Dear Coverage Pointers Subscribers:

It's a wonderful thing, this publication, because I've made such great friends with its subscribers. Wherever I travel, I run into those who have shared a part of their Friday with me, reading our ramblings. It is interesting, of course, that most talk about some abject silliness that I've included in this cover letter rather than the nitty-gritty nuances of waiver, estoppel and quasi in rem jurisdiction. I'll keep offering both with the hope that you can be both educated and entertained.

Editor's Note: The last time I thought seriously about quasi in rem jurisdiction was in late 1976, when I completed my Civil Procedure exam at the conclusion of my first semester in law school. I vow never to discuss it again in Coverage Pointers.

A Coverage Pointers Pointer - Coverage Pointers Search Engine
I want to take this opportunity to provide a tidbit on searching back issues of CP

I had a delightful lunch on Wednesday with a loyal CP subscriber who mentioned that he printed and saved back issues of this publication in case he wanted to refer back to a case mentioned in a past issue. Like my file of federal and state tax returns dating back to the early '70's, I surely understand how people save things. As an aside, as I jammed the copies of 2008 returns into the fireproof box with the other yellowing returns, I was compelled to recall that my starting salary at H&F as a law clerk in 1977 was $3.00/hour and I was surely overpaid then.

However, you need not do that! I want to save you cabinet space and spare a few trees as well. The Hurwitz & Fine website has a search engine that allows you to search through past issues of this publication and every issue of CP produced over the past 10+ years is available and searchable.

How do you get there? Simple.

  • Go to our website: www.hurwitzfine.com and click on the NEWSLETTER tab at the top of the page;
  • You'll be taken to a page where our two newsletters are introduced. Under Coverage Pointers, click on Previous Issues;
  • The page that opens up is the linked list of all previous Coverage Pointers issues and if you scroll down to the bottom of the page, you'll find the search engine.
  • So, for example, if you are interested in cases interpreting the Court of Appeals decision in Pecker Iron Works, you can put the case those three words in the search box and click and you'll find the 12 summaries that mention the decision. You will also be taken to the Google search page for our website that allows more sophisticated Boolean searches.

This Issue.
This issue brings you a good late notice case from the First Department, an interesting "temporary employee" opinion from the Second, and a First Department case discussing the impact of the "settlement statute: (General Obligations Law §15-108) on the right of insurer contribution. We thank Patrick J. Feeley of the New York City law firm of Dorsey & Whitney LLP for this summary. He represented one of the successful parties in that litigation and was kind enough to contribute the decision summary.

Oh, Canada - Canadian Beer and Martinis on the Beach
It's spring in Western New York and Southern Ontario and we've opened up the cottage. We're fortunate enough to have a second home on the north shore of Lake Erie, in the Township of Fort Erie, with 70 feet of pristine beachfront. I grew up in Brooklyn, and when I went to high school, my commute to work, by bus and subway, was 45 minutes in each direction. Now, I travel to my cottage each day, crossing an international border which of course includes clearing customs and my commute to work is about 14 minutes.

If any of you are traveling to this part of the country this summer, let me know. While you'll soon need a passport or equivalent to cross back and forth, we'd love to have you over for a cold one. Of course, we can't fit all 1750 of you at the same time, but we'll do our best.

Coverage Mediation
I still find it surprising that carriers are not opting to mediate coverage disputes with more regularity. There are times when insurers wish to resolve complex insurance coverage disputes without the expense and costs of trial and without the risk of potentially adverse judicial precedent. We have encouraged the mediation and/or arbitration of complex insurance coverage claims and our office can assist insurers and insureds in bringing reasoned resolution to coverage disputes.

We offer mediation and arbitration services. Why spend the money and the time to litigate these questions when resolution by mediation or arbitration can bring closure to hotly contested matters in relatively short order for substantially reduced costs.

I have been counseling, litigating and resolving complex insurance coverage matters for over 25 years. For over 20 years, I've has served as an Adjunct Professor of Insurance Law at the Buffalo Law School and am retained as an expert witness in insurance coverage matters throughout the United States, Canada and in the London market. An experienced mediator, arbitrator and trial attorney can assist carriers in resolving disputes by agreement, avoiding unfortunate precedent and saving tens of thousands of dollars in litigation costs. Contact me for information: [email protected] or 716.849.8942.

One Hundred Years Ago Today:

MRS. STRONG'S WILL STANDS
Even If She Did Buy Her Hats on Third
Avenue, as Contestants Testified
New York Times, April 17, 1909, p 16, col.6

Surrogate Cohalan admitted the will of Mrs. Harriett Fleet Strong to probate yesterday; she was the widow of Edward Strong, who left a large fortune. She was wealthy also in her own right, leaving an estate estimated at about $300,000. Mr. Strong died on Jan. 14, 1904, at the age of. 80 and his widow died on Oct. 17, 1908. They had been married for fifty years when Mr. Strong died.

Mrs. Strong left her property to be divided between her husband's nephew and George R. Branson, whom she described as a "friend of my husband and myself." The will was contested by Mrs. Strong's relatives, who contended that she was of unsound mind when she made it.

Several witnesses examined on behalf of the contestants testified that the fact that Mrs. Strong purchased hats and millinery in a Third Avenue department store, which was evidence that she was insane.

Editor's Note: The beneficiary of Mrs. Strong's will, George R. Branson, worked for a public adjusting company and was the person in charge of representing the insurance companies who paid off the property damage claim in the famous Triangle Shirtwaist Fire of 1911. I knew you may have suspected that.

The Duke of Lead Returns
After a short hiatus, Scott Duquin returns, with the assistance of Steve Peiper, in presenting a short piece on insurance coverage triggers.

From Audrey Seeley, Queen of No Fault:
Here is this week's cover note from Audrey Seeley (and the Editor's response, which follows):

The DRI Insurance Coverage and Claims Institute was a success, and for those who are looking for another great seminar, DRI has a Bad Faith Seminar this June. If you would like more information feel free to send me an email at [email protected].

The discussion still remains open on LMK. The recent discussion was regarding attorney's fees and whether an attorney's fee is based upon the aggregate of the bills, per provider or EIP, per action (lawsuit or arbitration) or upon the aggregate of the bills, per provider or EIP, irrespective of the number of actions. If you have any thoughts on it again feel free to send me an email. Building on that issue is whether a court will grant a consolidation motion for multiple suits from the same provider or will merely join the actions for trial. In the event that the fee is based upon each action and the cases are consolidated then only one fee may be provided. Pursuant to CPLR 8104 costs awarded on consolidated actions is as if only one action existed, unless the court ordered otherwise. Yet, if the cases are merely joined then they are still separate actions and separate fees can be awarded. It will be interesting to see what the courts do with this issue and we will be sure to keep you updated.

Audrey

Editor's Note:
Audrey did a fabulous job at the Chicago DRI program, just thought I'd mention it.

On the issue of attorneys' fees in No Fault matters, here's my two cents, based on nothing but a feeling based on the Court of Appeals' reasoning

Your editor believes that reason will prevail. Fees (I predict, with all the scientific certainty at my fingertips) will be based on the aggregate of the bills, no matter how many providers and irrespective of the number of actions or causes of action, pending at the time of fee determination. So, if you have 10 providers and 24 bills and six lawsuits and 24 causes of action total, the fee would be based on the aggregate. [Audrey predicts that it will be on the number of suits but we both believe that the Superintendent of Insurance may yet step with additional guidance]. Of course, if new bills come later because of subsequent treatment, etc., another fee might be calculated.

 

From Steve "Property and Potpourri" Peiper:
Spring, it appears, has finally sprung. Not much else to say this week, as the courts have been quiet in the first-party arena. We do have an interesting decision out of the Third Department on workers' compensation coverage and the role of safety group administrators. Other than that, I would invite everyone to review Scott Duquin's latest offering. He, with a little help from friends, takes a look at some of the more interesting coverage issues in a lead paint case. Lastly, as we mentioned a few weeks ago, we are continuing our review of green energy issues. Coming next issue we will address what green energy law is, what it affects, and most importantly why you should care. Cheers!

Steve
[email protected]

A Century Ago
OLYMPIC, 1,000-FOOT LINER
White Star Line Selects Name for Its Leviathan - May Build Sister Ship
New York Times, April 17, 1909, Page 1

The new 1,000 foot steamship the construction of which is to be commenced later in the year for the White Star Line will be named the Olympic. The present intention is to give it a speed of 20 knots. Harland and Wolf of Belfast will build it, and it will be designed exclusively to suit the requirements of the Southampton - New York trade.
It is possible that the White Star Company will decide to order two boats of this class, instead of one.

Editor's Note: In fact, there were two other boats of that class built by White Star. Launched on 20th October 1910 Olympic was the first of the trio of White Star Liners. Under the command of Captain E.J. Smith (who was later to command one of two sister ship, The Titanic) she sailed on June 14, 1911 on her Maiden voyage to New York.

Earl's Pearls:
Are you considering or handling lawsuits against professionals? Earl Cantwell's column discusses the statute of limitations in such claims in his article: For Whom the Statute Tolls: Limits of "Continuous Representation"

In this Week's Issue, Attached:

KOHANE'S COVERAGE CORNER

Dan D. Kohane
[email protected]

  • As SUM Claimant did not Exercise Due Diligence in Identifying Insured Status of Other Vehicle, Notice Given 10 Months After Accident Deemed Untimely
  • Lateness (73 Days) is Fatal to Disclaimer with Proof of Necessary and Diligent Investigation
  • Without Special Relationship, Insurance Agency Not Liable to its Customer for Providing Coverage Requested, when Policy Did Not Cover Risk
  • Lack of "Garage Operations: Determined by Insured's Default
  • Under Doctrine of "Estoppel," Insurer that Assumes the Defense without Advising that it May Not Have Obligation, Loses Right to Change its Mind Two Years Later
  • Section 15-108 Does Not Bar Co-Insurer Contribution Claims
  • Ignorance of the Law is an Excuse for Not Submitting to Second SUM IME
  • Qualification Established for UM Benefits from MVAIC
  • When Property Owner Knows that Infant Claimant has Sustained Burns and Went to Hospital, No Excuse for Not Giving Prompt Notice to Liability Carrier
  • The Age-Old Battle Over the Definition of "Temporary Employee" in CGL Policy; In this One, Court Decides that Term "Furnished" is Ambiguous and Includes Person Recommended by Another Employee
  • Injured Party Not Charged with Insured's Failure to Timely Notify Insurer of Accident; Injured Party's Diligence Independently Determined

 

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

Margo M. Lagueras
[email protected]

  • Contemporaneous Examination Is Needed To Support Inference Of Causation
  • Failure to Establish Causation also Precludes Recovery Under the 90/180-Day Category Alleged in the Second Of Three Accidents
  • The Plaintiff's Physicians' Failure to Reconcile their Findings Results in Dismissal of Plaintiff's Complaint
  • The Plaintiff Fails to Offer any Contemporaneous or Recent Objective Medical Evidence; Trial Court is Reversed, on the Law
  • Minor Limitations in ROM Do Not Amount to Significant or Permanent Limitations
  • Doctor's Advise to "Restrict Activities" Is Too General To Support A 90/180-Day Claim
  • A "Tailored" Affidavit which Differs from Plaintiff's Deposition Testimony Will Not Defeat Summary Judgment
  • A Recent Affirmed Report has No Probative Value if Based on Contemporaneous Unaffirmed Reports
  • Portions of an Affirmed Report Based on Unaffirmed Findings is Not Considered
  • Once Again, Affirmations Relying On Unsworn Reports Are Out
  • Affirmation Must be by a Currently Licensed Doctor
  • Physician's Failure to Review Medical Records from a Prior Accident Makes Conclusion that Injuries are Caused Solely by Subject Accident Speculative

 

AUDREY'S ANGLES ON NO-FAULT
Audrey Seeley
[email protected]
Litigation

  • Master Arbitration Award Upheld - Lower Arbitrator Committed Err in Finding Fraud Defense Valid
  • Follow-Up Verification Request Premature Rendering Denial Untimely
  • Plaintiff's Summary Judgment Motion Denied as Insurer Established Lack of Medical Necessity
  • Failure to Submit Proper Affidavit on Mailing Deems Denial Late
  • Plaintiff Failed to Submit Proper Affidavit to Establish Prima Facie Case Insurer Could Not Establish Tolling of 30 Days to Pay or Deny to Survive Summary Judgment

 

PEIPER ON PROPERTY (and POTPOURRI)

Steven E. Peiper
[email protected]

  • Despite its Many Attempts, Insured Cannot Excuse its Failure to Read and Understand its Own Policy

 

That's all the news that fits this week. Rejoice in the warmth and rebirth of springtime, as we are, here in the colder part of the country. Call us if you need us, we're here to help. And if we can't help you, perhaps we can, at least, entertain you.

Dan

Untitled Document

Hurwitz & Fine, P.C. is a full-service law firm
providing legal services throughout the State of
New York
NEWSLETTER EDITOR
Dan D. Kohane
[email protected]

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

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

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

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

APPELLATE TEAM
Jody E. Briandi, Team Leader

[email protected]
Scott M. Duquin

Index to Special Columns

Kohane’s Coverage Corner
Margo’s Musings on “Serious Injury”
 Audrey’s Angles on No Fault
Peiper on Property and Potpourri
Earl’s Pearls

Across Borders
Duquin -- The Duke of Lead
Reported Decisions

KOHANE’S COVERAGE CORNER

Dan D. Kohane
[email protected]e.com

4/14/09            In the Matter of Travelers Insurance Company v. Cohen
Appellate Division, Second Department
As SUM Claimant did not Exercise Due Diligence in Identifying Insured Status of Other Vehicle, Notice Given 10 Months After Accident Deemed Untimely
Cohen was injured on 12/23/05 she was caused to jump out of the way of a car driven by Wayne.  She was insured with Travelers, Wayne was insured with Progressive.  She contacted neither before she hired a lawyer the following September. On 10/3/06, Pearl gave notice to Travelers of a potential supplemental underinsured/uninsured motorist (hereinafter SUM) claim. Some 23 days later, Travelers denied coverage for the SUM claim based on her failure to give notice of the claim "as soon as practicable," as required by her policy.
Progressive denied in December on the ground of late notice.  On 1/2/07, Cohen sent a copy of Progressive's disclaimer letter to Travelers and again notified Travelers of her intention to pursue a SUM claim and then filed an arbitration demand. Travelers then moved to stay arbitration.
As the insured bears burden of demonstrating that she acted with due diligence in ascertaining the insurance status of the other vehicle, and there was no proof that Cohen did anything diligently, the notice was untimely and the arbitration should have been permanently stayed.  Travelers need not be prejudiced
4/14/09            New York City Housing Authority v. Underwriters at Lloyd's, London
Appellate Division, Second Department
Lateness (73 Days) is Fatal to Disclaimer with Proof of Necessary and Diligent Investigation
Lloyds did not disclaim coverage on the ground of late notice until more than three months after the plaintiff sent notice of the claim to it, and 73 days after the insured plaintiff turned over the file in the underlying case to it.  Therefore, under Insurance Law §3420[d] it did not disclaim as soon as practicable. The Underwriters asserted that the delay was necessitated by its investigation of the claim but the court found that the grounds for the disclaimer was apparent, at the latest, when the defendant received the case file. Moreover, the insurer did not prove that it conducted a diligent investigation.
4/14/09            Kay Bee Builders, Inc. v. Merchant's Mutual Insurance Company
Appellate Division, Second Department
Without Special Relationship, Insurance Agency Not Liable to its Customer for Providing Coverage Requested, when Policy Did Not Cover Risk
Kay Bee Builders, Inc., was hired to build a single-family home and subcontracted the roofing to Maggio. When Maggio denied responsibility for problems with the roof after its work was supposedly done, the plaintiff repaired the faulty portion of the roof for $140,000
Kay Bee then tried to pass off the costs to Merchants. When Merchants denied coverage, Kay Bee sued Merchants and its insurance agency.  The Errors and Omissions claim against the agency is dismissed because the agency established that it obtained a general liability insurance policy which provided the specific insurance coverage that the plaintiff requested.  Kay Bee did not establish that a special relationship existed with the agency which would give rise to a claim for negligent misrepresentation.
4/14/09            Lancer Insurance Company v. Omar Whitfield
Appellate Division, Second Department
Lack of “Garage Operations: Determined by Insured’s Default

Lancer issued a Garage Policy to Whitfield, an auto dealership.  An owned-auto was being driven by Charles Whitfield, Omar’s father and it was involved in an accident at 1:00 AM on some particular day. Johnson and Smalls, injured in the accident, sued the owner and driver (the Whitfields).  Lancer denied coverage and brought a declaratory judgment action alleging that the carrier was not liable to defend or indemnify because the use of the vehicle at the time of the accident did not fall within the coverage provisions of the subject policy as the driver's use was unrelated to "garage operations" as required by the policy.
The Whitfield defendants defaulted, thereby admitting the allegations in the instant complaint, that the driver had borrowed the subject vehicle "to visit friends” that at the time of the accident, he "was not operating the [subject vehicle] in furtherance of the garage business."
It was then the burden of the injured parties, the opponents of the motion, to provide evidence that the vehicle was being used in “garage operations.”  Since all the injured parties offered were an attorney’s affidavit, court declares coverage does not exist.
4/14/09            Liberty Insurance Underwriters, Inc. v. Arch Insurance Company
Appellate Division, First Department
Under Doctrine of “Estoppel,” Insurer that Assuming the Defense without Advising that it May Not Have Obligation, Loses Right to Change its Mind Two Years Later

This case involves a fight between two carriers over obligations to defend.  Here, one carrier undertook the defense of the insured and for two years controlled the defense before claiming it should have been in an excess position.  That carrier is estopped from changing its coverage position since the party it defended – and a carrier that may have had an obligation to defend – was prejudiced having ceded control.
4/9/09              Scotts Co. LLC v. Pacific Employers Ins. Co. and Employers Ins. of Wausau
Appellate Division, First Department
Section 15-108 Does Not Bar Co-Insurer Contribution Claims
Editor’s Note:
  From time to time, we ask one of the counsel involved in an appeal to provide a guest summary, particularly where the issues are unusual or unique or where the decision does not clearly articulate the reasons for a ruling.  A special thanks goes out to Patrick J. Feeley of the New York City law firm of Dorsey & Whitney LLP.  Pat and his firm represented Employers Insurance of Wausau, a successful party in this appeal, and Pat was kind enough to provide us this summary:
Employers Insurance of Wausau and Pacific Employers Ins. Co. both provided liability insurance coverage to Scotts Co. Wausau, which is defending asbestos claims against Scotts, asserted a claim that Pacific must contribute to the cost of defending the claims. Pacific, which entered into a prior settlement agreement with Scotts, sought to amend its third-party complaint to add a claim that Wausau's contribution claim was barred by Section 15-108 of the New York General Obligations Law. The trial court denied Pacific's motion to amend on the ground that Pacific's Section 15-108 claim was meritless.
The First Department affirmed the trial court's denial on two separate grounds. First, the court ruled that because Pacific's settlement agreement with Scotts expressly contemplated contribution claims by Scotts' other insurers, Pacific had waived any protection that Section 15-108 might offer. Second, the court held that Section 15-108 only bars contribution claims among joint tortfeasors; it does not bar contribution claims among co-insurers.
Editor’s Note:  Section 15-108 of the General Obligations Law provides that a settling tortfeasor is barred from pursuing contribution (but not indemnity) claims against non-settling tortfeasors.
4/9/09              New York Central Mut. Fire Ins. Co v. Bradfield
Appellate Division, Third Department
Ignorance of the Law is an Excuse for Not Submitting to Second SUM IME
Bradfield was hurt in a one car accident in January 2006. She was insured under a New York Central policy issued to her parents that included supplemental uninsured/underinsured motorist (hereinafter SUM) coverage. With consent, she settled her claim against the other tortfeasor.

At New York Central’s request, she submitted to an independent medical examination in January 2007 but refused to appear for two other examinations scheduled claiming that the SUM carrier was not entitled to multiple examinations. Bradfield then filed a demand for SUM arbitration and the carrier moved to stay, claiming that the refusal to attend the subsequent examinations violated the policy.

The SUM endorsement at issue here required respondent to "submit to physical examinations by physicians we select when and as often as we may reasonably require." 
Petitioner attempted to schedule a second examination in November 2007 but Bradfield’s counsel refused, taking the erroneous position that the carrier was only entitled to one exam. When, based on that position, Bradfield’s counsel continue to maintain that position and filed an arbitration demand, New York Central moved for this stay.  After receiving the motion papers, Bradfield’s counsel realize that the carrier did have the right to schedule more than one exam and indicated that Bradfield was willing to undergo the second exam.  New York Central refused.
The Third Department found that there was no evidence of avowed obstruction of the discovery rules but that Bradfield’s refusal was a result of a mistake in understanding the carrier’s right for an additional exam.
Editor’s Note:  The Court noted that the claimant and her attorney did not have a copy of the SUM endorsement.  Did the court forget that it’s a part of the Insurance Regulations, available to anyone?
4/9/09              Cardona v. Martinez and MVAIC
Appellate Division, Second Department
Qualification Established for UM Benefits from MVAIC

Lower court properly found that plaintiff was a "qualified person" entitled to proceed against MVAIC for uninsured motorists benefits. Plaintiff established that he cannot ascertain the identity of the owner or operator of the offending vehicle. There need not be a judicial determination that another motorist was not involved in the accident...
Editor’s Note:  We so rarely see MVAIC as a party in litigation anymore, as compared to “back in the day.” Is it because the Motor Vehicle Accident & Indemnification Corporate is paying claims or because everyone’s insured?

4/9/09              Ferreira v. Mereda Realty Corp.
Appellate Division, First Department
When Property Owner knows that Infant Claimant has Sustained Burns and Went to Hospital, No Excuse for Not Giving Prompt Notice to Liability Carrier
Notice was given by insured two months after it learned of accident and injuries.  Since the notice was late, it was the insured’s burden to establish that “a reasonably prudent person, upon learning of the accident, would have a good faith, objective basis for believing that litigation would not be commenced.”  No doubt, the insured’s property manager saw the burn scars on the infant plaintiff and knew he had been in the hospital.  Knowing that, the insureds could not have reasonably believed that there would be no litigation arising out of the accident and therefore have not shown any extenuating circumstances to justify their having delayed reporting the occurrence for another two months.
4/7/09              Nick's Brick Oven Pizza, Inc. v. Excelsior Insurance Company
Appellate Division, Second Department
The Age-Old Battle Over the Definition of “Temporary Employee” in CGL Policy; In this One, Court Decides that Term “Furnished” is Ambiguous and Includes Person Recommended by Another Employee

Guiliana Mendoa (Mendola) was injured when her car was rear ended by one driven by Travis.  She sued Travis and Nick’s Pizza, claiming that Travis negligently caused the accident while delivering pizza on behalf of Nick’s Pizza (and that Nick’s was liable as his employer).  Nick’s notified its CGL carrier, Excelsior but Excelsior disclaimed coverage on the basis of an exclusion for bodily injury arising out of an auto owned or operated by an “insured.”  The question was whether Travis was an “insured.”

“Employees” of Nick’s are within the definition of “insured” while “temporary workers” are not... A "temporary worker" is defined under the policy as "a person who is furnished to [Nick's Pizza] to substitute for a permanent employee' on leave or to meet seasonal or short-term workload conditions."  Since Travis was hire to meet seasonal or short-term workload conditions during business summer months, he was considered a “seasonal employee.”
Was he “furnished?”  Court finds that the term “furnished” is susceptible to two meanings (1) being provided by a recruiting or employment agency or (2) being referred to the named insured by anyone else. Hence, the term "furnished," is ambiguous. Moreover, the policy also does not clearly define whether an individual who is hired to meet seasonal or short-term workload conditions must also be "furnished" to the insured in order to qualify as a temporary worker, or whether only individuals hired to substitute for an employee on leave must be so "furnished." Since Travis was hired by recommendation from another employee and the term is ambiguous, the carrier is obligated to consider him a “temporary employee” and thus not an insured.  So coverage is afforded to Nick’s.
Editor’s Note:  Some courts have noted that the policy provisions for “leased workers” and “temporary workers are different.  “Leased workers” have to be referred by an agency while “temporary workers” have to be referred by any third party.
3/31/09            Malik v. Charter Oak Fire Insurance Company
Appellate Division, Second Department
Injured Party Not Charged with Insured’s Failure to Timely Notify Insurer of Accident; Injured Party’s Diligence Independently Determined
Juan was working in a Queens convenient store when Malik, a retired police officer, entered the premises.  While engaging in “horseplay” with Juan, Malik took out his gun, which accidentally discharged and the bullet struck Juan in the leg.  Juan subsequently died from the wound.
Malik was insured by Charter Oak, his homeowners carrier, and did not notify the carrier either at the time of the incident or soon thereafter.  Malik pleaded guilty to manslaughter for recklessly causing Juan’s death and was sentenced to a term of incarceration.  Malik testified that he was “consumed with guilt”.  Juan’s father, however, shortly after the shooting, retained counsel to commence a wrongful death action against Malik, and wrote to Malik asking for insurance information (by fax, phone and letter).  After the criminal plea, the Public Administrator on behalf of Juan’s estate brought the lawsuit against Malik, alleging, among other claims, negligence.  Another request was made for insurance information.  Finally, seven months after the occurrence, the summons and complaint were forwarded to Charter Oak, its first notice of the incident.  Two weeks later, Charter Oak denied coverage based on late notice.
The insured’s “consumed with guilt” excuse was unacceptable.  The insurer is entitled to notice when the information available to the insured could “glean a reasonable possibility of the policy’s involvement.”  However, the Public Administrator had a separate right to give notice, based on the injured party’s allowance under Section 3420(a)(3).   The Public Administrator created a paper trail establishing that she tried, with diligence, to identify Malik’s carrier, without success.  The injured person has an independent right to give notice and to recover thereafter, he is not to be charged insured's delay.  The injured person's rights must be judged by the prospects for giving notice that were afforded him, not by those available to the insured, so long as the injured party diligently pursued the rights.


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

Margo M. Lagueras
[email protected]

4/16/09            Kante v. Diarrassouba
Appellate Division, First Department
Contemporaneous Examination is Needed to Support Inference of Causation
In support of their motion, the defendants’ submitted affirmations from their experts demonstrating normal ranges-of motion, specifying the objective tests performed, and concluding that the plaintiff’s alleged injuries had resolved.  In opposition, the plaintiff’s experts reported range-of-motion limitations and the specific tests performed but those examinations were not contemporaneous with the accident.  The court determined their findings were too remote to infer causation.  The defendants also defeated the plaintiff’s claim under the 90/180-day category with the plaintiff’s own deposition testimony stating he returned to work within the first 90 days and, in response, the plaintiff failed to show, by competent medical evidence that he was unable to engage in his normal activities.

4/9/09              Falkner v. Hand
Appellate Division, Third Department
Failure to Establish Causation also Precludes Recovery under the 90/180-Day Category Alleged in the Second of Three Accidents
The plaintiff was involved in three accidents over a two-year period.  She commenced one action for the first and second accidents, and a second action for the third.  She claimed significant limitation of use of her spine as against all three defendants, and under the 90/180-day category as against Hand, the defendant from the second accident.  All three defendants moved for summary judgment and established that the condition of plaintiff’s spine was due to preexisting degenerative disease and not the accidents.  In fact, the plaintiff’s own medical records and deposition testimony all showed a long history of back problems predating the accidents.  The plaintiff did not offer any evidence to distinguish her previous condition from the claimed injuries, or even that she suffered an exacerbation. 

The trial court found this sufficient and dismissed the claims of significant limitation of use as against all three defendants, but allowed the 90/180-day claim to continue against Hand.  On appeal, the court reversed finding that the failure to prove causation in any of the accidents also precluded recovery under the 90/180-day category asserted only in the second accident.

4/7/09              Pamphile v. Bastien
Appellate Division, Second Department
The Plaintiff’s Physicians’ Failure to Reconcile their Findings Results in Dismissal of Plaintiff’s Complaint
The defendant met his burden by submitted the plaintiff’s own deposition testimony and affirmed medical reports from his examining neurologist, orthopedist and radiologist.  In opposition, the plaintiff’s examining physicians asserted he had range-of-motion limitations in the lumbar spine and left knee but those examinations were performed over 2 ½ years after the accident.  They failed to reconcile these findings with those of the plaintiff’s treating physician who, 2 ½ weeks after the accident found the plaintiff had full range-of-motion of the knee, and, upon subsequent examination 9 months later, found no limitations of either the spine or knee.  They also did not address the MRI which, according to the defendant’s radiologist, showed only degenerative conditions in the plaintiff’s lumbar spine and left knee.

4/7/09              Niles v. Lam Pakie Ho
Appellate Division, Second Department
The Plaintiff Fails to Offer any Contemporaneous or Recent Objective Medical Evidence;  Trial Court is Reversed, on the Law
Co-defendant Jacob Express Cab’s motion for summary judgment dismissing the complaint as against it is granted.  The plaintiff claimed injury to her left knee, cervical spine or lumbar spine under the “permanent consequential limitation of use” and the “significant limitation of use” categories but the reports and records from her chiropractor and a medical group were all unsworn or unaffirmed.  The affirmed report submitted by Dr. Bhatt was from an examination which he performed 1 ½ years after the accident and there were no contemporaneous finding of range-of motion limitations of the knee, nor had the knee been examined more recently.  An MRI revealed a tear of the medial and lateral menisci, but there was no objective evidence of the extent or duration of the alleged limitation as required being evidence of a serious injury.  The court found the same evidentiary deficiencies to exist with regard to the plaintiff’s submissions regarding her cervical and lumbar spine.

4/7/09              Tuberman v. Hall
Appellate Division, First Department
Minor Limitations in ROM Do Not Amount to Significant or Permanent Limitations
The defendants had reports from an expert orthopedist, neurologist and a radiologist showing not only that the plaintiff suffered only minor ROM limitations in the right knee, lumbar spine and shoulders, but also that the abnormalities seen in the MRIs of the plaintiff’s cervical spine, lumbar spine and right knee were all degenerative and not caused by the accident.  The dismissal of the complaint is unanimously affirmed.

4/7/09              Morris v. Ilya Cab Corp.
Appellate Division, First Department
Doctor’s Advise to “Restrict Activities” is too General to Support a 90/180-Day Claim
The plaintiffs raised issues of fact by submitting objective test results explaining why the claimed injuries were permanent, MRI reports revealing disc herniation, bulging and glenoid labrum tears, and a report explaining a preexisting condition.  However, the only support for the plaintiff’s 90/180-day claim was his own testimony that he had to quit his job as a result of the accident, and the statement of his physician that he advised the plaintiff to restrict his activities.  The court finds such a statement too general to support a 90/180-day claim.

4/7/09              Nguyen v. Abdel-Hamed
Appellate Division, First Department
A “Tailored” Affidavit which Differs From Plaintiff’s Deposition Testimony Will Not Defeat Summary Judgment
The defendants used the plaintiff’s own deposition testimony to demonstrate that she was only confined to her house for two weeks and only missed a couple of days of work following the accident.  In opposition, the plaintiff submitted an affidavit which the court found was “tailored to avoid the consequences” of her deposition testimony and was, therefore, insufficient to defeat summary judgment.  The court additionally searched the record, reversed the trial court, and granted summary judgment to all the remaining defendants, as well as to the appellants.
Note:  Not only did the tailored affidavit not defeat summary judgment, it appears to have ruffled the court’s feathers.

3/31/09            Ly v. Holloway
Appellate Division, Second Department
A Recent Affirmed Report has No Probative Value if Based on Contemporaneous Unaffirmed Reports
Based on a recent examination, the plaintiff’s examining physician concluded she had limited ROM in her cervical and lumbar spines but he also relied on the contemporaneous examination and records from plaintiff’s chiropractor in reaching his conclusions.  The chiropractor’s records, however, did not quantify the restrictions allegedly found nor were they in proper evidentiary form.  The court finds that sufficient to nullify the subsequent, and properly affirmed, report of the examining physician.
Note:  In addition to failing due to her physician’s reliance on unaffirmed or unsworn records, this is yet one more case where the plaintiff’s own deposition testimony undermines her claim under the 90/180 day category.

3/31/09            McNeil v. New York City Transit Auth.
Appellate Division, Second Department
Portions of an Affirmed Report Based on Unaffirmed Findings is Not Considered
The plaintiff relied on hospital records and EMG testing which had no probative value because they were unsworn.  Even those portions of the affirmed report of her treating physician, Dr. Murphy, which were based on the unsworn findings of other doctors, were disregarded.  However, Dr. Murphy found that the plaintiff had decreased ROM in her lumbar spine following the accident and for the following four years.  He also responded to the defendant’s experts, who opined that the plaintiff had problems prior to the accident, by stating that the plaintiff’s injuries were at least aggravated by the accident and constituted a permanent consequential limitation of use of her lumbar spine.  These portions of Dr. Murphy’s report were sufficient to raise a triable issue and defeat summary judgment.

3/31/09            Magid v. Lincoln Services Corp.
Appellate Division, Second Department
Once Again, Affirmations Relying on Unsworn Reports are Out
Yet again a plaintiff attempts to raise a triable issue of fact in opposition to summary judgment by submitting affirmations based upon the unsworn or unaffirmed records and reports of others, and fails.  Here, even though the affirmations revealed the existence of significant ROM limitations, they did not offer any admissible evidence of those limitations that were contemporaneous with the accident and that were in admissible form. 
Note:  The pattern which becomes evident is that a plaintiff must demonstrate restrictions with both contemporaneous and recent affirmed reports.  The repeating issue is that the contemporaneous records and reports often are not sworn or affirmed as often there was no litigation looming at the time.  When the recent affirmed report, now with views toward litigation, then compares  the recent with the contemporaneous findings, those comparisons are “without probative value” because they are based on the ‘unsworn findings of others’ contained in the contemporaneous reports.

3/31/09            Fung v. Uddin
Appellate Division, Second Department
Affirmation Must be by a Currently Licensed Doctor
Here, the defendants win a reversal.  The plaintiff’s former treating physician’s affirmation had no probative value because he was no longer licensed to practice medicine when he wrote the affirmation.  The plaintiff also failed to demonstrate the existence of any significant ROM limitations in his cervical or lumbar spine that were contemporaneous with the accident because the medical records submitted were neither affirmed nor sworn.

3/31/09            Cantave v. Gelle
Appellate Division, Second Department
Physician’s Failure to Review Medical Records From a Prior Accident Makes Conclusion that Injuries are Caused Solely by Subject Accident Speculative
The plaintiff had seriously injured his back two years earlier in another motor vehicle accident but his physicians did not review any of those prior medical records before concluding that the plaintiff’s  injuries and limitations were caused solely by the subject accident.  As a result, the court finds those conclusions speculative.  In addition, the plaintiff testified at his deposition that he went to work on the next business day after the accident and was not homebound, which demonstrated that his injuries did not qualify under the 90/180-day category. 
Note:  Another example of defendants’ use of plaintiff’s own deposition testimony to win dismissal of a claim under the 90/180-day category.

AUDREY’S ANGLES ON NO-FAULT
Audrey Seeley
[email protected]

Litigation

4/9/09  Travelers Indemnity Co. v. Rapid Scan Radiology, P.C.
Appellate Division, First Department
Master Arbitration Award Upheld – Lower Arbitrator Committed Err in Finding Fraud Defense Valid
The Master Arbitrator’s award was not vacated as there was no showing that he exceeded his authority or rendered an arbitrary or capricious decision.  The award had a rational basis in finding that the lower arbitrator erred as a matter of law in finding that Rapid Scan committed fraud as the denial was not issued on that basis and the defense was subject to the 30 day rule.

4/7/09  Alur Med. Supply, Inc. a/a/o Teresa Rodriguez v. Progressive Ins. Co.
Appellate Term, Second Department
Follow-Up Verification Request Premature Rendering Denial Untimely

The insurer failed to timely deny a claim leading to the preclusion of most available defenses.  The insurer prematurely mailed follow up verification requests rendering it without effect and consequently issued an untimely denial.

4/3/09  Metropolitan Med. Supplies, LLC a/a/o Grizel Serrano v. Eveready Ins. Co.
Appellate Term, Second Department
Plaintiff’s Summary Judgment Motion Denied as Insurer Established Lack of Medical Necessity
Plaintiff established is prima facie case to recover payment for medical supplies through the submission of an affidavit from plaintiff’s billing manager.  The court noted that if there was any deficiency in the plaintiff’s papers on proof of mailing it was cured by the insurer’s denial claim form and the insurer’s supervisor’s affidavit attesting to receipt of the supplies in question.  The court further noted that the plaintiff is not required in its prima facie case to establish its costs.

The insurer demonstrated lack of medical necessity for the medical supplies by submitting an affidavit from its supervisor and submitting the affirmed peer review.  Therefore, the plaintiff’s summary judgment motion should have been denied.

4/1/09  A.B. Med. Services, PLLC a/a/o Pierre Cameau v. Country-Wide Ins. Co.
Appellate Term, Second Department
Failure to Submit Proper Affidavit on Mailing Deems Denial Late
The insurer failed to submit proper affidavits to establish that the eligible injured person failed to appear for a scheduled independent medical examination.  The affidavit failed to properly establish that the scheduling letters were mailed.  Therefore, the denials were deemed late and the insurer was precluded from asserting a breach of the policy condition.

4/1/09  DJS Med. Supplies, Inc. a/a/o Frank Melendez v. Travelers Prop. Cas. Ins. Co.
Appellate Term, Second Department
Plaintiff Failed to Submit Proper Affidavit to Establish Prima Facie Case
Plaintiff failed to submit a sufficient affidavit from its officer to establish a foundation for the business record rule.

3/31/09  Westchester Med. Ctr. a/a/o Bartolo Reyes v. Lincoln Gen. Ins. Co.
Appellate Term, Second Department
Insurer Could Not Establish Tolling of 30 Days to Pay or Deny to Survive Summary Judgment
The insurer did not establish that its 30 days to pay or deny the plaintiff’s claim was tolled for verification based upon two letters sent to the plaintiff advising that the claim was being held pending an investigation into the loss.  The letters further indicated that there was an investigation regarding whether the eligible injured person was involved in a motor vehicle accident and that examinations under oath were being conducted.

The insurer’s argument that the 30 days to pay or deny was tolled pending receipt of a completed application for no-fault benefits (NF-2) when the insurer received a completed hospital facility form (NF-5).

Finally, the insurer did not raise a triable issue of fact that the motor vehicle accident was covered under Workers’ Compensation.  The basis for the argument was upon a hearsay statement from the insurer’s investigator.

PEIPER ON PROPERTY (and POTPOURRI)

Steven E. Peiper
[email protected]

4/02/09            Western Building Restoration Co., Inc. v Lovell Safety Mgt. Co., LLC
Appellate Division, Third Department
Despite its Many Attempts, Insured Cannot Excuse its Failure to Read and Understand its Own Policy
In this interesting case, plaintiff is a New York corporation that had begun conducting business operations in Massachusetts.  Prior to its decision to expand into the Massachusetts’s market, it had previously purchased a workers’ compensation policy through the New York State Insurance Fund.  Importantly, the policy issued by the Fund only covered injuries to workers within the State of New York. 

Four years after obtaining the policy with the Fund, plaintiff entered into a safety group which is permitted under the regulations governing workers’ compensation coverage.  Defendant served as the administrator of that group, and at some point, issued a certificate of insurance on behalf of the plaintiff.  In addition, plaintiff alleges that an employee of the group administrator also advised that plaintiff’s workers’ compensation coverage would apply to accidents which occurred outside the State of New York. 

As one may have guessed, an employee of plaintiff sustained injury while working at a jobsite in Massachusetts.  After the Fund denied on the basis that its policy was only exposed to injuries which occurred in New York, plaintiff commenced the instant action against the group administrator.  In its Complaint, plaintiff alleged causes of action for breach of contract, negligence, negligent misrepresentation, fraud, estoppel and General Business Law § 349. 

The Third Department quickly dismissed plaintiff’s causes of action based upon an alleged breach of contract where no contract could be produced which required the defendant to provide insurance advice and/or counseling.  Further, the Court noted that the policy – which was procured four years prior to plaintiff entering the safety group  and was renewed annually – did not create a contractual relationship between the parties.  Likewise, the Court also  noted that the certificate of insurance that was produced by defendant did not confer any contractual rights to any party.

In addition, the plaintiff’s claims based in negligence also failed where plaintiff could not establish that defendant owed a duty of care in this instance.  Contrary to the position advanced by plaintiff, the Court explicitly stated that defendant did not qualify as an insurance broker or insurance agent.  Indeed, its role was specifically defined under the regulations governing safety groups, and there is no indication that a group administrator will serve in the capacity as a broker/agent.  Moreover, the Court also flatly rejected the idea that the connection between plaintiff and defendant created a “special relationship” so as to create a duty of care.  Again, as no duty of care could be established, all of plaintiff’s claims sounding in negligence were dismissed. 

Finally, plaintiff’s claim under General Business Law §349 failed where it could not be established that defendant’s conduct had an impact on the general public as a whole.  As you will recall from other cases we have reviewed, a pre-requisite to any claim under GBL § 349 is that the conduct for which remedy is sought was directed toward the claimant as well as the general public

We also note that the Court indicated that even if plaintiff could establish the existence of a special relationship, or prove that defendant was an agent/broker, its claims would still fail.  This is because the policy unambiguously provided workers’ compensation coverage for  incidents which occurred within the State of New York only.  As an insured is deemed to know and understand the terms of its policy, it cannot blame another party for its failure to appreciate the plain limiting terms found within a policy that it had procured.  Further, where plaintiff attempted to create an ambiguity by comparing language found within the employers’ liability portion of the policy, the Court wisely noted that workers’ compensation coverage and employers’ liability coverage are separate and distinct grants of coverage.  Even if they were not separate and distinct, the Court noted that there was no ambiguity between the two clauses in any event. 


EARL’S PEARLS
Earl K. Cantwell, II
[email protected]


For Whom the Statute Tolls: Limits of “Continuous Representation”

In 2007, the New York Court of Appeals issued a major decision in Williamson v. PricewaterhouseCoopers LLP, 9 N.Y.3d 1, 840 N.Y.S.2d 730 (2007)  dealing with professional malpractice and negligence claims, the Statute of Limitations, and the tolling argument of “continuous representation”.  The decision was largely a victory for the accounting profession which circumscribed the use of the “continuous representation” argument to toll (extend) the statute of limitations for professional (in this case accounting) malpractice claims. 

The appeal came on by permission of the Appellate Division, First Department from an Order of the Appellate Division which reversed a prior Order of the Supreme Court which granted the accounting firm’s motion to dismiss negligence and malpractice claims concerning audits conducted from 1995 through 1999.  The decision of the Appellate Division was reversed, and, in essence, the Order of the trial court was reinstated. 

The Court of Appeals held that the continuous representation doctrine was not available to toll the limitations period in an accountant malpractice action commenced in July 2004 alleging improper audits of financial statements of investment funds for the years 1995 through 1999.  The malpractice claims accrued on the date plaintiff received the accountants’ audit opinions, and were barred by the three year statute of limitations and CPLR 214(6).  The Court of Appeals further ruled that the “continuous representation” doctrine by which the statute of limitations is sometimes tolled was not available as once the accounting firm performed services for a particular year no further work for that year was undertaken. 

Counsel for the accounting firm contended that consecutive or serial annual audits did not amount to continuous representation which would toll the statute of limitations.  Counsel for the plaintiffs argued that the applicability of the “continuous representation” doctrine was a question of fact that could not be determined prior to the development of discovery and a full factual record.  They argued that the First Department correctly held that the “continuous representation” doctrine created potential questions of fact. 

The case drew a number of amicus briefs including from the American Institute of Certified Public Accountants which argued that the relationship between the independent auditor and its client is not susceptible to application of the continuous representation doctrine, and that public policy was against subjecting auditors to basically an “indeterminate” statute of limitations.  On the other hand, attorneys for the National Association of Shareholder and Consumer Attorneys argued that companies and markets expect continuous long-term relationships between companies and their auditors, and continuous use of the same auditors can lead to errors which basically permit mistakes to be repeated year after year.  They argued that the contention that auditors would be subjected to “unlimited” liability if the continuous representation doctrine applied was simply false. 

The Court of Appeals posed the question as whether the continuous representation doctrine applied to toll the limitations period applicable to the auditing malpractice claims, and in the circumstances the Court concluded that it did not.

Beginning in or around 1990, the plaintiffs had annually engaged the accounting firm to perform a number of accounting services for the previous fiscal year including audit of and opinion of year-end financial statements.  The accounting firm was responsible for performing audits on the financial statements pursuant to generally accepted auditing standards.  After completing its inspection of the financial statements, the accounting firm issued opinions for the year audited stating that the financial statements fairly represented the financial position of the plaintiffs on December 31 of the subject year.  Critically and notably, once the annual audit services for a particular fiscal year were complete, the accounting firm did no further work for that year, at least not with respect to audit review. 

Ultimately, the plaintiff representing two investment funds discovered that, due to a former portfolio manager’s overstatements, the securities held in the funds had inflated assets, capital and profits in their respective financial statements for the years 1995 through 2000.  The result was a 40% decline in the funds’ equity value, and eventual dissolution and winding up of the funds in question.  On July 2, 2004, more than three years after the accounting firm completed its final audits of the financial statements, plaintiff commenced the action for malpractice based on the accounting firm’s alleged improper audits of financial statements for fiscal years 1995 through 2000.  Trying to invoke the “continuous representation” argument, the plaintiff alleged that the accounting firm’s services incorporated and built upon services rendered in prior years, were continuous, and performed in the same manner and for the same purposes until early 2002.  Plaintiff alleged that the audits were not conducted in accordance with generally accepted auditing standards and ignored errors in the portfolio management and valuation of the funds’ securities holdings. 

The accounting firm filed a pre-answer motion to dismiss arguing that the claims were barred by the three year statute of limitations.  Plaintiff countered that the statute of limitations was or should be tolled under the “continuous representation” doctrine because each audit was one part of continuous and inter-related services the accounting firm provided over a 12 year period from 1990 until it was discharged in February 2002. 

The trial court granted the motion to dismiss holding that the professional malpractice claims were time barred.  The court stated that the annual audits formed the only basis for the claims and that, taken together, the claims underscore that the audits constituted merely the continuation of a general professional relationship which was insufficient to toll the limitations under the “continuous representation” doctrine.  However, the Appellate Division, First Department reversed with two justices dissenting.  The majority reinstated the malpractice claims and held that the trial court should have given the plaintiff the opportunity to develop and establish the asserted fact that each audit was part of continuous and inter-related accounting services.  The dissenting judges countered that, inasmuch as these were discrete audits conducted on a year-to-year basis, the continuous representation doctrine did not apply to alter the accrual date of the causes of action.  In an unusual move, the Appellate Division itself granted defendant leave to appeal to the Court of Appeals. 

The Court of Appeals began its opinion by recognizing that an action for professional malpractice must be commenced within three years of the date of accrual, and that accrual occurs when the malpractice is committed not necessarily when the client discovers it.  In the context of an accounting malpractice claim, the claims accrued upon the client’s receipt of the accountant’s work product since that was the point that the client reasonably relies on the accountant’s skill and advice.  This is also the point when all the facts necessary to the cause of action have occurred and an injured party can allege and obtain relief in court.  Here the malpractice claims for 1995 through 1999 accrued on the date the funds received the audit opinions, and thus most were time barred unless the continuous representation doctrine applied. 

The Court of Appeals then proceeded to evaluate the “continuous treatment” doctrine, which was first recognized in medical malpractice cases.  Even in a medical context, the patient’s treatment for purposes of the doctrine did not necessarily terminate upon the patient’s last visit if further care or monitoring of the condition is explicitly anticipated by both physician and patient.  However, the rule of “continuous treatment” never applied to a continuing general relationship between a patient and a physician or to situations where the patient initiates routine, periodic examinations to check a condition. 

The Court of Appeals recognized that the rule of continuous treatment, or more appropriately continuous representation, has been applied to other types of professionals such as lawyers.  In such professional situations, the continuous representation doctrine may toll the statute of limitations if there is a “mutual understanding” of the need for further representation on the specific subject matter underlying the malpractice claim.  Thus, the argument is limited to where there is a specific mutual understanding between the parties of the need for further actions or representation on the specific subject matter underlying the malpractice claim, as opposed to merely some type of ongoing professional and work relationship. 

Getting to the case at hand, the Court of Appeals concluded that the plaintiff entered into annual engagements with the accounting firm for the provision of separate and discrete audit services for year-end financial statements.  Once the accounting firm performed services for a particular year, no further work as to that year was undertaken or contemplated.  These allegations may amount to failures within a continuing professional relationship, but not failures within a course of representation as to the particular audits that gave rise to the malpractice claims.  Even as a matter of pleading, the plaintiff could not allege that it and the defendant explicitly contemplated further work or actions regarding the annual audits and opinions.  Thus, the “mutual understanding” required for the continuous representation doctrine did not exist.  Although there may have been a continuing professional relationship, there was not a continuing representation as to the subject matter giving rise to the malpractice claims.  The main points of the Williamson case are:

  1. Continuous, ongoing relationship with a client does not necessarily mean “continuous representation” with respect to the subject matter of the malpractice claim; and
  2. For “continuous representation” to exist, the professional and the client must knowingly and mutually engage in further work and activity on the specific subject matter of the underlying malpractice claim, i.e., mere client belief or expectation is insufficient.  Another lesson for professionals is to try to limit and restrict retainers to specific times, tasks and matters to avoid “mission creep” which may muddy the waters of “continuous representation”.  Written retainer agreements setting forth the time, topic and deliverables of professional representation are of course advisable for this and many other reasons.

 

For purposes of analysis and application to other cases, the importance of Williamson is that a continuing professional relationship does not equate to continuing representation on the subject matter of the alleged malpractice.  Secondly, “continuous representation” can only arise where there is a clear mutual understanding that the professional firm will provide further or additional ongoing services in connection with that subject matter, and where there are no such facts or indications the complaint should be dismissed even as a point of pleading or on a summary judgment motion.  Defense counsel should carefully parse the complaint allegations and documents and try to segregate discrete issues and events, i.e., a particular audit report or financial statement, and move to dismiss if the statute of limitations has expired and be prepared to argue no tolling and no further “continuous representation”.  Note third that this understanding must be “mutual” – the plaintiff cannot allege only that the client thought the professional was going to “do more” with respect to the subject at hand.  There must be some admission, acknowledgement or recognition on the part of the professional that they were retained to and accepted and performed additional, ongoing or further work which might stop the statute of limitations from running. 

These thoughts and principles should be kept in mind upon any analysis of malpractice or negligence claims against attorneys, accountants, auditors, engineers, architects and other professionals as to whether all or parts of claims are time barred under the applicable statute of limitations.   



ACROSS BORDERS

               

4/9/09              Qualchoice, Inc. v. Nationwide Insurance Co.
Ohio Court of Appeals, Eighth Appellate District
Auto Policy’s Non-Assignment Clause Not Applicable to Non-Named Insured Seeking Medical Payment Coverage
Kimberly Gale-Page was involved in an automobile accident while allegedly operating a motor vehicle owned by Linda Borom for which Nationwide Insurance Company (“Nationwide”) provided coverage. Nationwide’s policy provided for payment of usual, customary and reasonable medical expenses/charges relating to an auto accident. Gale-Page had health insurance coverage with QualChoice, Inc. (“QualChoice”), which paid for Gale-Page’s medical care allegedly related to the accident in the amount of $823.39. QualChoice filed suit against Nationwide seeking recovery through subrogation from the auto no-fault medical payments coverage for its participant, Gale-Page. The trial court denied Nationwide’s motion for summary judgment, granted QualChoice’s motion for summary judgment and entered judgment in QualChoice’s favor in the amount of $823.69. On appeal, Nationwide contended that the trial court erred (1) in granting summary judgment in favor of QualChoice, (2) in rendering judgment in favor of QualChoice, (3) in denying Nationwide’s motion for summary judgment and (4) in considering QualChoice’s claims because they did not fall within the jurisdiction of a common pleas court. The Court of Appeals affirmed in part, reversed in part, and remanded the matter for further proceedings. The court sustained Nationwide’s first assignment of error finding there were genuine issues of material fact remaining. With respect to Nationwide’s third assignment of error, the court found the policy’s non-assignment clause which precluded an insured from transferring any interest or benefit under the policy without written consent, was not applicable to Gale-Page or her subrogees since she was not the named insured on the policy and because Ohio law prohibits application of policy provisions to be applied to a non-named insured who seek medical payment coverage. Finally, the court held that the trial court had jurisdiction and was not prohibited by law from hearing the matter. In so holding, the court stated that even assuming ERISA applied to the benefits offered by QualChoice, subrogation claims by ERISA benefit plans are governed by state law and are not preempted and the effect of state law to the matter was incidental in nature.
Submitted by: Bruce D. Celebrezze & Erin J. Volkmar (Sedgwick, Detert, Moran & Arnold LLP)