affidavit

The plaintiff was granted leave to renew her opposition to the award of summary judgment to the defendants and submitted the affidavit of her treating neurologist who performed two surgeries, a lumbar discectomy and a fusion at L4-5 and L5-S1, on her after the court’s decision.  The court determined that the affidavit, which stated that surgical intervention was necessary to alleviate the plaintiff’s disc herniation, and which addressed the permanency of the condition and the resulting limitations of range-of-motion, was sufficient to support the categories of permanent consequential limitation of use and significant limitation of use.  The court affirmed the dismissal of the claim under the 90/180-day category, however, as the plaintiff failed to submit the necessary objective evidence.

 

12/30/08          Thompson v. Saunders

Appellate Division, Second Department

Appeal Fails Where Plaintiff Fails to Submit Contemporaneous Competent Medical Evidence

Here, the plaintiff did not submit competent medical evidence of his range-of-motion limitations that was contemporaneous with the accident.  The court once again reiterated the well-established rule that the mere existence of bulging or herniated discs is not evidence of serious injury absent objective evidence to the extent of the resulting limitations.  The court also determined that the plaintiff’s claim under the 90/180-day category also failed because he continued working after the accident and he did not submit competent medical evidence that he was unable to perform substantially all his daily activities.

 

12/30/08          Washington v. Mendoza

Appellate Division, Second Department

“Certification” From Treating Physician Fails to Affirm Annexed Reports and Records

The court held that the “Certification” from the plaintiff’s treating physician did not serve to affirm any of the annexed reports or records, including his own.  As such, the reports and records were without any probative value as they were unsworn or unaffirmed.  In addition, the objective testing by the plaintiff’s orthopedic surgeon, who revealed significant range-of-motion limitations, was insufficient because no competent medical evidence was submitted to demonstrate similar limitations contemporaneous with the accident.  The affirmed MRI showing disc bulges and tendonitis was also insufficient to prove serious injury in the absence of objective evidence of the extent and duration of the resulting limitations.  Finally, the claim under the 90/180-day category similarly failed because no competent medical evidence was produced to support the claim.

 

12/23/08          Diaz v. Lopresti

Appellate Division, Second Department

Recent Examination Is Necessary to Support Limitation of Use Categories of Serious Injury

On appeal, the defendant’s motion to dismiss the first, second and sixth causes of action alleging serious injury, and the third alleging loss of services by the plaintiff’s mother, is granted.  In opposition to the defendant’s motion, the plaintiff offered reports of her treating orthopedist.  The reports, however, were not based on a recent examination and therefore did not raise a triable issue of fact under either the permanent consequential limitation of use or the significant limitation of use categories.

 

12/23/08          Guerrero v. Bernstein

Appellate Division, Second Department

Defendant’s Reliance on Plaintiff’s Reports That Indicate ROM Limitations Fails to Meet Prima Facie Burden

The defendants supported their motion, in part, on the medical reports of the plaintiff’s own treating physicians, which reports indicated that the plaintiff had significant limitations of motion in the cervical and thoracic regions of the spine.  The defendants did not, therefore, meet their initial burden of showing that the plaintiff did not sustain a serious injury as a result of the accident.

 

12/23/08          Guerrero v. Sadiq

Appellate Division, Second Department

Affirmations of Plaintiff’s Experts Raise Triable Issue Regarding Wrist Injury

Here the plaintiff, who injured her right wrist, defeated the defendant’s motion, both at the trial level and on appeal, by submitting affirmations of her treating orthopedist and the orthopedic surgeon who performed wrist surgery on her.  The affirmations were sufficient to raise an issue of fact as to whether the wrist injury was serious and causally related to the accident.

 

12/23/08          Strok v. Chez

Appellate Division, Second Department

Unexplained Lengthy Gap in Treatment Defeats Serious Injury Claim

First the defendants win; then upon reargument, they lose; and then on appeal they win again.  The issue was the lengthy gap in the plaintiff’s treatment which neither the plaintiff nor his orthopedist adequately explained.

 

12/23/08          Rizzo v. Torchiano

Appellate Division, Second Department

Opposing Papers Are Not Considered Where Issue of Fact Remains

Yet another case where the defendant appeals and losses because he fails to meet his prima facie showing for summary judgment.  As usual, because of this failure, the court does not even consider the sufficiency of the plaintiff’s opposing papers.

 

12/23/08          Taveras v. Amir

Appellate Division, Second Department

Jury Award That Deviates Materially From What Would Be Reasonable Is Modified

The jury’s award included $1,000,000 for past pain and suffering, $5,000,000 for future pain and suffering, $774,299 for future lost earnings and $2,339,077 for future medical expenses.  On appeal, the court found that the trial court correctly determined, as a matter of law, that the plaintiff sustained a serious injury.  The court also found that the trial court properly excluded the testimony of two of defendants’ experts because they were not disclosed until after the trial had begun and the defendants on whose behalf they were to testify had previously settled with the plaintiff and were dismissed from the action after the liability verdict. 

 

However, the court determined that the jury’s award “deviated materially from what would be reasonable compensation”.  The court deleted the awards for damages and ordered a new trial on the issue unless the plaintiff consented to the modified amounts of $500,000 for past pain and suffering, $1,250,000 for future pain and suffering, $500,000 for future lost earnings and $250,000 for future medical expenses.  

 

 

AUDREY’S ANGLES ON NO-FAULT

Audrey Seeley

[email protected]

 

Litigation

12/31/08          A.M. Med. Services, P.C. a/a/o Sergo Chadaevi v. Progressive Cas. Ins. Co.

Appellate Term, Second Department

Independent Contractor Defense Need Not Be Asserted in Denial and Plaintiff Cannot Fix Upon Discovery in Litigation.

The defendant’s summary judgment was properly granted as claim forms submitted by the plaintiff indicated that the services rendered were by independent contractors.  A claim form seeking reimbursement for independent contractor services is not proof of loss as to the billing provider as that provider is not a medical provider under the regulations.  The services must be rendered by the provider’s employees and not the independent contractor.

 

Further, the court rejected the plaintiff’s argument that the claim forms erroneously stated that the providers were independent contractors.  The court held that the plaintiff could not correct the defect once discovered because of litigation.  In addition, the insurer was not precluded from asserting the defense of nonpayment because of the provider’s independent contractor status because it was not the basis for the denial.

 

12/30/08          Globe Surgical Supply a/a/o Remy Gallant v. GEICO Ins. Co.

Appellate Division, Second Department

Class Certification Properly Denied as Representative Was Not Adequate for the Class

The Plaintiff’s motion for class certification against the insurer was properly denied but should have been denied without prejudice.  The Plaintiff’s action pertained to the amount of reimbursement for durable medical equipment (“DMI”).  The Plaintiff alleged breach of contract, violation of the no-fault law, violation of General Business Law §349, and unjust enrichment.  The Plaintiff alleged that the insurer engaged in a systematic pattern and practice of reviewing claims for DMI and improperly reducing the rate to what the insurer deemed the reasonable and customary rate in the geographic location.  The trial court dismissed the causes of action for violation of the no-fault law; unjust enrichment and violation of GBL §349.  It is noted that this decision does not address whether that decision was appealed from and specifically focuses on whether plaintiff’s motion for class certification was properly denied.

 

The Court held that the proposed class could be identified and there were common questions of law and fact presented.  It was also properly determined that there was adequacy of representation of the entire class.  However, plaintiff’s owner, Mr. Francois, was properly rejected as an adequate class representative.  This is because Mr. Francois was charged with insurance fraud in the past and displayed behavior that attempted to place his rights above the rest of the class when he invoked his Fifth Amendment right at his deposition.  Also, there was evidence presented that Mr. Francois received his invoices submitted to insurers.  Therefore, the Plaintiff failed to demonstrate an adequate representative of its class.

 

 

PEIPER ON PROPERTY (and POTPOURRI)

Steven E. Peiper

[email protected]

 

Property

 

01/06/09          RLI Ins. Co. v. Turner/Santa Fe, a Joint Venture, et al.

Appellate Division, First Department

“Soft Costs” (ie, Business Interruption Costs) are not Time Barred from Subrogation where Damages were not Paid Until More than Three Years After the Initial Loss

Plaintiff, RLI, commenced the instant case seeking reimbursement for losses it paid under property insurance as a result of a fire loss that was caused by defendant Turner.  The subrogation action was commenced timely (within three years of the fire), and sought recovery for “hard property damage claims”.  However, at the time the statute of limitations expired, RLI and its insured were still trying to determine the amount of soft costs incurred as a result of the loss.

 

Because a carrier’s right to subrogation does not accrue until it has paid the loss, Turner argued that RLI’s subrogation right for soft costs did not even ripen until after the status of limitations had expired.   Recognizing the inequity of this result, the First Department held that claims involving “soft costs” will be deemed timely where the subrogation claim for hard costs arising out of the same incident was commenced within three years of the date of loss.  The court reasoned that holding otherwise would result in a carrier being forced to (a) pay soft costs that were not fully adjusted or (b) complete the process and thereby be precluded from its subrogation rights. 

 

12/30/08          Fusco, et al. v.  State Farm Fire and Casualty Company

Appellate Division, Second Department

Purported Expert’s Conclusory Statement of No Evidentiary Value in this Property Damage Case

In this case, the soil in plaintiff’s back yard became contaminated by a neighbor’s leaky pool heater.  State Farm, as homeowners’ carrier for the neighbor, paid to remediate the property.  Plaintiff’s, however, sought additional compensation for the proposed stigma of living on ground that had previously been contaminated.  In support of their claim, plaintiffs produced an affidavit of a real estate appraiser which alleged the property value had been diminished by the now remedied pollution.  However, where the appraiser provided no comparisons to similarly situated properties, the Second Department concluded that the appraiser’s opinion was “highly speculative and conclusory.”  In turn, plaintiff’s claims of diminution were dismissed accordingly.

 

12/08/08          Great American Ins. Co. of NY v. TA Operating Corp.

United States District Court, Southern District of New York

Replacement Cost vs. Fair Market Value Cost in a Property Theft Dispute

As you all know, we rarely comment upon trial court decisions.  However, the facts of this case were simply too good to pass up.  As if adopted straight out of the movie Goodfellas, or Sopranos, or insert your favorite mob movie here, in this case, plaintiff Norvartis Pharmaceuticals Corporation (“Norvartis”) agreed to sell $60 million worth of pharmaceuticals to McKesson Corp. (“McKesson”).  The goods were loaded into two tractor trailers at Norvartis’ New Jersey warehouse, and sent on their merry way to McKesson’s facility in Tennessee.  However, after approximately forty-five minutes of travel, the driver of one of the vehicles decided to stop for a dinner and a refreshing shower.  Unfortunately, while in the course of his actions, the driver left the keys to his tractor, which was attached to $30 million in pharmaceuticals, in the ignition.  Naturally, of course, the doors to the tractor were left unlocked as well.  (it is noted that the opinion indicates that the driver left the keys in the ignition because he was concerned he’d lose them at the truck stop).  In any event, when the driver returned to the location where his truck had been parked, viola, he discovered that it had been stolen (along with $30 million in pharmaceuticals). 

 

Unfortunately for McKesson, it assumed responsibility for the drugs safe transport after the items left Norvartis’ warehouse.  As a result, and more unfortunate for Great American, McKesson submitted, ultimately, received payment for a $20 million claim (the policy’s limit).  That $20 million was then transferred to Norvartis, and Norvartis quickly replaced the stolen merchandise with items that actually arrived at their intended destination.  Thereafter, McKesson assigned its claims against third-parties to both Great American and Norvartis.    

 

One of several issues was the assessment of damages.  Norvartis as subrogee of McKesson sought market value for the stolen pharmaceuticals.  However, the defendants argued that replacement cost was the appropriate measure of damages.  It is noted that testimony revealed that the replacement cost of the items was substantially less than the fair market value.  The Southern District noted that under federal law, market value was the preferred measure of damages.  However, to prove a case for market value, plaintiff must establish that it sustained losses in addition to the stolen items (eg. Lost profits).  Although the second shipment was promptly received, the Court noted that due to the high demand McKesson very well may have sustained a loss of profit as well.  Accordingly, this item was left as a question of fact for the jury to determine.  As for Great American’s interest in this issue, under either fair market value or replacement cost the loss was still in excess of Great American’s $20 million.

 

NOTE – the story has a happen ending, of sorts, where the tractor-trailer turned up at the Vince Lombardi Service Plaza on the New Jersey turnpike a few weeks later.  The drugs, however, were long gone. 

 

Potpourri

12/30/08          Public Adjustment Bureau, Inc. v. Greater New York Mut. Ins. Co.

Appellate Division, First Department

Always, Always, Always Confirm in Writing…Always!

 

As loyal readers know, we are constantly commenting upon the need to document one’s file through the course of litigation.   As this case points out, however, that rule applies to claims professional and attorney alike.  Here plaintiff sought to enforce a settlement agreement it purportedly reached in this matter.  However, because the discussions leading to the alleged agreement were never reduced to writing, no evidence of the agreement existed.  In such a circumstance, the Court was compelled to dismiss plaintiff’s attempt to confirm the purported settlement.

 

12/23/08          Sigaran v. ELRAC, Inc.

Supreme Court, Bronx County

Grave’s Amendment does not Apply to Claims of Owner Negligence

Plaintiff commenced the current action seeking to recover for damages it sustained in a collision with a vehicle that was owned, and rented to the tortfeasor, by defendant ELRAC.  ELRAC then moved to dismiss the action as barred by the Grave’s Amendment’s protection against vicariously liability for commercial entities that lease or rent vehicles.

 

Plaintiff opposed ELRAC’s motion on the grounds that the Grave’s Amendment contains an exception which permits actions against commercial owners where there was actual negligence in the process of leasing or renting the vehicle.  In short, plaintiff argued that ELRAC negligently entrusted the vehicle to the tortfeasor when it failed to uncover that the renter had what amounted to a poor driving record. 

 

The trial court noted that there was authority which would hold a car rental company liable if it knowingly entrusted the car to an incompetent driver.  However, that case arose where the rental company failed to ensure that the renter was licensed driver.  Here, it appears that the tortfeasoer held a valid license at the time of the incident.  The trial court went on to reject the proposition that in addition to checking a renter’s driver’s license, the rental company must too inquire into the renter’s driving history.  As such, plaintiff’s claims of negligence were dismissed, and any claims under Vehicle and Traffic Law § 388 were likewise dismissed. 

 

EARL’S PEARLS

Earl K. Cantwell, II

[email protected]

 

A New “Plausible Pleading” Standard?

 

An arcane United States Supreme Court decision in the equally arcane field of anti-trust law is causing a ripple effect in Federal and State courts with respect to the standards to be applied upon initial review of pleadings and pre-Answer motions to dismiss.  Some legal commentators are claiming that the decision of the Supreme Court in Bell Atlantic Corporation v. Twombly, 550 U.S. 544, 127 S. Ct. 1955, 167 L.Ed. 2nd  929 (2007) is being cited for the proposition that courts will give closer scrutiny to the content of pleadings, and that there has been an adjustment, certainly in Federal Court, from “notice pleading” to a higher “plausible pleading” standard. 

 

Bell Atlantic involved an anti-trust claim brought by telephone and internet service subscribers claiming that local exchange carriers engaged in anti-competitive practices in violation of the Sherman Act, 15 U.S.C. §1.  The subscribers asserted that the local exchange carriers engaged in parallel billing and contracting misconduct to discourage new competitors from entering markets through sharing of the carrier’s networks.  The subscribers also alleged that the carriers agreed not to compete outside their own markets.  The Supreme Court held that the subscribers’ allegations that the carriers engaged in certain parallel conduct unfavorable to competition, absent some factual context suggesting agreement, were insufficient to state a claim under the Sherman Act.  The Court required that the pleading must have a factual context raising a “plausible suggestion” of a preceding agreement rather than independent business action.  The subscribers’ complaint also did not indicate or allege that the carriers’ resistance to competitors was anything more than natural, unilateral reaction as opposed to a “conspiracy,” combination or agreement among them. 

 

The Supreme Court began with the notion that liability under the anti-trust laws requires a contract, combination, or conspiracy in restraint of trade or commerce.  The seminal issue here was whether the challenged anti-competitive conduct stemmed from independent decisions or from  agreement, tacit or expressed.  Under the substantive anti-trust law, even conscious parallelism, a common reaction of firms in a concentrated market that recognizes their shared economic interest and their interdependence with respect to price and output decisions is not in itself unlawful or a statutory violation.  In deciding that the complaint at issue failed to state a claim under the anti-trust laws, however, the Supreme Court may have gone farther and endorsed a standard beyond mere “notice pleading” and required a plaintiff to state the grounds for relief above and beyond labels, conclusions and “formulaic recitations” of elements of a cause of action.  The factual allegations must be sufficient to raise a right to relief above the speculative to the “plausible” level.  This pleading standard is now being recognized as carrying implications to many different types of complicated litigation.  The Supreme Court concluded that, “Here in contrast, we do not require heightened fact pleading of specifics, but only enough facts to state a claim for relief that is plausible on its face.”  This attack and critique can be made against many insurance pleadings, for example, alleging bad faith, extra-contractual damages, or coverage and disclaimer issues. 

 

The Supreme Court emphasized the need at the pleading stage for allegations plausibly suggesting, and not merely consistent with, an agreement in violation of the Sherman Act.  The Court imposed this requirement as a threshold to show that the pleading has enough “heft” to show that the pleader is entitled to relief.  Statements or allegations of parallel conduct, even conduct consciously undertaken, required some setting or context suggesting that it was the result of an agreement necessary to make out a claim under the Sherman Act.

 

The Supreme Court then went beyond this specific notion of anti-trust pleading to state a general rule that, when the allegations in a complaint, however true, could not raise a claim of entitlement to relief, this basic deficiency should be exposed at the point of minimum expenditure of time and money by the parties and the Court.  In so doing, the Supreme Court seemed to be taking aim at “strike suits” and other pleadings brought with massive fanfare on a theory of plead first and obtain discovery to justify a cause of action later.  The Supreme Court noted that, “Some threshold of plausibility must be crossed at the onset before a patent antitrust case should be permitted to go into its inevitably costly and protracted discovery phrase.”  The same statements can be  raised in virtually any complex litigation whether anti-trust, product liability or insurance coverage.  The Supreme Court also noted with approval language from a 1983 case that “… a district court must retain the power to insist on some specificity in pleading before allowing a potentially massive factual controversy to proceed.” 

 

Significantly, the Supreme Court in Bell Atlantic laid down what some have perceived to be a significant shift in the standard of review on a pre-Answer motion to dismiss for failure to state a claim: The District Court must retain the power to insist upon some specificity in pleading before allowing a potentially massive factual controversy to proceed.  Additional and specific pleading material must be included beyond mere notice pleading to establish that the pleader has a “plausible” claim in the first instance. 

 

This rule is being cited by federal courts and sophisticated state courts in attempting to review and trim large and complex litigation in such areas as products liability, securities litigation, employment discrimination claims, fraud and conspiracy claims, insurance coverage and disclaimer litigation, claims of bad faith against insurance companies, etc. to hold that the old “plead first ask questions later” inquiry may be insufficient.  The Court noted that nothing in this complaint attributed either the defendants’ actions or inactions with a “plausible” conspiracy or agreement connection.  The complaint’s “general collusion” premise failed to plausibly suggest or evidence an actual conspiracy.    

 

The plaintiffs in Bell Atlantic were a class of subscribers of local telephone and/or high speed internet services who claimed violations of the Sherman Act.  With respect to the specific point of anti-trust law, the Supreme Court held that the complaint must contain enough factual matter to suggest that an agreement was in place, as allegations of parallel conduct or bare assertions of conspiracy do not suffice.  The crucial question was whether the challenged anti-competitive conduct stemmed from independent decision or from some type of agreement.  The plaintiffs relied on the long-stated rule from Conley v. Gibson, 355 U.S. 41 (1957) that a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove “no set of facts in support of his claim which would entitle him to relief.”  355 U.S. at 45-46.  This “no set of facts” language has often been used by courts to give short shrift to pre-Answer motions to dismiss.  Bell Atlantic is clearly a retreat from the Conley v. Gibson language, and the Supreme Court itself specifically reviewed and disavowed the Conley “no set of facts” language and stated it was not the minimum standard of adequate pleading to govern a complaint’s survival.  Rather, the complaint must allege facts and context plausibly suggesting alleged illegal conduct.

 

The key point in the decision, however, for all practitioners is that the Supreme Court ostensibly claimed it was not requiring heightened fact pleading of specifics but enough facts to state a claim for relief that is plausible on its face.  This may be an advancement of additional requirements beyond “mere notice pleading,” and is increasingly being used by practitioners to challenge pleadings in a wide variety of complicated litigation settings including insurance coverage and disclaimer litigation and claims of “bad faith” against insurance carriers.  The Bell Atlantic case is also being cited for the proposition that the Supreme Court has encouraged courts to view more negatively large scale “strike suits”, class actions and similar litigation where merely the threat of a complaint surviving and discovery ensuing forces parties to seek settlements to avoid the tremendous cost and expense of discovery and litigation. 

 

While not yet described as a seismic shift in pleading requirements, Bell Atlantic certainly has created heightened authority for pre-Answer motions to dismiss and provides federal and state courts with ammunition to critically review even complex pleadings and make them pass not just the “mere notice” pleading requirement but also a greater practical and legal requirement of “plausibility” in order to survive motion practice. 

 

DUQUIN – THE DUKE OF LEAD

Scott M. Duquin

[email protected] 

 

LEAD the Lingering Litigation

 

On hiatus this week.

 

ACROSS BORDERS

 

12/23/08          OneBeacon Insurance Company v. Don’s Building Supply, Inc.

Fifth Circuit Court of Appeals

Factors Triggering Liability under a Commercial General Liability Policy for Property Damage
The Court applied responses to questions it certified to the Texas Supreme Court about when property damage coverage is triggered under a commercial general liability policy: (1) property damage occurred when actual physical damage to the property occurred; and (2) the duty to defend is triggered when the complaint alleges property damage occurring during the policy term and is not relieved due to the fact the damage alleged was undiscoverable, not readily apparent, or not manifest during the policy period.

Submitted by: Gray Culbreath (Collins and Lacy)

 

12/22/08          Dickerson v. Lexington Insurance Company

Fifth Circuit Court of Appeals

Once Plaintiff Establishes Policy Covered Some Flood Damage, Under Louisiana Law, Defendant had to Prove Amount of Damage
The trial court awarded the plaintiff $175,467 for bad faith failure to pay insurance benefits for damages due to Hurricane Katrina. The plaintiff had separate flood coverage with a different insurer and wind coverage with the defendant. The parties disagreed over the amount of damage due to flooding (not covered) and amount of damage due to wind (covered). Applying Louisiana Law, once the plaintiff established the policy covered at least some of the damage, the defendant had to prove the amount of the damage due to the flooding, which was an issue of fact resolved during the bench trial. The Court applied a “vexatious” conduct standard to determine whether the defendant acted in bad faith, which requires an insurer’s “refusal to pay [have been] unreasonable, without reasonable or probable cause or excuse.” The Court held an insured does not have to prove the insurer intended to harm the insured. The delay in payment on the claim for five months after the loss and after two adjusters inspected the loss to adequately supported finding the defendant acted in bad faith. The Court also held the record did not show a genuine dispute existed as to the apportionment of the loss between covered and non-covered causes, citing the lack of evidence showing the insurer disputed the apportionment of the damages when adjusting the claim. The Court also held the insured could recover damages for mental anguish due to the insured’s breach of the covenant of good faith and fair dealing. The Court reversed the award of attorneys’ fees because the initial breach occurred before the statute was amended to allow an insured to recover attorneys’ fees and Louisiana did not recognize the continuing-breach doctrine.

Submitted by: Gray Culbreath (Collins and Lacy)

 

REPORTED DECISIONS

 

Bloom v. St. Paul Travelers Companies, Inc.

 

Ball & Rubin, LLP, White Plains, N.Y. (Wayne M. Rubin of

counsel), for appellants.

Kornstein Veisz Wexler & Pollard, LLP, New York, N.Y.
(Marvin Wexler and Daniel A.
Cohen of counsel), for respondents.

DECISION & ORDER

In a class action, inter alia, to recover damages for breach of an insurance contract and for the reformation of an insurance contract, the plaintiffs appeal from a judgment of the Supreme Court, Rockland County (Sherwood, J.), entered April 6, 2007, which, upon an order of the same court entered April 3, 2007, granting the defendants' motion for summary judgment dismissing the complaint, and denying their cross motion for summary judgment reforming a "PLUS" umbrella insurance policy to include supplemental underinsured motorist coverage previously provided by the defendants in a "SCOPE" umbrella insurance policy, is in favor of the defendants and against them dismissing the complaint.

ORDERED that the judgment is reversed, on the law, with costs, the complaint is reinstated, the defendants' motion for summary judgment dismissing the complaint is denied, the plaintiffs' cross motion for summary judgment reforming a "PLUS" umbrella insurance policy to include supplemental underinsured motorist coverage previously provided by the defendants in a "SCOPE" umbrella insurance policy is granted to the extent of reforming the "PLUS" insurance policy at issue to include supplemental underinsured motorist coverage in the amount of $25,000 because of bodily injury to or death of one or more persons in any one accident until such time as that coverage or the "PLUS" umbrella insurance policy is properly terminated, and the order entered April 3, 2007, is modified accordingly.

The plaintiff Jonathan Bloom purchased a "SCOPE" umbrella policy of insurance issued by the defendants which provided supplemental underinsured motorist (hereinafter SUM) coverage. In 2001 the defendants substituted a "PLUS" umbrella policy, which did not provide SUM coverage, for the "SCOPE" policy. Although the defendants mailed the plaintiffs a document entitled "Summary of Major Coverage Changes," that document failed to comply with the requirement of Insurance Law § 3425(d)(3) that the "[n]otice of intention to substitute a different policy form shall be accompanied by a full and clear comparison of the differences between the policy form last issued and the substitute policy form." The defendants' failure to provide the requisite notice entitles the plaintiffs to reformation of the "PLUS" policy to include SUM coverage in the amount of $25,000 because of bodily injury to or death of one or more persons in any one accident (see Hay v Star Fire Ins. Co., 77 NY 235, 240; Byron v Liberty Mut. Ins. Co., 63 AD2d 710; Janes v New York Cent. Mut. Ins. Co., 281 AD2d 982; cf. Allstate Ins. Co. v Young, 265 AD2d 278).

Contrary to the defendants' contention, the action was timely commenced. The action is based on a dispute arising under a contract of insurance, which seeks both its reformation and the payment of SUM benefits under the reformed policy. The applicable statute of limitations is thus the six-year period set forth in CPLR 213(2) (see Mandarino v Travelers Property Casualty Ins. Co., 37 AD3d 775; Matter of ELRAC, Inc. v Suero, 38 AD3d 544).


 Elrac, Inc., d/b/a Enterprise Rent-A-Car v. GE Capital Insurance Company

Cheven, Keely & Hatzis (Fiedelman & McGaw, Jericho, N.Y.
[James K. O'Sullivan], of counsel), for appellant-respondent.
Brand Glick & Brand, Garden City, N.Y. (Edward J. Savidge of
counsel), for respondent-appellant.

DECISION & ORDER

In an action for a judgment declaring, inter alia, that the defendant GE Capital Insurance Company is obligated to indemnify the plaintiff in an underlying action entitled Martinez v Elrac, Inc., commenced in the Supreme Court, Nassau County, under Index No. 1957/04, the defendant GE Capital Insurance Company appeals, as limited by its brief, from so much of an order of the Supreme Court, Suffolk County (Sgroi, J.), dated October 18, 2007, as granted the plaintiff's motion for summary judgment to the extent of determining that it is responsible for liability coverage for the subject accident under the insurance policy issued to Crocifissa Mazarese and denied its cross motion for summary judgment, and the plaintiff cross-appeals, as limited by its brief, from so much of the same order as granted its motion for summary judgment only to the extent of determining that the defendant Carmelo Mazarese is covered for the subject accident under the insurance policy issued by the defendant GE Capital Insurance Company to Crocifissa Mazarese.

ORDERED that the order is reversed insofar as appealed from, the plaintiff's motion for summary judgment is denied in its entirety, the cross motion is granted, and the matter is remitted to the Supreme Court, Suffolk County, for the entry of a judgment declaring, inter alia, that there was no coverage under the policy of automobile insurance issued by GE Capital Insurance Company to Crocifissa Mazarese for the subject accident, and that GE Capital Insurance Company is not obligated to indemnify the plaintiff in an underlying action entitled Martinez v Elrac, Inc., commenced in the Supreme Court, Nassau County, under Index No. 1957/04; and it is further,

ORDERED that the order is affirmed insofar as cross-appealed from; and it is further,

ORDERED that one bill of costs is awarded to the defendant GE Capital Insurance Company.

On November 18, 2003, the plaintiff, Elrac, Inc., d/b/a/ Enterprise Rent-A-Car (hereinafter Elrac), leased the subject vehicle (hereinafter the rental vehicle) to the defendant Carmelo Mazarese (hereinafter Mazarese), pursuant to a rental agreement. The rental agreement, which listed Mazarese as the driver, also provided, inter alia, that Mazarese was the only authorized driver and that the rental vehicle would be returned by December 18, 2003.

On January 12, 2004, the rental vehicle was involved in a motor vehicle accident. At the time of the accident, the rental vehicle was being operated by the defendant Lisa Martinez (hereinafter the driver), Mazarese's cousin, who borrowed the car from Mazarese with his permission, but who was not an authorized driver under the rental agreement.

On or about February 13, 2004, the defendant Joseph V. Martinez, the father of the defendant Tess Martinez, the infant passenger (also the daughter of the driver) who was riding in the rental vehicle at the time of the accident, commenced a personal injury action entitled Martinez v Elrac, Inc. (hereinafter the underlying action), in the Supreme Court, Nassau County, under Index No. 1957/04, against Elrac, the driver, and Mazarese. Pursuant to an infant's compromise order entered November 10, 2005, in the underlying action, Elrac, on behalf of itself and Mazarese (whom it represented therein) settled that action for the sum of $1.1 million (hereinafter the settlement).

On or about July 27, 2005, Elrac commenced this action against, among others, the defendant GE Capital Insurance Company (hereinafter GE), the driver, and Mazarese for declaratory relief seeking indemnification from GE.

Elrac and GE moved and cross-moved for summary judgment, respectively. In the order appealed from, the Supreme Court granted Elrac's motion for summary judgment to the extent of determining that Mazarese was covered for the subject accident under a policy of automobile insurance issued by GE to Crocifissa Mazarese (hereinafter the GE policy), Mazarese's mother and the named insured under the GE policy, and denied GE's cross motion. GE and Elrac appeal and cross-appeal, respectively.

Contrary to Elrac's contention, the nonowned auto provision of the GE policy did not provide coverage for the subject accident. The nonowned auto provision stated that "[a]ny relative of [the named insured] who resides in your household is also protected when using a nonowned auto provided that . . . [t]he relative is using the nonowned auto with the owner's permission and for the purpose the owner intended." The term "nonowned auto" is defined in the subject policy as "an auto that is not owned by or registered to the [named insureds] or a resident of your household; and is not furnished or available to [the named insureds] or any resident of your household for regular use." "Use" of an auto is defined as "owning, operating, loading, unloading and maintaining the auto."

The exclusion of coverage under certain conditions for a relative residing with an insured when using a nonowned automobile "was designed to protect the company from being subjected 'to greatly added risk without the payment of additional premiums'" (Sperling v Great Am. Indem. Co., 7 NY2d 442, 448, quoting Vern v Merchants Mut. Cas. Co., 21 Misc 2d 51, 52). The purpose of a provision for a nonowned vehicle not for the regular use of an insured is to provide protection to the insured for the occasional or infrequent use of a vehicle not owned by him or her and is not intended as a substitute for insurance on vehicles furnished for the insured's regular use (see Liberty Mut. Ins. Co. v Sentry Ins., 130 AD2d 629, 630; see Liberty Mut. Ins. Co. v Allstate Ins. Co., 237 AD2d 260; Egle v United Servs. Auto. Assn., 158 AD2d 661; Federal Ins. Co. v Allstate Ins. Co., 111 AD2d 146; but see New York Cent. Mut. Fire Ins. Co. v Jennings, 195 AD2d 541).

In determining whether a vehicle has been furnished for regular use, the general availability and frequency of use are criteria employed by the factfinder (see Liberty Mut. Ins. Co. v Allstate Ins. Co., 237 AD2d 260, 261; Liberty Mut. Ins. Co. v Sentry Ins., 130 AD2d 629, 630; Egle v United Servs. Auto. Assn., 158 AD2d 661, 662-663; McMahon v Boston Old Colony Ins. Co., 67 AD2d 757, 758; compare Hollander v Nationwide Mut. Ins. Co., 60 AD2d 380).

In his affidavit, Mazarese asserted, inter alia, that at the time of the accident, he did not own a motor vehicle, but the vehicle he used on a daily basis was a 2004 Mercury Mountaineer that was insured by nonparty Geico Insurance Company (hereinafter Geico). Mazarese had leased the rental vehicle from Elrac as a replacement vehicle while the Mercury Mountaineer was being repaired by the dealer. According to Mazarese, he used the rental vehicle "on an everyday basis." The rental agreement demonstrated that Mazarese rented the vehicle on November 18, 2003, and he returned it on January 13, 2004, the day after the subject accident. Thus, the rental vehicle clearly was available for Mazarese's regular use for 55 days. Accordingly, under the circumstances of this case, the rental vehicle did not meet the definition of a nonowned vehicle under the GE policy.

In addition, contrary to the Supreme Court's determination, Mazarese was not maintaining the rental vehicle at the time of the accident by virtue of his having entrusted the vehicle to the driver. "'Maintenance,' as that term is used in an insurance policy, means performance of work on an intrinsic part of the mechanism of the car and its overall function'" (Guishard v General Sec. Ins. Co., 9 NY3d 900, 902, quoting Farmers Fire Ins. Co. v Kingsbury, 105 AD2d 519, 520, citing 6B Appleman, Insurance Law & Practice, § 4315; see Pennsylvania Millers Mut. Ins. Co. v Manco, 63 NY2d 940, 942). Moreover, such entrustment of the rental vehicle to the driver did not constitute use of the rental vehicle as such term is otherwise defined in the GE policy because Mazarese neither owned, nor was he operating, loading, or unloading the rental vehicle at the time of the accident. Thus, the Supreme Court incorrectly concluded that there was coverage for the subject accident under the GE policy.

Accordingly, the Supreme Court should have denied Elrac's motion and granted GE's cross motion.

Elrac's remaining contentions either are without merit or need not be reached in light of the foregoing determination.

Since this is a declaratory judgment action, the matter must be remitted to the Supreme Court, Suffolk County, for the entry of a judgment declaring, inter alia, that there was no coverage under the policy of automobile insurance issued by GE Capital Insurance Company to Crocifissa Mazarese for the subject accident and that GE Capital Insurance Company is not obligated to indemnify Elrac in the underlying action entitled Martinez v Elrac, Inc., commenced in the Supreme Court, Nassau County, under Index No. 1957/04 (see Lanza v Wagner, 11 NY2d 317, 334, appeal dismissed 371 US 74, cert denied 371 US 901).

Diaz v. Lopresti


Richard T. Lau, Jericho, N.Y. (Gene W. Wiggins of counsel), for
appellant.
Riconda & Garnett, LLP, Valley Stream, N.Y. (Louis A.
Badolato of counsel), for respondents.

DECISION & ORDER

In an action, inter alia, to recover damages for personal injuries, etc., the defendant appeals from an order of the Supreme Court, Nassau County (McCormack, J.), entered April 2, 2008, which denied his motion for summary judgment dismissing the first, second, and sixth causes of action asserted by the plaintiff Ashley Diaz on the ground that she did not sustain a serious injury within the meaning of Insurance Law § 5102(d), dismissing the claim of the plaintiff Ashley Diaz to recover damages for economic loss in excess of basic economic loss within the meaning of Insurance Law § 5104, and dismissing the third cause of action asserted by the plaintiff Debbie Diaz for loss of services of Ashley Diaz.

ORDERED that the order is reversed, on the law, with costs, and the defendant's motion for summary judgment dismissing the first, second, and sixth causes of action asserted by the plaintiff Ashley Diaz, on the ground that she did not sustain a serious injury within the meaning of Insurance Law § 5102(d), dismissing the claim of the plaintiff Ashley Diaz to recover damages for economic loss in excess of basic economic loss within the meaning of Insurance Law § 5104, and dismissing the third cause of action asserted by the plaintiff Debbie Diaz for loss of services of Ashley Diaz, is granted.

The Supreme Court correctly determined that the defendant established, prima facie, his entitlement to judgment as a matter of law dismissing the first, second, and sixth causes of action asserted by the plaintiff Ashley Diaz (hereinafter Ashley), and the third cause of action asserted by the plaintiff Debbie Diaz for loss of Ashley's services by showing that Ashley did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident (see Toure v Avis Rent A Car Sys., 98 NY2d 345; Gaddy v Eyler, 79 NY2d 955, 956-957). However, in opposition, the plaintiffs failed to raise a triable issue of fact as to whether Ashley sustained a serious injury as a result of the subject accident. The medical reports of Ashley's treating orthopedist failed to raise a triable issue of fact as to whether she sustained a serious injury under the permanent consequential limitation of use and/or the significant limitation of use categories of Insurance Law § 5102(d) since they were not based on a recent examination of her (see Landicho v Rincon, 53 AD3d 568, 569; Cornelius v Cintas Corp., 50 AD3d 1085; Park v Orellana, 49 AD3d 721; Amato v Fast Repair, Inc., 42 AD3d 477).

Moreover, the plaintiffs failed to submit competent medical evidence that the injuries allegedly sustained by Ashley as a result of the subject accident rendered her unable to perform substantially all of her daily activities for not less than 90 days of the first 180 days subsequent to the subject accident (see Rabolt v Park, 50 AD3d 995; Roman v Fast Lane Car Serv., Inc., 46 AD3d 535; Sainte-Aime v Ho, 274 AD2d 569).

Without a serious injury, no claim can be made on behalf of Ashley to recover damages for economic loss in excess of basic economic loss within the meaning of Insurance Law § 5104 (see Abbas v Cole, 44 AD3d 31, 33). Moreover, Ashley failed to establish economic loss in excess of basic economic loss (see Watford v Boolukos, 5 AD3d 475).
RIVERA, J.P., FLORIO, ANGIOLILLO, McCARTHY and CHAMBERS, JJ., concur.

Guerrero v. Bernstein


Malapero & Prisco, LLP, New York, N.Y. (Mary Bergmann of
counsel), for appellants.
Alan M. Sanders, Carle Place, N.Y. (David M. Schwarz of
counsel), for respondents.

DECISION & ORDER

In an action to recover damages for personal injuries, etc., the defendants appeal from an order of the Supreme Court, Suffolk County (R. Doyle, J.), entered December 24, 2007, which denied their motion for summary judgment dismissing the complaint on the ground that the plaintiff Jose Guerrero did not sustain a serious injury within the meaning of Insurance Law § 5102(d).

ORDERED that the order is affirmed, with costs.

The defendants failed to meet their prima facie burden of showing that the plaintiff Jose Guerrero (hereinafter the injured plaintiff) did not sustain a serious injury within the meaning of the subject accident (see Toure v Avis Rent A Car Sys., 98 NY2d 345; Gaddy v Eyler, 79 NY2d 955, 956-957). In support of the defendants' motion, they relied upon, inter alia, the medical reports of the injured plaintiff's treating physicians. Those reports revealed the existence of significant limitations of motion in the cervical and thoracic regions of the injured plaintiff's spinal column (see Mendola v Demetres, 212 AD2d 515).

Since the defendants did not meet their prima facie burden, it is unnecessary to decide whether the papers submitted by the plaintiffs in opposition were sufficient to raise a triable issue of fact (see Coscia v 938 Trading Corp., 283 AD2d 538).
SKELOS, J.P., DILLON, CARNI and LEVENTHAL, JJ., concur.

Guerrero v. Sadiq


Baker, McEvoy, Morrissey & Moskovits, P.C., New York, N.Y.
(Colin F. Morrissey of counsel), for appellants.
Michelstein & Associates, PLLC, New York, N.Y. (Richard A.
Ashman of counsel), for respondent.

DECISION & ORDER

In an action to recover damages for personal injuries, the defendants Ilyas Sadiq and Nouras M. Deen appeal, as limited by their brief, from so much of an order of the Supreme Court, Kings County (Vaughan, J.), dated January 16, 2008, as denied that branch of their motion which was for summary judgment dismissing the claim to recover damages for injury to the plaintiff's right wrist on the ground that she did not sustain a serious injury within the meaning of Insurance Law § 5102(d).

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

Although the defendants made a prima facie showing that the plaintiff did not sustain a serious injury to her right wrist within the meaning of Insurance Law § 5102(d) as a result of the subject accident (see Toure v Avis Rent A Car Sys., 98 NY2d 345; Gaddy v Eyler, 79 NY2d 955), the affirmations of the plaintiff's treating orthopedist and the orthopedic surgeon who performed surgery on her right wrist were sufficient to raise a triable issue of fact as to whether she had sustained a serious injury to her right wrist that was causally related to the subject accident (see e.g. Qurashi v Hittin, 51 AD3d 652; also Kuznetzov v Cuccia, 8 AD3d 244; Rahman v Brown, 6 AD3d 518).
SPOLZINO, J.P., SANTUCCI, MILLER, DICKERSON and ENG, JJ., concur.

Rizzo v. Torchiano


Richard T. Lau, Jericho, N.Y. (Kathleen E. Fioretti of counsel), for
appellant.
Joachim, Frommer, Cerrato & Levine, LLP, Garden City, N.Y.
(Louis J. Cerrato and Mary Ellen
O'Brien of counsel), for respondents.

DECISION & ORDER

In an action to recover damages for personal injuries, etc., the defendant appeals from an order of the Supreme Court, Nassau County (Mahon, J.), entered November 28, 2007, which denied his motion for summary judgment dismissing the complaint on the ground that the plaintiff John M. Rizzo did not sustain a serious injury within the meaning of Insurance Law § 5102(d).

ORDERED that the order is affirmed, with costs.

The defendant failed to make a prima facie showing that the plaintiff John M. Rizzo did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident (see Staubitz v Yaser, 41 AD3d 698; O'Neal v Bronopolsky, 41 AD3d 452; Hughes v Bo Cai, 31 AD3d 385). Accordingly, the defendant's motion for summary judgment dismissing the complaint was properly denied without the need to consider the sufficiency of the plaintiffs' opposition papers.
FISHER, J.P., COVELLO, BALKIN and BELEN, JJ., concur.

Strok v. Chez


Longo & D'Apice, Brooklyn, N.Y. (Deborah Ann Kramer and
Victor A. Vincenzi of counsel), for appellants.
Aleksandr Vakarev (James M. Lane, New York, N.Y. of
counsel), for respondent.

DECISION & ORDER

In an action to recover damages for personal injuries, the defendants appeal, as limited by their brief, from so much of an order of the Supreme Court, Kings County (Jacobson, J.), dated October 1, 2007, as, upon reargument, denied their motion for summary judgment dismissing the complaint on the ground that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d), which had been determined in an order of the same court dated May 9, 2007.

ORDERED that the order dated October 1, 2007, is reversed insofar as appealed from, on the law, with costs, and, upon reargument, the determination in the order dated May 9, 2007, granting the motion of the defendants 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), is adhered to.

On their motion for summary judgment, the defendants established, prima facie, their entitlement to judgment as a matter of law by showing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject motor vehicle accident (see Toure v Avis Rent A Car Sys., 98 NY2d 345; Gaddy v Eyler, 79 NY2d 955). In opposition, the plaintiff failed to raise a triable issue of fact. Neither the plaintiff nor his examining orthopedist adequately explained a lengthy gap in the plaintiff's treatment (see Pommells v Perez, 4 NY3d 566, 574; Sibrizzi v Davis, 7 AD3d 691; cf. Black v Robinson, 305 AD2d 438, 439-40). Accordingly, upon reargument, the Supreme Court should have adhered to its original determination granting the defendants' motion for summary judgment dismissing the complaint (cf. Wei-San Hsu v Briscoe Protective Sys., Inc., 43 AD3d 916, 917; Waring v Guirguis, 39 AD3d 741, 742).

The defendants' remaining contention has been rendered academic in light of our determination.
SKELOS, J.P., SANTUCCI, COVELLO, McCARTHY and CHAMBERS, JJ., concur.

Taveras v. Amir


Philip J. Rizzuto, P.C., Carle Place, N.Y. (Kristen N. Reed of
counsel), for appellants Muhammad A. Amir and Thurston Steed.
Russo, Keane & Toner, LLP, New York, N.Y. (Thomas F.
Keane of counsel), for appellants Lakhwinder
Singh and Platform Taxi Service, Inc.
Block & O'Toole (Pollack, Pollack, Isaac & De Cicco, New
York, N.Y. [Brian J. Isaac and Jillian
Rosen]) of counsel, for respondent.

DECISION & ORDER

In an action to recover damages for personal injuries, etc., the defendants Muhammad A. Amir and Thurston Steed appeal, and the defendants Lakhwinder Singh and Platform Taxi Service, Inc., separately appeal, from a judgment of the Supreme Court, Kings County (Schack, J.), entered August 29, 2007, which, upon a jury verdict on the issue of liability finding these defendants 100% at fault in the happening of the accident, upon the granting of the motion of the plaintiff Jesus Taveras for judgment as a matter of law on the issue of serious injury, and upon a jury verdict on the issue of damages finding that the plaintiff Jesus Taveras sustained damages in the sums of $1,000,000 for past pain and suffering, $5,000,000 for future pain and suffering, $150,000 for past lost earnings, $774,299 for future lost earnings, and $2,339,077 for future medical expenses, is in favor of the plaintiff and against them.

ORDERED that the judgment is modified, on the facts and in the exercise of discretion, by deleting the provisions thereof awarding damages for past pain and suffering, future pain and suffering, future lost earnings, and future medical expenses; as so modified, the judgment is affirmed, with costs to the appellants, and the matter is remitted to the Supreme Court, Kings County, for a new trial on the issue of damages as to those causes of action only, and for the entry of an amended judgment thereafter, unless within 30 days after service upon the plaintiff Jesus Taveras of a copy of this decision and order, he shall serve and file in the office of the Clerk of the Supreme Court, Kings County, a written stipulation consenting to reduce the verdict as to damages for past pain and suffering from the sum of $1,000,000 to the sum of $500,000, for future pain and suffering from the sum of $5,000,000 to the sum of $1,250,000, for future lost earnings from the sum of $774,299 to the sum of $500,000, and for future medical expenses from the sum of $2,339,027 to the sum of $250,000, and to the entry of an amended judgment accordingly; in the event the plaintiff Jesus Taveras so stipulates, then the judgment, as so reduced and amended, is affirmed, without costs or disbursements.

Contrary to the appellants' contention, the Supreme Court did not err in granting the motion of the plaintiff Jesus Taveras (hereinafter the plaintiff) for judgment as a matter of law on the issue of whether he sustained a serious injury in the subject motor vehicle accident. Viewing the evidence in the light most favorable to the defendants, as we must, we find that there is no rational process by which the trier of fact could conclude that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) (see Campo v Neary, 52 AD3d 1194; Harwood v Hinds, 295 AD2d 949). The Supreme Court also did not improvidently exercise its discretion in precluding the testimony of two expert witnesses who had been retained by the defendants Emerito DeLeon and Elrac, Inc. The plaintiff did not receive disclosure of these witnesses until the trial was already under way (see CPLR 3101[a]), and their testimony was not even offered on behalf of DeLeon or Elrac, Inc., who had previously settled with the plaintiff, and who were dismissed from the action following the liability verdict (see generally Fava v City of New York, 5 AD3d 724).

The jury's award of damages will not be disturbed unless the award deviates materially from what would be reasonable compensation (see CPLR 5501[c]; Tyberg v Tomasino, 19 AD3d 405; Pellegrino v Felici, 278 AD2d 212, 213). The damage awards deviated materially from what would be reasonable compensation to the extent indicated herein (see Wallace v Stonehenge Group, Ltd., 33 AD3d 789, 790).

The appellants' remaining contentions are without merit.
SANTUCCI, J.P., COVELLO, LEVENTHAL and BELEN, JJ., concur.

All American Flooring, Ltd. v. The Sirius America Insurance Co.


Law Office of Joseph A. Marra, Yonkers (Vincent P. Fiore of
counsel), for appellant.
Brody, O'Connor & O'Connor, Northport (Scott A. Brody of
counsel), for respondent.

Judgment, Supreme Court, New York County (Louis B. York, J.), entered May 2, 2008, denying plaintiff's motion for summary judgment and granting defendants' cross motion for summary judgment declaring that defendants are not required to defend or indemnify plaintiff in an underlying personal injury action, unanimously affirmed, without costs.

The evidence shows that plaintiff's president was notified of the injured party's accident the day after it occurred, was aware that she was hurt but had refused an ambulance, and did not notify defendants of the possibility of a claim until more than six months later. This was unreasonable as a matter of law (see DiGuglielmo v Travelers Prop. Cas., 6 AD3d 344, 345-346 [2004], lv denied 3 NY3d 608 [2004]). Although a good-faith belief in nonliability may excuse the failure to provide timely notice (see Great Canal Realty Corp. v Seneca Ins. Co., Inc., 5 NY3d 742, 743-744 [2005]), there is no indication that plaintiff attempted to ascertain the possibility of its liability for the accident. For example, had plaintiff conducted an inquiry by contacting the injured party after the accident, it would have learned that she was bleeding and had pain in her shoulder and back after a closet door, which plaintiff's employees had removed during the course of their work in the injured party's apartment, had fallen on her back and that she subsequently went to the hospital, where she was treated for her injuries. Under the circumstances presented, there is no basis for a good-faith belief in plaintiff's nonliability (see Tower Ins. Co. of N.Y. v Lin Hsin Long Co., 50 AD3d 305, 308 [2008]; York Speciality Food, Inc. v Tower Ins. Co. of N.Y., 47 AD3d 589 [2008]).

Continental Casualty Company v. Employers Insurance Company of Wausau

In this declaratory judgment action, plaintiff insurance companies seek a declaration that they do not have a duty to indemnify the now-defunct insured, Robert A. Keasbey Co., in pending asbestos-related claims. Although the tort claims of the defendant class (hereinafter referred to as "the claimants") have not yet been adjudicated, and even though a judgment must be entered against Keasbey before an action could be brought under Insurance Law § 3420(a)(2) against the plaintiffs, the insurers seek the declaration that all the pending claims in the underlying complaints against Keasbey fall within the products hazard/completed operations coverage. Such coverage is subject to aggregate limits which indisputably were exhausted after the insurers paid out more than $110,000,000 in negotiated settlements on policies issued to Keasbey.

Continental Insurance Co. and American Casualty Co. (hereinafter referred to as "CNA") initiated this action first against its insured, Keasbey, as aggregate limits were being exhausted by lawsuits that had been brought against Keasbey as a manufacturer, seller and distributor of an inherently dangerous product, asbestos. In May 2001, counsel for about 20,000 claimants informed Keasbey and CNA that these claimants would be pursuing a new theory of liability (non-products or "operations" coverage), which was not subject to aggregate limits, and thus opened up Keasbey and its insurers to "perpetual coverage."

The record reflects that now-dissolved defendant Keasbey was an insulation contractor that installed, repaired, renovated and removed insulation at various sites in and around New York since the late 1800s. Keasbey distributed and installed insulation materials for industrial and commercial facilities including the powerhouses, Consolidated Edison and other utilities. Until about 1972 those insulation materials contained asbestos. Keasbey also mixed and distributed two asbestos-containing finishing cements.

Most of the litigation against Keasbey occurred as a result of the post-World War II construction boom in the 1950s and 1960s, and the need for new and upgraded powerhouses. The increase in construction activity also increased the use of asbestos-containing insulation in powerhouses and other commercial facilities.

By 1965, however, studies conducted by Dr. Irving Selikoff and his research team at Mt. Sinai Hospital revealed the potential dangers of asbestos. Dr. Selikoff's studies sparked concern among asbestos workers, other trades and their employers, about the use of asbestos.

As a result of these developments, ConEd directed, in 1971 and 1972, that asbestos no longer be used at ConEd sites; Keasbey complied with ConEd's directive. Keasbey management also issued a written directive in the early 1970s banning the use of asbestos-containing products.

The subject insurance policies are 17 primary level comprehensive general liability (hereinafter referred to as "CGL") policies that were issued by CNA to Keasbey between February 1970 and February 1987. None of the CNA policies issued to Keasbey during this time period contained asbestos-related exclusions.[FN1] The primary policies generally insured Keasbey against claims for "bodily injury" caused by an "occurrence."

The CNA policies have aggregate limits that apply only to claims that come within the definition of "products hazard" or "completed operations hazard." The products hazard aggregates range from $300,000 to $1,000,000 per policy, with combined aggregate limits of $8,700,000. Under the policies, "products hazard" "includes bodily injury [...] arising out of the named insured's products [...] but only if the bodily injury [...] occurs away from premises owned by or rented to the named insured and after physical possession of such products has been relinquished to others."

The completed operations hazard is defined as: "bodily injury and property damage arising out of operations [...] but only if the bodily injury or property damage occurs after such operations have been completed or abandoned and occurs away from premises owned by or rented to [...] the named insured."

The CNA policies contain no aggregate limits for claims that are not products hazards, such as "operations" claims. The only limitation for such coverage is the per occurrence provision in each policy. Between 1972-78 CNA additionally issued Keasbey five excess policies with aggregate limits totaling $50 million.

Since 1986, thousands of individuals have brought tort claims against Keasbey for asbestos-related injuries. Most of the claimants are tradesmen and other individuals who worked for other companies and who were allegedly exposed to asbestos while working in the vicinity of Keasbey insulators.

In the early 1990s, New York state and federal judges consolidated hundreds of the asbestos claims in litigation known as the "Powerhouse Cases." Keasbey was a defendant in those consolidated actions. Claimants tried the cases against Keasbey on a strict products liability and negligent "failure to warn" theory emphasizing Keasbey's role as manufacturer and distributor of asbestos products.

None of the plaintiffs in the Powerhouse Cases ever presented any evidence of Keasbey's negligent installation. Until 2001 the insured, the insurers, primary and excess carriers, and the claimants all treated Keasbey claims as strict products liability claims based on the inherently dangerous nature of Keasbey's asbestos products.

While the Powerhouse Cases proceeded, CNA, among others, engaged in settlement discussions with counsel for the claimants. As CNA emphasizes, Keasbey pushed at that time to bring in its excess carriers because the claimed damages appeared to exceed the aggregate amounts of products coverage left under the subject primary policies. Keasbey accepted the excess carriers' contributing funds to the State Powerhouse Cases, and did not object to the cost-sharing agreement among the excess carriers, which expressly treated the asbestos claims as products hazard claims subject to the aggregate limit.

Thus, by May 1992, CNA exhausted their aggregate limits of $8,700,000 in the State Powerhouse Cases. Between May 1992 and May 2001, the excess insurance carriers, including CNA, paid out more than $100,000,000 under their policies and, for all intents and purposes, CNA exhausted their excess policy limits also [FN2]. Keasbey ceased doing business in 1995, and was dissolved in 2001.

By letter dated May 15, 2001, the attorneys for the majority of the remaining asbestos-injured claimants sent a letter to Keasbey's litigation counsel asserting that the remaining claims against Keasbey were "non-products" or "operations" hazard claims that were not subject to the products hazard aggregate limits.
The letter stated in relevant part:

"it is highly likely that the products/ completed operations aggregate limits do not apply to these so-called non-products' claims. As a result, the actual value of Keasbey's insurance asset appears to be vastly greater than is reflected [...] The claimants therefore wish to ensure [...] that Keasbey and the carriers do not [...] otherwise extinguish the insurers' obligations that, in many cases could be perpetual." (emphasis added).


The letter did not identify any particular claimant, lawsuit or insurer.

CNA did not issue a disclaimer of coverage in response to the May 15, 2001 letter; instead, it commenced this declaratory judgment action in October 2001 against Keasbey and added as of right the defendant class of asbestos claimants against Keasbey. CNA asked the court to declare that it owed no duty to indemnify Keasbey for any of the pending asbestos-related bodily injury claims because all of the remaining claims were within the definition of products liability/completed operations coverage in the primary level policies that CNA had issued to Keasbey, that the limits of the subject policies had been exhausted, and that CNA had other defenses to further obligations under the policies.

Following a transfer of venue from Westchester County to New York County, the case was certified as a class action against the defendant class in January 2004. After extensive discovery and motion practice, a nonjury trial began on July 13, 2005, and ended on October 28, 2005. Keasbey, which had already ceased operations, defaulted in the action.

The trial court concluded, inter alia, that CNA had failed to carry its burden in showing that pending asbestos claims fall within the "products aggregates" of the subject insurance policies for products hazard and completed operations coverage. Moreover, it determined that the claimants were entitled to coverage under the "operations" provision.

Second, the court decided that the defunct Keasbey was guilty of laches but that the claimants were not subject to the affirmative defenses that CNA may have had against Keasbey. The court observed that such defenses as timely notice of claim, laches, ratification, estoppel and judicial estoppel were based on Keasbey's conduct, and that any right of the members of the defendant class to sue CNA was not derived from Keasbey directly, but was derived from Insurance Law § 3420(a)(2). Thus, the court determined that the only defenses the insurer had against the injured claimants were those that "grow out of" the terms of the policy. The court also determined that CNA would nonetheless be precluded from asserting affirmative defenses, as it failed to timely disclaim coverage as to the class defendants.

Third, the court determined that coverage for asbestos-related injuries is triggered by exposure through inhalation and that each separate class member's exposure to conditions resulting in bodily injury constituted a separate occurrence under the subject insurance policy.

Further, the court held that CNA could not rely on the "expected or intentional" exclusion, nor on the pollutant exclusion under the primary policies; and that the aggregate limit of plaintiff's excess policy RDU 8047261 was not exhausted. Finally, the court determined that One Beacon's defense obligations extended only to claims arising out of an exposure to a Keasbey asbestos-containing product at the Indian Point Nuclear Power Plant Units #2 and #3.

On appeal, CNA asserts that the trial court erred in virtually every determination except the finding that Keasbey was guilty of laches. CNA argues that the "operations" provision is not applicable to the suits of the claimants because there is no evidence whatsoever that bodily injury in the plain meaning of the phrase was sustained while installation operations were ongoing or that it was incurred before the completion of any of the projects.

CNA also asserts that since Keasbey has defaulted, the claimants stand in the shoes of Keasbey, and thus the equitable affirmative defenses like laches, waiver and equitable estoppel may be used against them; that exposure/inhalation is not the trigger according to applicable policy provisions; and that the trial court was wrong about allocating the burden of proof to CNA. Additionally CNA asserts that its excess policies should be declared exhausted. 

Defendant One Beacon America Insurance Company cross-appeals from that part of the order declaring that CNA's claims for reimbursement and contribution against One Beacon were not barred by CNA's failure to provide timely notice of the claims for which reimbursement and contributions were sought. Defendant Employers Insurance Company of Wausau also cross-appeals from the court's findings of fact and conclusions of law with respect to the obligations of CNA and One Beacon under their policies.

At the outset, we find that a disclaimer of coverage is not necessary in order for CNA to preserve its defenses under the policy. See Generali-U.S. Branch v. Rothschild, 295 A.D.2d 236, 237-238, 744 N.Y.S.2d 159, 161 (1st Dept. 2002) (commencement of a declaratory judgment action can constitute disclaimer); see also Travelers Ins. Co. v. Volmar Constr. Co., 300 A.D.2d 40, 45, 752 N.Y.S.2d 286, 290 (1st Dept. 2002) (insurer has duty to disclaim only after it receives demand for defense and indemnification).

Further, for the reasons set forth below, this Court finds that the trial court erred in denying CNA the declaration it sought. As a threshold matter, it is well established that CNA has the burden of proving that it is entitled to the declarations it seeks. Mount Vernon Fire Ins. Co. v. NIBA Constr., 195 A.D.2d 425, 427, 600 N.Y.S.2d 936, 937 (1st Dept. 1993) (Sullivan J., concurring). For CNA to obtain a declaratory judgment as to its obligation to indemnify in advance of trial, it must demonstrate as a matter of law that "there is no possible factual or legal basis on which the insurer may eventually be held liable under its policy." First State Ins. Co. v. J & S United Amusement Corp., 67 N.Y.2d 1044, 1046, 504 N.Y.S.2d 88, 90, 495 N.E.2d 351, 353 (1986).

Notwithstanding the foregoing, the equally well established principle is that an insured must prove entitlement to the coverage sought while an insurer must prove an exclusion in the policy to defeat coverage. Consolidated Edison Co. of N.Y. v. Allstate Ins. Co., 98 N.Y.2d 208, 218, 746 N.Y.S.2d 622, 625, 774 N.E.2d 687, 690 (2002). Since Keasbey, the insured, defaulted and claimants stand in its shoes, claimants bear the same burden of proof. D'Arata v. New York Cent. Mut. Fire Ins. Co., 76 N.Y.2d 659, 665, 563 N.Y.S.2d 24, 27, 564 N.E.2d 634, 637 (1990).

In this case, CNA demonstrated that there exists no possible basis, factual or legal, for liability outside of the products/completed operations provisions. In any event, claimants did not produce any evidence whatsoever in support of the new theory of liability; namely, that injuries arose before contracting operations by Keasbey were completed.

In the most egregious part of its determination, the trial court agreed that Keasbey was guilty of laches but that none of the equitable defenses of laches, waiver, ratification or estoppel were available to CNA against the claimants. The court found that Keasbey had never brought a declaratory judgment action asserting that there should be "operations" coverage for asbestos claims against it. It further found that CNA, as Keasbey's insurer, would be prejudiced in defending any such "operations" claims because numerous material witnesses had died, and relevant documents are no longer available.

Indisputably, Keasbey was guilty of laches. The court found, however, that the claimants were in a different position. In so ruling, the trial court misconstrued Insurance Law § 3420, which deals with the rights of an injured plaintiff to proceed directly against an insurer after obtaining judgment against an insured. See Lang v. Hanover Ins. Co., 3 NY3d 350, 354-355, 787 N.Y.S.2d 211, 214, 820 N.E.2d 855, 858 (2004), quoting Coleman v. New Amsterdam Cas. Co, 247 N.Y. 271, 275, 160 N.E. 367, 369 (1928) (Cardozo, Ch.J.) (under New York's direct action statute, Insurance Law § 3420, the rights of an injured claimant against the insurer are no less and no greater than those of the insured). This plainly means that all the defenses available to an insurer against an insured are available also against injured claimants.

In its departure from New York law, the trial court appeared to rely on Rucaj v. Progressive Ins. Co. (19 AD3d 270, 797 N.Y.S.2d 79 [1st Dept. 2005]), in which this Court held that an insurer's defenses in a section 3420 action against a claimant are those it would have against the insured. Then, without the support of any legal authority, the court stated: "That should not be held to mean that all of the insurer's defenses against the insured are available against an injured claimant." Instead of relying on case law that was precisely on point, the trial court relied on two cases that had nothing to do with rights derived from Insurance Law § 3420.

The principle that neither party in a section 3420 action has any rights greater or lesser than if the action were between insurer and insured has been consistently applied by the Court of Appeals and intermediate appellate courts, which have found that those rights include the equitable affirmative defenses available against a policyholder. See D'Arata, 76 N.Y.2d at 665, 563 N.Y.S.2d at 27. In D'Arata, the plaintiff, a victim of an assault, brought an action under section 3420, seeking to compel the insurer to pay a judgment on behalf of the insured defendant up to the limit of the policy. The insurer used collateral estoppel as an affirmative defense asserting that the plaintiff was estopped from relitigating the issue of insured's intent to inflict bodily injury. Id. at 662, 563 N.Y.S.2d at 25 (analysis related to whether a finding in a criminal proceeding could be used to satisfy the expected and intended exclusion of the policy).

In considering whether the defense barred the claim, the Court of Appeals first observed that the affirmative defense of collateral estoppel is an "equitable doctrine [...] grounded on concepts of fairness and should not be rigidly or mechanically applied." Id. at 664; 563 N.Y.S.2d at 26. The Court further held that the plaintiff was subject to the same affirmative defenses that would apply against the insured, and explained: "Plaintiff by proceeding directly against [insurer] does so as subrogee of the insured's rights and is subject to whatever rules of estoppel would apply to the insured." Id. at 665, 563 N.Y.S.2d at 27; see also Zimmerman v. Tower Ins. Co. of N.Y., 13 AD3d 137, 138-139, 788 N.Y.S.2d 309, 310-311 (1st Dept. 2004) (plaintiff subrogee of insured's rights is subject to whatever rules of estoppel that would apply to insured); Van Gordon v. Otsego Mut. Fire Ins. Co., 232 A.D.2d 405, 648 N.Y.S.2d 306 (2d Dept. 1996) (noncooperation of insured party is ground upon which insurer was denying coverage and may be asserted by insurer as defense in action on a judgment by injured plaintiff pursuant to Insurance Law § 3420(a)).

Thus, the issue is not whether claimants engaged in delay and are guilty of laches. The issue properly framed is whether claimants can obtain coverage under a newly asserted theory of liability when the insured engaged in acts or omissions that would preclude that coverage had the insured brought this claim. The answer must be, as precedent demands, that equitable affirmative defenses are available to CNA against the claimants who stand in Keasbey's shoes, and that if laches is available against Keasbey, it may be used against the claimants.

Laches is an equitable doctrine based on fairness. Courts have invoked the doctrine to prevent stale claims and the prejudice that can result. Whether the doctrine is applicable, however, depends on the facts of the case. See Orange & Rockland Util. v. Philwold Estates, 70 A.D.2d 338, 343, 421 N.Y.S.2d 640, 643 (3rd Dept. 1979), modified, 52 N.Y.2d 253, 437 N.Y.S.2d 291, 418 N.E.2d 1310 (1981).

In this case, the inequity would be particularly egregious. As the amicus curiae brief asserts in behalf of Keasbey's insurers, CNA would be in a position to owe "perpetual and virtually unlimited obligations to provide coverage for a never-ending torrent of asbestos claims" under a theory of coverage "never before asserted by Keasbey," and yet they would be "hampered in their ability to defend [...] because of the loss of evidence." Here, counsel for claimants raised the possibility of "perpetual coverage" under a new theory of liability in May 2001 as the products aggregates were being exhausted. As a result of negotiated settlements, eventually more than $110,000,000 was paid out over 10 years, largely to the clients of the law firm of Weitz & Luxenberg. Of that, CNA paid out $8.7 million on its primary policies and more than $50,000,000 as an excess insurer.

Moreover, testimony at the bench trial in this case adduced the following: that until 2001, Keasbey was sued as a manufacturer, distributor and seller for strict products liability and failure to warn. Keasbey argued in each case that it was an installer (which should have triggered "operations" coverage for alleged negligent installation), but Keasbey always lost that argument. Claimants, or rather counsel for claimants, apparently did not want to be involved in cases where they would have to prove that bodily injury was tied to a specific accident or occurrence of negligent installation in a specific period of time when the installer had used a specific manufacturer's asbestos product.

Indeed, the simplest route to recovering damages for asbestos-related claims after 1973 was to assert products liability against the manufacturer, distributor or seller based on asbestos being "unreasonably dangerous." See Borel v. Fiberboard Paper Prods. Corp., 493 F.2d 1076 (5th Cir. 1973), cert. denied, 419 U.S. 969, 95 S.Ct. 127, 42 L.Ed.2d 107. Under Borel, which was followed in New York, claimants were obligated to prove only that (1) they had been exposed to defendant's product and (2) show an asbestos-related disease. Additional relief for claimants appeared in 1986 when a legislative amendment to the statute of limitations meant that the clock started running upon "discovery" of disease rather than actual injury.

The foregoing events led to the biggest mass tort litigation of our time with courts in New York creating asbestos dockets where cases, sometimes hundreds at a time, were consolidated and special asbestos rules allowed standard complaints and discovery requests to be used in cases where, as CNA asserts, facts were tried for a few and then special verdicts were applied to all. Cases against Keasbey were brought mainly in New York by a handful of law firms, the most prolific of which were Weitz & Luxenberg, and Wilentz Goldman.

Testimony further adduced that a typical claimant filed a standard asbestos complaint generally against a list of defendants which typically read: "During the course of [plaintiff's] employment, plaintiff was exposed to the defendants' asbestos and asbestos containing materials to which exposure directly and proximately caused him to develop an asbestos related disease." All claimants alleged that Keasbey was a manufacturer and seller who "should have known" about the health hazards of products and warned others of those hazards.

The record reflects that in the State Powerhouse consolidation trial of 1992, two claimants obtained multi-million damages verdicts after claimants' counsel opened the proceedings by pointing to Keasbey's role as a manufacturer with a " resultant obligation' to understand [...] its resultant potential liability for a failure to warn." Counsel closed by calling Keasbey a "murderer." After 1992 and until 2003, only a few Keasbey cases began trial and all settled before verdict

As to settlement negotiations, testimony at trial further adduced the following: In late 1991, court-supervised settlement negotiations began in the State Powerhouse Cases combined with Federal Powerhouse Cases. In cases from both jurisdictions, hundreds of claimants, dozens of defendants and insurers for each defendant participated in negotiations. CNA was part of the discussions as Keasbey's primary insurance carrier; subsequently Hartford, Keasbey's excess carrier, joined the discussions, as did excess carriers INA and Fireman's Fund, a second-level insurer.

As CNA asserts, it was understood that excess carriers would pay for Keasbey's asbestos cases only if prior products cases had exhausted the aggregate limits in the primary policies and if the pending cases were all products-hazard cases. Since insurers at the time were aware that a "non-products" argument could avoid aggregation, Hartford, INA and Fireman's Fund scrutinized the evidence on these issues to satisfy themselves that the claims indeed fit within the products-hazard coverage and thus were subject to aggregate limits.

Indeed, trial exhibits established that Keasbey's counsel discussed coverage issues including whether to file a declaratory judgment coverage action arguing for coverage beyond aggregate limits such as would be available in claims pursuant to "operations" coverage. As determined by the trial court, Keasbey never filed such an action, and in fact testimony at trial established that until 2001, when CNA was paying the last of its excess coverage, nobody questioned that Keasbey asbestos claims were products claims subject to products aggregate limits. By the time aggregate limits were reached, claimants had received more than $110,000,000 in satisfaction of their claims.

Ultimately, the prejudice in defending against a new theory of liability (see discussion below) that is particularly dependent on establishing facts for each individual claimant is obvious when witnesses have either died or are suffering from faded memories, and relevant documents have been lost. Given the foregoing, it is patently false for claimants to argue that CNA knew that asbestos claims against Keasbey are likely to be "operations" claims. On the contrary, prior to CNA reaching the aggregate limit of its coverage in 2001, all claims were products claims. Thus, CNA had no reason to preserve evidence or perpetuate testimony (even had it been able to depose claimants), or seek declaratory relief regarding any particular insured.

The well-established rationale for the doctrine of laches is to prevent a party from injustice that would arise from the assertion of stale claims. See Marcus v. Village of Mamaroneck, 283 N.Y. 325, 332, 28 N.E.2d 856, 859 (1940) (defense of laches is based upon the principle that plaintiffs have delayed to the prejudice of defendants). Thus, the trial court correctly found that laches is applicable in this case.

However, contrary to the court's findings, there is nothing at all inequitable in applying the doctrine to the claimants. Even if the Insurance Law did not require such application to the subrogee claimants, in this case it is fittingly applied to them. It is worth noting that as late as 2003, a Keasbey trial brought by claimant Michael O'Reilly opened and closed in a fashion consistent with all prior cases. Keasbey was sued as manufacturer, seller or distributor on theories of strict products liability and failure to warn. In this case, the same Michael O'Reilly stands as the class representative, typical of all class members, who apparently would sue Keasbey for sustaining bodily injury during Keasbey's negligent installation of asbestos under a non-products theory simply because the theory provides a new set of deep pockets. In another case, where a claimant is now also a member of defendant class, counsel defeated a summary judgment motion filed by Keasbey by arguing that Keasbey was a manufacturer and seller of asbestos-containing products. No evidence was presented that Keasbey was negligent in installation. The summary judgment motion was argued in October 2003, more than two years after counsel had raised the issue of non-products claims against Keasbey.

We find therefore that laches in this case is a valid affirmative defense against the claimants who stand in defendant Keasbey's shoes, and it bars the claim of the defendant class. Thus, there exists no legal basis on which the insurer may eventually be held liable for operations coverage under its policy.

Furthermore, the trial court erred in holding that a factual basis exists for CNA's liability under the non-products/operations provisions because it incorrectly relied on the holding in Frontier Insulation Contrs. v. Merchants Mut. Ins. Co. (91 N.Y.2d 169, 667 N.Y.S.2d 982, 690 N.E.2d 866 [1997]). The court erred in its extrapolation from that case that exposure by inhalation constitutes an injury that triggers coverage. The instant case is simply not controlled by Frontier.

Frontier involves only the very narrow issue of an insurer's duty to defend where allegations before the court included those of negligent installation. In fact, the Court started its opinion with the words: "The narrow issue before us [...] is whether the products hazards' exclusions in the insurance policies at issue relieve defendant insurers of the duty to defend their insured, an asbestos insulation contractor." Id. at 173-174, 667 N.Y.S.2d at 984.

The insurer in Frontier sought a ruling that all of the claims against its policyholder should be considered products-hazards claims since injuries arose out of the inherently dangerous nature of the product. Frontier however, was not a manufacturer or seller like Keasbey, but only an installer of insulation products. The tort claims arising against it were not based on a manufacturer's or seller's duty to warn or based on what a seller or manufacturer should know about a product they put into the stream of commerce, but were based on a theory of negligent installation. The Court of Appeals ruled against the insurer, as it found that products liability coverage "cannot apply to accidents or occurrences that allegedly took place while Frontier's installation work was in progress because the offending product the asbestos installation was not relinquished from Frontier's control until installation was complete." Id. at 177, 667 N.Y.S.2d at 986 (emphasis added).

Rather, the Court observed that at least some of the suits "expressly allege" that negligent installation of asbestos caused their personal injuries. The Court then added that:

"Since asbestos fibers may be readily released into the air and inhaled while a contractor is cutting and sawing the product during installation, there is a reasonable possibility that any liability attributed to Frontier would stem from injuries that occurred during ongoing operations covered events." Id. at 177-78, 667 N.Y.S.2d at 986.

Much has been made of this foregoing observation in the trial court's decision and by the claimants on appeal. Mistakenly so, since it should not be considered as anything more than dicta.

First, the issue before the Frontier court was the duty to defend, which is a much broader duty than the duty to indemnify. Atlantic Mut. Ins. Co. v. Terk Tech. Corp., 309 A.D.2d 22, 28, 763 N.Y.S.2d 56, 60 (1st Dept. 2003) (the duty to indemnify does not turn on the pleadings but rather on whether the loss as established by the facts is covered by the policy). The duty to defend is decided solely on the allegations in the complaint which must be accepted by a court as true, and which here included allegations of personal injuries arising out of negligent installation.

Further, the declaration sought in Frontier was that all the claims fell within the products-hazard exclusion, and there was no distinction made as to whether the injuries happened before or after operations were completed. More significantly, the insurers did not present any evidence as to the scope or timing of the injury, and so there was no such analysis by the Frontier Court. In other words, there was no evidence, as there is in the instant case, as to what constitutes injury in an asbestos claim, and whether that injury can in fact occur while operations are ongoing and before they are completed. Ultimately, the Frontier Court was constrained to rule against the insurer because it found there was a "reasonable possibility" of liability.

To the extent that there was no evidence before the Frontier court, and therefore no analysis, on the issue of "injury," we decline to follow the suggestion that injury happens on inhalation, as it is obiter dictum. The trial court, therefore, incorrectly interpreted the Frontier decision to stand for the proposition that injury in asbestos-related claims occurs upon exposure by inhalation of fibers.

To reach that point in this case, the trial court made the distinction between three different theories of liability: (1)products hazard coverage for insurable risks due to a defective product that has been put into the stream of commerce; (2) completed operations coverage, which covers risks of loss for injuries that arise out of operations of the insured that have been completed and occur away from the premises of the insured, and (3) premises/operations coverage, which covers risks that arise due to injuries from the defective product while the work with the product is still in progress. 16 Misc 3d 223, 230-231, 839 N.Y.S.2d 403, 410-411 (2007). "If relinquishment has not occurred, and the operations have not been completed, then operations coverage applies." Id. at 231, 839 N.Y.S.2d at 411.

The court then held that CNA had not demonstrated that the injuries of claimants occurred after relinquishment of the asbestos products or after operations were completed. The court observed that: "When defendant Keasbey cut, sawed, mixed, and removed asbestos-containing materials as part of its installation operations at various job sites, other individuals at those sites were exposed to asbestos dust." Id. at 229, 839 N.Y.S.2d at 410. Without pointing to any other evidentiary material, the court then concluded: "the evidence has shown that the injuries happened while the installation operations of defendant Keasbey were ongoing." Id. at 231, 839 N.Y.S.2d at 411 (emphasis added).

In its discussion as to when coverage is triggered for malignant and non-malignant asbestos-related injuries, the court stated that "coverage is triggered under the subject insurance policies when a bodily injury occurs." Id. at 241, 839 N.Y.S.2d at 418. In the next paragraph however, citing to Appalachian Ins. Co. v. General Elec. Co.,(19 AD3d 198, 796 N.Y.S.2d 609 [1st Dept. 2005], aff'd, 8 NY3d 162, 831 N.Y.S.2d 742, 863 N.E.2d 994 [2007]) and Matter of Midland Ins. Co., (269 A.D.2d 50, 709 N.Y.S.2d 24 [1st Dept. 2000]), the court held that, "it is an occurrence that triggers coverage, and an occurrence is the exposure to asbestos by inhaling it [...] not an injury therefrom." Therefore coverage for both types of injuries is "triggered by exposure to asbestos during [*12]the policy periods." 16 Misc 3d at 241, 839 N.Y.S.2d at 418.

Finally, in addition to these conflicting determinations, the trial court observed: "[t]he risks of injuries during operations grows out of the use of the asbestos products during the operations." Id. at 231, 839 N.Y.S.2d at 411.

Setting aside the fact that the timing of the risks of injuries is irrelevant, the court, in relying on Matter of Midland Ins. Co. and Frontier [that occurrence not injury triggers coverage] ignored the applicable policy provisions relevant to this case; and in holding that "injuries happened" during installation operations, disregarded New York law. The court all but ignored the testimony of medical experts that went largely uncontroverted at trial.

As a starting point for any analysis as to what triggers coverage, the Court must look at the applicable policy provisions. As noted, in this case, the policies at issue are 17 primary level CGL policies. The policies between 1970 and 1987 cover bodily injury and property damage which occur during the policy period. Three pre-1973 policies under the CGL provisions state that CNA is obligated to pay "all sums" for an occurrence defined as an "accident including continuous or repeated exposure to conditions which results during the policy period in bodily injury."

In the 1973-1987 primary policies, "bodily injury" is defined as "bodily injury, sickness or disease sustained by a person which occurs during the policy period." "Occurrence" is defined as "an accident including continuous or repeated exposure to conditions which results in bodily injury [...] neither expected nor intended from the standpoint of the insured."

Quite clearly then, under the 17 subject policies, it is "bodily injury" that triggers coverage, and an insured in order to recover under the policy must show that an injury occurred during the policy period and that it occurred as a result of an accident or injurious exposure. Further, to recover under the "operations" provisions, an insured must show that the injury occurred before any such contracting operations were completed.

Testimony at trial indicated that a typical instruction for claims handlers looking at claims falling within "operations" coverage stated: "This type of loss relates to injuries that allege injury to the claimant resulting from exposure while the insured is using a substance or causes a substance to be released." The example given in the instructions was of an employee of the insured — as for example a Keasbey installer would be — repairing a chemical tank on the premises of corporation "A". During repair the insured ruptures the tank causing an employee of corporation "A" to suffer chemical burns.

This simple example of a visible injury sustained contemporaneously with the negligent act or occurrence however is not particularly useful to any analysis of asbestos-related claims. The undisputed fact that both malignant and non-malignant asbestos-related diseases require periods of long, intensive exposure rather than a single period of inhalation coupled with the fact that the full-blown version of both types of disease develop only after a long latency period almost always prompts the question of what constitutes injury in an asbestos-related claim. Moreover, in an "operations coverage" case, establishing the when and the how of the injury is especially crucial since injury must be shown to arise before the completion of an operation.

The question of what constitutes injury in asbestos-related claims has vexed state and federal courts across the nation since the 1980s. See Insurance Co. of N. Am. v. Forty-Eight Insulations Inc., 633 F.2d 1212, 1222 (6th Cir. 1980), cert. denied, 454 U.S. 1109, 102 S.Ct. 686, 70 L.Ed.2d 650 (1981) ("cumulative, progressive disease does not fit the disease or accident situation which the policies typically cover"). The Sixth Circuit majority explained the dilemma as follows: "There is usually little dispute as to when an injury occurs when dealing with a common disease or accident. [In the case of asbestosis] there is considerable dispute as to when an injury [...] should be deemed to occur." Id. at 1222. Hence the pertinent question is: what constitutes sufficient bodily injury to trigger coverage. See Continental Cas. Co. v. Rapid-American Corp., 80 N.Y.2d 640, 650, 593 N.Y.S.2d 966, 970-971, 609 N.E.2d 506, 510-511 (1993).

Testimony by CNA's medical experts as to how malignant and non-malignant types of asbestos-related diseases develop was largely uncontroverted. It established that adverse health effects from asbestos are "due to the inhalation of fibers in concentrations sufficient to overwhelm the normal pulmonary defense and clearance mechanisms." Researchers, acknowledged to be authoritative by the claimants' expert, testified that "most workers with asbestos exposure, as well as members of the general population who inhale asbestos fibers from ambient air, show no evidence of [subclinical] fibrosis."

Medical experts for both sides at trial agreed that there is a threshold fiber dose below which asbestosis is not seen, although the claimants' expert did not offer an opinion as to when it was reached. CNA, however, introduced testimony based on leading studies that showed the following statistics: that asbestosis is usually observed in individuals who have had many years of high-level exposure, typically asbestos miners and millers, asbestos textile workers and asbestos insulators like Keasbey employees (who are not members of the class in the instant case because workers compensation laws prevent them from suing Keasbey). The Selikoff studies showed that for asbestos insulators asbestosis occurs in 92% of those with more than 40 years exposure but in only 10% of those with 10-19 years of exposure.

Typical "bystanders" on the other hand, who comprise the majority of the claimants, here have normal lungs 71% of the time if they had less than 30 years of exposure. Based partly on these studies, one of CNA's medical experts opined that the threshold is typically not reached for "bystanders" for at least "several years" - which CNA asserts is longer than any Keasbey contracting job took to complete.

Dr. Edward Philip Cohen, for CNA, testified as follows as to the development of asbestos-related diseases:

"Each inhalation of asbestos fibers results in alterations that contribute in a significant manner to the cumulative disease process. I would not use the word injury [...] but certainly the presence of asbestos fibers indirectly results in damage to cells and alterations of cellular material that over a period of 20-40 years can result in the development of impairment." (Emphasis supplied).

Testifying about the point where cell mutation becomes irreversible in malignant asbestos related diseases like mesothelioma, Dr. Cohen stated:

"to say that cancers develop well before clinical manifestations is true but not for mesothelioma [...] once the last mutation occurs the cells take off and grow very, very rapidly and the evidence from that is the time of death from the time symptoms first appear."


As for what causes mesothelioma, he testified:  "mesothelioma is common in individuals who have been exposed to asbestos however [...] many individuals with mesothelioma have no such exposure history [...] and even in individuals who have [it] and have an exposure history does not necessarily prove that mesothelioma was a consequence of the earlier exposure to asbestos and the only way to prove [that] is to examine the mesothelioma and look for presence of asbestos bodies."

As for lung cancer, Dr. Cohen testified that studies have shown "a synergistic increase in the risk of lung cancer is present in individuals who both smoked and were exposed to asbestos."

Hence, testimony and evidence established that it can take 20 to 40 years after exposure for actual impairment of bodily functions to develop, that it is a progressive, cumulative disease that starts with alterations of tissue cells and subclinical tissue damage and could progress, though not necessarily progress, into full-blown asbestosis, mesothelioma or lung cancer.

Further, medical evidence submitted in this case established that while those with asbestos-related diseases can usually track the illness back to asbestos exposure of some type, it is not axiomatic that exposure results in asbestos-related injury, sickness or disease. The conclusion to be drawn therefore is that factors other than mere initial or one-time exposure to asbestos fibers are implicated in the development or progression towards asbestos-related injury sickness or disease. Whether these factors are related to the length of exposure or intensity of exposure, or whether there are catalysts like smoking or genetic predisposition involved is not established. However, one indisputable fact to emerge from medical evidence in the plethora of asbestos cases litigated in many different jurisdictions is that actual injury generally develops over time depending on a range of circumstances and conditions, but does not occur upon exposure by inhalation.

As one judge of the Sixth Circuit eloquently stated in his dissent in Insurance Co. Of N. Am. v. Forty Eight Insulations Inc.:

"The [exposure] rule is not satisfactory because some asbestos may be safely inhaled without the disease ever developing. With more exposure, some harm may later develop but remain latent for a significant number of years. Insurance law does not impose liability or coverage until some identifiable harm arises. An indemnifiable act does not occur at the time of the negligent act, but at the time the legally recognizable harm appears [...] [a]t the time of initial exposure, a victim could not successfully bring an action against the manufacturer because at that time he has suffered no compensable harm." 633 F.2d at 1229 (Merritt, J.).

There are jurisdictions like the Sixth Circuit that subscribe to the exposure theory holding that even minimal tissue damage is injury. It is the theory that the trial court appears to favor. But that is not the law in New York. The Court of Appeals declined to subscribe to an exposure theory in Continental Casualty Co. v. Rapid America Corp. (80 N.Y.2d 640, 593 N.Y.S.2d 966, 609 N.E.2d 506 (1993)), and instead appeared to approve of injury-in-fact as a trigger for coverage. It explained:

"Decisions on when coverage is triggered for asbestos-related injury generally may be divided into four categories: (1) on exposure to asbestos; (2) on manifestation of disease; (3) on onset of disease, whether discovered or not ( injury-in-fact'); and (4) all of the above in other words, a continuous trigger.' Federal courts have concluded that the injury-in-fact' rule is most consistent with New York law." Id. at 650-651, 593 N.Y.S.2d at 971 (internal citations omitted).

Indeed, an injury-in-fact test rests on when the injury, sickness, disease or disability actually began and, of the four categories, comports most closely with general principles of tort and insurance law. In American Home Prods. Corp. v. Liberty Mut. Ins. Co. (565 F.Supp. 1485 [S.D.N.Y. 1983], aff'd in part, modified in part, 748 F.2d 760 [2d Cir. 1984]), the court stated:

"although exposure to asbestos does not usually injure seriously enough to constitute an occurrence' in the context of a liability insurance policy, a finder of fact might, nevertheless, find that a particular exposure or period of exposure contemporaneously caused a compensable injury [...]" 565 F.Supp. at 1498. "[A] real but undiscovered injury proved in retrospect to have existed at the relevant time would establish coverage irrespective of the time the injury became manifest." Id. at 1497.


But the court stated unequivocally that "injury-in-fact" requires the insured to demonstrate actual damage or injury during the policy period. Id. at 1497.

Claimants in the instant case offered no evidence whatsoever that any of them sustained an injury-in-fact in any one of the policy periods arising out of "ongoing operations." Not surprisingly since the burden on claimants to prove so would be insurmountable given not only the absence of evidentiary material, but the difficulty if not impossibility of pinpointing when any subclinical tissue damage tipped over into actual impairment. In Matter of Midland Ins. Co., this Court determined that "[t]here exist at present no medical techniques capable of specifically identifying and quantifying the progression of asbestos-related injury, sickness or disease actually sustained in each year from and after a first exposure to asbestos fiber." 269 A.D.2d at 58, 709 N.Y.S.2d at 30.

The Fifth Circuit echoed that view, observing: "[t]he challenge in adopting the injury-in-fact approach is that, in each case [...] a mini-trial must be held to determine at what point the build-up of asbestos in the plaintiff's lungs resulted in the body's defenses being overwhelmed. At that point, asbestosis could truly be said to occur." Guaranty Natl. Ins. Co. v. Azrock Indus., 211 F.3d 239, 246 (5th Cir. 2000) (internal quotation marks and citation omitted).

Thus, each claimant in the instant case would have to produce medical evidence that the point where asbestos fibers overwhelmed the body's defenses happened in one of the 17 years of the subject insurance policies. Further, and crucial to recovery under non-products/operations coverage, they would have to establish that the injury was sustained before a contracting operation was completed. This means that a claimant would have to show one of two sets of conditions occurred: (1) contemporaneous injury, that is, injury-in-fact stemming from an ongoing operation in the same policy year, but the probability of such a situation appears highly unlikely given the absence of evidence that any Keasbey installation project lasted long enough for the sort of lengthy intensive exposure required for asbestosis to develop in the same year; or, possibly (2) injury-in-fact arising in the policy year but as a result of exposure during an ongoing operation years, maybe decades, prior. In the latter case, a claimant would have to show that he was exposed only during that ongoing operation and that he was never exposed to asbestos after a Keasbey installation project was completed. In other words, setting aside the lack of documentary evidence or witness testimony to establish such, the claimant would be obligated to prove a negative, that is, he was never exposed to asbestos after Keasbey completed its installation operations.

This would be impossible for claimants who typically were "bystanders," that is tradesmen and utility workers who worked alongside Keasbey installers during installation projects and then continued working in the plant after operations were completed, and were thus exposed to the installed asbestos.

Indeed, no such evidence was presented at trial for any group of claimants, never mind the class. Claimants rely on the assertion that CNA acknowledged in the prior "products hazards" claims that the claims arose out of plaintiffs' exposure to asbestos dust during contracting operations, in effect admitting that injuries were sustained during an ongoing operation.

They are mixing apples and oranges. CNA acknowledged that claimants were exposed during operations, and that at some future point in time, sometimes decades later, claimants manifested asbestos-related disease. Recovery under products liability claims is not dependent, as it is here, on the timing of the actual injury nor the particular stage of installation projects at which actual injury may have taken place. The claimants are making an impermissible leap if they believe they can go forward and prove injury during ongoing operations simply by a conclusory assertion: claimant was exposed, claimant developed full blow-blown asbestos-related injury decades later, ergo, injury was sustained at time of exposure.

In rejecting the contention that manifestation of asbestosis 40 years later is proof that injury occurred when the first asbestos dust was inhaled, it is perhaps worth considering the view of Judge Learned Hand in 1939 when he wrote on a health insurance case: "A disease is no disease until it manifests itself. Few adults are not diseased, if by that one means only that the seeds of future troubles are not already planted." Grain Handling Co. v. Sweeney, 102 F.2d 464, 465-466 (2d Cir. 1939) cert. denied, 308 U.S. 570, 60 S.Ct. 83, 84 L.Ed. 478 (1939).

In any event, injecting a conclusory assertion into what is essentially a products liability argument is not enough to establish a basis for coverage under ongoing operations provisions of the subject policies. The only conclusion that can be reached is that injury did occur sometime before manifestation and after exposure. However, in order for claimants to establish their entitlement to limitless liability and perpetual coverage they must show, under the relevant provisions of the subject policies, that the actual injury occurred in the policy period and that it arose solely out of an ongoing operation. The burden on a claimant to come forward with the necessary medical evidence or documentation or witnesses to support that his or her only exposure occurred during an ongoing project rises to the level of factual impossibility. 

We find, therefore, that CNA has demonstrated that there is no factual or legal basis for liability other than under the products/completed operation provisions of the policies, and so the declaration sought by plaintiffs that they have no duty to indemnify is warranted by the record.

Finally, we are persuaded that as to excess policy RDU 8047261, the aggregate limit of $1,000,000 is exhausted. More than a year after CNA filed its declaratory action in 2001, CNA settled six claims for $2,865,000. At the time of the settlements, CNA did not know there was a 1971 excess policy with $1,000,000 in untapped products coverage. Consequently, it accounted for the settlement of the six claims by labeling them with an accounting code that indicated bodily injury claims rather than products cases. The defendant class assert that CNA cannot now reclassify the claims and so have the excess policy declared exhausted. We disagree.

As CNA points out, the claims were settled on six trial-ready cases that CNA was not ready to defend. It argues that it used a catch-all accounting code for bodily injury because no other code applied once aggregate limits appeared exhausted. But CNA rejects the contention that it made a deliberate coverage decision to classify the claims as operations claims. It settled the claims to avoid default judgment. Indeed, by bringing the declaratory judgment action in the prior year, we would agree that CNA reserved its right to apply the $2,865,000 against the later-discovered products policy, thus exhausting the aggregate limit of the policy.

In light of the foregoing, we find the remaining issues raised by plaintiffs on appeal and defendants One Beacon and Wausau on cross appeal academic, and therefore decline to rule on them.

Accordingly, the order of the Supreme Court, New York County (Richard F. Braun, J.) entered on or about June 11, 2007, insofar as it declared that the asbestos claims against insured Keasbey are not within the products liability coverage, and thus not subject to the policies' aggregate limits; that the defendant class is not subject to the affirmative defenses that plaintiffs may have had against Keasbey; that coverage for the defendant class is triggered by exposure and that each individual class member's exposure to conditions resulting in bodily injury constituted a separate occurrence; and that the aggregate limit of CNA's policy RDU 8047261 was not exhausted, should be reversed, on the law, with costs, and it is declared that (1) claims arising out of Keasbey's asbestos insulating activities are included within the products hazard/completed operations coverage (2) defendant class is subject to the affirmative defenses that CNA may have had against Keasbey (3) coverage for defendant class is not triggered by exposure, but by injury-in-fact and each individual class member's exposure to conditions resulting in bodily injury does not constitute a separate occurrence (4) the aggregate limit of CNA's excess policy RDU 8047261 is exhausted.

M-6192Continental Casualty Company, et al v Employers Insurance Company, etc.


Motion seeking leave to file amicus brief granted.

Squib inserted here:
Order, Supreme Court, New York County (Richard F. Braun, J.), entered on or about June 11, 2007, reversed, on the law, with costs, and it is declared that (1) claims arising out of Keasbey's asbestos insulating activities are included within the products hazard/completed operations coverage, (2) defendant class is subject to the affirmative defenses that CNA may have had against Keasbey, (3) coverage for defendant class is not triggered by exposure, but by injury-in-fact and each individual class member's exposure to conditions resulting in bodily injury does not constitute a separate occurrence (4) the aggregate limit of CNA's excess policy RDU 8047261 is exhausted.
 

Unitrin Kemper Auto and Home v. Irizarry


Appeal from a judgment (denominated order and judgment) of the Supreme Court, Monroe County (Matthew A. Rosenbaum, J.), entered October 3, 2007 in a proceeding pursuant to CPLR article 75. The judgment, insofar as appealed from, declared that Lancer Insurance Company provide primary coverage and Allstate Insurance Company provide excess coverage for the incident underlying this proceeding.


GOLDBERG SEGALLA LLP, BUFFALO (SARAH J. DELANEY OF COUNSEL), FOR APPELLANT.
TREVETT CRISTO SALZER & ANDOLINA, P.C., ROCHESTER (DANIEL P. DEBOLT OF COUNSEL), FOR PETITIONER-RESPONDENT.
SCHIANO LAW OFFICE, P.C., ROCHESTER (CHARLES A. SCHIANO, JR., OF COUNSEL), FOR RESPONDENT-RESPONDENT ARCELINA V. IRIZARRY.
LAW OFFICES OF MARY A. BJORK, ROCHESTER (THOMAS P. DURKIN OF COUNSEL), FOR RESPONDENT ALLSTATE INSURANCE COMPANY.


It is hereby ORDERED that the judgment insofar as appealed from is unanimously reversed on the law without costs and the declarations are vacated.

Memorandum: Petitioner commenced this proceeding pursuant CPLR article 75 seeking a permanent stay of the arbitration demanded by its insured, respondent Arcelina V. Irizarry, after a vehicle driven by her collided with a vehicle owned by Edwin Diaz, doing business as PR Auto Sales (Diaz), a used car dealer, and insured by appellant, Lancer Insurance Company (Lancer). The girlfriend of Diaz, Sandra Gonzalez, who was insured by respondent Allstate Insurance Company (Allstate), was driving the vehicle at the time of the collision, in part for the purpose of test-driving it to determine whether she wished to purchase it for her son. Although it appears from the record that Supreme Court joined Lancer and Allstate as parties to the proceeding "so [the] Court can determine insurance coverage," no declaratory judgment action was ever commenced and neither Diaz or Gonzalez is a party to this proceeding. Further, we are unable to ascertain from the record before us whether an underlying negligence action was in fact commenced, and, if so, which parties are involved in that action. We thus conclude that, in the absence of a declaratory judgment action in which jurisdiction over all necessary parties was obtained, the court erred by, in effect, converting this proceeding in part to a declaratory judgment action and declaring the rights of Lancer and Allstate (see CPLR 103 [c]; cf. Matter of Cologne Life Reins. Co. v Zurich Reins. [N. Am.], 286 AD2d 118, 119).

Kumar v. American Transit Insurance Company


Appeal from an order of the Supreme Court, Niagara County (Richard C. Kloch, Sr., A.J.), entered March 3, 2008. The order granted plaintiffs' motion for summary judgment.

POKLEMBA & HOBBS, LLC, SARATOGA SPRINGS (JOHN J. POKLEMBA OF COUNSEL), FOR DEFENDANT-APPELLANT.
GARVEY & GARVEY, BUFFALO (MATTHEW J. GARVEY OF COUNSEL), FOR PLAINTIFFS-RESPONDENTS.

It is hereby ORDERED that the order so appealed from is unanimously reversed on the law without costs and the motion is denied.

Memorandum: Plaintiffs commenced this action seeking damages incurred as the result of alleged acts of bad faith by defendant, the insurer of plaintiffs' assignor, in refusing to settle the underlying personal injury action. Defendant appeals from an order granting plaintiffs' motion for summary judgment on the complaint. Contrary to defendant's contention, an action seeking damages for an insurer's bad faith refusal to settle an underlying action may be resolved by a motion for summary judgment (see e.g. Lavaud v Country-Wide Ins. Co., 29 AD3d 745; Little Princess Express Cab Corp. v American Tr. Ins. Co., 12 AD3d 266; Levit v Allstate Ins. Co., 9 AD3d 417, lv dismissed in part and denied in part 3 NY3d 732). We agree with defendant, however, that Supreme Court erred in granting plaintiffs' motion. To prevail in such an action, a plaintiff must establish that the insured " lost an actual opportunity to settle the . . . [action]' . . . at a time when all serious doubts about [his or her] liability were removed" (Pavia v State Farm Mut. Auto. Ins. Co., 82 NY2d 445, 454, rearg denied 83 NY2d 779; see generally St. Paul Fire & Mar. Ins. Co. v United States Fid. & Guar. Co., 43 NY2d 977, 978), and that "defendant insurer engaged in a pattern of behavior evincing a conscious or knowing indifference to the probability that an insured would be held personally accountable for a large judgment if a settlement offer within the policy limits were not accepted" (Pavia, 82 NY2d at 453-454). Here, we agree with defendant that plaintiffs failed to meet their initial burden on their motion of establishing their entitlement to judgment as a matter of law (see generally Zuckerman v City of New York, 49 NY2d 557, 562) and, consequently, we do not consider the sufficiency of defendant's opposing papers (see Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853). We therefore reverse the order and deny plaintiffs' motion.

Thompson v. Saunders


Peter M. Zirbes, Esq. & Assoc., P.C., Forest Hills, N.Y. (Jason Stern
of counsel), for appellant.
Boeggeman, George & Corde, P.C., White Plains, N.Y. (Cynthia
Dolan of counsel), for respondent.

DECISION & ORDER

In an action to recover damages for personal injuries, the plaintiff appeals from an order of the Supreme Court, Queens County (Rosengarten, J.), dated August 22, 2007, which granted the defendant's cross motion for summary judgment dismissing the complaint on the ground that he did not sustain a serious injury within the meaning of Insurance Law § 5102(d), and denied, as academic, his motion for summary judgment on the issue of liability.

ORDERED that the order is affirmed, with costs.

The defendant made a prima facie showing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident (see Toure v Avis Rent A Car Sys., 98 NY2d 345), shifting the burden to the plaintiff to produce sufficient evidence to raise a triable issue of fact.

In opposition, the plaintiff failed to raise a triable issue of fact. The plaintiff failed to produce competent medical evidence of restrictions in range of motion roughly contemporaneous with the subject accident (see LaFerlita v Seagull 2000, Inc., 54 AD3d 905). Since the defendant's doctor referred to the results of magnetic resonance imaging examinations demonstrating bulging and herniated discs, those results were properly before the court (see Zarate v McDonald, 31 AD3d 632; Ayzen v Melendez, 299 AD2d 381). However, the mere existence of bulging or herniated discs is not evidence of a serious injury in the absence of objective evidence of the extent of the alleged physical limitations resulting therefrom (see LaFerlita v Seagull 2000, Inc., 54 AD3d at 906; Kearse v New York City Tr. Auth., 16 AD3d 45, 50). Further, the plaintiff admitted that he continued working after the accident, and failed to submit 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 subject accident (see LaFerlita v Seagull 2000, Inc., 54 AD3d at 906).

In light of the foregoing, we need not reach the plaintiff's remaining contention.
RIVERA, J.P., FLORIO, ANGIOLILLO, McCARTHY and CHAMBERS, JJ., concur.

Washington v. Mendoza


Baker, McEvoy, Morrissey & Moskovits, P.C., New York, N.Y.
(Holly E. Peck of counsel), for appellants.
Gratt & Associates, P.C., Brooklyn, N.Y. (Glenda Flores of
counsel), for respondent.

DECISION & ORDER

In an action to recover damages for personal injuries, the defendants appeal from an order of the Supreme Court, Kings County (Saitta, J.), dated January 31, 2008, which denied their motion for summary judgment dismissing the complaint on the ground that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d).

ORDERED that the order is reversed, on the law, with costs, and the defendants' motion for summary judgment dismissing the complaint is granted.

The defendants met their prima facie burden of showing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident, which occurred on March 17, 2002 (see Toure v Avis Rent A Car Sys., 98 NY2d 345; Gaddy v Eyler, 79 NY2d 955, 956-957). In opposition, the plaintiff failed to raise a triable issue of fact. The so-called "Certification" from the plaintiff's treating physician, Dr. Gustave Drivas, was insufficient to affirm the contents of any of the reports or records that were annexed thereto, including his own reports. Thus, the reports or records of Dr. Drivas, Dr. Deepak Sachdev, Dr. Bryan Douglas, and Dr. Valery Kalika were without any probative value since they were unaffirmed or unsworn (see Grasso v Angerami, 79 NY2d 813; Uribe-Zapata v Capallan, 54 AD3d 936; Patterson v NY Alarm Response Corp., 45 AD3d 656; Verette v Zia, 44 AD3d 747; Nociforo v Pena, 42 AD3d 514; Pagano v Kingsbury, 182 AD2d 268). The same conclusion applies to the unaffirmed magnetic resonance imaging reports of Dr. Jeffrey Chess.

While the plaintiff proffered results of a recent examination by Dr. Joseph Paul, the plaintiff's examining orthopedic surgeon, in which objective testing revealed significant limitations in the range of the motion of the plaintiff's cervical spine, lumbar spine, and left shoulder ranges of motion, neither the plaintiff nor Dr. Paul proffered competent medical evidence demonstrating the existence of similar range of motion limitations that were contemporaneous with the subject accident (see Leeber v Ward,AD3d, 2008 NY Slip Op 07629 [2d Dept 2008]; Ferraro v Ridge Car Serv., 49 AD3d 498; D'Onofrio v Floton, Inc., 45 AD3d 525).

The affirmed magnetic imaging reports of Dr. Robert Scott Schepp concerning the plaintiff's cervical spine and left shoulder merely revealed that as of March and April 2002, the plaintiff had disc bulges at C4-5, C5-6, and C6-7, as well as Grade III tendonitis of the distal supraspinatus tendon of the left shoulder. The mere existence of a bulging disc, and even a tear in a tendon, is not evidence of a serious injury in the absence of objective evidence of the extent of the alleged physical limitations resulting from the injury and its duration (see Cornelius v Cintas Corp., 50 AD3d 1085, 1087; Shvartsman v Vildman, 47 AD3d 700; Tobias v Chupenko, 41 AD3d 583). The self-serving affidavit of the plaintiff was insufficient to meet this requirement (see Sealy v Riteway-1, Inc., 54 AD3d 1018; Hargrove v New York City Tr. Auth., 49 AD3d 692; Shvartsman v Vildman, 47 AD3d 700).

Lastly, the plaintiff failed to submit competent medical evidence that the injuries he allegedly sustained in the subject accident rendered him unable to perform substantially all of his daily activities for not less than 90 days of the first 180 days subsequent to the subject accident (see Rabolt v Park, 50 AD3d 995; Roman v Fast Lane Car Serv., Inc., 46 AD3d 535; Sainte-Aime v Ho, 274 AD2d 569).
SKELOS, J.P., RITTER, DILLON, CARNI and LEVENTHAL, JJ., concur.

Christie v. Coady


Appeal from an order of the Supreme Court, Erie County (Frederick J. Marshall, J.), entered June 21, 2007 in a personal injury action. The order granted the motion of plaintiff for leave to renew her opposition to defendants' motion for summary judgment dismissing the complaint and, upon renewal, the court adhered to its prior decision.

CELLINO & BARNES, P.C., BUFFALO (GREGORY V. PAJAK OF COUNSEL), FOR PLAINTIFF-APPELLANT.
BOUVIER PARTNERSHIP, LLP, BUFFALO (JOSHUA P. RUBIN OF COUNSEL), FOR DEFENDANTS-RESPONDENTS.

It is hereby ORDERED that the order so appealed from is unanimously modified on the law by denying defendants' motion in part and reinstating the complaint, as amplified by the bill of particulars, with respect to the permanent consequential limitation of use of a body organ or member and significant limitation of use of a body function or system categories of serious injury within the meaning of Insurance Law § 5102 (d) and as modified the order is affirmed without costs.

Memorandum: Plaintiff commenced this action seeking damages for injuries she allegedly sustained when her vehicle was rear-ended by a vehicle driven by defendant Sheila C. Gilcrist and owned by defendant Joann Coady. According to plaintiff, she sustained serious injuries to her lumbar spine as a result of the motor vehicle accident, and she eventually required a lumbar discectomy and fusion at L4-5 and L5-S1. Supreme Court granted defendants' motion for summary judgment dismissing the complaint on the ground that plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102 (d). Plaintiff thereafter moved for leave to renew her opposition to the motion and, upon granting leave to renew, the court adhered to its prior decision. Contrary to plaintiff's contention, the court properly adhered to its prior decision with respect to the 90/180 category of serious injury. Defendants established their entitlement to judgment as a matter of law with respect to that category and, in opposition to the motion, plaintiff failed "to submit the requisite objective evidence of a medically determined injury or impairment of a non-permanent nature' . . . and to establish that the injury caused the alleged limitations on plaintiff's daily activities" sufficient to raise a triable issue of fact (Calucci v Baker, 299 AD2d 897, 898).

We agree with plaintiff, however, that the court upon renewal erred in adhering to its prior decision with respect to the permanent consequential limitation of use and significant limitation of use categories of serious injury, and we therefore modify the order accordingly. Although defendants met their initial burden with respect to those categories of serious injury, plaintiff raised triable issues of fact (see generally Zuckerman v City of New York, 49 NY2d 557, 562). Upon renewal of her opposition to the motion, plaintiff submitted the affidavit of her treating neurologist, who conducted two surgical procedures after the court previously had granted defendants' motion. The neurologist described her disc herniation and "the necessity of surgical intervention to alleviate the . . . condition" (Evans v Mendola, 32 AD3d 1231, 1233; see Ellithorpe v Marion [appeal No. 2], 34 AD3d 1195, 1196-1197; Mustello v Szczepanski, 245 AD2d 553; see also Chmiel v Figueroa, 53 AD3d 1092), as well as the permanency of her condition and the resulting limitations on her range of motion.

In light of our determination, we need not consider plaintiff's remaining contentions.

In re State Farm Indemnity Co., v. Moore


Richard T. Lau & Associates, Jericho (Joseph G. Gallo of
counsel), for appellant.
Russo, Keane & Toner, LLP, New York (David S. Gould of
counsel), for New York Central Mutual Fire Ins. Co., respondent.

Order, Supreme Court, Bronx County (Patricia A. Williams, J.), entered on or about April 28, 2008, which denied the petition brought pursuant CPLR article 75 to permanently stay arbitration of a claim for uninsured motorist benefits, unanimously affirmed, without costs.

Respondents Troy Moore and Rashod Cowan sustained injuries in an accident between an automobile owned and operated by Moore and in which Cowan was a passenger, and a vehicle owned by Alnardo Perez. Moore's vehicle was insured by petitioner and records showed that Perez's car was insured by respondent New York Central Mutual Fire Insurance Co. (Central). Central, upon being notified of the accident, commenced an investigation during which it unsuccessfully attempted to contact Perez. Due to Perez's lack of cooperation, Central disclaimed coverage and Moore and Cowan commenced an arbitration proceeding seeking recovery of uninsured motorist benefits.

"When an insured deliberately fails to cooperate with its insurer in the investigation of a covered incident as required by the policy, the insurer may disclaim coverage" (Matter of New York Cent. Mut. Fire Ins. Co. [Salomon], 11 AD3d 315, 316 [2004]). To meet its "very heavy burden" (id.), the insurer must establish that it diligently acted in seeking the cooperation of the insured, that its efforts were reasonably calculated to bring about the insured's cooperation, and that the insured's attitude "was one of willful and avowed obstruction'" (Thrasher v United States Liab. Ins. Co., 19 NY2d 159, 168 [1967], quoting Coleman v New Amsterdam Cas. Co., 247 NY 271, 276 [1928]). Although it is not required of the insurer to show that the insured openly avowed an intent to obstruct the investigation of the claim, "the facts must support an inference that the failure to cooperate was deliberate" (Matter of Liberty Mut. Ins. Co. v Roland-Staine, 21 AD3d 771, 773 [2005]).

The court properly denied the petition to permanently stay the arbitration, as Central provided sufficient grounds for disclaiming coverage. The evidence demonstrates that upon being informed of the subject accident, Central promptly commenced a detailed investigation and diligently followed up on it. In addition to numerous telephone calls being made to the number Perez provided in the subject insurance policy, letters via certified or registered mail were sent to the address provided by Perez, and Central provided evidence that Perez signed for one of the letters. Furthermore, visits were made to Perez's address and his mother maintained that she did not know his whereabouts. In light of these unsuccessful efforts that were reasonably calculated to obtain Perez's cooperation, the inference that Perez deliberately chose not to cooperate is compelling.

American Guaranty and Liability Insurance Company v. Moskowitz


Steinberg & Cavaliere, LLP, White Plains (Steven A. Coploff
of counsel), for appellant.
Fried & Epstein LLP, New York (Lee Epstein of counsel), for
respondents.

Order, Supreme Court, New York County (Bernard J. Fried, J.), entered July 7, 2008, which, inter alia, declared that defendants are entitled to recover from plaintiff $33,845.03, representing legal fees and expenses incurred in this declaratory judgment action, and order, same court and Justice, entered February 28, 2008, which, inter alia, denied plaintiff's motion for summary judgment and granted defendants' cross motion for summary judgment declaring that plaintiff had a duty to defend defendant Avraham Moskowitz in an underlying federal action and that defendants are entitled to reimbursement for costs incurred in connection with this declaratory judgment action, unanimously affirmed, with costs.

Moskowitz was counsel to a certain individual and companies in which she owned stock. He was named as a defendant in the first amended complaint in a federal action alleging fraud and RICO violations against, inter alia, these clients. A fair reading of the amended complaint, which expressly alleges that Moskowitz "is and was an attorney" and "represented [the individual and the aforementioned companies]," reveals that the claims against him were predicated upon his purported acts or omissions in rendering those legal services. Therefore, they were covered under the subject professional liability insurance policy (see Automobile Ins. Co. of Hartford v Cook, 7 NY3d 131, 137 [2006] [when the allegations of the complaint even "suggest" a "reasonable possibility of coverage," the insurer will be required to defend]). The allegation that Moskowitz had served as "de facto in-house counsel" does not render him an officer, director or employee of a business enterprise whose coverage is negated pursuant to Exclusion D of the policy (see RJC Realty Holding Corp. v Republic Franklin Ins. Co., 2 NY3d 158, 165 [2004]). Nor does the conclusory, unsupported allegation that Moskowitz was a member of a criminal enterprise, which apparently arose out of communications between him and his client or clients in the course of his representation of her or them, place him within Exclusion A, which renders the policy inapplicable to any claim arising out of a criminal act by an insured (see Fitzpatrick v American Honda Motor Co., 78 NY2d 61, 68 [1991]).

We have considered plaintiff's remaining contentions and find them without merit

Taylor v. Vasquez


Baker, McEvoy, Morrissey & Moskovits, P.C., New York
(Holly E. Peck of counsel), for appellant.

Order, Supreme Court, Bronx County (Wilma Guzman, J.), entered on or about May 13, 2008, which denied defendants' motion for summary judgment dismissing the complaint for lack of a serious injury as required by Insurance Law § 5102(d), unanimously reversed, on the law, without costs, the motion granted and the complaint dismissed. The Clerk is directed to enter judgment accordingly.

Defendants' medical submissions in support of their motion for summary judgment did not address plaintiff's medical condition during the 180 days following the accident. However, plaintiff's deposition testimony that he was confined to home and bed for just one or two weeks following the accident is an admission that defeats his claim that he suffered an impairment that substantially interfered with his usual and customary daily activities for 90 of the first 180 days following the accident (see Prestol v McKissock, 50 AD3d 600 [2008]; Cartha v Quinn, 50 AD3d 530 [2008], lv denied 11 NY3d 704 [2008]). This claim is also defeated by reports prepared by medical providers who found that plaintiff was able to carry out normal activities of daily living two months after the accident.

As for plaintiff's claim that he suffered a permanent or significant limitation of use of his lumbar spine, defendants met their initial burden of demonstrating the absence of such limitation by submitting the affirmed medical report of a neurologist that describes the tests he performed supporting his finding that plaintiff had full range of motion in the cervical and lumbar spine, and his conclusion that plaintiff had recovered from the sprain/strain-type injury to the lumbar spine suffered as a result of the accident (see Nagbe v Minigreen Hacking Group, 22 AD3d 326 [2005]). Defendants also submitted an affirmed report of a radiologist who, upon review of the MRI taken a month after the accident, found no evidence of herniation or bulge, but identified a "bony overgrowth" at the L4-L5 intervertebral disc level that, she opined, could not have occurred in less than six months time, had no traumatic basis and was degenerative in origin. In opposition, plaintiff submitted a medical affirmation that, while asserting that plaintiff had a 20% loss of range of motion, was deficient since it failed to specify what objective tests, if any, were performed to arrive at that measurement, or what the normal range of motion should be (see Taylor v Terrigno, 27 AD3d 316 [2006]; Vasquez v Reluzco, 28 AD3d 365 [2006]). Nor did plaintiff present any evidence rebutting the opinion of defendants' radiologist that the growth shown on the MRI was a degenerative condition that had developed over time (see Pommells v Perez, 4 NY3d 566, 579-580 [2005]). Also fatal to plaintiff's claim is the failure to explain his cessation of treatment after five months of physical therapy, acupuncture and chiropractic care (see id. at 574 [2005]; Vasquez v Reluzco, supra).

Although appellant's codefendant did not file a notice of appeal from the denial of the motion for summary judgment, summary judgment should be granted in his favor as well "because, obviously, if plaintiff cannot meet the threshold for serious injury against one defendant, [he] cannot meet it against the other" (Lopez v Simpson, 39 AD3d 420, 421 [2007]).

RLI Ins. Co. v. Turner/Santa Fe, a Joint Venture, et al.


Shaub, Ahmuty, Citrin & Spratt, LLP, Lake Success
(Christopher Simone of counsel), for appellants.
Cozen O'Connor, Philadelphia, PA (Jim H. Fields, Jr. of the Bar
of the State of Pennsylvania, admitted pro hac vice, of counsel),
for respondents.

Order, Supreme Court, New York County (Carol R. Edmead, J.), entered July 12, 2007, which, in a subrogation action, insofar as appealed from as limited by the briefs, denied defendants-appellants alleged tortfeasors' motion to dismiss plaintiffs insurers' claim for "soft costs" as time-barred, and deemed plaintiffs' bill of particulars amended to include the amount of such costs, unanimously affirmed, with costs.

While the amount of "soft costs" (delay in opening/business interruption) was still being calculated and had not yet been paid by plaintiffs insurers to their injured insured, the owner of a construction site damaged by a fire, there is no dispute that defendants-appellants, subcontractors at the site allegedly responsible for the fire, were given notice, in the timely filed complaint, that soft-costs claims were being made based on the same facts for which plaintiffs had already partially paid claims for "hard" property damages. Although the right to subrogation arises upon payment (see J & B Schoenfeld, Fur Merchants, Inc. v Albany Ins. Co., 109 AD2d 370, 372-373 [1985]), and payment of the soft-costs claims were not made until more than three years after the fire, i.e., after the three-year statute of limitations had run on plaintiffs' subrogation causes of action (see Allstate Ins. Co. v Stein, 1 NY3d 416, 420-421 [2004]), plaintiffs clearly possessed an inchoate, or contingent, right of subrogation for soft-costs claims at the time they commenced the timely action, and defendants were clearly on notice of that right (CPLR 3013; see Foley v Agostino, 21 AD2d 60, 62-63 [1964]). If a third-party action is "broad enough to encompass contingent claims based on subrogation," and if "[l]ogically, there is no difference in terms of maturity of an action based on subrogation, as opposed to indemnity," in that both accrue upon payment or the determination of liability (Krause v American Guar. & Liab. Ins. Co. (22 NY2d 147, 152-153 [1968]), then logically there is no reason why a timely stand-alone action should not be broad enough to encompass a technically unripe subrogation claim as well. To hold otherwise would create the very circumstance condemned by the Court of Appeals, where "the insurer may be put in the position, on the one hand, of having to pay the insured substantial sums of money on questionable claims in order to preserve its subrogation rights, or, on the other hand, it may have to forego the opportunity to prepare what might well have proved to be an excellent case against the alleged tort-feasor" (id. at 155). Thus, the court properly deemed the bill of particulars amended to include the exact amount of the soft-costs claims, once determined and paid to the insured by plaintiffs (see Sahdala v New York City Health & Hosps. Corp., 251 AD2d 70 [1998]; CPLR 203[f]).

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

Fusco, et al. v  State Farm Fire and Casualty Company

 

Robinson & Associates, P.C., Syosset, N.Y. (Kenneth L. Robinson
of counsel), for respondents.


DECISION & ORDER

In an action, inter alia, to recover damages for injury to real property pursuant to Navigation Law § 181(1), the defendant appeals from (1) a judgment of the Supreme Court, Nassau County (Winslow, J.), entered August 29, 2007, which, upon a jury verdict and upon the denial of its motion, in effect, pursuant to CPLR § 4401 for judgment as a matter of law, made at the close of evidence, is in favor of the plaintiffs and against it in the principal sum of $225,000, and (2) a supplemental judgment of the same court entered November 28, 2007, awarding the plaintiffs an additional principal sum of $61,603.80 for attorney's fees, expert fees, costs and disbursements.

ORDERED that the judgment and the supplemental judgment are reversed, on the law, with costs, the defendant's motion, in effect, pursuant to CPLR 4401 for judgment as a matter of law is granted, and the complaint is dismissed.

In the summer of 2003, the plaintiffs noticed a stain on the liner to the swimming pool on their property. The plaintiffs had soil tests performed and discovered that the stain was caused by an oil discharge from their neighbor's pool heater. The neighbor contacted its insurance carrier, the defendant, State Farm Fire and Casualty Company, a/k/a State Farm Insurance Company, which also carried the plaintiff's homeowner's insurance.

The defendant paid for the full remediation of the oil spill, including removing and replacing the soil, excavating the plaintiffs' backyard, replacing the plaintiffs' pool, shrubs, driveway, fencing, and landscaping, and purchasing beach club membership for them. In addition, an aquifer was installed on the property to monitor the ground water.

The monitoring wells remained on the plaintiffs' property for two years, and by November 16, 2006, the New York State Department of Environmental Conservation issued a "No Further Action Letter" determining that the necessary clean-up and removal actions for the site had been completed, and the monitoring wells were removed.

At trial, the plaintiffs contended that the value of their property was diminished due to the stigma of the oil leak. They presented evidence from a real estate appraiser purporting to establish that the stigma, as an indirect consequence of the spill, was a further measure of the damages suffered. The plaintiffs' appraiser, however, did not provide evidence of sales of properties that had oil leaks compared to properties that did not, rendering her opinion of diminution of value due to stigma highly speculative and conclusory (see Hodge v Losquardro Fuel Corp, 29 AD3d 861; Putnam v State of New York, 223 AD2d 872). The evidence at trial demonstrated that the plaintiffs had been made whole for their losses and that no permanent damages were sustained.

Contrary to the plaintiffs' contention, even viewing the facts in the light most favorable to the plaintiffs, there is no valid line of reasoning and permissible inferences which could lead rational persons to the conclusions reached by the jury upon the evidence presented at trial, which did not establish, prima facie, that any diminution of value of the property remained after the completion of the remediation (see Antigua v City of New York, 52 AD3d 751). Accordingly, the defendant's motion, in effect, pursuant to CPLR 4401 for judgment as a matter of law should have been granted and the complaint dismissed.

In view of the foregoing, there is no basis for the award of attorney's fees, expert fees, costs, and disbursements.
LIFSON, J.P., SANTUCCI, BALKIN and BELEN, JJ., concur.

Public Adjustment Bureau, Inc. v. Greater New York Mutual Insurance Company


Weg and Myers, P.C., New York (Joshua L. Mallin of counsel),
for appellant.
Anderson & Ochs, LLP, New York (Mitchell H. Ochs of
counsel), for respondent.

Order, Supreme Court, New York County (Louis B. York, J.), entered October 12, 2007, which denied plaintiff's motion to enforce a purported settlement agreement between plaintiff and defendant Seward Park Housing Corp., unanimously affirmed, without costs.

The parties' communications with respect to settlement were insufficient to meet the requirements of CPLR 2104, which provides that a settlement agreement "is not binding upon a party unless it is in a writing subscribed by [the party] or [its] attorney or reduced to the form of an order and entered" (see Bonnette v Long Is. Coll. Hosp., 3 NY3d 281, 285-286 [2004]). Nor is the computer entry by the County Clerk containing the word "SETTLED" sufficient to satisfy the open-court requirement set
forth in CPLR 2104 (see Matter of Dolgin Eldert Corp., 31 NY2d 1, 9-10 [1972]; Gustaf v Fink, 285 AD2d 625, 626 [2001]).

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

SIGARAN v. ELRAC, Inc.

 

APPEARANCES: For Plaintiffs

Adam Ashe, Esq.
For Defendants ELRAC, Inc. and Edwin Fernandez

James M. Carman, Esq.

 

Dominic R. Massaro, J.

Defendant ELRAC, Inc., a corporation involved in the business of renting motor vehicles, and Defendant Edwin Fernandez, who rented a car from this corporation, move for an Order, pursuant to CPLR Rule 3211(a)(7), dismissing the instant complaint based upon Plaintiffs' failure to state a cause of action against the corporate defendant. The motion is granted.

Specifically, Movants argue that Plaintiffs failed to state a cause of action against the corporate Defendant for negligence because federal law, i.e., the "Graves Amendment" (49 USC §30106), removes jurisdiction from state courts to decide vicarious automobile negligence claims against car rental companies. According to Defendants, the Graves Amendment set forth Congress' intention to remove jurisdiction from this Court in cases involving vicarious negligence liability for vehicle rental companies and utilizes the constitutional doctrines of federal supremacy and conflict preemption to remove said jurisdiction from state courts (see, Graham v. Dunkley, 50 AD3d 55 [2nd Dept. 2008]).

Herein, Movants maintain that Plaintiffs' causes of action against ELRAC are based solely upon Vehicle & Traffic Law §388 and Congress precludes such claims under the "Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users" (hereinafter, "Transportation Equity Act"), a comprehensive transportation law which included the Graves Amendment (see generally, Milsap v. U-Haul Truck Rental Co., 2006 U.S. Dist. Lexis 92219 [D. Ariz., 2006]). Congress entitled the specific section containing the Graves Amendment as "Rented or leased motor vehicle safety and responsibility" (49 USC §30106).

Plaintiffs oppose dismissal and argue instead that, while the Graves Amendment may apply to some extent to this automobile negligence case, separate grounds, independent of Vehicle & Traffic Law §388, exist which do not require dismissal under the federal statute. Further, Plaintiffs allege that an exemption to the Graves Amendment exists based upon the owner's negligence and possible criminal wrongdoing. Stated another way, Plaintiff asserts that, despite the Graves Amendment, ELRAC retained a duty to ensure against negligence when it rented and entrusted the vehicle to Fernandez. Plaintiffs say that negligence determination is not barred by the Graves Amendment.

Background

Plaintiffs' complaint alleges injuries from a motor vehicle accident that occurred on April 20, 2007- approximately two years after Congress enacted the Graves Amendment. Defendant Leslie De Lacruz (apparently the infant Plaintiffs' mother or other female relative) operated the vehicle in which the infants were passengers when her car was hit by a rented car driven by Fernandez.

The accident occurred near the intersection of Riverside Drive and West 153rd Street, New York County. Plaintiffs allege that Defendants were negligent in the rented car's operation and the corporation negligently rented the vehicle to Defendant Fernandez on April 13, 2007, in the regular course of its business of renting vehicles to the general public.

In their answer, Movants denied Plaintiffs' allegations generally and alleged fifteen affirmative defenses to the complaint, including the Graves Amendment. Movants also cross claimed against co-defendant Leslie A. De Lacruz for contribution and indemnification. No copy of Leslie De Lacruz's answer was submitted with the record and she filed no answering papers to the instant motion.

Discussion

On a CPLR Rule 3211 motion to dismiss, the Court will accept the facts as alleged in the complaint as true, accord plaintiffs the benefit of every possible favorable inference, and determine only whether the facts as alleged fit within any cognizable legal theory (see, Luma v ELRAC, Inc., 19 Misc 3d 1138A [Sup Ct. Kings 2008]). While affidavits may be considered, if the motion has not been converted to a summary judgment motion, such affidavits are generally intended to remedy pleading defects and not to offer evidentiary support for properly pleaded claims. Where a defendant submits evidentiary material on a motion to dismiss, "it may be considered in assessing the viability of a complaint, although the complaint should not be dismissed unless the defendant demonstrates that a material fact alleged by the plaintiff is not a fact at all' and that no significant dispute exists regarding it'." (Pechko v Gendelman, 20 AD3d 404, 406-07 [2nd Dept. 2005] [quoting Guggenheimer v Ginzburg, 43 NY2d 268, 275[1977)]. Stated simply, CPLR Rule 3211(a)(7) provides that a party may move for judgment dismissing one or more causes of action asserted against him upon the ground that the pleadings fail to state an actionable cause of action. On a Rule 3211 dismissal motion, pleadings are afforded a liberal construction (see, CPLR §3026). For purposes of the instant motion, all Plaintiffs' factual averments in their complaint must be accepted as true and the complaint liberally construed in the pleader's favor (see, Salles v. Chase Manhattan Bank, 300 AD2d 226 [1st Dept.2002]).[FN1]

At issue here is the effect of the Graves Amendment (49 U.S.C. § 30106) and whether this statute bars Plaintiffs' cause of action against ELRAC, Inc., which is based upon Vehicle & Traffic Law §388.

Vehicle & Traffic Law § 388

Clearly, no dispute exists that Plaintiffs state a cause of action actionable under Vehicle & Traffic Law §388 against the corporate defendant. Section 388(1) provides, in relevant part, that "(e)very owner of a vehicle used or operated in this state shall be liable and responsible for death or injuries to person or property resulting from negligence in the use or operation of such vehicle, in the business of such owner or otherwise, by any person using or operating the same with the permission, express or implied, of such owner." Enacted in 1924, this section imposes vicarious liability upon the owner of any vehicle involved in an accident (see generally, Stampolis v. Provident Auto Leasing Co., 2008 US Dist. Lexis 91024 (ED NY 2008]); Hall v. Elrac, Inc., 52 AD3d 262 [1st Dept. 2008] [Graves Amendment is constitutional]).

.As relevant here, Plaintiffs allege that ELRAC, Inc., was negligent under Vehicle & Traffic Law §388 and, further, because the corporation knew (or should have known) that Fernandez had a history of operating vehicles in an unsafe, careless, and reckless manner (see, Complaint ¶¶10 to 12).

Graves Amendment

On August 10, 2005, President Bush signed the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users ("SAFETEA-LU"), Pub.L. No. 109-59, 119 Stat. 1144. Included in this law are provisions codified at section 30106, subchapter I, Chapter 301, Part A, Subtitle VI, of Title 49, United States Code (the "Graves Amendment") which expressly preempts all state vicarious liability schemes that impose liability on lessors of motor vehicles where the vehicle is involved in an accident through no fault of the lessor (see generally, Garcia v. Vanguard Car Rental USA, Inc., 510 F. Supp.2d 821 [MD Fla., 2007], aff'd, 540 F.3d 1242 [11th Cir. 2008] [also discusses effect of Graves Amendment's "financial responsibility laws" provision]).

The Graves Amendment [FN2] provides, in relevant part, that an owner of a motor vehicle that rents or leases the vehicle to an individual shall not be liable under the law of any State, by reason of being the vehicle's owner, for harm to persons or property that results out of the use, operation, or possession of the vehicle during the period of the rental, provided that:

(1) the owner is engaged in the trade or business of renting or leasing motor vehicles; and

(2) there is no negligence or criminal wrongdoing on the owner's part of the owner.

(49 U.S.C. § 30106[a)][1]) and [a][2]).

As the statute's title indicates, the Graves Amendment was not part of either the original House or Senate versions of the Safe, Accountable, Flexible, Efficient Transportation Equity Act; but instead was offered by Congressman Sam Graves of Missouri and adopted during House consideration of the original bill (see, Zizersky v. Life Quality Motor Sales, Inc., 21 Misc 3d 871 [Sup. Ct. King 2008], citing 151 Cong. Rec. No. 27, March 9, 2005, at H1199-H1203 and US Code Cong. & Admin. News, 109 Cong., 1st Sess. [2005] 452, et seq.). President Bush made no reference to the Graves Amendment when he signed the Transportation Equity Act on August 10, 2005 (see, 41 PD 1271 [2005]) and no guidance exists in the floor debate or in the Conference Report on the issues before the Court (see, Zizersky v. Life Quality Motor Sales, Inc., supra .).

In construing statutes, congressional intent is controlling, and the Court's function is to discern and apply the legislature's will (see generally, Matter of Brown v. Wing, 93 NY2d 517 [1999]) The most direct way to effectuate the will of the legislature in this case Congress is to give meaning and force to the statute's wording (see generally, Jones v. Bill, 10 NY3d 550 [2008] [case interpreting the Graves Amendment's effective date only]). As a general proposition, our Court of Appeals teaches that a Court need not look further than the unambiguous language of a statute to discern its meaning (Id. at 554). Applying the above methodology, the Graves Amendment, by its express language, preempts all state statutory and common law to the extent those laws hold owners in the business of renting or leasing motor vehicles vicariously liable for the negligence of drivers, except when there is negligence or criminal wrongdoing on the part of the vehicle's owner (see, Garcia v. Vanguard Car Rental USA, Inc., supra .) (see also, Merchants Insurance Group v. Mitsubishi Motor Credit Association, 2008 US Dist. Lexis 4755 [ED NY 2008]).

Critical Question

Distilled, the question presented is whether the corporation's alleged failure to discover Fernandez's driving history is negligence sufficient to remove this case from the penumbra of the Graves Amendment. Restated, is the corporation's failure sufficient to remove ELRAC from the Graves Amendment's protection. In this respect, Defendants argue for dismissal because Plaintiffs' allegations against the corporation do not state a cause of action because the allegations, if true, are barred by federal law. Defendants reject the notion that Plaintiffs allege a cause of action independent of Vehicle & Traffic Law §388.

Before the enactment of the Graves Amendment, New York Courts consistently held that owners of leased vehicles were vicariously liable under Vehicle & Traffic Law §388 for the negligent operation of those vehicles (see generally, Sullivan v. Spandau, 186 AD2d 641 [2nd Dept. 1992) (holding that defendant lessor, who leased vehicle for a term of twenty-two months, was an owner under § 128 and jointly and severally liable under § 388). Subsequently, no dispute exists that the Graves Amendment preempted state laws, including New York's, that imposed vicarious liability on businesses that rent or lease motor vehicles (see generally, Merchants Insurance Group v. Mitsubishi Motor Credit Association, 525 F.Supp. 2d 309 [ED NY 2007]).

The Court finds that the terms of the Graves Amendment validly apply here because the statute regulates and protects things in interstate commerce and because it regulates activity that substantially affected interstate commerce. Congress has legitimate authority under the Commerce Clause to regulate liability imposed upon a rental car company and the Graves Amendment constitutionally preempted state laws that imposed vicarious liability on rental car companies (see, Garcia v. Vanguard Car Rental USA, Inc., 540 F.3d 1242 (11th Cir. 2008); Flagler v. Budget Rent a Car Systems, Inc., 538 F. Supp. 2d 557 [ED NY 2008]).[FN3] [FN4][FN5]

Clearly, the Graves Amendment voids Vehicle & Traffic Law §388 to the extent that the Transportation Equity Act applies (see, Hall v. ELRAC, Inc., 52 AD3d 262 [1st Dept. 2008]); Hernandez v. Sanchez, 40 AD3d 446 [1st Dept. 2007]; Graham v. Dunkley, 50 AD3d 55 [2nd Dept. 2008]; Jones v. Bill, 34 AD3d 741 [2nd Dept. 2006], rev'd, 10 NY3d 550 [2008] [reversed on effective date of the amendment]; Williams v. White, 2007 Slip Op 02227 [3rd Dept. 2007]; Castillo v. Bradley, 17 Misc 3d 1107(A) [Sup. Ct. Kings 2008]; Infante v. U-Haul Co. of Fla., 11 Misc 3d 529 [Sup. Ct. Queens 2006]).

Basing their claim upon the Graves Amendment, Defendants say the complaint against the corporation fails to state a cause of action because the allegations, if true, are barred by the statute. In this regard, Defendants focus their attack upon Plaintiffs' allegation that ELRAC, Inc. was negligent because the corporation knew (or should have known) Fernandez's history of operating vehicles in an unsafe, careless, and reckless manner (see, Complaint ¶¶10 to 12).

Failure to State a Cause of Action

As stated, to survive a Rule 3211(a)(7) dismissal motion, a pleading need only state allegations from which damages attributable to Defendant's conduct may reasonably be inferred (see generally, Voluto Ventures, LLC v. Jenkens & Gilchrist Parker Chapin LLP, 46 AD3d 354 [1st Dept. 2007]). A motion for dismissal under this rule will be denied where, from the complaint's four corners, factual issues are discerned which taken together manifest any cause of action cognizable at law (see, Polonetsky v. Better Homes Depot, Inc., 97 NY2d 46 [2001]).

Construing liberally, as it must, Plaintiffs urge that the Court find that a claim is stated against the corporation because the complaint alleges a cause of action under an exception to the Graves Amendment, i.e., actual negligence (49 U.S.C. § 30106[a][2]). In this regard, by the statute's plain reading, while the Graves Amendment absolves rental car companies of vicarious liability, it does not absolve rental car companies for their own negligence (see generally, Novovic v. Greyhound Lines, Inc., 2008 US Dist. Lexis 94176 [ED NY 2008]) (see also, American Association for Justice, AAJ Annual Convention Reference Materials, 2 Ann 2007 AAJ-CLE 1873 [2007]).

To decide whether ELRAC falls under the "own negligence" exception, the Court must decide whether the corporation was under an obligation to check Fernandez's driving record and whether failure to carry out such duty places this case under the exemption provided by 49 USC §30106(a)(2) ("no negligence or criminal wrongdoing on the part of the owner").

Hereinbefore noted, the Graves Amendment prohibits states from imposing vicarious liability on owner-lessors only where the lessor is not negligent (see generally, Merchants Insurance Group v. Mitsubishi Motor Credit Association, supra .). In this case, Plaintiffs allege negligence in rental procedures, and, therefore, seek to place in issue the actual liability exclusion to Graves Act protection existing under section 30106(a)(2) (but see generally, Berkan v. Penske Truck Leasing Can., Inc., 535 F. Supp. 2d 341 [WD NY 2008] [no evidence adduced that rental company engaged in any negligence or criminal wrongdoing]).

Plaintiffs' allegations are limited to the following: (1) the corporate defendant had a duty to ensure that any vehicle rented by it would be operated in a safe manner; (2) the corporate defendant has a duty to determine whether any drivers to whom it rented vehicles did not have a history of operating vehicles in a careless way, and (3) ELRAC was negligent in renting to Fernandez (Complaint ¶¶ 9 to 11). Beyond that, no specifications were made concerning the nature of Fernandez's driving record that should have alerted ELRAC not to rent to him.

In their answering papers, Plaintiffs generally argue that ELRAC was, in essence, guilty of "negligent entrustment," but cite no basis or any specifics for claiming that ELRAC was under a duty to check Fernandez's driving record.

Decision

At common law, owners could be held liable if they knowingly entrusted their car to an incompetent driver. "One who supplies a chattel for the use of another whom the supplier knows or has reason to know to be likely because of his youth, inexperience, or otherwise, to use it in a manner involving unreasonable risk of physical harm to himself and others may be liable for negligent entrustment" (see, Pacho v. Enterprise Rent-A-Car Co., 572 F.Supp.2d 341 [SD NY 2008]) The Pacho Court found "negligent entrustment" applied to the rental company's failure in that case to properly process the co-defendant's driver's license. However, in this case, no allegations exist that the corporate defendant failed to check Fernandez's license.[FN6] Therefore, the Court must conclude that Plaintiffs failed to state a cause of action that the corporate defendant knew, or should have known, that Fernandez was unlicensed, incompetent, or reckless. Further, Plaintiffs failed to cite any legal authority that ELRAc was under an obligation to check Fernandez's driver's record beyond verifying that he had a valid driver's license (see generally, Vedder v. Cox, 18 Misc 3d 1142 [A] (Sup. Ct. Nassau 2008]).

Based upon the foregoing, the Court finds that Plaintiffs failed to state a cause of action against the corporate Defendant. Likewise, the Court determines that Plaintiffs' did not allege a claim independent of Vehicle & Traffic Law §388.[FN7]

WHEREFORE, based on the foregoing, it is

ORDERED that Defendants ELRAC, Inc., and Edwin Fernandez's motion, seeking an Order, pursuant to CPLR Rule 3211(a)(7), dismissing the complaint as to ELRAC, Inc., based upon Plaintiffs' failure to state a cause of action, is GRANTED.

The foregoing constitutes the decision and order of this Court.

Dated: Bronx, New York

December 23, 2008

___________________________________Hon. DOMINIC R. MASSARO

Justice of the Supreme Court

Footnotes



Footnote 1: Concerning timeliness of this motion, a motion to dismiss a complaint for legal insufficiency may be made at any time (see generally, Pace v. Perk, 81 AD2d 444 [2nd Dept. 1981]). This motion was submitted following Defendants' answer.

Footnote 2: For a discussion of the Graves Amendment's legislative history, see Martin, Commerce Clause Jurisprudence and the Graves Amendment: Implications for the Vicarious Liability of Car Leasing Companies, 18 U. Fla. J.L. & Pub. Policy 153 (2007). See also, Validity, Construction, and Application of Graves Amendment Governing Rental or Leased Motor Vehicle, 29 ALR Fed 2d 223 [2008]). See generally, Resnick, Lessons in Federalism from the 1960s Class Action Rule and the 2005 Class Action Fairness Act: "The Political Safeguards" of Aggregate Translocal Actions, 156 U. Pa. L. Rev. 1929, at 1954 (2008).

Footnote 3: Local courts in two states, other than New York, consider the Graves Amendment's constitutional: (1) Connecticut (see, e.g., Mitchell - Mckenna v. Tick, 2008 Conn. Super Lexis 228 [Superior Ct. 2008])and (2) Florida(see, Kumarsingh v. PV Holding Corp., 983 So.2d 599 (Fla. Ct. App. 3rd Dist 2008);and Bechina v. Enter. Leasing Co., 972 So.2d 925 [Fla. Ct. App. 3rd Dist 2007]). At least one Florida Court indicated dispute with the Bechina case (see, Brookins v. Ford Credit Titling Trust, 2008 Fla. App. Lexis 10881 [Ct. App. 4th Dist. 2008]).

Footnote 4: Thus far, neither the United States Supreme Court nor the Second Circuit have issued decisions addressing the constitutionality of the Graves Amendment (see, Stampolis v. Provident Auto Leasing Co., 2008 US Dist Lexis 91024 [ED NY 2008]). The Eleventh Circuit held the Graves Amendment constitutional (see, Garcia v. Vanguard Car Rental USA, Inc., 540 F.3d 1242 [11th Cir. 2008]. Various federal district courts have held the Graves Amendment constitutional (see, e.g., Stampolis v. Provident Auto Leasing Co., 2008 US Dist Lexis 91023 [ED NY 2008]; Flagler v. Budget Rent a Car Systems, 538 F. Supp.2d 557 [ED NY 2008]; Berkan v. Penske Truck Leasing Canada, Inc., 535 F. Supp. 2d 341 (WD NY 2008); Noll v. Avis Budget Group LLC, 2008 US Dist Lexis 76588 [ED NY 2008]); Mechs. Ins. Group v. Mitsubishi Motor Credit Ass'n, 525 F. Supp.2d 309 (ED NY 2007]).

Footnote 5: At least one federal district court found the Graves Amendment's vicarious liability provision unconstitutional. This is the trial court in Vanguard Car Rental USA, Inc. v. Drouin, 521 F. Supp. 2d 1343 (SD Fla 2007).See also, Vanguard Car Rental USA, Inc. v. Huchon, 532 F. Supp. 2d 1371 [SD Fla. 2007] [financial responsibility provision of 49 USC §30106[b] unconstitutional]). The District Court in Myron v. Rodriguez, 2008 US Dist Lexis 13302 [MD Fla 2008] decided to issue a stay until the 11th Circuit heard the appeal in Garcia v. Vanguard Car Rental USA, 510 F.Supp.2d 821 (M.D. Fla. 2007); the Circuit Court found the Graves Amendment constitutional at 540 F.3d 1242 (11th Cir. 2008) undermining both Drouin and Huchon.

Footnote 6: ELRAC's employee, Halene Holland, submitted a copy of Fernandez's lease agreement which showed that the corporate defendant determined that Fernandez had a Florida driver's license (Plaintiff's Exhibit C).

Footnote 7: This case is distinguishable from Luma v. ELRAC, Inc., 19 Misc 3d 1138(A) (Sup. Ct. Kings 2008) where the Luma Court denied ELRAC's motion to dismiss (based upon the Graves Amendment) and permitted Plaintiff to amend its complaint to raise negligent entrustment against ELRAC. The Luma Defendant failed to rebut the allegations that ELRAC was guilty of negligent maintenance. Further, to the extent that the Luma Court permitted amendment of the complaint, this Court finds that the facts here compel a contrary result because Fernandez was not an ELRAC employee, a situation different from the employer/employee relationship presented in Luma. Id.

 

Silva v. F.R. Real Estate Development, Corp.

Ronald P. Berman, New York, for appellant.
Doyle & Broumand, LLP, Bronx (Michael B. Doyle of
counsel), for Galaxy General Contracting Corp., respondent.
John T. Ryan & Associates, Riverhead (Robert F. Horvat of
counsel), for F.R. Real Estate Development Corp., and
Neighborhood Partnership Housing Development Fund Company,
Inc., respondents.

Judgment, Supreme Court, Bronx County (Mary Ann Brigantti-Hughes, J.), entered on or about July 19, 2007, in a declaratory judgment action to resolve an insurance coverage dispute, inter alia, granting the motion of third-party defendant/second third-party plaintiff Galaxy General Contracting Corp. (Galaxy) to reargue an order of the same court and Justice, entered January 31, 2007, and, upon reargument, directing second third-party defendant Zurich Specialties London Ltd. (Zurich) to immediately defend and indemnify Galaxy and third-party plaintiffs F.R. Real Estate Development Corp. (FR Real Estate) and Neighborhood Partnership Housing Development Fund Co., Inc. (Neighborhood) in an underlying personal injury action, and directing the Clerk, upon payment of fees and the filing of a notice of trial/inquest, to set a date for the determination of legal fees, costs, and expenses due Galaxy as a result of Zurich's refusal to defend and indemnify, and bringing up for review an order, same court and Justice, entered July 9, 2007, which, inter alia, granted Galaxy's motion to reargue the prior order, entered January 31, 2007, and, upon reargument, modified the prior order to find that there were no issues of fact with respect to the deletion of the exclusions in the subject insurance policy, or with respect to whether Zurich received timely notification of the underlying action, and granted Galaxy's request for an order of indemnification and defense, unanimously modified, on the law, to vacate that portion of the judgment directing the Clerk to set a date for determination of legal fees, costs, and expenses, and otherwise affirmed, without costs. Appeal from above order entered July 9, 2007, unanimously dismissed, without costs, as subsumed in the appeal from the judgment. Order, same court and Justice, entered June 9, 2008, which, upon granting the motion of FR Real Estate and Neighborhood to modify an order of the same court and Justice, entered January 12, 2007, so as to award FR Real Estate as well as Neighborhood a grant of conditional indemnification as against Galaxy, and impliedly denying Zurich's motion to vacate the above judgment, directed that Zurich defend and indemnify Galaxy, FR Real Estate, and Neighborhood in the underlying action, unanimously affirmed, without costs.

The court properly directed Zurich to defend and indemnify Galaxy, FR Real Estate and Neighborhood in the underlying action. The record establishes that the subject policy afforded coverage to Galaxy, and that the liability exclusions in the policy relied upon by Zurich had been deleted from the policy. Furthermore, under the circumstances presented, the delay in notifying Zurich of the third-party action was not unreasonable as a matter of law.

However, we modify the judgment to the extent indicated, since the law "is well established that an insured may not recover the expenses incurred in bringing an affirmative action against an insurer to settle its rights under the policy" (New York Univ. v Continental Ins. Co., 87 NY2d 308, 324 [1995]; West 56th St. Assoc. v Greater N.Y. Mut. Ins. Co., 250 AD2d 109, 114 [1998]). Accordingly, there could be no basis for the award of "legal fees, costs, and expenses" as recited in the judgment, and there would be no purpose in holding a trial on whether these amounts may be recovered.

Regarding the June 9, 2008 order, the court properly corrected its prior order to find that FR Real Estate, as well as Neighborhood, was entitled to a defense and indemnification by Zurich (CPLR 5019). Contrary to Zurich's contention, the issue of indemnification was before the court by way of Zurich's application to vacate the July 2007 judgment.

We have considered Zurich's remaining contentions and find them unavailing.