Dear Coverage Pointers Subscribers:
Attached is this week's issue of Coverage Pointers, Hurwitz & Fine's bi-weekly insurance coverage newsletter. It's a balmy 25 degree at press time.
It was nice to actually leave the office when the sun was still peeking above the horizon. Spring, I have been promised, is around the bend.
LinkedIn - "New York
Insurance" Group -- Networking with a Business Purpose:
For those of you who haven't tip-toed over to LinkedIn yet, it is worth the minimal effort it takes to join this business networking site. It is free and membership does not generate spam. To give you another good reason for participation, I have started a LinkedIn interest group which I have [not very creatively] named New York Insurance. You should be able to get there via this link: www.linkedin.com/groups?gid=1777061. It's designed as a forum to discuss insurance-related issues in New York, and I am inviting all of you to join me there. It's our on-line supplement to Coverage Pointers and hopefully can be a place for lively discourse.
Late Notice / Direct Action Law Now in Effect
The Late Notice/Direct Action law has now gone into effect. Let me take a few moments to review the major components and offer some strategic advice. As a reminder, the New York State Insurance Department has issued a Circular Letter describing this new law (enacted as Chapter 388 of the Laws of 1988) and that can be found here: http://www.ins.state.ny.us/circltr/2008/cl08_26.pdf. These new rules only impact liability policies issued after January 18, 2009.
A carrier cannot disclaim on
late notice unless it proves material prejudice defined as that which
impairs the ability of the
insurer to investigate or timely defend the claim.
Strategic Recommendation: New York requires specificity in disclaimer letters. If an insurer makes a determination that it has been prejudiced, we would recommend that it consider the following language, when the insured's late notice is in question, substituting the appropriate words from your quoted policy provision (with copies to the injured party and any other claimant required in bodily injury and wrongful death claims):
Under the terms of your policy, you were
obligated to provide notice of the [occurrence, claim or suit] to [ABC
Insurance Company] as soon as reasonably possible. You have failed to do so and
as a result [ABC Insurance Company's] ability to [investigate and/or timely
defend the claim - select one or both] has been materially impaired and [ABC
Insurance Company] has been prejudiced.
Strategic Recommendation: As a reminder, the injured party has a separate and distinct right to give notice to an insurance company, under the provisions of the New York State Insurance Law. If late notice is received directly from the injured party and the insurer has sustained prejudiced, include this language in a letter directed at the injured party (with copies to the insured and any other claimant required in bodily injury and wrongful death claims):
Under the provisions of the New York State
Insurance Law, you were obligated to provide notice of the [occurrence, claim
or suit] to [ABC Insurance Company] as soon as reasonably possible. You
have failed to do so and as a result [ABC Insurance Company's] ability to [investigate
and/or timely defend the claim - select one or both] has been materially
impaired and [ABC Insurance Company] has been prejudiced.
· Pre-judgment declaratory judgment actions by injured parties are only permitted on sole question of late notice and only if the insurer or insured fails to commence a declaratory judgment action within 60 days of disclaimer;
Recommendation: If an insurer denies coverage based on late notice,
it will have sixty (60) days to commence a declaratory judgment action in the
appropriate jurisdiction you select, if it wants to pre-empt the injured party
from doing so. If the insurer opts NOT to commence an action, the claimant can
start a direct action, perhaps selecting a different, yet appropriate,
jurisdiction that the insurer may not prefer. For example, one might prefer
commencing a DJ action in the United States District Court for the Eastern
District of New York rather than in Kings County Supreme.
In wrongful death and personal injury claims, if the insurer disclaims liability or denies coverage upon the failure to provide timely notice, then the injured person or other claimant may maintain an action directly against such insurer, in which the sole question is the insurer's disclaimer or denial based on the failure to provide timely notice. This limits direct actions to late notice cases only, unless there is a judgment already against the purported insured.
The only direct action that may be commenced, prior to the injured party taking judgment against the insured, is one based on late notice. It can only be brought by a person who seeks recovery for injury or wrongful death. It can only be brought if the insurer or the insured has not commenced a declaratory judgment action within 60 days after the denial, naming the injured person as a party.
Written Request to
With respect to liability policies that provide coverage with respect to claims for bodily injury or wrongful death, where the policy is a personal lines policy (subject to Section 3425 of the Insurance Law) other than an excess or umbrella policy, an insurer shall, within 60 days of receipt of a written request by an injured party who has filed a claim or by another claimant, confirm to the injured person or other claimant in writing whether the insured had a liability insurance policy in effect with the insurer and the limits of coverage provided under that policy.
If the insurer does not have sufficient information to identify such a policy, the insurer has 45 days from the initial request to ask for more information and then another 45 days after it is provided to provide the information requested.
Bad Faith in New York:
Among the most popular questions I am asked by my clients is whether some particular strategy we are discussing can "open up the policy limits" because of a concern about bad faith. My regular readers know that for the last couple of years, in my end-of-the-year issue, I have provided a count of appellate decisions in New York an insurer has been held liable for bad faith. How many have there been? In the past two years, we have not seen a single written decision finding a liability carrier responsible in bad faith (although there were a couple of cases on consequential damages that might be extended to liability carriers in the future).
Faithful followers will remember that in February 2007, in the Diamond State v. Utica First Case reported in Volume VIII, No. 16 of this publication, we discussed a pending bad faith case where the Appellate Division permitted discovery to go forward in a battle between two carriers. Bad faith in a time-limited demand case had not yet been established. We report to you this week that the defendant carrier finds itself in deeper water now because on January 9, 2009, the lower court struck the defendant's answer as a discovery sanction for not review and producing certain records as required. Steve Peiper reports on this lower court decision in his Potpourri column this week.
One Hundred Years Ago Today:
A century ago, lawyers and claims professionals were struggling to create a "more perfect" insurance law as was reported in the national press.
January 23, 1909
SEEK IDEAL INSURANCE LAW
Movement Begun to Create Commission to Frame Statute.
Matter Taken Up by Committee of the American Bar Association Now in Session.
A movement for the creation of a commission to frame a law to control insurance companies for the District of Columbia which will be a model law for all the States to follow has been inaugurated by the committee on insurance law of the American Bar Association.
* * *
The subject considered by the committee was the initiation of a movement for the improvement of the laws dealing with the regulation and control of the insurance companies of the country, and which should also produce uniformity in the States. There is no state which has a satisfactory code of insurance laws.
With this in view, the committee, in conference with Mr. Nathaniel Wilson,
President of the District of Columbia Bar Association, and other persons interested in the general movement, have decided to favor the creation by Congress of a commission to prepare a code for the regulation and control of insurance companies doing business in the District of Columbia, which shall be reported to Congress for its action with reasonable diligence
The committee will enforce this plan in its report to the next meeting of the American Bar Association which will held in Detroit in August.
Editor's Note: With fits and starts, it took until 1914 until the Model Code was drafted in tentative form, with a second draft in 1915 and a third in 1916. On May 28, 1917, a proposed code for the District of Columbia (to serve as a model code for the several states) consisting of eight titles and 13 chapters was adopted for submission to Congress and it was so submitted in 1919. The American Bar Association Committee on Insurance was chaired by Arthur .I. Vorys, former Ohio Superintendent of Insurance. Vorys founded a four-man firm in 1909 called, Vorys, Sater, Seymour and Pease LLP, (now an Ohio-based, national law firm of the same name with 350 attorneys).
Are you one of those unfortunate souls, like me, who finds himself or herself developing thumbolois from punching away at a Blackberry (or similar device) in an elevator, restaurant or some other inappropriate location? Even consider the privacy and privilege issues relating to the use of these devices? Earl Cantwell has and discusses these questions in his regular column.
From Audrey Seeley:
Many of the cases this edition address whether the plaintiff submitted sufficient evidence to establish a prima facie case. It still confounds me that there are a number of decisions continuing to address whether a plaintiff can merely submit its notice to admit and the insurer's response without calling a single witness at trial to establish its prima facie case. Likewise, we see a number of decisions on what is a sufficient affidavit to admit records as business records.
In the arbitration realm, the issues are a bit different, but again recur time and again. One issue is the eligible injured person seeking payment of a medical bill in arbitration that was paid by the private health insurer. The arbitrators in Upstate New York have consistently determined that you cannot recover that payment and dismiss the claim; yet, we continue to see the same issue again and again.
As always we offer training and are willing to come to you to provide it. Many issues we are asked to speak on are claims handling, arbitration submissions and hearings, and addressing EIPs with pre-existing injuries or a subsequent injury. If you are interested in any training please feel free to email me at [email protected].
Finally, another reminder of a great CLE
and/or training program with DRI: the Insurance Coverage and Claims Institute
from April 1-3. There are a number of topics being covered regarding property
and casualty coverage issues. There are also a number of practical topics being
addressed such as preparing an insurance professional for a deposition, using
(and abusing) summary judgment motions, and jury selection techniques. If you
would like a brochure please send me an email at
The Duke of Lead:
Scott Duquin resumes his ongoing series of articles on Lead Paint Litigation with an article discussing strategy for medical discovery in lead paint cases
This Week's Highlights:
In this issue, you'll find the following interesting cases:
KOHANE'S COVERAGE CORNER
Dan D. Kohane
- Blanket Additional Insured Provisions Require Contract, Not Bid
- Where Insured Conducts Accident Investigation and is Told by Injured Party that Accident was Her Own Fault, Good Faith Belief in Non-Liability Excuses Late Notice
- Director Exclusion Excludes Claim Against Director (Who Can Argue?)
- "Built" Means "Enlarged," According to Court
- Failure to Raise Criminal Acts Exclusion Denies Carrier Right to Rely Upon it; Accepting Trial Testimony of Underlying Lawsuit Makes it Difficult to Prove Injuries Intentionally Caused
MARGO'S MUSINGS ON SERIOUS INJURY UNDER NEW YORK NO FAULT
Margo M. Lagueras
- Plaintiff's Expert's Failure to Address Findings That Conditions Are Congenital and Degenerative Is Fatal
- Plaintiff's Affirmed Evidence Supports "Significant Limitation of Use of a Body Function or System" Category
- Cessation of Treatment Without Submission of Physician Affirmation That Further Treatment Would Have Been Unavailing Is Fatal to Claim
- Reminder - If Health Insurer Paid Bill Then Applicant Cannot Recover For The Health Insurer
- Applicant's Knee Replacement and Subsequent Wage Loss Not Causally Related to Accident
- Plaintiff's Still Submitting Insufficient Affidavits to Establish Prima Facie Case
- Plaintiff's Notice to Admit Does Not Establish Its Prima Facie Case at Trial
- Yet Again, Plaintiff's Notice to Admit and Insurer's Response Alone Does Not Establish a Prima Facie Case
- Plaintiff's Complaint Dismissed for Failure to Offer Proper Testimony From Former Employee
- Failure to State Year Affidavit Executed on Insurer's Mailing Affidavit Not Fatal to Motion
- Summary Judgment Granted as Insurer Addressed Claims Other Than Those Plaintiff Moved On
PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper
- General Release not the Worth the Paper its Printed on where Defendant was Aware of an Existing Lien at the Time the Release was Executed'
- Plaintiff's Subrogation Claims Precluded against All Contracting Parties where Waiver of Subrogation Clause Exists
- Trial Court Strikes Answer, which in Turn Results in Bad Faith
- Settlement Agreements are Discoverable by Non-Settling Parties, but Only if it has Information that is Material and Necessary the Remaining Parties' Defense
That's all folks. See you in LinkedIn and keep sending us feedback.
Hurwitz & Fine, P.C. is a
full-service law firm
providing legal services throughout the State of New York
Dan D. Kohane
INSURANCE COVERAGE TEAM
Dan D. Kohane, Team Leader
Michael F. Perley
Audrey A. Seeley
Steven E. Peiper
Margo M. Lagueras
FIRE, FIRST-PARTY AND SUBROGATION TEAM
Andrea Schillaci, Team Leader
Jody E. Briandi
Steven E. Peiper
Audrey A. Seeley, Team Leader
Margo M. Lagueras
Jody E. Briandi, Team Leader
Scott M. Duquin
Index to Special Columns
Dan D. Kohane
Appellate Division, First Department
Blanket Additional Insured Provisions Require Contract, Not Bid
Provisions in bid documents that would require City to be listed as an additional insured on policies is not an agreement between general contractor and subcontractor that requires AI status. With such an agreement requiring additional insured status, City does not become insured under policy that requires prior written contract for AI status to exist.
Appellate Division, First Department
Where Insured Conducts Accident Investigation and is Told by Injured Party that Accident was Her Own Fault, Good Faith Belief in Non-Liability Excuses Late Notice
There was a five-six month delay by the insured in notifying five- or six-month delay in notifying its liability carrier of an accident. The manager of the diner attested that, on October 25, 2003, an unknown person entered the diner and informed him that a woman had fallen in the parking lot. The manager went outside and saw a woman sitting on the ground with her husband next to her. When the manager asked the woman if she wanted help or if he should call an ambulance, the husband indicated that he had already called, and told him "not to worry" because his wife had tripped over her shoelaces. The injured wife said "she was clumsy and fell." The manager told the couple he needed to get a pen and paper from the diner to get information "to make a report," but when he returned they were gone and he "was never able to write a report."
Notice was given upon the commencement of the lawsuit. As the insured had conducted an investigation, was told that the accident was caused by the plaintiff and left before information could be gathered about her identity, the court, found that there was a “good faith belief in non-liability” that established an excuse for late notice.
Appellate Division, First Department
Director Exclusion Excludes Claim Against Director (Who Can Argue?)
The policy excluded an “claim based, in who or in part, upon the … insured’s capacity as a director” and the claims arise in part out of the individual defendant’s status as a corporate director. Enough said. Exclusion applicable.
Tower Insurance Company of New York v. Diaz
Appellate Division, First Department
“Built” Means “Enlarged,” According to Court
Court finds that the property on which occurred the accident that gave rise to the underlying action was an “insured location.” The definition of that term includes “vacant land, other than farm land, owned by or rented to an insured,'" and "land owned by or rented to an insured' on which a one or two family dwelling is being built as a residence for an insured." Court holds that addition of a second floor to a building located on the property falls within that definition of “built.”
Editor’s Note: Nah. We don’t think so. But that’s why we don’t wear the robes.
Clayburn v. National Mutual Fire Insurance Company
Appellate Division, Third Department
Failure to Raise Criminal Acts Exclusion Denies Carrier Right to Rely Upon it; Accepting Trial Testimony of Underlying Lawsuit Makes it Difficult to Prove Injuries Intentionally Caused
Robert Clayburn and his brother Mark were walking down the street as passed Tamsett. Words were exchanged, followed by Tamsett pushing Robert to the ground. A scuffle followed and the two men, Robert and Tamsett, fell through a plate glass window of a nearby store.
Tamsett, as an insured under his parents' homeowner's insurance policy, informed National of a potential claim. National disclaimed coverage based upon the policy's exclusion for what the court characterized as intentional acts and refused to defend Tamsett in the Clayburn lawsuit that followed. The trial court found Tamsett negligent, and entered a judgment against him. .
Robert then started a direct action was started against National seeking enforcement of the judgment.
Nation sought to rely on two exclusions, one based on criminal acts and the other based on intentional acts. Since the carrier never raised the criminal acts exclusion in its disclaimer letter, it waived its right to raise it.
The other exclusion was not an “intentional acts” exclusion but an “intentional injury” exclusion. It removed coverage for bodily injury "caused intentionally by or at the direction of an insured, including willful acts the result of which the insured knows or ought to know will follow from the insured's conduct."
Here, the carrier allowed the lower court to rely on the trial to decide whether or not the injuries were intentionally caused. That was in interesting tactic, because nobody from the carrier participated in the trial, and surely the parties to the underlying lawsuit had no reason to establish that the injuries where intentionally caused..
The lower court had found that Tamsett intentionally placed
his hands upon plaintiff but did to “ward of an attack.” The Appellate Division
accepted the lower court's determination that Tamsett did not expect, intend or
foresee that plaintiff would end up crashing through the plate glass window or
be injured in any way when Tamsett placed him in a bear hug and accordingly
found the exclusion inapplicable.
Editor’s Note: We wonder what would have happened if the carrier, not bound by the underlying action, had not accepted the record in the case in which it didn’t participate and tried out the issue.
Margo M. Lagueras
1/22/09 Delfino v. Luzon
Appellate Division, First Department
Plaintiff’s Expert’s Failure to Address Findings That Conditions Are Congenital and Degenerative Is Fatal
The defendant appeals and wins a reversal. His experts, including a radiologist and orthopedist, stated that the plaintiff’s MRIs, taken soon after the accident, were normal other than certain conditions with which the plaintiff had been born. The physical exam revealed full range-or-motion and the operation on the plaintiff’s left shoulder approximately three months after the accident was for a congenital/degenerative condition. In opposition, the plaintiff’s expert did not describe the tests used or any objective basis to substantiate the range-of-motion assessments, not did he causally link the restrictions to the accident. Moreover, he did not address or rebut the findings of the defendant’s experts that the plaintiff’s conditions were congenital and degenerative. As such, he failed to raise an issue of fact as to causation, defeating the claim of serious injury.
1/15/09 Morris v. Cisse
Appellate Division, First Department
Plaintiff’s Affirmed Evidence Supports “Significant Limitation of Use of a Body Function or System” Category
The plaintiff was a passenger in a livery vehicle involved in an accident in September 2004. She was treated and released from the hospital and remained out of work for two weeks. She then commenced rehabilitation treatment until July 2006. In support of her claims, she submitted numerous reports which findings included cervical strain and radiculitis, muscle spasms, herniations at C3-4, C4-5 and C5-6, lumbar radiculopathy, limited range-of motion in the cervical and lumbar spine and lumbosacral derangement. Two and a half years after the accident, she underwent arhroscopic surgery to her left shoulder. In addition, she submitted the reports of two IMEs performed in 2004, one stating she was not disabled but the other noting lumbosacral strain.
In affirming the denial of summary judgment under the “significant limitation of use of a body function or system”, court noted that there was no evidence in the record of any pre-existing degenerative condition or gap in treatment. As such, the court determined that a report from 2006 which concluded that the plaintiff’s injuries had resolved was undermined by the subsequent surgery and continuing treatment. However, given that she missed only two weeks from work, the court modified the trial court’s decision and granted summary judgment to the defendants dismissing the plaintiff’s claim under the 90/180-day category.
1/15/09 Rivera v. Gelco Corp.
Appellate Division, First Department
Cessation of Treatment Without Submission of Physician Affirmation That Further Treatment Would Have Been Unavailing Is Fatal to Claim
The defendants met their burden by submitting reports based on physical examinations and review of medical records attesting to normal findings. In opposition, the plaintiff failed to submit a physician’s affirmation to explain that his cessation of treatment, more than two years before the summary judgment motion, was due to the fact that further treatment would have been unavailing. The plaintiff’s physician’s affirmation also did not address a prior accident or age-related degenerative conditions. In addition, the plaintiff’s assertion that he was unable to lift heavy items was not supported by competent medical evidence and his claim under the 90-180-day category failed because the physician’s affirmation was based on an examination performed long after the accident.
Note: Claims under the 90-180-day category must be established through contemporaneous medical examination, not examinations that are performed long beyond the 180-day period.
1/20/09 In the Matter of the Arbitration Between Applicant and Respondent
Arbitrator Thomas J. McCorry (Erie County)
Reminder – If Health Insurer Paid Bill Then Applicant Cannot Recover For The Health Insurer
The Applicant, eligible injured person, sought $15,553.35 in medical expense benefits that were paid by a private health insurer. Most of the bills were for service dates from 2000, 2001, and 2002, which were barred by the six year statute of limitations. However, one bill that was for a service rendered less than six years before the arbitration was commenced, indicated that a private health insurer paid the bill. The claim was denied as the private health insurer did not have an assignment from the Applicant and also the health provider is an eligible injured person who could recover its bill in arbitration.
1/15/09 In the Matter of the Arbitration Between Applicant and Respondent
Arbitrator Thomas J. McCorry (Erie County)
Applicant’s Knee Replacement and Subsequent Wage Loss Not Causally Related to Accident
Our own, Margo Lagueras, successfully argued this arbitration on behalf of the insurer. The Applicant, eligible injured person, was changing a flat tire on his motor vehicle on the side of the Thruway when a truck struck his vehicle. The Applicant allegedly sustained knee and back injuries, which resulted in a knee replacement.
The Applicant’s claim for medical expenses was denied as they were paid by Applicant’s private health insurer.
The Applicant’s lost wage claim was denied based upon an independent medical examination by Dr. Daniel Carr, an orthopedic surgeon. Dr. Carr’s report indicated that the Applicant was morbidly obese and weighed at one point 360 pounds. Dr. Carr opined that the Applicant’s findings on an MRI of the right knee were unrelated to the motor vehicle accident. The MRI revealed advanced osteoarthritic changes of the medial joint compartment with articular cartilage thinning and a torn ACL. Dr. Carr further reasoned that the ACL tear was prior to the accident because there was no bone bruise or effusion of the knee. Also, the Applicant’s examination shortly after this accident by his treating physician revealed normal range of motion in his knees without complaint of pain. The Applicant’s knees were stable and there was no swelling on either leg. Therefore, the knee replacement Applicant underwent was not causally related to the accident.
The assigned arbitrator reasoned that since the Applicant’s knee replacement surgery, that took him out of work, was not causally related to the accident then the Applicant did not have a viable lost wage claim.
1/9/09 Union Physician Healthcare, P.C. v. Utica Mut. Ins. Co.
Appellate Term, Second Department
Plaintiff’s Still Submitting Insufficient Affidavits to Establish Prima Facie Case
The plaintiff’s summary judgment motion should have been denied. The plaintiff’s affidavits in support of its motion by an officer failed to lay the proper foundation for admitting the annexed documents as business records.
1/9/09 All Mental Care Medicine, P.C. v. State Farm Mut. Ins. Co.
Appellate Term, Second Department
Plaintiff’s Notice to Admit Does Not Establish Its Prima Facie Case at Trial
At trial, the plaintiff offered only a notice to admit and defense counsel’s affirmation to prove its prima facie case. The court, citing, Bajaj v. General Assur., 18 Misc3d 25 (2007), held that if a party seeks to satisfy it burden of proof at trial through admission of a document then testimony is required to establish the document’s admissibility. The party cannot merely rely upon its opponent’s response in the notice to admit to establish that a document is a business record.
1/9/09 Vista Surgical Supplies, Inc. v. State Farm Mut. Ins. Co.
Appellate Term, Second Department
Yet Again, Plaintiff’s Notice to Admit and Insurer’s Response Alone Does Not Establish a Prima Facie Case
The plaintiff, at trial, failed to call a single witness and moved to admit into evidence plaintiff’s notice to admit and the insurer’s response to establish plaintiff’s prima facie case. The insurer objected and cross-moved for a directed verdict. The cross-motion was properly granted.
The plaintiff, yet again is reminded, that the insurer’s admission of receipt of the claim forms is not a concession of the facts within the claim form. Even if the insurer admitted that the attached claim forms were received and were a true copy, the plaintiff must lay the sufficient foundation to have the claim forms admitted as a business record exception to the hearsay rule.
1/9/09 V.S. Med. Services, P.C. a/a/o Mohamad Nazir v. Travelers Ins. Co.
Appellate Term, Second Department
Plaintiff’s Complaint Dismissed for Failure to Offer Proper Testimony From Former Employee
The plaintiff at trial offered testimony from its former employee to admit its claims forms into evidence. The insurer objected on the ground that plaintiff failed to lay the proper foundation because the former employee did not testify as to the generation of the claim forms. The trial court ultimately dismissed the complaint as plaintiff failed to establish its prima facie case, which was affirmed.
1/9/09 Complete Orthopedic Supplies, Inc. v. State Farm Mut. Auto. Ins. Co.
Appellate Term, Second Department
Failure to State Year Affidavit Executed on Insurer’s Mailing Affidavit Not Fatal to Motion
The plaintiff’s summary judgment motion was properly denied but the insurer’s cross-motion should have been granted. The decision that insurer failed to demonstrate its claims forms were timely mailed simply because of a technical defect on an affidavit was improper. The fact that the affidavit of mailing of the claims forms did not have a year in which the affidavits were executed. This technical defect did not cause prejudice to the plaintiff’s substantial rights and importantly was never raised by the plaintiff. Accordingly, the insurer established that the claims were timely denied.
However, in review of the plaintiff’s opposition to the insurer’s cross-motion, the plaintiff failed to rebut the insurer’s showing of lack of medical necessity based upon a peer review. Therefore, the insurer’s cross-motion for summary judgment should have been granted.
1/8/09 Long Island Multi-Medicine Group, P.C. v. Travelers Ins. Co.
Appellate Term, Second Department
Summary Judgment Granted as Insurer Addressed Claims Other Than Those Plaintiff Moved On
The plaintiff’s summary judgment motion was affirmed but on the ground that while the insurer submitted an affidavit demonstrating claim forms were denied for failure to timely submit the claim, none of them responded to the claims at issue in summary judgment motion. Therefore, the insurer failed to demonstrate that it had timely denied those claims that plaintiff sought summary judgment.
Steven E. Peiper
Appellate Division, Third Department
General Release not the Worth the Paper its Printed On where Defendant was Aware of an Existing Lien at the Time the Release was Executed
In this case, Group Health’s insured settled a personal injury action against Mid-hudson. As part of the settlement, counsel to the injured party agreed that the proceeds of the settlement would be used, in part, to satisfy Group Health’s lien which was approximately $71,000. As such, injured party and Mid-hudson executed a General Release which barred any further claims against Mid-hudson – including health insurance liens. When the injured party failed to satisfy Group Health’s lien, the current action was commenced.
Mid-hudson moved to dismiss the action on the basis that the General Release it had obtained from the injured party’s counsel barred all future claims. However, where, as here, a defendant is aware of a medical lien at the time of settlement, the General Release will not preclude the lien holder from proceeding in subrogation. As such, the General Release did not apply to Group Health, and Mid-hudson’s motion was denied accordingly.
Appellate Division, Second Department
Plaintiff’s Subrogation Claims Precluded against All Contracting Parties where Waiver of Subrogation Clause Exists
Another subrogation claim, however, in this case, the outcome was markedly different. Rather, in this case, Park City owned a parking garage that required restoration work. To accomplish this, Park City contracted with Quality Building Contractor (“Quality”). In turn, Quality then retained Affordable Concrete Construction (“Affordable”) as a subcontractor on the project. Unfortunately, the concrete roof of the garage collapsed causing property damage as a result. Gulf Insurance Company, as Park City’s commercial property insurer, paid the damages, and then commenced the current action in subrogation against Quality and Affordable.
However, the Park City/Quality contract contained a waiver of subrogation clause. Accordingly, Gulf’s subrogation claims against Quality were precluded. Likewise, because the terms of the Park City/Quality contract were also incorporated into the Quality/Affordable contract, Gulf’s claims against Affordable were similarly lost. As a result, both claims were dismissed on summary judgment. It is noted that Gulf’s subrogation claim against the architect survived only because the architect was not party to the Park City/Quality prime contract.
Supreme Court, New York County
Trial Court Strikes Answer, which in Turn Results in Bad Faith
Yet another subrogation action; this one involving everyone’s favorite topic – bad faith. This case has a long and tortured past, which we will only briefly re-cap here. Basically, Diamond State paid a property damage claim on behalf of its own insured, and commenced a subrogation action against Utica First’s named insured. When Utica First’s insured defaulted, Diamond State obtained a judgment and made a demand for payment from Utica First pursuant to the Insurance Law. When the demand went unpaid, Diamond State commenced the current action alleging therein that Utica First’s failure to proffer settlement funds within thirty days amounted to bad faith.
In the course of this action, Diamond State sought discovery of all claims files maintained by Utica First, or any other material maintained by Utica First, which involved the application of a certain roofing exclusion from October 10, 2002 – February 20, 2005. Upon appeal to the First Department, the court agreed the request was appropriate in a bad faith claim, and ordered that Utica First was to provide all materials related to the roofing exclusion at issue to Diamond State.
After two compliance conferences with the trial court, Utica First maintained that the task was simply too large to undertake, and that, in any event, it had not located any responsive documents. Indeed, Utica First provided an affidavit from its claims manager which said that there was a possible 6,000 policies to review, and that Utica First did not have the capability to search to determine if a coverage issue regarding the roofing exclusion had come up in any of those cases. Utica First did review the 184 policies that resulted in litigation, and again noted that it had found no responsive documents.
Unfortunately for Utica First, Diamond State located a 2004 Second Department decision which held that Utica First’s roofing exclusion did not bar the claimant’s request for a defense. Strike One!
Diamond State also found two trial court decisions which again addressed the application of the roofing exclusion, and which fell within the period of time defined by the First Department’s previous ruling. Strike Two!
Finally, Utica First withheld production of a relevant pleading which also fell within the period of discovery. Strike Three!
In an attempt to avoid having its answer struck, Utica First argued that its failure to comply was not willful and contumacious, and that it would produce all of the requested material. The trial court was not persuaded, and noted that Utica First did not review all 6000 claims files as it had been ordered by the First Department. Further damning was the fact that the Second Department case that Utica First did not produce was handled by the same defense firm that was representing Utica First in the current action, and likewise the same claims professional at Utica First was also assigned to both cases.
Just as arguing balls and strikes in baseball gets you thrown out of the game, so to does arguing about failure to comply with discovery orders. Indeed, the trial court struck Utica First’s answer, and it too is out…out of arguments, out of options, and out of the case.
Peiper’s Take - For its part, we note that Utica First raises some good points with respect to its attempts to comply and we doubt we’ve heard the last of this one. Such a drastic remedy for errors when sifting through some 6,000 files is an onerous and dangerous trend to set. As always, we will keep you posted.
It is also important to note that although this resulted in bad faith, such an outcome was not based upon the merits of Utica First’s coverage position. Rather, the matter was resolved upon a violation of discovery procedure which is governed by the CPLR and not the Insurance Law. As a result, we still have not seen a finding of bad faith, on the merits, at any time in the last three years.
Appellate Division, First Department
Settlement Agreements are Discoverable by Non-Settling Parties, but Only if it has Information that is Material and Necessary the Remaining Parties’ Defense
Another discovery dispute, no bad faith in this one though. In a large suit based upon violations of the Labor Law, plaintiff named the Owner, General Contractor and a Subcontractor all as main-party defendants. In their Answer, Owner/GC (represented by the same counsel) cross-claimed for contractual indemnification against the remaining defendant. At some point during the course of the litigation, plaintiff settled his claim against the Owner and GC and a stipulation of discontinuance was filed with the County Clerk’s Office where the action was pending.
Upon learning of the settlement and stipulation, Subcontractor sought to compel its production. Owner and GC refused on the grounds that the settlement agreement was confidential, and as such, not discoverable. On a subsequent motion to compel, Subcontractor continued to seek the contents of the settlement agreement by arguing that the terms expressed therein might be material and necessary to its continued defense. On appeal, the First Department noted that the terms of the agreement are indeed discoverable IF it contains terms which are material to the remaining parties’ defense. However, if the agreement does not have an impact on the remaining parties, the terms of a confidential settlement agreement are not discoverable. In turn, the agreement was ordered to be provided to the trial court for in camera review and only those parts deemed material and necessary to be disclosed to the Subcontractor.
Precautions for Closet Crackberry Addicts
Hand held digital devices such as the Blackberry have become an everyday part of insurance and legal professionals’ practice. A lawyer or insurance representative, for example, who loses or misplaces a wireless handheld may risk disclosure of confidential information and waiving the attorney-client privilege or work-product protection. The increased use of Blackberries, their small size, and the fact they are highly portable increase the danger of accidentally disclosing sensitive information such as company e-mails, data bases, e-mail addresses, and phone numbers. For lawyers, the dangers are that lost or inadvertent disclosure might waive the attorney-client privilege or work-product protections and violate attorney duties of confidentiality.
Under traditional doctrines of “inadvertent disclosure” by counsel, if there is a loss or misuse of handheld machines or data, the courts will typically ask whether and how the attorney took steps to prevent inadvertent disclosure and then rectify any disclosure once discovered.
DR 4-101(B) of the New York Code of Professional Responsibility prohibits lawyers from “knowingly” revealing client confidences and secrets. The Committee on Professional Ethics of the New York State Bar Association has recognized that an attorney must use reasonable care to protect client confidences and secrets. Likewise, insurance industry professionals, particularly those who frequently communicate with counsel, must also be careful about carrying, using and disclosing confidential and privileged information.
The following are some recommendations for Blackberry use
and protection which the user and their company and IT personnel should
1. Establish a procedure to retrieve and erase data on wireless handhelds of departing employees.
2. Double check any e-mails composed on your handheld to insure the original or reply is directed only to proper recipients.
3. Use password features so that only designated users can access or activate the device.
4. Regularly delete or transfer old documents and e-mails stored in the device so that fewer documents may be subject to disclosure in the event of loss or theft.
5. Put a physical notice or sticker on the handheld with identifying and return information and also stating that the information stored therein is confidential.
6. Likewise, apply the same confidentiality notice to e-mails and documents sent from the handheld device as would be shown on documents generated from the office.
7. Do not draft or read e-mails if others can see them over your shoulder. One of the biggest problems with wireless and handheld devices is their use in public places such as the elevator, sidewalk, restaurants, and airports where information can be obtained by good old fashioned eavesdropping.
Scott M. Duquin
LEAD the Lingering Litigation
Part IV – Injury
In this week’s article on lead paint litigation we take a look at the issue of causation, i.e., what are the actual injuries that a lead poisoned person suffers. Believe it or not, this is a subject of some debate in the medical and scientific community and is an opportunity for defense counsel to attack the plaintiff’s case at trial and/or negotiate a more favorable settlement for the insured. In terms of settlements and jury awards there is much variation, and the ultimate resolution of the case is driven by many factors besides the plaintiff’s blood lead level.
It seems that in nearly every case we are defending, or we are representing the interests of an excess carrier, the plaintiff’s bar is using boiler plate pleadings regarding the issues of injury and damages. The pleadings allege: attention deficit hyperactivity disorder, oppositional defiant disorder, cognitive impairments, decreased educational attainment, decreased IQ, interference with normal cell and system function, irreversible brain damage, neural brain behavioral injuries, decreased educational and employment opportunities, learning disabilities, memory deficits, deficits in speech intelligibility, severe articulation disorder and/or deficits and language skills, etc.
The CDC has set the threshold level at no more than 10 micrograms per deciliter. Generally lead poisoning is divided into five classes. Class 1 is 9 grams or less micrograms per deciliter. Class 2A is 10 to 14 micrograms per deciliter. Class 2B is 15 to 19 micrograms per deciliter. Class 3 lead poisoning is classified where the blood lead level is 20 micrograms per deciliter through 44 micrograms per deciliter. Class 4 lead poisoning is classified where the blood lead level is in the range of 45 micrograms per deciliter to 69 micrograms per deciliter. In Class 3 and Class 4 lead poisoning cases, standard protocol calls for environmental survey of the child’s environment for the presence of lead and/or Chelation or mobilization therapy. Again, these therapies are designed to reduce the body’s blood lead level burden. Chelation therapy is an in-patient treatment wherein chemicals are introduced to the body that will bond to the lead in the blood stream and then be purged from the body.
In Class 5, which is where the blood lead level is in excess of 70 micrograms per deciliter, it is readily agreed upon that this is a medical emergency requiring immediate Chelation therapy. In cases of extremely high blood lead levels in excess of 90, lead can cause encephalopathy (brain dysfunction usually manifested in altered moods, confusion) and even death.
There is certainly medical and scientific evidence that indicates chronic low level lead exposure may cause neurological impairment including decreased intelligence, and behavioral and learning disorders. In the early 1990’s, the CDC revised the acceptable threshold down from 25 micrograms per deciliter to 10 micrograms per deciliter based on its review of then recent scientific studies, which seemingly indicated lower levels of lead exposure were having adverse health affects. It seems that any exposure to lead at any level may have adverse health affects on a human being; however, just because a plaintiff has an elevated blood lead level, that does not necessarily mean that all of the injuries and maladies claimed in the pleadings were actually caused by the child’s lead. There are often many confounding variables and/or other factors present that may be contributing to the plaintiff’s injuries and damages. For example, there are scientific studies which indicate statistically there is a stronger correlation between maternal smoking while the plaintiff was in utero with attention deficit hyperactivity disorder than low level lead exposure, even if it is chronic. Environmental and social factors can also be contributing to a plaintiff’s poor performance in academic studies. Lead poisoning can exist without anemia (iron deficiency); but often in cases where there is an elevated blood lead level the plaintiff also has an iron deficiency. Iron deficiency is strongly associated with some of the maladies allegedly caused by lead.
We recommend a case by case approach to evaluating a plaintiff’s injuries. In order to properly evaluate a plaintiff’s claimed injuries and the association with an elevated blood lead level, we recommend obtaining all of the medical records, including public health records that may have been kept. We also recommend obtaining all of the child’s educational records including any Individual Education Plans (IEP’s,), any school IQ testing and any diagnoses by school medical professionals. In these cases, often the most objective records are the school records as they have no stake in the litigation outcome.
We further recommend having an IME performed which includes psychological assessment, IQ testing and other cognitive testing to see what the plaintiff’s actual brain function is. There are published journal articles that indicate an inverse relationship between blood lead level and IQ. One such study suggest that for every one microgram per deciliter increased there is a decreased .25 IQ points. There are other scientific studies published in authoritative journals that dispute such an empiric relationship. For these reasons, we are also recommending retaining a neurologist to perform a record review and to have on hand as an expert. In significant cases, it may be worth also having a neurological IME.
We further recommend that the psychological IME give a standard battery of IQ testing. A standardized battery of IQ testing has been published and has studies and data to support the reliability and accuracy of the IQ testing. Another method of psychological evaluation is the variable battery of IQ testing where the psychologist or test administrator pulls certain sub tests from several different sources. The problem with the variable battery testing is that it is subject to manipulation by a sophisticated test giver. Certain psychological and cognitive tests can increase or magnify a person’s alleged cognitive deficit. Further, with a variable battery of tests, there are no standardized publications showing the reliability of the sub tests given for accuracy. A sophisticated test giver can skew the results to make it seem that the plaintiff has a lower intelligence, more cognitive impairments and maladies than they actually do have or would manifest if a fixed battery of tests were given. Thus, we recommend that the plaintiff’s psychological expert report be evaluated by the defense psychologist for these weaknesses. It makes for good cross examination of the plaintiff’s Ph.D. In egregious case of test selectivity, a Fry motion might be considered alerting the Court that the reliability of a variable battery psychological test is not generally accepted in the field of psychology.
Another avenue for the defense is to gather as much information on the family history, the work history, and the educational history of the parents and the siblings. As it stands to reason, if Dad was not a rocket scientist, Johnny will not be a rocket scientist either. Currently, in New York Law, discovery of parental work records, parental educational records and/or compelling parents to attend IMEs are not permissible. Present New York law favors the right of privacy of family members over the defense’s need for this environmental and family information. Prior to the 1990’s discovery of family information was allowed. Defense psychologists will ask counsel for this information as it is helpful in their evaluation. A motion to compel parental and/or sibling records should be considered. However, we caution that given the state of the law in New York, the motion will probably be unsuccessful. If such a motion is desired, it needs to be backed up by expert affidavits, including a literature review of the current scientific and medical information available.
Generally on the issue of damages, the plaintiffs will project out decreased educational attainment, often claiming that the plaintiff would have gone on to graduate from college, if not for the lead poisoning. They will put on evidence indicating that this child is now in special education, will not earn a regular high school diploma and/or may not graduate from high school at all. Often the plaintiffs will put on economists that will take the median earnings of a college graduate and project those out for a lifetime of earnings, as compared to the projected out median earnings of a high school graduate over the course of a lifetime. As it would stand to reason, the average lifetime earnings of a college graduate are significantly higher than those of a high school graduate. Thus, plaintiffs readily can put forth in front of a jury a lifetime of lost earnings in excess of $1 million dollars, and in some cases in excess of $2 million dollars. With proper case preparation and planning ahead of time, these issues can be combated at trial with a mitigation of damages argument. If the lead poisoned child spent all of his/her time watching TV rather than getting tutoring at school, did not apply himself/herself and does not work, then all of this can be used on the mitigation of damages argument.
In short, there are a lot of variables in lead paint poisoning cases. Thus, we recommend budgeting for and retaining experts early. The cost of neurologists and psychologists tend to be rather high and tend to be a rather large part of the cost of the defense of the case. However, the important thing is that there are no hard and fast rules in terms of damages and causation in lead paint cases, and a well planned defense, although expensive, can be effective in mitigating the damages issues and/or may defeat the case entirely on the issue of causation.
In the next article we will examine some insurance coverage and insurance regulatory issues in the context of New York State lead paint litigation.
Mutual Ins. Co. v. Wroblewski
Indiana Court of Appeals
No Auto Insurance Liability Coverage for Accident Caused by Named Insured’s Grandson
Aaron Litherland, a minor, lived with his grandparents and legal guardians, Bertha and Robert Shemberger. When Aaron obtained his driver’s license, Bertha signed a financial responsibility form pursuant to Indiana Code section 9-24-9-3. That statute requires a minor’s application for a driver’s license to be signed and sworn to by a parent, guardian, or other adult willing to assume certain statutory obligations. One of these statutory obligations is specified in Indiana Code section 9-24-9-4(a) as “[a]n individual who signed an application for a permit or license under this chapter agrees to be responsible jointly and severally with the minor applicant for any injury or damage that the minor applicant causes by reason of the operation of a motor vehicle if the minor applicant is liable in damages.” Aaron was involved in a vehicle collision in which his passenger, Alexis, suffered injuries. Alex sued Aaron as well as Bertha, as a defendant bearing responsibility for Aaron’s acts. The trial court entered judgment against Bertha in the amount of $99,422.19, plus court costs, and Alexis then instituted proceedings against Motorists Mutual Insurance Company (“Motorists Mutual”) as a garnishee-defendant, on the theory that the Shembergers were covered under an automobile insurance policy issued by Motorists Mutual at the time of the accident, and that the Motorists Mutual policy provided coverage for the judgment entered against Bertha. The trial court found that there was coverage under the Motorists Mutual policy, and the appellate court reversed. It held that there was no coverage because the policy at issue clearly provided that there was no “Liability Coverage for the ownership, maintenance or use of: . . . B (3) any vehicle, other than your covered auto, which is: owned by any family member.” In the case at hand, Aaron, who was Bertha’s family member, owned the car involved in the accident and the car was not a covered auto under the policy at issue. Accordingly, the exclusion applied to preclude coverage.
Submitted by: Bruce D. Celebrezze and Nicholas J. Boos (Sedgwick, Detert, Moran & Arnold LLP)
Carolina Farm Bureau Mutual Ins. Co. v. Durham
Anti-Concurrent Causation Clause Precludes Coverage Under Homeowner’s Policy
Supreme Court of the State of South Carolina
Howard and Cherie Durham’s (“the Durhams”) home and in-ground pool were covered by a homeowner’s insurance policy issued by South Carolina Farm Bureau Mutual Insurance Company (“South Carolina Farm”). At one point, the Durhams drained the water from their pool to empty it in order to clean the pool. Before the pool was fully emptied, the area experienced rainfall over a four-day period. The pool was then fully emptied and, within two to three days of being fully emptied, the pool “floated” out of its foundation and rose from the ground, causing damage to the pool and deck. South Carolina Farm denied coverage based on, among other things, the following exclusion: “We do not insure for loss caused directly or indirectly by any of the following. Such loss is excluded regardless of any other cause or event contributing concurrently or in any sequence to the loss. . . . Water [d]amage, meaning . . . water below the surface of the ground, including water which exerts pressure on or seeps or leaks through a building, sidewalk, driveway, foundation, swimming pool or other structure.” Based on the foregoing exclusion, the primary point of contention was what “caused” the Durhams’ pool to “float.” South Carolina Farm contended that the pool “floated” because of the presence of underground water pressure in conjunction with the Durhams draining the pool without pulling a plug in the drain system. In South Carolina Farm’s view, if the water pressure was a factor of any kind in causing the loss, even an indirect or remote one, the language of the policy excluded the loss. The South Carolina Supreme Court agreed. It reasoned that the exclusion provided that “[s]uch loss is excluded regardless of any other cause or event contributing concurrently or in any sequence to the loss.” As such, though the underground water pressure was not the sole cause of the loss or even the efficient proximate cause, it was a cause of the loss and so, the exclusion applied.
Submitted by: Bruce D. Celebrezze and Nicholas J. Boos (Sedgwick, Detert, Moran & Arnold LLP)
Calendar Date: November 12, 2008
Before: Peters, J.P., Spain, Lahtinen, Kane and Kavanagh, JJ.
Epstein & Rayhill, Latham (Jeffrey T. Culkin of
counsel), for appellant.
Abdella Law Offices, Gloversville (Robert Abdella of
counsel), for respondent.
MEMORANDUM AND ORDER
Appeal from an order of the Supreme Court (Catena, J.), entered August 14, 2007 in Montgomery County, which, among other things, granted plaintiff's motion for summary judgment.
As plaintiff and his brother, Mark Clayburn, were walking down the street past Robert Tamsett, Clayburn and Tamsett exchanged unkind words. Tamsett began to follow the brothers, continuing the verbal argument with Clayburn. While some of the details surrounding the incident are in dispute namely who initiated each aspect of physical contact it is undisputed that Tamsett pushed Clayburn to the ground. Tamsett and plaintiff then became physically engaged, with Tamsett holding plaintiff in a bear hug. As they struggled, they lost their balance and fell through the plate glass window of a nearby store.
Tamsett, as an insured under his parents' homeowner's insurance policy, informed defendant of a potential claim. Defendant disclaimed coverage based upon the policy's exclusion for intentional acts. Due to this disclaimer, defendant did not defend Tamsett in plaintiff's negligence action seeking recovery for injuries related to the severe facial lacerations he received as a result of this incident. After a bench trial in that underlying action, Supreme Court (Sise, J.) found Tamsett negligent and entered a judgment against him for his portion of the damages.
Plaintiff then commenced this action, pursuant to Insurance Law § 3420, seeking a declaration that defendant must indemnify Tamsett and satisfy the judgment against him. Plaintiff moved for summary judgment and defendant cross-moved for similar relief. Supreme Court (Catena, J.) initially denied both motions and ordered a trial de novo. Both parties accepted the court's alternative suggestion, that the court simply review the record from the trial in the underlying action and decide the matter based upon that record. After such review, the court granted plaintiff's motion and denied the cross motion, finding that defendant is required to indemnify Tamsett. Defendant appeals.
Defendant cannot rely on its policy's criminal acts exclusion, even though Tamsett pleaded guilty to harassment based on his involvement in this incident. By failing to include that exclusion in its disclaimer letter, defendant waived its right to rely on that ground (see General Acc. Ins. Group v Cirucci, 46 NY2d 862, 864 ; Maroney v New York Cent. Mut. Fire Ins. Co., 10 AD3d 778, 780-781 , affd 5 NY3d 467 ; Cain v Allstate Ins. Co., 234 AD2d 775, 776 ).
Supreme Court properly determined that the intentional acts exclusion does not bar coverage here. The policy at issue excludes coverage for bodily injury "caused intentionally by or at the direction of an insured, including willful acts the result of which the insured knows or ought to know will follow from the insured's conduct." To successfully bar coverage under an insurance policy's intentional acts exclusion, the insurer must prove that there is no possible legal or factual basis to support a finding that, from the point of view of the insured, the bodily injuries inflicted were unexpected, unintended and unforeseen (see Agoada Realty Corp. v United Intl. Ins. Co., 95 NY2d 141, 145 ; Pennsylvania Millers Mut. Ins. Co. v Rigo, 256 AD2d 769, 770 ; Home Mut. Ins. Co. v Lapi, 192 AD2d 927, 928 ). Yet courts are wary of claims that intentional acts resulted in unintended injuries where the harm "was inherent in the nature and force" of the wrongful act (Pennsylvania Millers Mut. Ins. Co. v Rigo, 256 AD2d at 771; see New York Cent. Mut. Fire Ins. Co. v Wood, 36 AD3d 1048, 1049 ).
Here, while Supreme Court acknowledged that Tamsett intentionally placed his hands upon plaintiff, the court found that Tamsett did so in an attempt to subdue plaintiff or ward off an attack, "as opposed to beat him." Tamsett and plaintiff did not exchange any punches, or even any words. Tamsett merely wrapped his arms around plaintiff in response to plaintiff approaching him after Tamsett pushed Clayburn to the ground. We accept the court's determination that Tamsett did not expect, intend or foresee that plaintiff would end up crashing through the plate glass window or be injured in any way when Tamsett placed him in a bear hug (see Baldinger v Consolidated Mut. Ins. Co., 15 AD2d 526, 526 , affd 11 NY2d 1026 ; compare Smith v New York Cent. Mut. Fire Ins. Co., 13 AD3d 686, 688 ; Mazzaferro v Albany Motel Enters., 127 AD2d 374, 376 ). Plaintiff's injuries were not inherently likely to result from the nature and force of a defensive bear hug. Under the circumstances, the intentional acts exclusion does not apply (see Slayko v Security Mut. Ins. Co., 98 NY2d 289, 293 ; cf. Allstate Ins. Co. v Zuk, 78 NY2d 41, 46 ). Because Supreme Court did not issue a declaration in this declaratory judgment action, we modify by declaring that defendant is obligated under its insurance policy to indemnify its insured in relation to the judgment rendered in plaintiff's favor against Tamsett.
Tower Insurance Company of New York v. Diaz
Max W. Gershweir, New York, for appellant.
Weber & Pullin, LLP, Woodbury (Allan L. Pullin of counsel),
Order, Supreme Court, New York County (Doris Ling-Cohan, J.), entered July 15, 2008, which, inter alia, denied plaintiff's motion for summary judgment on its first cause of action seeking a declaration that it has no duty to defend or indemnify defendants Segundo Diaz, Jr. and Christina Diaz in the underlying personal injury action, and upon a search of the record, granted summary judgment in favor of said defendants on that cause of action, unanimously affirmed, with costs.
We agree with the motion court that the property on which occurred the accident that gave rise to the underlying action is an "[i]nsured location" within the meaning of the subject policy, which defines that term as, inter alia, "[v]acant land, other than farm land, owned by or rented to an insured,'" and "[l]and owned by or rented to an insured' on which a one or two family dwelling is being built as a residence for an insured'" (see White v Continental Cas. Co., 9 NY3d 264, 267 ). We also agree that the word "built" encompasses the work being done here, i.e., the addition of a second floor to the building located on the property. In any event, to the extent that that term is ambiguous, the ambiguity must be resolved in defendants' favor (id.).
Marjorie E. Bornes, New York, for Mady Cisse, appellant.
Mead, Hecht, Conklin & Gallagher, LLP, Mamaroneck (Sara
Luca Salvi of counsel), for Abdul Sawaneh, appellant.
Jacoby & Meyers, LLP, Newburgh (Kristine M. Cahill of
counsel), for respondent.
Amended order, Supreme Court, Bronx County (Sallie Manzanet-Daniels, J.), entered on or about February 29, 2008, which, insofar as appealed from, denied defendant Cisse's motion and defendant Sawaneh's cross motion for summary judgment dismissing the complaint as against them, unanimously modified, on the law, to the extent of granting those portions of the motions seeking summary judgment dismissing the claims based on the 90/180 provision of Insurance Law § 5102(d), and dismissing those claims, and otherwise affirmed, without costs.
The record presents triable issues regarding whether plaintiff sustained a serious injury (Insurance Law § 5102[d]) as a result of a car accident that occurred on September 10, 2004 while a passenger in a livery vehicle. Considering the facts in the light most favorable to plaintiff (see Toure v Avis Rent a Car Sys., 98 NY2d 345, 353 ), the properly affirmed evidence submitted by plaintiff's physicians demonstrates that plaintiff may well have sustained a "significant limitation of use of a body function or system" (Insurance Law § 5102[d].
While plaintiff was treated at and released from the emergency room at St. Barnabas Hospital on the day of the accident, she remained home from work for two weeks. She then sought treatment at Bronx Rehabilitation Associates and continued treatment there until July 31, 2006. Plaintiff's physician, Dr. Edwin Gangemi, reports that she sustained cervical strain and cervical radiculitis on the left side that diminished her extension by 10 degrees and that she continued to have left-sided pain. He further found continued pain, bilateral joint dysfunction, lumbosacral dysfunction, and lumbar radiculopathy. He prescribed various pain killers, including Ultracet and Flexoril. Dr. Michael Shapiro, a board certified radiologist, found muscle spasm, and central disc herniations at C3-4, C4-5 and C5-6 and Dr. Michael Marini, also of Bronx Rehabilitation Associates, found cervical radiculopathy and lumbosacral derangement, secondary to herniated disc and referable to the accident of September 10th. Based on that, there is substantial evidence that plaintiff sustained, inter alia, a permanent cervical strain, cervical and lumbar radiculopathy, central disc herniations and had limited range of motion in the cervical and lumbar spine (see Hoisington v Santos, 48 AD3d 333 ; Brooks v Zises, 16 AD3d 221 ). She also underwent arthroscopic surgery to her left shoulder approximately 2½ years after the accident at Montefiore Hospital following a diagnosis of olecranon bursitis by Dr. Sanjiv Bansal, an orthopedist who also attributed her shoulder impairment to the accident. She has continued treatment with Dr. Bansal. All of the above physicians' findings, are referable to the accident on September 10, 2004. Plaintiff also attached affirmations from Dr. Michael L. Russ and Dr. Ronald Lanfranchi, who had performed independent medical examinations of plaintiff in 2004. The latter physicians found that plaintiff was not disabled from performing her daily activities, but Dr. Lanfranchi found that she sustained lumbosacral sprain/strain.
Contrary to defendants' contention, there is no evidence that plaintiff had a pre-existing or degenerative condition prior to the subject accident (see Pommells v Perez, 4 NY3d 566, 577-578 ), and the record is devoid of evidence of any gap in treatment (id. at 574). The conclusion of Dr. Stanley Ross, who examined plaintiff on one occasion in October 2006, that any strain or sprain that plaintiff sustained had been resolved and that she could carry on daily activities without restriction is undermined by the subsequent arthroscopic surgery and continuing treatment.
However, those portions of the motions seeking summary judgment dismissing the claim under the 90/180-day category should be granted. Defendants made a prima facie showing of entitlement to judgment as a matter of law dismissing that claim by establishing that plaintiff only missed two weeks of work following the accident (see Camacho v Dwelle, 54 AD3d 706 ; Onishi v N & B Taxi, Inc., 51 AD3d 594 ; Thompson v Abbasi, 15 AD3d 95, 96-97 ). In opposition, plaintiff failed to raise a triable issue of fact regarding whether during the first 180 days following the accident she was "curtailed from performing [her] usual activities to a great extent rather than some slight curtailment" (Gaddy v Eyler, 79 NY2d 955, 958 , quoting Licari v Elliott, 57 NY2d 230, 236 ).
Arnold E. DiJoseph, III, New York, for Efraim Rivera and Julia
The Edelsteins, Faegenburg & Brown, LLP, New York (Evan
M. Landa of counsel), for Michael Ortiz, appellant.
Malapero & Prisco, LLP, New York (Yana M. Siegel of
counsel), for respondents.
Order, Supreme Court, Bronx County (Mary Ann Brigantti-Hughes, J.), entered October 30, 2007, which granted defendants' motion for summary judgment dismissing the complaints, unanimously affirmed, without costs.
Defendants carried their prima facie burden of demonstrating that the injured plaintiffs did not sustain serious injuries (Insurance Law § 5102[d]) by submitting physician reports based on physical examinations of plaintiffs and reviews of their medical records, in both instances attesting to normal findings (see Toure v Avis Rent A Car Sys., 98 NY2d 345, 350-351 ). In response, plaintiff Ortiz failed to raise an issue of fact. Having ceased medical treatment more than two years before the summary judgment motion, he failed to submit a physician's affirmation to explain that further treatment would have been unavailing (see Pommells v Perez, 4 NY3d 566, 574 ), which was fatal to his claim (Otero v 971 Only U, Inc., 36 AD3d 430, 431 ). With respect to his claim of incapacity for 90 of the first 180 days after the accident, which the motion court failed to address, his assertion that he was unable to lift heavy items was insufficient in the absence of competent medical evidence of his claimed restrictions (see Onishi v N & B Taxi, Inc., 51 AD3d 594, 595 ; Rossi v Alhassan, 48 AD3d 270 ).
In the face of evidence of a prior accident and injury, and in opposition to defendants' expert opinions that his claimed injuries were not caused by the accident and were the result of age, plaintiff Efraim Rivera failed to raise an issue of fact. His physician's affirmation did not even mention the prior injury or address degeneration (see Sky v Tabs, 2008 NY App Div LEXIS 9171, 2008 WL 5083699). The affirmation was based on an examination conducted long after the accident and failed to raise an issue of fact as to incapacity under the 90/180-day test (Uddin v Cooper, 32 AD3d 270, 272 , lv denied 8 NY3d 808 ).
Heidell, Pittoni, Murphy & Bach, LLP, New York (Daniel S.
Ratner of counsel), for appellant.
Ford Marrin Esposito Witmeyer & Gleser, L.L.P., New York
(Adrian M. Szendel of counsel), for respondent.
Order and judgment (one paper), Supreme Court, Bronx County (John A. Barone, J.), entered October 13, 2006, which denied plaintiff's motion for summary judgment and granted defendant's motion for summary judgment declaring that it is not obligated to defend and indemnify plaintiff in an underlying personal injury action, unanimously reversed, on the law, with costs, plaintiff's motion granted, defendant's motion denied, and it is declared defendant is so obligated.
The issue before this Court is whether plaintiff insured's five- or six-month delay in notifying its liability insurer about an incident may be excused based on a reasonable belief of nonliability. Defendant Burlington Insurance Company issued a liability insurance policy to plaintiff, the owner of a diner, which required it to notify Burlington "as soon as practicable of an occurrence' or an offense which may result in a claim." The manager of the diner attested that, on October 25, 2003, an unknown person entered the diner and informed him that a woman had fallen in the parking lot. The manager went outside and saw a woman sitting on the ground with her husband next to her. When the manager asked the woman if she wanted help or if he should call an ambulance, the husband indicated that he had already called, and told him "not to worry" because his wife had tripped over her shoelaces. The injured wife said "she was clumsy and fell." The manager told the couple he needed to get a pen and paper from the diner to get information "to make a report," but when he returned they were gone and he "was never able to write a report." There is no evidence that an ambulance appeared.
On April 2, 2004, the injured party commenced a personal injury action against plaintiff alleging that she had injured her ankle by tripping on a defect in the parking lot pavement. On April 24, plaintiff filed a notice of occurrence and claim with Burlington and provided it with a copy of the summons and complaint for the personal injury action. By letter dated May 11, 2004, Burlington disclaimed coverage on the ground of late notice. Thereafter, plaintiff brought this action for a declaratory judgment seeking coverage, and, upon plaintiff's motion for summary judgment, the trial court searched the record and instead granted Burlington summary judgment, finding as a matter of law that plaintiff's notice was untimely.
When an insurance policy requires the insured to notify the insurer of an occurrence "as soon as practicable," the insured's noncompliance "constitutes a failure to satisfy a condition precedent to coverage" (Great Canal Realty Corp. v Seneca Ins. Co., Inc., 5 NY3d 742, 743  [internal quotation marks and citation omitted]). However, if the insured has established a good-faith belief of nonliability, said belief may excuse the claimed untimely notice (Security Mut. Ins. Co. of N.Y. v Acker-Fitzsimons Corp., 31 NY2d 436, 441 ). The insured's belief of non liability must be objectively reasonable (id.).
The husband's statement to the manager that he should not "worry" and that his wife had tripped over her shoelaces, and the wife's statement the she was "clumsy," followed by the couple's departure without giving the manager an opportunity to obtain further information, led the manager to reasonably believe that the couple would not seek to hold the diner's owner liable for the mishap (see 426-428 W. 46th St. Owners, Inc. v Greater N.Y. Mut. Ins. Co., 23 AD3d 207 , lv dismissed 7 NY3d 741 ).The uncontroverted evidence as to what occurred in plaintiff's parking lot establishes as a matter of law plaintiff's good-faith belief in its nonliability and therefore excuses its failure to give timely notice.
Latham & Watkins LLP, New York (Blair Connelly of
counsel), for appellants.
Steinberg & Cavaliere, LLP, White Plains (Ronald W. Weiner
of counsel), for respondent.
Order, Supreme Court, New York County (Shirley Werner Kornreich, J.), entered September 10, 2007, which granted plaintiff's motion for summary judgment, unanimously affirmed, without costs.
Summary judgment was properly granted to plaintiff after it demonstrated that the allegations of the underlying complaint fell within an exclusion. The policy clearly and unambiguously provides that it "shall not apply to any Claim based upon or arising out of, in whole or in part . . . the Insured's capacity or status as . . . [a] director." The claims in the underlying lawsuit arise, in part, out of the individual defendant's status as a director of the plaintiff in the underlying action.
Illinois National Ins. Co. v. American Alternative Insurance Corporation
Lester Schwab Katz & Dwyer, LLP, New York (Ellen M.
Spindler of counsel), for appellants.
Faust Goetz Schenker & Blee LLP, New York (Lisa L.
Gokhulsingh of counsel), for respondent.
Order, Supreme Court, New York County (Emily Jane Goodman, J.), entered October 1, 2007, which granted plaintiffs' motion for reargument of their motion for summary judgment and, upon reargument, adhered to a prior order and judgment (one paper), same court and Justice, entered May 9, 2007, denying plaintiffs' motion and granting defendant's cross motion for summary judgment declaring that it has no obligation to defend or indemnify plaintiffs in the underlying personal injury action, unanimously affirmed, without costs.
The insurance contract issued by defendant to the nonparty asbestos abatement subcontractor includes as an insured "any person or organization for whom you are performing operations when you and such person or organization have agreed in writing in a contract or agreement that such person or organization be added as an additional insured on your policy." Plaintiffs concede that the subcontractor's contract with the City plaintiffs' general contractor does not contain an agreement that the City parties be named as additional insureds. Contrary to their contention, the provision in the bid documents of plaintiff New York City School Construction Authority stating that the performance of asbestos abatement work "shall be governed by" certain terms and conditions, among which was a requirement to name the City plaintiffs as additional insureds, does not constitute an "agree[ment] [between the subcontractor and the City plaintiffs] in writing in a contract or agreement that [the latter] be added as an additional insured on [the former's] policy."
The certificate of insurance generated by the subcontractor's broker, by its terms, confers no rights upon the certificate holder (see Moleon v Kreisler Borg Florman Gen. Constr. Co., 304 AD2d 337, 339 ).
Delfino v. Luzon
Defendant appeals from an order of the Supreme Court, New York County
(Deborah A. Kaplan, J.), entered May 21, 2008, which denied his motion for
summary judgment dismissing the complaint on the ground that plaintiff had not
suffered a "serious injury" within the meaning of Insurance Law § 5102(d).
Baker, McEvoy, Morrissey & Moskovits, P.C., New
York (Stacy R. Seldin of
counsel), for appellant.
Shanker & Shanker, P.C., New York (Steven J. Mines
of counsel), for respondent.
Defendant satisfied his prima facie burden of entitlement to summary judgment dismissing the complaint based on the affirmations of his expert witnesses. The defense radiologist's review of an MRI film of plaintiff's left shoulder, taken 17 days after the accident, showed normal osseous structures, labrum, deltoid muscle, and biceps tendon, and no rotator cuff injury, tendinitis, osteochondral defect or fracture. There was some fluid in the acromioclavicular joint, which the radiologist believed would "resolve without intervention due to the absence of any ligamentous, osseous, or tendinous etiology." An MRI film of plaintiff's lumbar spine, taken six weeks after the accident, was normal, other than dessication and bulging at the L5 transitional S1 vertebral level, which resulted from a condition with which plaintiff was born. The radiologist stated that the dessication could not have occurred during the interval between the accident and the examination, but rather was "indicative of pre-existing, degenerative change likely associated with the congenital variant." Similarly, the bulging was "related to ligamentous laxity" and was "degenerative in nature." Notably, there were no osseous, ligamentous, or intervertebral disc changes of recent or post-traumatic origin.
Upon conducting a physical examination of plaintiff, defendant's orthopedist determined that plaintiff had full range of motion of the lumbar spine and left shoulder, and plaintiff's medical records did not show a substantial injury to either of those two regions. The fluid around plaintiff's acromioclavicular joint, evident in the MRI film, was consistent with mild joint sprain. Surgical records indicated that an operation on plaintiff's left shoulder three and one-half months after the accident was for a "congenital/degenerative condition of subacromial impingement related to an abnormally shaped (dysmorphic) acromion which was reshaped surgically."
The opinions of defendant's experts were confirmed by plaintiff's own MRI report, which found only "fluid and/or soft tissue inflammation surrounding the acromioclavicular joint" and noted that the "MRI of the left shoulder [was] otherwise unremarkable."
In opposition to defendant's medical evidence of no serious injury, plaintiff submitted an affirmation from a nontreating physiatrist who examined him ten months after the accident and again four months after that. Although the expert listed specific numeric losses of range of motion for the left shoulder, he failed to describe what tests were used or provide any objective basis to substantiate his range of motion assessments, his opinion that the restrictions were causally linked to the accident, or his prognosis that plaintiff will never fully recover and might require further surgery. Those omissions in plaintiff's expert's affirmation are fatal to plaintiff's claim (see Rodriguez v Abdallah, 51 AD3d 590 ; Smith v Cherubini, 44 AD3d 520 ; Munoz v Hollingsworth, 18 AD3d 278 ). The absence from the record of objective findings of limited range of motion contemporaneous with the accident compounds the inadequacy of plaintiff's opposition (see Lloyd v Green, 45 AD3d 373 ).
More importantly, plaintiff's expert did not even address, let alone rebut, the objectively substantiated findings of defendant's experts that plaintiff's conditions are congenital and degenerative, and therefore did not raise a triable issue of fact as to causation (see Mullings v Huntwork, 26 AD3d 214, 216 ). In addition, plaintiff's expert did not attempt to reconcile his conclusory assertion that the shoulder surgery was necessitated by accident-related injuries with the MRI report describing the shoulder as "unremarkable" other than "fluid and/or soft tissue inflammation surrounding the acromioclavicular joint."
Accordingly, the order of the Supreme Court, New York County (Deborah A. Kaplan, J.), entered May 21, 2008, which denied defendant's motion for summary judgment dismissing the complaint on the ground that plaintiff had not suffered a "serious injury" within the meaning of Insurance Law § 5102(d), should be reversed, on the law, without costs, and the motion granted. The Clerk is directed to enter judgment in favor of defendant dismissing the complaint.
Calendar Date: October 14,
Before: Mercure, J.P., Peters, Lahtinen, Malone Jr. and Kavanagh, JJ.
Korybski & Levinson, L.L.P., New York City (Scott
S. Levinson of counsel), for appellant.
Carter, Conboy, Case, Blackmore, Maloney & Laird,
P.C., Albany (Leah W. Casey of counsel), for respondent.
MEMORANDUM AND ORDER
Appeal from an order of the Supreme Court (Donohue, J.), entered October 9, 2007 in Columbia County, which granted defendants' motion to dismiss the complaint.
In August 2004, Stephanie L. Weaver was struck and injured by a vehicle while she was walking. The vehicle was driven by defendant Charles J. Goodman Jr. and owned by defendant Mid-Hudson Cablevision, Inc.. Plaintiff, which had issued Weaver a health insurance plan, indicates that it paid approximately $71,000 on her behalf for medical and hospital services rendered. Weaver commenced a personal injury action against defendants, ultimately settling for $2 million. The settlement agreement contained a general release of all claims that Weaver had or may have against defendants, and Weaver's agreement to "indemnify and save harmless" defendants "against any and all further claims for damages, costs, expenses and liens, including but not limited to . . . health insurance liens."
There is no dispute that defendants were aware of plaintiff's claim that it had a lien and subrogation rights prior to settlement of the personal injury action. Weaver's counsel, however, indicated to defendants that the "purported lien will be satisfied[;] . . . I and my client specifically agree to hold back sufficient funds in my escrow account and to satisfy" the lien. Moreover, the record further reveals that although Weaver's counsel informed plaintiff of the possibility that the personal injury action would be settled and notified plaintiff of the date when the "settlement hearing" would take place, he stated that the settlement would be for pain and suffering only, not damages for medical expenses. Thus, plaintiff did not attempt to intervene in the personal injury action. After Weaver failed to satisfy plaintiff's claim, it commenced this subrogation action against defendants to recover the amount paid in connection with Weaver's medical expenses. Defendants moved to dismiss based upon the general release executed by Weaver in their favor. Supreme Court granted the motion and dismissed the complaint. Plaintiff appeals, and we now reverse.
"It is so well settled as not to require discussion that an insurer who pays claims against the insured for damages caused by the default or wrongdoing of a third party is entitled to be subrogated to the rights which the insured would have had against such third party for its default or wrongdoing . . . [and] to enforce these rights by an action in its own name and without joining the insured as a party" (Ocean Acc. & Guar. Corp. v Hooker Electrochemical Co., 240 NY 37, 47 ; accord Allstate Ins. Co. v Stein, 1 NY3d 416, 422 ; see Teichman v Community Hosp. of W. Suffolk, 87 NY2d 514, 521 ; Winkelmann v Excelsior Ins. Co., 85 NY2d 577, 581 ). This doctrine of equitable subrogation must be liberally applied for the protection of its intended beneficiaries, i.e., insurers (see Winkelmann v Excelsior Ins. Co., 85 NY2d at 581; Ocean Acc. & Guar. Corp. v Hooker Electrochemical Co., 240 NY at 47). Therefore, while a general release may prejudice the rights of the subrogee by extinguishing the right of subrogation (see Weinberg v Transamerica Ins. Co., 62 NY2d 379, 384 ; State Farm Mut. Auto. Ins. Co. v Hertz Corp., 28 AD3d 643, 644 ; see also Federal Ins. Co. v Arthur Andersen & Co., 75 NY2d 366, 371-372 ), "if the tortfeasor's settlement occurred after it had learned of the subrogation right, but without the insurance company's consent, the settlement [will] not . . . destroy the insurance company's right to proceed in a subrogation action" against the tortfeasor (Callicoon Co-Op Ins. Co. v Osborne, 206 AD2d 796, 797 ; see Aetna Cas. & Sur. Co. v Bekins Van Lines Co., 67 NY2d 901, 903 ; Hamilton Fire Ins. Co. v Greger, 246 NY 162, 167-168 ; Ocean Acc. & Guar. Corp. v Hooker Electrochemical Co., 240 NY at 47-48; Aetna Cas. & Sur. Co. v Siskind & Sons, 209 AD2d 215, 215-216 ; Silinsky v State-Wide Ins. Co., 30 AD2d 1, 3 ; see also Allstate Ins. Co. v Mazzola, 175 F3d 255, 260-261 [2d Cir 1999]).
Contrary to the conclusion of Supreme Court, nothing in Allstate Ins. Co. v Stein (supra) calls these settled principles into question. In Allstate, the Court of Appeals held that the statute of limitations in a subrogation action by an insurance company, as subrogee of an insured to whom it had paid additional personal injury protection benefits, runs from the date of the accident, rather than the date that benefits were first paid (Allstate Ins. Co. v Stein, 1 NY3d at 417-418, 420-423). Regarding the insurer's argument that claims may become time-barred before the right of subrogation even exists if the limitations period begins to run from the date of the accident, the Court stated that "this sort of risk is inherent in subrogation; the subrogee acquires only the rights that the subrogor had, and so any subrogee may find its claim defeated by a defense based on the subrogor's action or inaction" (id. at 423). The Court explained that in such circumstances, "the subrogee's remedy is against the subrogor, for conduct that has prejudiced the subrogee's right" (id. at 423). Such a rule is consistent with that set forth in cases holding that an insurer may proceed against an insured that has prejudiced the insurer's subrogation rights by entering into a settlement with a third-party tortfeasor while concealing the existence of those subrogation rights (see Hamilton Fire Ins. Co. v Greger, 246 NY at 168; State Farm Mut. Auto. Ins. Co. v Hertz Corp., 28 AD3d at 644; see also Weinberg v Transamerica Ins. Co., 62 NY2d at 384). The decision in Allstate does not, however, overturn or even address the long-standing rule that a general release will not extinguish an insurer's subrogation rights against the tortfeasor when the tortfeasor did, in fact, have knowledge of those rights.
In sum, inasmuch as it is undisputed here that defendants, the third-party tortfeasors, had knowledge of plaintiff's subrogation rights, the settlement has no effect on plaintiff's right to recover against them, and Supreme Court erred in dismissing the complaint (see Aetna Cas. & Sur. Co. v Bekins Van Lines Co., 67 NY2d at 903; Ocean Acc. & Guar. Corp. v Hooker Electrochemical Co., 240 NY at 47-51; Aetna Cas. & Sur. Co. v Siskind & Sons, 209 AD2d at 215-216; see also Callicoon Co-Op Ins. Co. v Osborne, 206 AD2d at 797; but see Progressive Ins. Co. v Sheri Torah, Inc., 44 AD3d 837, 838 [2d Dept 2007] [holding that, under Allstate, a general release will extinguish subrogation rights despite a tortfeasor's knowledge of those rights]). We do not address plaintiff's claim that defendants have a cause of action for indemnification against Weaver.
Peters, Lahtinen, Malone Jr. and Kavanagh, JJ., concur.
ORDERED that the order is reversed, with costs, and motion denied.
Gulf Insurance Company v. Quality Building Contractor, Inc.
Rubin, Fiorella & Friedman, LLP, New York, N.Y. (Paul Kovner
and Jeffrey Rubinstein of counsel), for appellant Quality Building
Gogick, Byrne & O'Neill, New York, N.Y. (Kevin J. McGrath
of counsel), for appellant Howard L.
Zimmerman Architects, P.C.
Gwertzman Lefkowitz Burman Smith & Marcus, New York,
N.Y. (Roberta Burman, Barbara
Marcus, and Amy Weissman of counsel), for
appellant Affordable Concrete
Cozen O'Connor, New York, N.Y. (Gerard F. Belz, Jr., John B.
Galligan, and Robert W. Phelan of
counsel), for respondent.
DECISION & ORDER
In a subrogation action to recover for property damage, the defendants Quality Building Contractor, Inc., Howard L. Zimmerman Architects, P.C., and Affordable Concrete Construction, Inc. separately appeal, as limited by their respective briefs, from so much of an order of the Supreme Court, Queens County (Cullen, J.), dated February 14, 2007, as, upon, in effect, reargument, denied their respective motions for summary judgment dismissing the complaint and all cross claims insofar as asserted against them.
ORDERED that the order is modified, on the law, by deleting the provisions thereof denying those branches of the respective motions of the defendants Quality Building Contractor, Inc., and Affordable Concrete Construction, Inc., which were for summary judgment dismissing the complaint and substituting therefor provisions granting those branches of the motions; as so modified, the order is affirmed insofar as appealed from, with one bill of costs to the defendants Quality Building Contractor, Inc., and Affordable Concrete Construction, Inc., payable by the plaintiff and one bill of costs payable to the plaintiff by the defendant Howard L. Zimmerman Architects, P.C., and the matter is remitted to the Supreme Court, Queens County, for further proceedings, including conversion of the cross claims asserted by the defendant Howard L. Zimmerman Architects, P.C., against the defendants Quality Building Contractor, Inc., and Affordable Concrete Construction, Inc., into a third-party complaint against those defendants, and amendment of the caption accordingly.
The defendant Quality Building Contractor, Inc. (hereinafter Quality), contracted with Park City Estates Tenants Corporation (hereinafter Park City) to perform "restoration work" on an underground parking garage owned by Park City, which was part of an apartment building complex located in Rego Park. Quality contracted with the defendant Affordable Concrete Construction, Inc. (hereinafter Affordable), as its subcontractor with respect to the work. The architect for the project was the defendant Howard L. Zimmerman Architects, P.C. (hereinafter HLZA). On April 6, 2003, while the work was in progress, a section of the concrete roof of the garage collapsed. The plaintiff Gulf Insurance Company (hereinafter Gulf), as Park City's subrogee, brought this action to recover property damages sustained as a result of the collapse.
Quality's contract with Park City provided, in relevant part, that Park City and Quality "waive[d] all rights against each other for damages caused by fire and other perils to the extent covered by insurance obtained pursuant to this Article or any other property insurance applicable to the Work" (emphasis added). The "Work" was defined under Section 01010-1 of the Park City/Quality contract. At the time of the collapse of the garage roof, Park City had a property insurance policy issued by Gulf which covered the garage.
"Subrogration, an equitable doctrine, allows an insurer to stand in the shoes of its insured and seek indemnification from third parties whose wrongdoing has caused a loss for which the insurer is bound to reimburse" (Kaf-Kaf, Inc. v Rodless Decorations, 90 NY2d 654, 660; see Dillion v Parade Mgmt. Corp., 268 AD2d 554, 555). "While parties to an agreement may waive their insurer's right of subrogation, a waiver of subrogation clause cannot be enforced beyond the scope of the specific context in which it appears" (Kaf-Kaf, Inc. v Rodless Decorations, 90 NY2d at 660, citing S.S.D.W. Co. v Brisk Waterproofing Co., 76 NY2d 228).
The Supreme Court erred in denying that branch of Quality's motion which was for summary judgment dismissing the complaint insofar as asserted against it. Quality demonstrated its prima facie entitlement to judgment as a matter of law by presenting evidence that the damages sustained as a result of the collapse were encompassed by the description of the "Work," as defined in the parties' contract, and that, therefore, Park City's waiver of subrogation barred the instant action insofar as asserted against it. In opposition, Gulf failed to raise a triable issue of fact.
The Supreme Court also erred in denying that branch of Affordable's motion which was for summary judgment dismissing the complaint insofar as asserted against it. Affordable demonstrated its prima facie entitlement to judgment as a matter of law by presenting evidence that, under its contract with Quality, which incorporated the Park City/Quality contract and which granted Affordable "the benefit of all rights, remedies and redress afforded to [Quality] by these Contract Documents," Affordable was entitled to the benefit of Park City's waiver of subrogation. Gulf failed to raise a triable issue of fact in opposition.
However, the Supreme Court
properly denied HLZA's motion for summary judgment dismissing the complaint and
all cross claims insofar as asserted against it. HLZA failed to demonstrate its
prima facie entitlement to judgment as a matter of law. Its letter agreement
with Park City with respect to the garage restoration project contains no waiver
of subrogation by Park City, and HLZA was not a party to Park City's contracts
with either Quality or Affordable. Consequently, HLZA's contention that it was
entitled to the benefit of Park City's waiver because the parties had in place
an "insurance plan" under which Park City was obligated to pay for damages to
the "Work," as defined in the Park City/Quality contract, even assuming there
was such an "insurance plan," is unavailing. Likewise, there was no subrogation
waiver between HLZA and Quality or between HLZA and Affordable. Therefore, the
Supreme Court properly denied those branches of the motions of Quality and
Affordable which were to dismiss HLZA's cross claims against them.
SPOLZINO, J.P., SANTUCCI, ENG and LEVENTHAL, JJ., concur.
The Williams defendants appeal
from the order of the Supreme Court, Bronx County (Sallie Manzanet-Daniels, J.),
entered on or about July 2, 2008, which denied so much of their motion for
disclosure of the terms of a settlement agreement between plaintiff and the
remaining defendants other than the amount.
Dillon Horowitz & Goldstein, New York (Michael M.
Horowitz and Thomas Dillon
of counsel), for appellants.
London Fischer LLP, New York (Michael J. Carro and
John E. Sparling of counsel),
The order denying that portion of the Williams defendants' motion to compel defendant Turner Construction Co. and defendant FDA Queens, L.P., to provide the Williams defendants with a copy of a settlement agreement (or a sworn statement reciting the terms of the agreement) entered into between Turner and FDA and plaintiff must be reversed. Because the law on the disclosure of settlement agreements to nonsettling parties is unclear and presents a thorny issue with which the trial courts are required to grapple (see Connors, Practice Commentaries, McKinney's Cons Laws of NY, Book 7B, CPLR C3101:18A, at 35), we take this opportunity to review that law and offer guidance to the trial courts in dealing with requests by nonsettling parties for disclosure of settlement agreements.
Plaintiff sustained injuries in a construction site accident and commenced an action against Turner, the general contractor, and FDA, the owner of the site. Plaintiff also commenced the action against the Williams defendants, subcontractors on the project at the site. Turner and FDA, represented by the same counsel, interposed an answer asserting a cross claim against the Williams defendants for contribution and indemnification; Turner and FDA subsequently commenced a third-party action against the Williams defendants for contribution, indemnification and breach of contract. The Williams defendants and both Turner and FDA impleaded certain insurers for breach of contract, and plaintiff's employer and a company that provided equipment at the site for negligence.
Supreme Court granted plaintiff summary judgment on the issue of liability on his Labor Law § 240(1) cause of action and severed the main action from the impleader actions [FN1]. Thereafter, plaintiff and Turner and FDA entered into a stipulation of discontinuance and filed it with the Bronx County Clerk. While the stipulation stated that those parties had settled the matter as between them, none of the terms of the settlement were provided.[FN2]
Approximately four months after the stipulation was filed, the Williams defendants served on plaintiff and Turner and FDA a request for admissions regarding whether they settled the action as between them and whether plaintiff released Turner and FDA from the action. The Williams defendants also served on plaintiff and Turner and FDA a demand for a copy of the settlement agreement. Turner and FDA responded to the demand for admissions by acknowledging that plaintiff had agreed to release Turner and FDA but they refused to provide any further details of the settlement.
The Williams defendants moved, among other things, to compel Turner and FDA to provide the Williams defendants with a copy of the settlement agreement or a sworn statement setting out its terms. The Williams defendants brought the motion because they viewed the content of the settlement agreement as "material and relevant to the issues pending between plaintiff and the Williams defendants." Specifically, the Williams defendants voiced their concern that plaintiff and Turner and FDA were "improperly colluding," and stated that the content of the settlement agreement is relevant under General Obligations Law § 15-108. Turner and FDA opposed the motion, arguing that the settlement agreement contained a confidentiality provision. Turner and FDA, however, stated that they are "willing ... to submit a copy of the settlement agreement for in camera review by [Supreme] Court. However, in the event [Supreme Court] deems it necessary to disclose any of the terms of the agreement, counsel for the Williams [defendants] and their clients should be asked to execute a similar confidentiality agreement." The agreement was never provided to Supreme Court for in camera inspection. The court subsequently granted the motion to the extent of directing Turner and FDA to disclose the amount of the settlement. Turner and FDA have disclosed the amount of the settlement but have not provided any other details concerning it.
The touchstone for determining whether information is discoverable in an action is whether the information is "material and necessary" (CPLR 3101[a]; see Allen v Crowell-Collier Publ. Co., 21 NY2d 403, 406  ["The words, material and necessary', are ... to be interpreted liberally to require disclosure, upon request, of any facts bearing on the controversy which will assist preparation for trial by sharpening the issues and reducing delay and prolixity"]). Thus, disclosure of the terms of a settlement agreement by a settling party to a nonsettling party may be appropriate, despite the presence of a confidentiality clause in the agreement, where the terms of the agreement are "material and necessary" to the nonsettling party's case (Masterwear Corp. v Bernard, 298 AD2d 249, 250 ; see Connors, Practice Commentaries, supra, C3101:18A, at 35 ["The central inquiry in resolving ... disclosure requests [regarding settlement agreements] should focus on relevance"]; see generally Stiles v Batavia Atomic Horseshoes, 174 AD2d 287, 292 , revd on other grounds 81 NY2d 950  [observing with respect to a "Mary Carter" agreement that "[s]uch an agreement is a contract by which one or more defendants in a multiparty case secretly conspires with the plaintiff to feign an active role in the litigation in exchange for assurances that its own liability will be diminished proportionately by increasing the liability of the nonagreeing defendant(s). If such an agreement is established, it may be void per se, and the failure to disclose it may require a new trial"] [internal citations omitted]). Conversely, where the terms of a settlement agreement have no bearing on the issues in the case, the terms are not discoverable by a nonsettling party (see Matter of New York County Data Entry Worker Prod. Liab. Litig., 222 AD2d 381 , affg 162 Misc 2d 263 [Sup Ct, New York County, Crane, J., 1994]; see also Allegretti-Freeman v Baltis, 205 AD2d 859 ). "Any doubt as to the relevance [of the terms of the settlement] may be resolved by an in camera inspection" of the settlement agreement and "the settling parties' remaining interest in confidentiality may be protected by an order limiting the disclosure of the settlement agreement to [the nonsettling defendants] and [their] counsel or by such other manner as Supreme Court directs" (Masterwear Corp., 298 AD2d at 250-251).
Here, Supreme Court was not provided with the settlement agreement for in camera inspection and the agreement has not been provided to us. Thus, like Supreme Court, we have no idea of the contents of the agreement and are unable to gauge whether it contains information that is "material and necessary" to the Williams defendants' defense of the underlying personal injury action, the cross claims and third-party claims asserted against them by Turner and FDA, or both. Notably, the Williams defendants contend - and Turner and FDA do not dispute - that Turner and FDA plan on participating in the trial of the underlying action, which at this point will apparently be only between plaintiff and the Williams defendants. It is not obvious why Turner and FDA would want to participate in that trial or whether Supreme Court should allow them to do so since they and plaintiff have settled the action as between them (see Meleo v Rochester Gas & Elec. Corp., 72 AD2d 83, 97 , lv dismissed 49 NY2d 703  ["because after a settlement under section 15-108 of the General Obligations Law the true adversaries in the trial become the plaintiff and the nonsettling defendant, the presence of the settling defendants for even a limited participation in the trial against the nonsettling defendant would seem to be totally unwarranted"]). The uncertainty about whether Turner and FDA plan on participating in that trial and, if they do plan to do so, the reason for their continued participation, are at least cause for concern (see Matter of Eighth Jud. Dist. Asbestos Litig., 8 NY3d 717, 721  ["secretive agreements may result in prejudice to the nonagreeing defendant at trial, distort the true adversarial nature of the litigation process, and cast a cloud over the judicial system"]; id. at 722-723 ["whenever a plaintiff and a defendant enter into a high-low agreement in a multi-defendant action which requires the agreeing defendant to remain a party to the litigation, the parties must disclose the existence of that agreement and its terms to the court and the nonagreeing defendant(s)" [emphasis added]).
Accordingly, the appropriate course of action is to reverse the order appealed and remand the matter to Supreme Court for an in camera inspection of the settlement agreement and a new determination of the Williams defendants' motion (see Masterwear Corp., 298 AD2d at 249). We recognize that "[s]trong public policy considerations favor settlements, which avoid costly litigation and preserve scarce judicial resources" (Connors, Practice Commentaries, supra, CPLR C3101:18A, at 35). However, "[t]hese public policy concerns can be accommodated short of denying a non-settling defendant information that is material and relevant to its case. The court can allow disclosure [of a settlement agreement] while protecting the confidential nature of the settlement agreement through a CPLR 3103[a] protective order" (id. [citation omitted])[FN3]. Supreme Court, "[i]n exercising its discretion regarding whether and to what degree a protective order under CPLR 3103 should issue, ... must strike a balance by weighing the [parties'] conflicting interests in light of the facts of the particular case before it" (Cynthia B. v New Rochelle Hosp. Med. Ctr., 60 NY2d 452, 461 ). Thus, the court may direct the disclosure of those portions of the agreement that it finds are "material and necessary," while shielding from disclosure those portions of it that are not, and "limiting the disclosure of the settlement agreement to [the nonsettling defendants] and [their] counsel or by such other manner as Supreme Court directs" (Masterwear Corp., 298 AD2d at 250-251).
Accordingly, the order of Supreme Court, Bronx County (Sallie Manzanet-Daniels, J.), entered on or about July 2, 2008, which denied so much of the Williams defendants' motion for disclosure of the terms of a settlement agreement between plaintiff and the remaining defendants other than the amount, should be reversed, on the law, without costs, and the matter remanded for reconsideration of the motion after in camera inspection of the settlement agreement.
THIS CONSTITUTES THE DECISION
OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.
ENTERED: JANUARY 15, 2009
Footnote 1:In their brief, the Williams defendants assert that "the case against [them] and [plaintiff] is presently pending for trial. Additional causes of action for contribution, indemnification, and insurance declaratory judgment by and among the Williams [defendants] and additional parties which were severed in the Order of Justice Tuitt are in the pre-note of issue phase, and are proceeding under a separate index number." Indeed, in an order dated August 17, 2005, Justice Tuitt severed plaintiff's action from the impleader actions. It is not clear whether Supreme Court has severed from plaintiff's action Turner's and FDA's cross claims for contribution and indemnification against the Williams defendants. Nor is it clear why Turner and FDA also brought the same claims against the Williams defendants in their third-party action.
Footnote 2:CPLR 2104 states: "With respect to stipulations of settlement and notwithstanding the form of the stipulation of settlement, the terms of such stipulation shall be filed by the defendant with the county clerk" (emphasis added). The Williams defendants do not argue that the stipulation of discontinuance filed with the Bronx County Clerk failed to comply with CPLR 2104. What the statute may require with respect to the disclosure of the terms of a stipulation of settlement is not clear (see Alexander, 2003 Supp. Practice Commentaries, McKinney's Cons Laws of NY, Book 7B, CPLR C2104:2, 2008 Pocket Part, at 304-305; Connors, Practice Commentaries, supra, C3101:18H, at 36; Siegel, NY Prac § 204, at 339 [4th ed]; 140 Siegel's Practice Review 1, Tracking the New Law on Filing Settlements Still Most Controversial Issue: Seeking Ways of Filing Settlements Without Revealing Underlying Details [Oct. 2003]).
Footnote 3:CPLR 3103 states that "[t]he court may at any time on its own initiative, or on motion of any party or of any person from whom discovery is sought, make a protective order denying, limiting, conditioning or regulating the use of any disclosure device. Such order shall be designed to prevent unreasonable annoyance, expense, embarrassment, disadvantage, or other prejudice to any person or the courts."
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