Dear Coverage Pointers Subscribers
This should be the last week of the summer drought of appellate decisions. The courts gear up again and we should be receiving the steady drumbeat of interesting insurance opinions in the weeks to come. The issue published one year ago, right after Labor Day, reported on four cases, the year before, six. The floodgates will open soon and we'll be back up to our usual 20 - 40 decisions in no time.
Few Things are as Nice as Being Recognized by One's Peers
Hurwitz & Fine Tops Lawyers List
Hurwitz & Fine, P.C. is proud to announce
that 10 of the firm's attorneys were identified by other lawyers as outstanding
in their respective fields in the 2008 New York Super Lawyers magazine.
This multi-phase selection process surveys attorneys across the state to
determine which counsel have attained a high degree of peer recognition and
professional achievement. Only 5% of lawyers make the final list. The firm is
especially proud to comprise nearly 15% of the even more select list of the Top
50 New York Super Lawyers from all of Upstate New York (the entire state
outside of the NYC metro area and Westchester). Additionally, one of our lawyers
was named to the list of the Top 25 Female New York Super Lawyers and one
to the Top 10 New York Super Lawyers in all of Upstate New York in that
Robert P. Fine: Business/Corporate, Top 50
Lawrence C. Franco: Business/Corporate, Top 50
Dan D. Kohane: Insurance Coverage, Top 50
Ann E. Evanko: Employment & Labor, Top 50/Top 25 Female
Harry F. Mooney: Personal Injury Defense: Products, Top 50
Roger L. Ross: Real Estate
Paul J. Suozzi: Personal Injury Defense
Lawrence M. Ross: Health Care, Top 50
Michael F. Perley: Personal Injury Defense, Top 10/Top 50
Andrea Schillaci: Business Litigation
Speaking Engagements and Engaging Speakers
We'll see some of you in Syracuse today for the Law Schools for Claims Professionals program. I'm a last minute relief pitcher on the topic of Additional Insured Issues. Steve Peiper and I will be speaking in Buffalo on September 19th with Steve speaking on bad faith issues and yours truly discussing Notice, Late Notice and Disclaimers. Of course, we can provide training at your shop on these topics or others.
Update on Consequential Damages and Bi-Economy
We're about six months post-Bi-Economy and as predicted, the cases applying it are starting to trickle in. We reported on an earlier Appellate Division case in Hoffman in our May 16th edition. There have been a couple of US District Court cases, on in the Southern District of New York and another from Kansas which have referenced the high court's decisions. In this week's edition, Steve Peiper reviews a lower court decision - in a case called Handy and Harman v. AIG, from NY Supreme (our trial level court) handed down this week. Justice Cahn, well-regarded in that court, refuses to throw out a claim for consequential damages against an insurer. More trouble to come, no doubt.
Look at this dangerous language from the Handy and Harman decision, involving an environmental clean-up policy and wonder aloud whether it can and will be applied to virtually any kind of policy in the future:
As the Court of Appeals found in Bi-Economy Mkt., Inc. v Harleysville Ins. Co. of N.Y., plaintiff here asserts that this was not a pure agreement to pay or a contract for money only. . Rather, it is claimed that the purpose of this insurance policy -- what plaintiff planned to do with the payment -- was at the very core of the contract. Plaintiff bargained for this policy not only so that it could be paid the policy amount, but so that it also could have "the peace of mind or comfort, of knowing that it will be protected in the event of a catastrophe" .
It was purchased by plaintiff to protect it from the calamity of unforeseen and monumental environmental clean-up costs, and avert risk with regard to such costs and liabilities. Moreover, the particular circumstances of this insurance contract know by the parties at or prior to contracting, point to the foreseeability of consequential damages. For example, the site was being dug up and pollution conditions being remediated, with the purpose that the site was to be redeveloped.
By delaying and failing to investigate, plaintiff contends that the site is further on the road to redevelopment and no longer open or easily inspected, resulting
in further foreseeable harm in the form of increased costs and difficulty of proof. It is therefore claimed that, in light of the nature and purpose of this pollution liability policy and the circumstances of the policy, the claim for consequential damages was within the contemplation of the parties as a probable result of a breach at the time of or prior to contracting.
Thus, plaintiff' has sufficiently alleged a claim for consequential damages for breach of the covenant of good faith, all of which are incorporated into the first cause of action for breach of contract.
From Audrey Seeley, our No Fault guru, we offer you these words:
There is a healthy dose of cases for you again this edition. Many speak of the slow summers with the courts but I can honestly say that none of the courts have taken a vacation when it comes to no-fault. Most of the cases continue to address the issue of whether the plaintiff's evidence is in admissible form. There is an interesting insurance department opinion out regarding whether a medical provider can directly bill a patient, after taking an assignment of benefits, when the policy limit has been exhausted. The insurance department concluded that the medical provider can do so if there is no other available insurance coverage. Yet, the medical provider is still bound to the fee schedule rate for the medical bills.
Baseball and Nap Rucker
Instant replay now available to review home run calls? Tell me it ain't so!
Thanks for all the great feedback on the Superbas and the Doves.
One hundred years ago today, Nap Rucker
pitched a no-hitter for the Brooklyn Superbas (now the LA Dodgers).
Nap Rucker was one of the Deadball Era's top
left-handed pitchers. Brooklyn's winning percentage was an even .500 when the
hard-throwing Southerner got the decision, but without him the Superbas played
.430 ball, losing 175 more games than they won. "The Rucker appendage is the
only thing that has kept Brooklyn in the league," wrote the New York Herald,
while the Brooklyn Eagle lamented that "the fates have tied him up with
an aggregation that has steadfastly refused to make a bid for championship
honors." Still, the gentlemanly Rucker loved pitching for the blue-collar
borough. "It's got New York beaten by three bases," he told a reporter in 1912.
"You can get a good night's rest in Brooklyn. You meet more real human beings in
Brooklyn. Your life is safer in Brooklyn."
In 1906, the Brooklyn team drafted Rucker for $500. The 22-year-old rookie earned a $1900 salary and went 15-13 and lead the team in innings (275), strikeouts (131), and ERA (2.06). The following year, he won 17 games for a team that lost 101. The highlight came at Washington Park on September 5, 1908, when he pitched a no-hitter, striking out 14 Boston Doves. Rucker stayed with the Dodgers until 1916 and ended up with a lifetime record of 134-134, with 28 percent of those victories coming by shutout
Earl Cantwell discusses federal expert witness disclosure in this regular column this week. Another great read .
Enjoy the waning days of summer .
All the best
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,
Audrey A. Seeley
Steven E. Peiper
and Subrogation Team
Andrea Schillaci, Team Leader
Jody E. Briandi
Steven E. Peiper
Audrey A. Seeley, Team Leader
Jody E. Briandi, Team Leader
Scott M. Duquin
Index to Special Columns
Starosielec’s Serious Side of “Serious Injury”
Peiper on Property
9/2/08 Medrano v. State Farm Fire & Casualty Company
Appellate Division, Second Department
In Case Involving Food Fight and
Tossed Trash Can, Homeowners Carrier has Obligation to Defend Tosser
Medrano, a teacher’s aid in a Queens middle school was monitoring students in a cafeteria when a food fight erupted. She was injured when the Robert Filer tossed a garbage can in the air which struck her.
Medrano sued Filer, alleging negligence, careless and recklessness. Filer’s parents had a homeowners policy with State Farm and State Farm denied, alleging that the incident did not qualify as an “occurrence” under the policy and contained an exclusion for a claim for bodily injury that either was expected or intended by the insured or was the result of willful and malicious acts of the insured.
Medrano commenced an action declaring that State Farm was obligated to defend and indemnify Flier. Apparently nobody challenged her standing to do so, as she had no standing under Lang v. Hanover.
The lower court denied State Farm’s motion for summary judgment based on the allegations of negligence in the complaint and based on a review of Flier’s deposition testimony which indicated a lack of intent to injure the plaintiff. Not surprising, the Appellate Division affirmed.
State Farm failed to demonstrate its entitlement to judgment as a matter of law since it did not show that the allegations of the complaint fell wholly outside coverage or within any valid policy exclusion. The allegations of negligence in the complaint implied an unintentional or unexpected event which potentially gives rise to a covered claim as against Filer (see Barry v Romanosky, 147 AD2d 605).
The plaintiffs and Filer demonstrated their prima facie entitlement to judgment as a matter of law by submitting evidence that Filer did not intentionally cause injury to the plaintiff, and that although such injury may have been the unintended result of Filer's conduct, it was not the result of a willful and malicious act.
In the Matter of Interboro Insurance Company v. Rienzo
Appellate Division, Second Department
Prior Arbitration Against Tortfeasor where Damages are Assessed did Not Prohibit Insured from Pursuing Underinsured Claim
For reasons unclear from the opinion, Interboro argued that the insured could not pursue an underinsurance claim because a decision in a previous case. It appears from the citation to a previous decision, that the plaintiff/insured had been a party to a previous arbitration against the tortfeasor and perhaps the SUM carrier wanted to use the damage award there to collaterally estop the insured from seeking a larger judgment. The Appellate Division held that the claimant could relitigate the award and directed the arbitration to proceed. However, the carrier was entitled to have the applicant submit to an examination under oath and a physical examination, and to furnish pertinent medical documentation or authorizations for the petitioner to obtain that documentation, prior to arbitration.
9/2/08 In re Ancillary Receivership of Reliance Insurance Company
Appellate Division, First Department
What is a Claim under a “Claims Made” Policy? Split Court Decides that Letter Seeking Information About Evil Conduct is Not a Claim
At issue is whether a letter received by an insured constitutes a "claim" within the meaning of a claims-made insurance policy. Although the term is undefined in the insurance contract, the Superintendent of Insurance, as Ancillary Receiver for Reliance Insurance Company, contended that a letter be treated as a claim. The court decides that a letter, which neither makes any demand for payment nor advises that legal action will be forthcoming, is insufficient to state a claim.
Yale Club of New York was the insured under two "claims-made" insurance policies issued by Lloyds, London and Reliance, providing directors and officer’s liability coverage for the years ending on November 23, 1993 and November 23, 1994, respectively. In August 1993, while plaintiff was insured under the Lloyds policy, it received a letter from an attorney representing certain waiters and other employees at the Yale Club who alleged to have been "deprived of tips and bonuses." The letter requested information to enable compliance with counsel's stated "obligation to make a reasonable inquiry into the facts before filing a pleading with the courts."
Plaintiff never notified Lloyds about the letter. In February 1994, after coverage had commenced under the Reliance policy, the attorney instituted an action against plaintiff on behalf of 13 Yale Club employees represented by his firm. Plaintiff notified the Reliance of the claim the following month. Reliance disclaimed coverage in April 1994 on the ground that the August 1993 letter (which defendant terms "The Originating Letter") constituted notice of a claim made.
The Reliance policy excluded coverage to liability for acts for which claims are first made against the insured while the policy is in force." The Superintendent (Reliance) contended that the August 1993 letter constitutes a claim made against the Yale Club's officers and directors as at the time the letter was received the employees' union had accused the Club of financial improprieties, defendant argued that in context the letter "could not have been viewed in any other light than as a claim"
The policy did not define the term “claim.” The court noted that that while the “disputed letter certainly conveys the suggestion that a lawsuit was being contemplated, it also states unequivocally that counsel was seeking information in connection with his obligation to determine whether legal action was warranted.” It was noted that the letter did suggest that the Yale Club's actions variously "constitute criminal violations, as well as civil violations of RICO and the New York State Labor Law, and fraud and conversion."
Since counsel's letter to plaintiff falls “far short of a demand for money or services” and since the term “claim” was undefined as needs to construed against the carrier, it was held not to be a claim made before the policy period.
The next question was whether the letter was sufficient to
make plaintiff aware of “occurrence which may subsequently give rise to a claim
being made,” which, under a separate section of the policy, required notice at
the inception of the policy period. Perhaps, but Reliance did not advance this
ground for denying coverage so the issue of the timeliness of the notice of
claim is not preserved for appellate review.
Editor’s Note: A strong, two-judge dissent argues (and again, I side with the dissent) that the letter could not have been clearer). It claimed that the insured committed bad, bad acts and cost the plaintiffs squillions of dollars in losses. Court of Appeals, here they go …
STAROSIELEC’S SERIOUS (INJURY) SIDE OF NEW YORK NO FAULT
9/2/08 Charley v. Goss
Appellate Division, First Department
Long Opinion Affirming
Defendants’ MSJ Provides Good Overview on SI Threshold
In a very lengthy opinion, the Appellate Division affirmed the lower court order which had granted defendants’ motion for summary judgment. Almost as lengthy was the dissent.
The lower court held the plaintiff failed to raise a triable issue of fact under the 90/180 day category. After a brief overview of threshold motions for summary judgment, the Appellate Division held that initially defendants shouldered their burden of establishing, prima facie, that plaintiff did not sustain a serious injury. Defendants submitted the affirmed report of Dr. Charles Totero, a board certified orthopedic surgeon, who conducted an IME of plaintiff, during which he viewed various ranges of motion and performed a number of objective tests. Dr. Totero also viewed plaintiff's prior medical records. He opined that MRIs of the cervical and lumbar spines documented minimal degenerative changes with bulging discs only. No herniations or nerve root impingement was documented. Further, he opined that based on the objective evidence in this case, that no disability exists at this time as it pertains to the accident. Defendants also rely on plaintiff's deposition testimony, in which she claims to have missed only two weeks of work (in contrast to her verified bill of particulars, which states she returned to work after only six days).
Plaintiff, in response, submitted the affirmed medical report of Dr. Post, who had one "orthopedic consultation" with plaintiff almost three years after the accident. Dr. Post, unlike Dr. Totero, reviewed only the narrative reports of plaintiff's MRI studies, and not the films themselves. Dr. Post's report addresses plaintiff's subjective complaints of recurring discomfort, tenderness and pain, but fails to list any objective orthopedic tests performed, and neglects to adequately, or in some cases, even peripherally explain plaintiff's cessation of treatment, All concur except Tom, J.P. and Renwick, J. who dissent in a memorandum by Renwick, J. as follows:
The dissenting stated that plaintiff also alleged serious injury under the "permanent consequential limitation of a body organ or member" and "significant limitation of use of a body function" and in this case the burden never shifted to plaintiff. If the defendant meets this burden, the plaintiff can provide a medical expert's designation of a numeric percentage of a loss of range of motion or an expert's qualitative assessment of the plaintiff's condition to raise a triable issue of fact.
A defendant fails to meet his or her initial burden when he or she relies upon an examining physician's report which identifies limitations or restrictions (or lack thereof) in a part of the body where the plaintiff claims to have sustained a consequential or significant injury, but which does not sufficiently quantify or qualify the resulting limitations so as to establish that they are permanent or significant. In support of their motion for summary judgment, defendants submitted various records of plaintiff and an affirmed report from Dr. Totero. His report falls short of meeting the principles set forth in Toure. He noted the existence of "limited flexion of [plaintiff's] lumbar spine," and "mild to moderate decreased of range of motion" in plaintiff's cervical spine. However, the doctor failed to set forth numerical values for his observations with respect to plaintiff's lumbar and cervical spine or provide the normal range of motion so as to permit meaningful comparison. Nor did Dr. Totero provide a qualitative assessment of plaintiff's condition. Absent such comparative quantification or qualitative assessment, this Court can only speculate as to the significance of the findings.
8/26/08 In the Matter of the Arbitration Between Applicant and Respondent
Arbitrator Veronica K. O’Connor (Erie County)
Extended Medical Leave Payments, If Not Diminished or Exhausted, Qualify As An Offset.
The Applicant, eligible injured person, challenged an insurer’s ability to take Extended Medical Leave payments as an offset, under 11 NYCRR §65-3.16(b)(1)(i), to her lost wage claim. The assigned arbitrator held that the insurer was entitled to take the payments as an offset.
The applicable portion of the regulation provides that an insurer, when determining lost wages, cannot take an offset unless Insurance Law Article 51 expressly permits the offset. Under Insurance Law §5102(a)(2), an insurer cannot take as an offset statutory or contractual wage continuation plans that are diminished or exhausted as payments are made or when accumulated sick time is utilized.
The Applicant’s employer’s sick leave policy provided for a continuation of pay and benefits when an employee was absent for non-work related injuries. The policy further indicated that sick leave could not be taken before accrued. The Applicant’s employer’s Extended Medical Leave policy provided employees with continued pay and benefits when unable to work due to non-work related injuries. That policy further provided that accrued sick leave is used during the first seven calendar day waiting period and thereafter the extended medical leave payment is triggered for a maximum of 26 weeks. The Applicant’s employer advised that the Extended Medical Leave payment was a per occurrence benefit. Accordingly, the benefit was not a contractual wage continued plan that was diminished or exhausted as payments were made.
8/19/08 Carothers, MD, PC a/a/o Eduard Skverchak v. GEICO Indemnity Co.,
Appellate Term, Second Department
Dr. Carothers Will Be Produced Again for Testimony On The Fraudulent Incorporation Issue
Defendant appealed from the denial of its motion to amend its answer to assert two affirmative defenses of fraudulent incorporation and lack of standing as well as summary judgment in plaintiff’s favor on the issue that the plaintiff was a real party in interest. The court held that the defendant should have been permitted to amend its answer to include the affirmative defense of fraudulent incorporation since the plaintiff failed to demonstrate prejudice or surprise. Yet, the defendant’s motion to amend its answer to assert lack of standing was properly denied as the defendant already asserted the defense in its answer.
The defendant’s motion to compel the deposition of Dr. Carothers should have been granted as well since the plaintiff failed to move for a protective order.
Finally, the plaintiff’s summary judgment motion should have been denied as the court granted the deposition of Dr. Carothers, who could provide facts to establish the defendant’s affirmative defense of lack of standing.
8/19/08 Quality Health Products, PC a/a/o Malik Bunnche v. Progressive Ins. Co.
Appellate Term, Second Department
Summary Judgment Partially Denied As Issue of Fact on Medical Necessity Based Upon Peer Review Report.
Plaintiff’s summary judgment motion was improperly granted as to those bills denied based upon a peer review report. The defendant’s affidavit in opposition established that verification, follow up verification, and the denials were timely mailed. Further, the court stated, even thought the issue was not preserved for appeal, that the defendant’s peer review report created an issue of fact. The peer review report set forth the factual basis and medical rationale for the determination that the medical supplies provided were not medically necessary.
8/19/08 Mid Atlantic Med., PC a/a/o Reginald Smalls v. Victoria Select Ins. Co., Appellate Term, Second Department
Collateral Estoppel Defense Not Applicable Where Plaintiff Not A Party To Prior Action
Plaintiff moved for summary judgment and defendant cross-moved to dismiss the complaint pursuant to CPLR §3211(a)(5) based upon a prior Virginia court order rescinding the insurance policy. The court held that the defendant must raise this basis prior to a responsive pleading and defendant’s cross-motion was properly denied.
Turning to the plaintiff’s summary judgment motion, the court rejected the defendant’s opposition on the basis of collateral estoppel due to the uncertified Virginia court order as the plaintiff was not a party to that action. The court, reviewing the defendant’s evidence, did conclude that there was sufficient evidence to raise a triable issue of fact as to whether the plaintiff’s assignors sustained injuries arising out of an insured accident. Therefore, plaintiff’s motion should have been denied.
8/19/08 NK Acupuncture a/a/o Taniya Smith-Jones v. Travelers Indemnity Co., Appellate Term, Second Department
Insurer’s Motion for Change of Venue Granted
The defendant’s motion for change of venue from Kings County to Queens County was granted. The defendant argued that it was a foreign corporation and did not transact business in Kings County. The plaintiff could only oppose the motion by conclusory stating that the defendant did transact business within Kings County. Due to this, the defendant’s motion was properly granted.
8/19/08 NYC East-West Acupuncture, PC a/a/o Ah Kow Lock v. Maryland Cas. Co., Appellate Term, Second Department
Plaintiff Waived Any Objection to Sufficiency of Defendant’s Out of State Affidavit
Plaintiff’s summary judgment should have been denied as it failed to submit an affidavit that would establish personal knowledge of the office practices and procedures for business records.
The defendant’s cross-motion should have been granted. While the defendant’s examiner submitted an out of state affidavit that did not have the certificate of conformity as required by CPLR 2309(c) and Real Property Law §299-a, this issue was never raised by the plaintiff below and any objection now was waived. Moreover, the defendant’s cross-motion was unopposed and should have been granted.
8/19/08 Crossbridge Diag. Radiology, PC a/a/o Andre Sarjoo v. Progressive Ins. Co.,
Appellate Term, Second Department
Plaintiff’s Failure to Submit Evidence to Rebut Defendant’s Expert Report Fatal
The defendant moved, pursuant to CPLR 603, to sever the plaintiff’s causes of action. The plaintiff cross-moved for summary judgment and the defendant cross moved from summary judgment. The court properly determined that plaintiff established it prima facie case entitled to summary judgment. Further, the court also properly determined that the defendant rebutted the presumption of medical necessity. Yet, the plaintiff failed to submit any further evidence in support of its position that the services rendered were medically necessary. Due to this, the defendant’s cross motion for summary judgment was properly granted.
8/19/08 Midisland Med., PLLC a/a/o Denis Cantave v. Allstate Ins. Co.
Appellate Term, Second Department
Treating Physician’s Affirmation Insufficient to Establish Prima Facie Case
Plaintiff’s motion for summary judgment was improperly granted. The defendant, on appeal, asserted that the plaintiff failed to establish its prima facie case as there was no affirmation from plaintiff’s officer to have the bills admitted as business records. The plaintiff argued that it was not required to as it submitted an affirmation from the treating physician who signed the claim forms. The court rejected this argument as the plaintiff is required to present evidence that the bills were mailed in admissible form and the physician’s affirmation submitted in this case was insufficient.
7/30/08 State of New York Insurance Dept. Office of Counsel General Opinion
AOB Ineffective Once Policy Exhausted But Physician Still Limited to Fee Schedule on Bills
If a medical provider accepts an assignment of benefits from a patient then the medical provider cannot attempt to bill the patient directly. This opinion addresses the question of what happens if the policy limits are exhausted. If the policy limits are exhausted can the medical provider begin billing the patient directly for the services. This opinion indicates that once the policy limits are exhausted the assignment of benefits is no longer effective. The patient and the medical provider should look to other available insurance coverage, i.e., private health insurance. If other insurance coverage is available then the medical provider should consult with the contractual arrangement with that insurer for billing.
In the event the patient has no other insurance coverage available the medical provider can bill the patient directly for the services. HOWEVER, the medical provider can only bill the patient at the workers’ compensation fee schedule rate for the services. The fact that the policy limit was exhausted has no effect on the requirement under Insurance Law §5108 that the medical provider charge at the workers’ compensation fee schedule rate.
PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper
08/26/08 Handy & Harman v American International Group, Inc., et al
Supreme Court, New York County
Bi-Economy Expanded – Court Permits Consequential Damages Claim to Proceed under
an Environmental Pollution policy.
In this matter, plaintiff purchased an insurance policy from defendant (“AIG”) to cover “environmental pollution liabilities” related to a remediation project of a former metal manufacturing plant in Fairfield, Connecticut. Among the risks underwritten, the Court indicated that AIG agreed to cover losses related to clean-up costs which resulted from pollution on, or underground, the premises insured (hereinafter referred to as “coverage ‘A’). In addition, the policy also covered plaintiffs for losses in excess of an agreed upon self insured retention limit which were identified in a “Remedial Plan” which was also submitted prior the policy’s inception (coverages “K” and “L”, respectively).
Apparently, the costs of the clean up exceeded the pre-agreed to self insured retention limit, and as such AIG paid its policy limit under coverage “L”. In late December of 2005, plaintiff learned of additional environmental clean up costs, and accordingly sought coverage under the AIG policy in question. AIG responded to plaintiff’s requests for coverage by denying the claim on the basis that plaintiff’s liability limits were exhausted by the previous claim under coverage “L”.
By way of letter dated June 20, 2006, Plaintiff’s took the position, however, that the current claim also triggered coverage under coverage “A” of the policy, which had limits that were not exhausted by the previous claim. On July 14, 2006, AIG again responded by stating that claims might have been provided under coverage “L” prior to its exhaustion, and declining to provide protection under coverage “A”. Plaintiff again requested that AIG reassess its coverage position in letter dated August 4, 2006.
Next, by way of October 6, 2006 letter, AIG, for the first time, indicated that there was no coverage available to plaintiff because the initial notice of additional pollutants was not a “claim” under the policy. Again, by letter dated February 9, 2007, plaintiff’s counsel requested that AIG reconsider its position. In response, AIG again denied coverage upon the basis that there was no “claim” under the Policy, and that even if a “claim” had been made coverage “A” did not apply. Plaintiff’s counsel again responded on July 26, 2007, and argued that AIG had failed to investigate plaintiff’s request for coverage.
AIG denied coverage for a final time on November 7, 2007, and indicated that plaintiff had now failed to cooperate with AIG’s investigation for failing to provide certain documentation. Almost immediately thereafter, plaintiff commenced the present action alleging breach of contract, bad faith and consequential damages against plaintiff. In support of its claim, plaintiff alleged that AIG’s failure to investigate and delay in responding were indicative of its breach of the covenant of good faith. AIG responded by moving to dismiss the claims of bad faith and consequential damages for failure to state a cause of action.
The Good News: The Trial Court dismissed plaintiff’s claim for bad faith. In support of this decision, the Court noted that plaintiff was not entitled to extra-contractual damages on a “bad faith” argument where it was unable to “state a separate tort claim for the breach of the duty of good faith” (***Please Note – In so holding, the Court applied the NYU and Rocanoava tests which have defined First-Party Bad Faith for more than the last decade. This, as we had hoped, implies that the holding of Bi-Economy Mkt. v Harleysville Ins. Co of NY does not apply to bad faith claims).
More Good News: The Trial Court also dismissed plaintiff’s claims for attorneys’ fees; therein citing the long standing principle that an insured is not entitled to attorneys’ fees when it seeks to enforce the terms of an insurance policy.
The Bad News: In reliance upon the Court of Appeals decision in Bi-Economy Mkt., Inc. v Harleysville Ins. Co of N.Y. (and its sister case Panasia Estates, Inc. v Hudson Ins. Co.), the Trial Court noted that plaintiff’s claims for consequential damages were permissible. In so holding, the court stated that AIG’s delay and lack of investigation was sufficient to sustain a cause of action for a breach of to the duty of good faith.
Further, the court explained that a breach of the covenant of good faith, which the court stated was implicit in all contacts, could give rise to “expected” extra-contractual damages (ie., consequential damages). Importantly, the Trial Court spent a considerable amount of time discussing the fact that the possibilities of consequential damages were a probable result of breach at the time of the contract. Significantly, the court noted that “[p]laintiff purchased the insurance so that it could avoid financial pressure on its business upon funding the costs of a pollution remediation.”
As such, the court ruled that plaintiff had stated a cause of action for both breach of the insuring agreement, as well as a claim breach of the covenant of good faith (permitting the imposition of consequential damages).
(*** In this decision, the court indicated that delay and lack of investigation are grounds for a claim for consequential damages. However, reading the decision, it is implied that simply a mistaken reliance upon a policy provision is not enough, standing alone, to sustain an allegation of a breach of the covenant of good faith. This is an issue that was left unexplained in Bi-Economy and Panasia Estates, accordingly, and it gets one step closer to defining what will constitute a claim for consequential damages in the future. What is still unclear is if both delay and failure to investigate were needed, or if the court would have permitted the claim with only delay or failure to investigate. We will continue to monitor this one, and let you know how it plays out at the Appellate Division***).
Earl K. Cantwell, II
Playing “20 Questions” With Expert Witnesses
Some jurisdictions, such as New York State, retain the old practice of trial by ambush with respect to expert witnesses. Disclosures are often conveniently served a month before trial and reveal little or nothing about a projected trial expert, leading one to start asking “20 Questions,” such as whether the expert is living or dead, and going from there. However, under the Federal Rules of Civil Procedure, much more extensive disclosure of expert witness testimony is required, usually at a much earlier stage of the proceedings, which, for example, sets the stage for depositions of expert witnesses, which are almost never held under archaic New York State practice. The following is a brief summary of the rather stringent and extensive expert witness disclosures required under the Federal Rules of Civil Procedure, as opposed to the scant disclosures under New York State practices:
The key aspect of federal expert witness disclosure is a written report, which must be actually prepared and signed by the witness (not counsel). The report must contain at least the following items:
? A complete statement of all opinions the witness will express at trial, and the bases and reasons for them;
? The data or other information considered or relied upon by the witness in forming and expressing the opinions;
? Copies of any notes or exhibits that will be used to summarize or support the testimony;
? The expert witness’s qualifications, including a list of all publications authored within the previous ten years;
? A list of all other cases in the past four years where the witness testified as an expert at trial or at a deposition; and
A statement or summary of the compensation to be paid for the expert’s study
and testimony in the case.
The foregoing list is much more extensive, for example, than expert witness disclosure required under New York State practice. Case law and anecdotal experience also indicate that the federal courts are more prone to hold a party and an expert within the confines of the items and opinions disclosed in the report, and refuse to allow an expert to express an opinion not disclosed or use an exhibit not previously produced. If you have a case in federal court or in a state whose practice is parallel to the Federal Rules, the expert witness report should be closely scrutinized to be sure it includes all of the required items, and its content committed to memory as to what opinions, exhibits, and information were disclosed.
Many federal court pre-trial orders also require disclosure of expert witness testimony even before the conclusion of discovery, so as to accommodate expert witness depositions. This allows a party much more time to depose an expert and to investigate and evaluate the expert’s claims or contentions. Technically, under Rule 26, unless there is a stipulation or court order otherwise, expert witness disclosure must be made at least 90 days before the date set for trial, which is also significantly more time to prepare than the approximately 30-day period provided in the CPLR.
In short, the Federal Rules of expert witness disclosure provide much more detail and time in which to prepare and evaluate an expert brought forth by an opposing party, in contrast to New York State practice, where expert witness submissions are made very close to trial and contain little if any information, forcing one to begin to ask the series of “20 Questions,” such as, is he/she living or dead? Is the expert a male or female? Etc.
section of the Federation of Defense & Corporate Counsel website,
www.thefederation.org. Dan Kohane
served as the FDCC President from 2006 – 2007 and was a founder of its website.
8/21/08 Lloyd’s of London v. Pagan-Sanchez
First Circuit Court of Appeals
Insurer’s Payment of Claim
Excused by Insured’s Breach of Warranty
The plaintiffs, a group of insurance companies and underwriters including Lloyd’s of London, Gothaer Versicherungen AG, Great Lakes Reinsurance (UK) PLC, and ING Insurance SA, issued an insurance policy to William Pagan-Sanchez. The policy, which was effective between January 31, 2003 to January 31, 2004, provided hull, machinery, and liability coverage for Pagan-Sanchez's recently purchased forty-three-foot pleasure boat. The policy was embodied in a twelve-page insuring agreement which included a three-page section entitled “General Conditions & Warranties.” One of the contract warranties provided that: “If the scheduled vessel is fitted with fire extinguishing equipment, then it is warranted that such equipment is properly installed and is maintained in good working order. This includes the weighing of tanks once a year and recharging as necessary.” On July 19, 2003, as the boat was traveling to an island off of Puerto Rico, an exhaust hose came loose on the boat and it began taking on water through the exhaust system. Attempts to pump out the water were unsuccessful, and the boat flooded and sank.
The insured submitted a claim to the plaintiffs for the loss of the boat and salvage operations, and the plaintiffs commenced an investigation into the incident. The investigation showed, among other things, that the loss of the boat was caused by wear and tear, gradual deterioration, and lack of maintenance, that the vessel’s fire extinguishing equipment had not been inspected or certified within the preceding year, and that the automatic engine room fire extinguisher system had been disconnected prior to the loss. There was no finding that the condition of the fire extinguishing equipment had any relation to the sinking of the boat. The plaintiffs sought a declaratory judgment in federal district court in Puerto Rico that the breach by the insured of the insurance policy’s fire extinguisher warranty precluded payment of the insured’s claim. Plaintiffs moved for summary judgment, were denied, and appealed. The First Circuit Court of Appeals reversed and directed entry of judgment in favor of the plaintiff insurers. The court first concluded that the fire extinguisher clause was a clear and unambiguous promissory warranty on the part of the insured, and that the insured breached the warranty. Next, the court held that the effect of the insured’s breach was to excuse the insurers from payment. It reasoned that, although Puerto Rican law was silent on the issue, the majority rule was that a breach of a promissory warranty in a maritime insurance contract excuses the insurer from coverage. Because Puerto Rico has not stated a contrary rule, the court saw no reason not to apply the majority rule.
Bruce D. Celebrezze and Nicholas J. Boos, Sedgwick, Detert, Moran and Arnold LLP
8/20/08 James River Ins. Co. v. Ground Down Engineering, Inc.
Eleventh Circuit Court of Appeals
Court Upholds Pollution
Exclusion Applying Florida Law
The insurer appealed the trial court’s dismissal of its declaratory judgment action and denial of its summary judgment motion concerning the “pollution exclusion” in a case involving the insured’s failure to discover construction debris and fuel tanks during an environmental site assessment. The appeals court reversed in favor of the insurer finding that the “pollution exclusion” applied and there was no duty to defend. The appellate court rejected the argument that the “pollution exclusion” requires that the insured be the polluter and that the exclusion itself was overly broad.
Submitted by: Gerald A. Melchiode, Galloway, Johnson, Tompkins, Burr and Smith
In re Ancillary Receivership of Reliance Insurance Company
The Yale Club of New York City, Inc., Plaintiff-Respondent, Reliance Insurance Company in Liquidation, Defendant-Appellant.
Defendant appeals from an order
and judgment (one paper) of the Supreme Court, New York County (Michael D.
Stallman, J.), entered February 23, 2007, which confirmed a Referee's report
finding coverage under the subject policy, and awarded damages in favor of
plaintiff insured and against defendant.
Herzfeld & Rubin, PC, New York (David B. Hamm
and Abraham David of
counsel), for appellant.
Cone & Kilbourn, Mount Kisco (Joseph A. Kilbourn
of counsel), for respondent.
At issue is whether a letter received by an insured constitutes a "claim" within the meaning of a claims-made insurance policy. Although the term is undefined in the insurance contract, defendant Superintendent of Insurance, as Ancillary Receiver for Reliance Insurance Company, contends that case law dictates that the letter be treated as a claim. Since there is an ambiguity as to what constitutes a claim under the Reliance policy, such ambiguity must be construed against the insurer under the doctrine of contra proferentum. In the context of ongoing attempts by the union representing the insured's employees to resolve the parties' dispute, the letter, which neither makes any demand for payment nor advises that legal action will be forthcoming, is insufficient to state a claim.
Plaintiff Yale Club of New York was the insured under two "claims-made" insurance policies issued by Lloyds, London and Reliance, providing directors and officers liability coverage for the years ending on November 23, 1993 and November 23, 1994, respectively. In August 1993, while plaintiff was insured under the Lloyds policy, it received a letter from an attorney representing certain waiters and other employees at the Yale Club who alleged to have been "deprived of tips and bonuses." The letter requested information to enable compliance with counsel's stated "obligation to make a reasonable inquiry into the facts before filing a pleading with the courts." There is no evidence that plaintiff ever notified Lloyds about the letter. In February 1994, after coverage had commenced under the Reliance policy, the attorney instituted an action against plaintiff on behalf of 13 Yale Club employees represented by his firm [FN1]. Plaintiff notified the insurer of the claim the following month. Reliance disclaimed coverage in April 1994 on the ground that the August 1993 letter (which defendant terms "The Originating Letter") constituted notice of a claim made. After Reliance went into liquidation, defendant, as Ancillary Receiver on behalf of the Liquidation Bureau of the New York State Insurance Department (Insurance Law § 7404), resisted payment of plaintiff's claim for indemnification of its litigation expenses.
The issue of the August 1993 letter's effect on the insurer's liability to plaintiff was submitted to a Referee, who found that "the letter was merely a request for information; the claim was properly filed after the Reliance coverage began." In opposition to plaintiff's motion to confirm the Referee's report, defendant took the same position as he does on appeal: "The waiters' claims against The Club here were first made in The Originating Letter, three months prior to and completely outside of the policy period and were therefore clearly outside of the policy coverage." Defendant relied on the limitation contained in Section I of the Reliance policy and in a notice printed at the top of the policy endorsements, which states, "Except as may be otherwise provided herein, the coverage of this policy is limited to liability for acts for which claims are first made against the insured while the policy is in force." Defendant also invoked Section VII of the policy, entitled "Notice of Claim," which provides:
"A. If, during the Policy Period . . . the Company or the
Directors and Officers:
"(1) shall receive written or oral notice from any party that it is the intention of each [sic] party to hold the Directors and Officers, or any of them, responsible for a Wrongful Act; or
"(2) shall become aware of any occurrence which may subsequently give rise to a claim being made against the Directors and Officers, or any of them, for a Wrongful Act;
"and if the Company or Directors and Officers shall in either case during such period give written notice as soon as practicable to the Insurer . . . then any claim which may subsequently be made against the Directors or Officers arising out of such Wrongful Act, shall, for the purpose of this policy, be treated as a claim made during the Policy Year."
Defendant contended that the August 1993 letter constitutes a claim made against the Yale Club's officers and directors. Noting that, at the time counsel's letter was received by plaintiff, the employees' union had accused the Club of financial improprieties, defendant argued that in context the letter "could not have been viewed in any other light than as a claim." Defendant concluded that because the letter was received prior to the date the policy commenced, the claim arose outside the policy period, and the insurer was under no obligation to reimburse plaintiff for its defense and settlement costs.
As the Court of Appeals has observed, "The best evidence of what parties to a written agreement intend is what they say in their writing" (Slamow v Del Col, 79 NY2d 1016, 1018 ). Where the meaning of the contract language is clear and unambiguous, it is determined by the court as a matter of law (Hartford Acc. & Indem. Co. v Wesolowski, 33 NY2d 169, 171-172 ). Courts must neither add, excise nor modify the terms of an agreement; nor may a court distort the meaning of an agreement under the guise of interpretation (see Vermont Teddy Bear Co. v 538 Madison Realty Co., 1 NY3d 470, 475 ). Where the contract at issue is an insurance policy, any exclusion from coverage must be stated unambiguously (see Oot v Home Ins. Co. of Ind., 244 AD2d 62, 69 ), and any ambiguity must be resolved against the insurer as drafter of the policy's language (see Matter of Mostow v State Farm Ins. Cos., 88 NY2d 321, 326 ).
The operative question before this Court is the meaning to be ascribed to the word "claim," a term that defendant concedes is undefined in the Reliance policy. While the disputed letter certainly conveys the suggestion that a lawsuit was being contemplated, it also states unequivocally that counsel was seeking information in connection with his obligation to determine whether legal action was warranted. Moreover, the letter does not even state that the purpose of any such action would be the recovery of civil damages, merely alleging that the Yale Club's actions variously "constitute criminal violations, as well as civil violations of RICO and the New York State Labor Law, and fraud and conversion."
The failure of the Reliance policy to provide any definition of "claim" presents an ambiguity that defendant invites this Court to resolve by speculating as to the parties' intent. This approach must be rejected because New York law ascribes no generally accepted meaning to the term in the context of a claims-made policy (see Andy Warhol Found. for Visual Arts, Inc. v Federal Ins. Co., 189 F3d 208, 215  [purporting to resolve the ambiguity by formulating a definition "gleaned" from federal case law]). In those New York cases involving the issue of when a claim arose for the purposes of coverage, the term has been defined in the policy as, for instance, "a demand received by the Insured . . . for money or services" (Evanston Ins. Co. v GAB Business Servs., 132 AD2d 180, 185 ; see also Purcigliotti v Risk Enter. Mgt. Ltd., 240 AD2d 205, 206 ; Heen & Flint Assoc. v Travelers Indem. Co., 93 Misc 2d 1, 4  ["'Claim' includes a judgment, arbitration award or any demand for money or services resulting from an actual or alleged act or omission covered hereunder"]).
Counsel's letter to plaintiff falls far short of a demand for money or services (Retirement Fund of the Fur Mfg. Indus. v Republic Ins. Co., 755 F Supp 625 [SD NY 1991], affd 948 F2d 1275 [2d Cir 1991]), or even the expression of a present intent to initiate legal proceedings (see In re Ambassador Group, Inc. Litig., 830 F Supp 147, 155 [ED NY 1993]). Any action that might have been contemplated in pursuit of the employees' claim is implicitly conditioned upon the outcome of counsel's investigation of its merit. Thus, the letter received by plaintiff is not "an assertion of a legally cognizable damage, . . . a type of demand that can be defended, settled and paid by the insurer" (Evanston Ins. Co., 132 AD2d at 185).
Supreme Court properly confirmed the Referee's finding that Section VII of the Reliance policy is immaterial to the question of whether the letter constitutes a claim. Since the Notice of Claim provision of Section VII(A)(1) is expressly limited to "written or oral notice" received "during the Policy Period," and it is undisputed that the letter was received prior to the effective date of the policy, subsection (1) is inapposite by its express terms.
Arguably, the letter was sufficient to make plaintiff aware of "occurrence[s] which may subsequently give rise to a claim being made," thereby obliging plaintiff to give Reliance notice of the potential claim "as soon as practicable." Thus, as the dissenters argue, it could be said that plaintiff, having been in possession of purported notice of the potential claim at the inception of the policy period on November 23, 1993, but having failed to give notice of the claim to Reliance until March 1994, defaulted on its obligation to give the insurer notice "as soon as practicable" under Section VII(A)(2) of the notice provision. However, defendant did not advance this basis for avoiding liability under the policy before Supreme Court; nor does defendant raise it on appeal, confining his argument in both instances to the assertion that the claim arose outside the policy period. Thus, the issue of the timeliness of the notice of claim is not preserved for appellate review (see Telaro v Telaro, 25 NY2d 433, 438 ; Recovery Consultants v Shih-Hsieh, 141 AD2d 272, 276 , citing Huston v County of Chenango, 253 App Div 56, 60-61 , affd 278 NY 646 ), and defendant is barred from raising it (see Oot, 244 AD2d at 71).
Defendant does not contend that coverage is precluded by any exclusion contained in the Reliance policy. As pertinent to this dispute, Section V excludes any loss "which is insured by another valid policy" or "for which the Directors and Officers are entitled to indemnity and/or payment by reason of having given notice of any circumstances which might give rise to a claim under any policy or policies the term of which has expired prior to the inception date of this policy." Since there is no indication that plaintiff gave notice to Lloyds of the employees' claim and since neither the Lloyds policy nor any other affords coverage, these exclusions are inapplicable. Defendant's sole basis for seeking reversal of the judgment against the Liquidation Bureau is his contention that the claim arose prior to the inception of the Reliance policy and, thus, outside the scope of its coverage.
Defendant's contention lacks a sound factual predicate. To sustain his attack on the judgment would require this Court to assign an expansive meaning to the term "claim" under uncertain and contentious circumstances. It is uncontested that the workers on whose behalf the letter sought information were represented by a union, and it is apparent that the union was engaged in efforts to resolve the dispute on their behalf and on behalf of the rest of its members employed at the Yale Club. Plaintiff's mere awareness that an action was being contemplated by the attorney for the 13 Yale Club employees was hardly tantamount to notice that an action would be brought, since his investigation could have revealed that suit was unwarranted or subsequent events could have rendered an action unnecessary. The mere awareness of alleged wrongdoing is not a "claim" within the meaning of the typical claims-made policy (see Purcigliotti, 240 AD2d at 206).
Defendant's contention that the letter is a claim relies on the happenstance that an action was ultimately commenced, and it depends wholly on post hoc ergo propter hoc reasoning [FN2]. Without the advantage of hindsight, defendant's contention that the "letter must be recognized as containing a claim first made prior to the policy period, rendering subsequent pleading of that claim outside the coverage of the policy," must be rejected as speculative.
While, at the time of the August 1993 letter, plaintiff was aware of facts that might possibly have led to litigation, it was equally aware of, and participating in, ongoing negotiations with the employees' union, which included alternative dispute resolution. As defendant conceded in opposition to plaintiff's motion, the claim purportedly communicated in counsel's letter was asserted only on behalf of certain Yale Club employees who "did not want to be represented by Local 6," the Hotel, Restaurant & Club Employees and Bartenders Union. In view of the union's participation in efforts to resolve the dispute, it was by no means clear that independent legal action by some of its members would be necessary, appropriate or even permissible under the terms of the governing collective bargaining agreement [FN3]. Even if plaintiff could be said to have been aware of the viability of an action limited to those employees disaffected by the union's representation of their interests, a fact not in evidence, settlement of the dispute or legal action undertaken by the union itself would have obviated any such independent lawsuit. Under these circumstances, the subject letter requesting documents and information in support of counsel's "inquiry into the facts" does not suffice to state a demand for payment so as to warrant the conclusion that a claim arose at such time (Evanston Ins. Co., 132 AD2d at 185).
American Ins. Co. v Fairchild Indus., Inc. (56 F3d 435 [2d Cir 1995]), relied upon by the dissenters, does not require a contrary result. In that case, involving insurance coverage for an environmental violation, discussions conducted well before the manufacturer received the letter alleged to constitute a claim made it clear that the New York State Department of Environmental Conservation intended to require Fairchild Industries to remedy the environmental hazard. The court specifically declined to hold the letter to be a "claim" (a term similarly undefined in the policy) "because no New York case has as of yet addressed that precise issue" (id. at 440).
The Circuit Court presumed to draw a distinction between the effect of a notice of "claim" and a notice of "occurrence" with respect to the insured's obligation to notify the carrier. This approach was specifically rejected in Reynolds Metal Co. v Aetna Cas. & Sur. Co. (259 AD2d 195  [involving primary liability insurance policies]), in which the Third Department stated:
"we perceive no reason why a failure to give a timely notice of claim should not be excused by an insured's good-faith belief in nonliability or noncoverage. It appears illogical that insureds should be required to promptly notify insurers of every claim no matter how remote the possibility of liability or coverage but be excused from doing so if a reasonable evaluation of an occurrence yields the same conclusion" (id. at 201).
As a final point, the language of the Reliance policy's notice of claim provision does not assist defendant's attempt to exclude plaintiff's loss from coverage. The provision only applies if the insured, "during the policy period . . . shall become aware of any occurrence which may subsequently give rise to a claim being made" (emphasis added). It does not by its terms exclude a claim of which the insured had become aware prior to the effective date of the policy (cf. Fogelson v Home Ins. Co., 129 AD2d 508, 509  [explicitly excluding "any acts or omissions occurring prior to the effective date of this policy if the Insured at the effective date knew or could have reasonably foreseen that such acts or omissions might be expected to be the basis of a claim or suit"]). "To negate coverage by virtue of an exclusion, an insurer must establish that the exclusion is stated in clear and unmistakable language, is subject to no other reasonable interpretation, and applies in the particular case" (Continental Cas. Co. v Rapid-American Corp., 80 NY2d 640, 652 ). The notice of claim provision is not an exclusion, does not apply by its express language and is therefore subject to a contrary interpretation.
Accordingly, the order and judgment (one paper) of the Supreme Court, New York County (Michael D. Stallman, J.), entered February 23, 2007, which confirmed a Referee's report finding coverage under the subject policy, and awarded damages in favor of plaintiff insured and against defendant, should be affirmed, without costs.
All concur except Friedman and Catterson, JJ. who dissent in an Opinion by Catterson, J.
CATTERSON, J. (dissenting)
Because in my opinion the attorney's letter of August 12, 1993, on behalf of the non-party Yale Club waiters constituted a claim, and that claim was made outside the subject policy period, I respectfully dissent. I believe that disclaimer of coverage by Reliance was warranted, and that therefore the order appealed should be reversed.
The issues in this case arise out of a "claims-made" insurance policy (hereinafter referred to as "the policy") issued by Reliance Insurance Company (hereinafter referred to as "Reliance") to The Yale Club of New York City, Inc. (hereinafter referred to as "the Yale Club"). The policy's effective dates were from November 23, 1993 through November 23, 1994. It covered only "claims first made during the policy period."
In the policy, the term "claim" was not defined. "Loss" was defined as "any amount which the directors and officers [were] legally obligated to pay" because of their "[w]rongful [a]cts." Reliance obligated itself to pay "all Loss" that arose from the directors'/ officers' wrongful acts associated with claims that were "first made during the policy period." Section VII of the Policy, entitled "Notice of Claim," provided in relevant part that:
"A. If, during the [p]olicy [p]eriod or [d]iscovery [p]eriod, the [c]ompany or [d]irectors and [o]fficers:
"(1) shall receive written or oral notice from any party that it is the intention of each party to hold the [d]irectors and [o]fficers, or any of them, responsible for a [w]rongful [a]ct; or
"(2) shall become aware of any occurrence which may subsequently give rise to a claim being made against the [d]irectors and [o]fficers, or any of them, for a [w]rongful [a]ct,
"and if the [c]ompany or [d]irectors and [o]fficers shall in either case during such period give written notice as soon as practicable to the [i]nsurer... then any claim which may subsequently be made against the [d]irectors or [o]fficers arising out of such [w]rongful [a]ct, shall, for the purpose of this policy, be treated as a claim made during the [p]olicy [y]ear."
On August 12, 1993, more than three months prior to the Reliance policy period, the Yale Club received a letter (hereinafter referred to as "the Letter") from an attorney representing 11 Yale Club waiters "with respect to wage claims."[FN1]
The Letter arrived after a series of conversations between the Yale Club and the waiters' union regarding allegations made by the waiters concerning wrongfully distributed commissions. The Letter was sent on behalf of a group of waiters who had declined union representation regarding their individual claims.[FN2]
From its very first sentence, the Letter could not have been a plainer statement that its subject matter was the claim being made on behalf of certain named employees of the Yale Club. The sentence read: "Please be advised that our office represents the above named employees of the Yale Club with respect to wage claims..." In the Letter, the waiters claimed, among other things, "that they [had] been deprived of tips and bonuses which amount to hundreds of thousands, and probably, millions, of dollars." The Letter further alleges that "[t]he deprivation of these monies constitute[s] criminal violations, as well as civil violations of RICO and the New York State Labor Law, and fraud and conversion." It requests 13 sets of relevant documents and information, as well as insurance information.
Significantly, the Letter states that pursuant to court rules "counsel is under an obligation to make a reasonable inquiry into the facts before filing a pleading with the courts." It is reasonable to assume that were it not for "court rules", counsel would have already filed the summons and complaint.
Subsequently, on February 14, 1994, the waiters commenced an action in the District Court for the Southern District of New York alleging tip withholding, denial of wages, nonpayment of overtime, RICO violations and racial discrimination. On February 22, 1994, upon receipt of the summons and complaint, the Yale Club notified Reliance. On April 12, 1994, Reliance denied coverage on the grounds that the claims against the Yale Club were first made in the Letter and therefore were made prior to the policy period.
On April 7, 2000, the Yale Club settled with the waiters for $370,000. Shortly thereafter Reliance went into liquidation and the Yale Club submitted a proof of loss to its Ancillary Receiver for the sum of the $370,000 settlement, plus $405,005.07 in attorney fees, as well as interest at 9% from May 2000. Like Reliance, the Ancillary Receiver of Reliance asserted that the date of the Yale Club's receipt of the Letter constituted the date upon which the waiters' claims were first made, and, since this date occurred prior to the policy period, denied coverage.
The Yale Club and the Ancillary Receiver attended a hearing on June 13, 2006, which culminated in a written decision dated August 17, 2006. In the decision, the referee determined that the Yale Club's claim was covered by the Reliance Policy. Specifically, the referee determined that the Letter "was merely a request for information" and that the claim was properly filed after the Reliance coverage began.
Upon the Yale Club's motion to confirm, the court upheld the referee's decision. The court did not determine whether the Letter constituted a claim. Rather, the court determined "that the [L]etter might have otherwise constituted a notice of claim under Section VII had it been sent during the policy period does not lead to the flawed conclusion that it was a notice of claim outside the policy period."
On appeal, the Ancillary Receiver maintains that the content of the Letter supports a finding that the Letter was "a claim" made, and that such claim predated the Reliance Policy and, thus, fell outside its coverage. The Club, relying on In re Ambassador Group, Inc. Litig. (830 F. Supp 147 (E.D.N.Y. 1993)), argues that the Letter was not "a claim" because the Letter did not make a demand for specific relief. Rather, the Yale Club asserts that the Letter "merely requested some documents and information." While indicating indirectly that there was a possibility of a future lawsuit, the Letter was, essentially, a mere inquiry. The Yale Club argues that it properly gave notice of "a claim" to Reliance upon its receipt of a summons and complaint, which was after the policy period had started to run and thus, it is entitled to recovery from Reliance.
For the reasons set forth below, I agree with the position taken by the Ancillary Receiver on behalf of Reliance. It is well settled that an insurance policy is a contract between the insurer and the insured and governs the agreement between them. See White v. Continental Cas. Co., 9 NY3d 264, 267, 848 N.Y.S.2d 603, 605, 878 N.E.2d 1019, 1021 (2007) (equating insurance policies with other written contracts) citing Teichman v. Community Hosp. of W. Suffolk, 87 N.Y.2d 514, 520, 640 N.Y.S.2d 472, 474, 663 N.E.2d 628, 630 (1996). Thus, Reliance, pursuant to the terms laid out in the policy, contractually obligated itself to cover only those claims that were first made within the policy period.
The majority's assertion that the only issue on this appeal is whether there was a claim made during the policy period, is incorrect. That would be a facile analysis since it is uncontested that the Yale Club informed Reliance of the summons and complaint during the policy period. The relevant question, however, is whether there was a claim made prior to the Reliance policy period such that Reliance may properly deny coverage because a claim was first made outside of the policy period. In my opinion, there was just such a claim made prior to the policy period in the Letter.
Courts have long recognized that undefined, unambiguous terms in insurance policy are given their ordinary meaning. White, 9 N.Y.2d at 267, 848 N.Y.S.2d at 605, 878 N.E.2d at 1021. Here, even though the word "claim" is not specifically defined in the Reliance policy, "claim" should be given its ordinary understanding of a demand by a third party against the insured for money damages or other relief owed. See e.g. American Ins. Co v. Fairchild Indus., Inc. 56 F.3d 435 (2d Cir. 1995) (where the court interpreted a standard New York claim provision as being "an assertion by a third party that in the opinion of that party the insured may be liable to it for damages within the risk covered by policy" and stated that "[a claim] must relate to an assertion of legally cognizable damage, and must be a type of demand that can be defended, settled and paid by the insurer,'" quoting Evanston Ins. Co.v.GAB Bus. Servs., 132 A.D.2d 180, 185, 521 N.Y.S.2d 692, 695(1st Dept. 1987) (where "a claim" was specifically defined in the agreement); see also Home Ins. Co. of Illinois v. Spectrum Info. Tech., Inc., 930 F. Supp 825, 846 (E.D.N.Y. 1996) citing In re Ambassador Group, 830 F. Supp. at 155 (stating that "the term claim' as used in liability insurance policies is unambiguous and generally means a demand by a third party against the insured for money damages or other relief owed").
In my view, to treat the Letter as anything other than a "claim" would require this Court to ignore the entire substance of the Letter. The second paragraph of the Letter commences: "They claim, among other things, that they have been deprived of tips and bonuses which amount to hundreds of thousands, and probably, millions, of dollars." The paragraph continues to enumerate four ways the third-party waiters suspected that their wages and tips were being improperly withheld. The Letter continues with the claim that "[t]he deprivation of these monies constitute[s] criminal violations... and fraud and conversion."
The fact that the waiters claimed that the Yale Club was guilty of conversion of their tips is necessarily the equivalent of demanding remuneration for those tips. See PJI 3:10 ("A person who, without authority, intentionally exercises control over the property of another person and thereby interferes with the other person's right of possession has committed a conversion and is liable for the value of the property.")
Moreover, the Letter did not arrive in a vacuum: it arrived after a meeting between the Yale Club and the waiters' union, after an attempted arbitration and after a discontinued lawsuit all regarding matters that were clearly related to the claims asserted in the Letter. Finally, the Letter describes itself as a mere court-mandated precursor to a lawsuit.
Further, I contend that both the Yale Club and the majority improperly cite to the nonbinding U.S. District Court opinion in Ambassador to support their contention that the Letter was not a claim because it was not a "demand for money or services." In Ambassador, the state insurance commissioner sent two letters to the insurer stating that it "had uncovered facts which [led] him to conclude that certain former directors and officers were guilty of acts falling within the scope of coverage afforded by the ... policy."[FN3] In re Ambassador Group, Inc. Litig., 830 F. Supp. at 151 (E.D.N.Y. 1993). The policy did not define the term "claim" and the District Court held that neither of the two letters in question constituted a claim as the term is normally viewed. Id.
In reaching its decision, the Ambassador court relied heavily upon the fact that the policy characterized the reporting of a "claim" to the insurer as giving notice and the reporting of a "claim" directly to the directors and officers as the making of a claim. Id. at 154. The court also relied upon the fact that the letters under evaluation did not specify an alleged wrongdoing nor did they contain a demand for relief. Id. at 155. Thus, the Ambassador court found that the letters in question did not constitute a claim. Id. at 156.
Notwithstanding, Ambassador is distinguishable from the instant case insofar as in this case, the Letter very clearly alleges wrongdoing. Furthermore, in Ambassador, the letters were sent to the insurance company and here, the Letter was sent directly to the directors and the officers of the Yale Club who had knowledge of the ongoing dispute with the wait staff over tips. This fact clearly undercuts the majority's characterization that the Letter constituted merely a notice of a potential claim. See also Retirement Fund of the Fur. Mfg. Indus. v. Republic Ins. Co., 755 F. Supp. 625 (S.D.N.Y. 1991), aff'd, 948 F.2d 1275 (2d Cir. 1991) (disputed letter was not found to be a "claim" in part because the letter was sent to the insurer and not the party against whom a claim was later made).
Finally, in my opinion, the majority is mistaken in taking its analysis no further than the determination that the summons and complaint filed during the policy period are the only relevant "claim." Under the majority's interpretation of the contract, since the summons and complaint constitute the claim, then the Letter would have triggered an obligation of notice of claim to Reliance pursuant to section VII (A)(1) had it arrived during the policy period. Obligation to give notice of a claim "as soon as practicable" would also have been triggered by the Club's officers and directors becoming aware [during the policy period] of an occurrence that could give rise to a claim. The majority's position is that neither eventuality occurred here.
However, the Club's officers and directors were certainly aware by the time they received the Letter that the dispute with the waiters would give rise to a lawsuit. The fact that they were aware of this by the first day of the policy period rather than becoming aware of it on the first day of the policy period is a metaphysical distinction that should not be argued here and should not foreclose the insurer's right to disclaim coverage. It would be the height of absurdity to differentiate between the acts of becoming aware and being aware of an occurrence as of the policy period. It is undisputed that as of the start of the policy period with Reliance, the Yale Club was aware that a lawsuit was pending on the grounds of alleged wrongdoings by its officers and directors. This triggered the obligation pursuant to the terms of the policy to give the insurer notice as soon as practicable, that is on the first day of the policy period, thus allowing the insurer the option of rescinding or cancelling the policy or excluding the event from coverage.
THIS CONSTITUTES THE DECISION
OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.
ENTERED: SEPTEMBER 2, 2008
Footnote 1: Counsel also commenced a 1996 action in Bronx Supreme Court and a 1999 action in Federal District Court for the Southern District of New York.
Footnote 2: In fact, several actions were commenced asserting most of the grounds mentioned in the letter. The merit of the various causes of action was never judicially determined since the parties entered into a stipulation resolving the litigation.
Footnote 3: A federal lawsuit was brought by the union alleging deficiencies in plaintiff's contribution to various union funds. It was discontinued with prejudice by stipulation dated August 4, 1993 in favor of alternative dispute resolution.
Footnote 1:At the time the Letter was received in August 1993, the Yale Club had a one-year insurance policy with non-party Lloyds, London, effective November 23, 1992 through November 23, 1993.
Footnote 2:It is clear that the Yale Club was aware that these waiters had declined union representation by virtue of a letter sent by the Yale Club to the vice president of the waiter's union on May 5, 1993 which acknowledged that several waiters "did not want to be represented by [the union]."
Footnote 3:More specifically, the first letter stated that the "Commissioner ha[d] uncovered facts which [led] him to conclude that certain former directors and officers were guilty of acts falling within the scope of coverage afforded by the ... policy, resulting in losses to the estate of the Ambassador." The letter concluded that National Union was thereby "given notice of a claim." The second letter stated, "[L]et me assure you that we have read carefully and researched thoroughly the coverages available under the subject policy. We are also aware that claims pressed against directors and officers on behalf of the Commissioner as receiver are to be presented directly to those directors and officers. We have written you in accordance with the policy provision regarding notice of occurrence and to allow you an opportunity to commence any investigation you feel necessary." Id. at 151-152.
Medrano v. State Farm Fire & Casualty Company
Kelly, Rode & Kelly, LLP, Mineola, N.Y. (George J. Wilson
and John Hoefling of counsel), for defendant-appellant.
VoutÉ, Lohrfink, Magro & Collins, LLP, White Plains, N.Y.
(Kevin P. Fitzpatrick of counsel), for
Preston Wilkins Martin & Rodriguez LLC, New York, N.Y.
(Gregory R. Preston of counsel), for
DECISION & ORDER
In an action for a judgment declaring that the defendant State Farm Fire & Casualty Company has an obligation to defend and indemnify the defendant Robert Filer, an infant by his parents and natural guardians, Robert Filer and Marcia Filer, in an underlying personal injury action entitled Medrano v Filer, pending in the Supreme Court, Queens County, under Index No. 20919/03, the defendant State Farm Fire & Casualty Company appeals, as limited by its brief, from so much of an order and judgment (one paper) of the Supreme Court, Queens County (Hart, J.), entered May 11, 2007, as granted the plaintiffs' motion for summary judgment declaring that it is so obligated, granted the cross motion of the defendant Robert Filer, an infant by his parents and natural guardians, Robert Filer and Marcia Filer, for summary judgment declaring that it is so obligated, denied its cross motion for summary judgment, and declared that it is obligated to defend and, if necessary, indemnify the defendant Robert Filer, an infant by his parents and natural guardians, Robert Filer and Marcia Filer, in the underlying action.
ORDERED that the order and judgment is affirmed insofar as appealed from, with one bill of costs payable to the respondents appearing separately and filing separate briefs.
On March 28, 2003, at approximately 1:00 P.M., the plaintiff Elsa Medrano (hereinafter the plaintiff), a teacher's aide, was working at Middle School 202 in Ozone Park. She was monitoring a student in the cafeteria, when a food fight broke out among eighth-grade students. The defendant Robert Filer threw a garbage can into the air, which struck the plaintiff and injured her.
The plaintiff and her husband, suing derivatively, commenced a personal injury action alleging that Filer negligently, carelessly, and recklessly caused the plaintiff's injuries. At the time of the injury, Filer's parents were insured under a homeowner's insurance policy issued by the defendant State Farm Fire & Casualty Company (hereinafter State Farm). State Farm issued a disclaimer letter and denied liability coverage for the claims asserted against Filer in the personal injury action stating, inter alia, that the alleged incident did not qualify as an "occurrence," which is defined in the policy as an accident, and that the policy contained an exclusion for a claim for bodily injury that either was expected or intended by the insured or was the result of willful and malicious acts of the insured.
The plaintiffs commenced this action for a judgment declaring that State Farm is obligated to defend and indemnify Filer in connection with the underlying personal injury action. The Supreme Court granted the plaintiffs' motion for summary judgment declaring that State Farm is so obligated, granted Filer's cross motion for the same relief, and denied State Farm's cross motion for summary judgment. The court reasoned, in part, that the complaint in the underlying action alleged negligence. It further based its determination on the deposition testimony of Filer, which indicated a lack of intent to injure the plaintiff, ruling that this was sufficient to bring the underlying personal injury action within the parameters of the policy, and to create a duty to defend. We agree.
The State Farm policy defines an "occurrence" as an accident which results in bodily injury, and the policy's bodily injury exclusion states that coverage does not apply to bodily injury which was either expected or intended by the insured or was the result of willful or malicious acts of the insured. State Farm failed to demonstrate its entitlement to judgment as a matter of law since it did not show that the allegations of the complaint fell wholly outside coverage or within any valid policy exclusion. The allegations of negligence in the complaint implied an unintentional or unexpected event which potentially gives rise to a covered claim as against Filer (see Barry v Romanosky, 147 AD2d 605).
The plaintiffs and Filer demonstrated their prima facie entitlement to judgment as a matter of law by submitting evidence that Filer did not intentionally cause injury to the plaintiff, and that although such injury may have been the unintended result of Filer's conduct, it was not the result of a willful and malicious act (see Slayko v Security Mut. Ins. Co., 98 NY2d 289, 293; Allegany Co-op Ins. Co. v Kohorst, 254 AD2d 744, 745; Baldinger v Consolidated Mut. Ins. Co., 15 AD2d 526, affd 11 NY2d 1026). In opposition, State Farm failed to raise a triable issue of fact.
Accordingly, the Supreme Court
properly awarded summary judgment to the plaintiffs and Filer, properly denied
State Farm's cross motion for summary judgment, and properly declared that State
Farm is obligated to defend Filer in the underlying personal injury action (see
Frontier Insulation Contrs. v Merchants Mut. Ins. Co., 91 NY2d 169, 175;
Fitzpatrick v American Honda Motor Co., 78 NY2d 61, 65-66; Seaboard Sur.
Co. v Gillette Co., 64 NY2d 304, 310-311).
SANTUCCI, J.P., ANGIOLILLO, ENG and CHAMBERS, JJ., concur.
Kahn Gordon Timko & Rodriques, P.C., New York (Thomas B. Grunfeld of counsel), for appellant.
Law Offices of Brian J. McGovern, LLC, New York (Alison M. K. Lee of counsel), for respondents.
Order, Supreme Court, New York County (Deborah A. Kaplan, J.), entered May 9, 2007, which granted defendants Goss and Conroy's motion for summary judgment dismissing the complaint as against them, affirmed, without costs.
This is a personal injury action which arises out of a motor vehicle accident that occurred on February 14, 2004 at the intersection of West 31st Street and Dyer Avenue in Manhattan. Plaintiff asserts that she was the front-seat passenger in a vehicle owned and operated by defendant Nelson when it came into contact with a vehicle owned by defendant Conroy and operated by defendant Goss. Plaintiff declined medical treatment at the scene and first sought medical attention, according to her deposition testimony, "a few days after" the incident.
Plaintiff subsequently commenced this action in February 2005, alleging that she had sustained a serious injury as defined in Insurance Law § 5102(d). Defendants Goss and Conroy, after issue was joined and discovery conducted, moved for summary judgment dismissing the complaint as against them on the ground that plaintiff failed to meet the serious injury threshold. The motion court, in a decision and order entered on May 9, 2007, granted the motion and dismissed the complaint against the moving defendants, holding, inter alia, that "the plaintiff has failed to demonstrate an inability to perform substantially all of the material acts that constituted her usual and customary duties for 90 of the 180 days following the accident [and] offers contradictory reasons for her cessation of or gap in treatment." Plaintiff testified that she stopped treatment because she could no longer afford it, as emphasized by the dissent, but subsequently seems to have reported to Dr. Post, who submitted a medical report in opposition to defendants' motion, that there had been some improvement in her condition at the time treatment was discontinued, although some discomfort persisted. Plaintiff appeals, and we now affirm.
The Court of Appeals has often stated that the " legislative intent underlying the No-Fault Law was to weed out frivolous claims and limit recovery to significant injuries'" (Toure v Avis Rent-A-Car Sys., 98 NY2d 345, 350 , quoting Dufel v Green, 84 NY2d 795, 798 ). In that vein, the Court of Appeals has rejected the contention that the question of whether a plaintiff has sustained a serious injury is always a question of fact for the jury and, instead, has held that the issue of whether a claimed injury falls within the statutory definition of a "serious injury" is a question of law for the courts in the first instance, which may properly be decided on a motion for summary judgment (Licari v Elliott, 57 NY2d 230, 237 ; Rubensccastro v Alfaro, 29 AD3d 436, 437 ).
Once the proponent of a motion for summary judgment has set forth a prima facie case that the injury is not serious, the burden then shifts to plaintiff to demonstrate, by the submission of objective proof of the nature and degree of the injury, that he/she did sustain such an injury, or that there are questions of fact as to whether the purported injury was "serious" (Toure, 98 NY2d at 350; Cortez v Manhattan Bible Church, 14 AD3d 466 ). Moreover, "even where there is medical proof, when additional contributory factors interrupt the chain of causation between the accident and claimed injury such as a gap in treatment, an intervening medical problem or a preexisting condition summary dismissal of the complaint may be appropriate" (emphasis added) (Pommells v Perez, 4 NY3d 566, 572 ; see Perez v Rodriguez, 25 AD3d 506, 508 ).
Initially, we find that defendants shouldered their burden of establishing, prima facie, that plaintiff did not sustain a serious injury within the statutory definition. Defendants submitted the affirmed report of Dr. Charles Totero, a board certified orthopedic surgeon, who conducted an independent medical examination of plaintiff, during which he viewed various ranges of motion and performed a number of objective tests. Dr. Totero also viewed plaintiff's prior medical records, including MRI films, and concluded, among other things, that "[m]otor and sensory are grossly intact . . . [t]here is negative Hawkins, negative drop arm, and negative impingement sign. Negative Neer sign. Motor and sensory to the upper extremities are intact." Dr. Totero further opined that:
"MRIs, of the cervical and lumbar spines documented minimal degenerative changes with bulging discs only. No herniations or nerve root impingement was documented. Electrodiagnostic studies of the upper and lower extremities showed no evidence of lumbar or cervical radiculopathy. An MRI of the right shoulder documented pre-existing hypertrophic changes of the AC joint with a tendonitis present (emphasis added).
"The above orthopedic physical examination documents no objective orthopedic findings at this time. The claimant is currently working in her prior capacity. She is undergoing no active treatment at this time."It is my opinion, based on the objective evidence in this case, that no disability exists at this time as it pertains to the incident of 2/14/04 and the above diagnoses. She requires no further diagnostic testing and/or treatment, and may carry on normal work and daily activities, without restrictions."
Defendants also rely on plaintiff's deposition testimony, in which she claims to have missed only two weeks of work (in contrast to her verified bill of particulars, which states she returned to work after only six days), and that she stopped all medical treatment after approximately four months.
Plaintiff, in response to defendants' motion, submitted the affirmed medical report of Dr. Paul Post, who had one "orthopedic consultation" with plaintiff on December 11, 2006, almost three years after the accident. Initially, we find a review of Dr. Post's report to be revealing in that Dr. Post, unlike Dr. Totero, reviewed only the narrative reports of plaintiff's MRI studies, and not the films themselves. Moreover, whereas Dr. Totero was provided with numerous medical records including ultrasound and EKG reports, doctors' files and summaries and medical records from Valerie Conner Acupuncture - which he incorporated into his conclusions, Dr. Post was apparently not given the benefit of that background information.
More importantly, Dr. Post's report addresses plaintiff's subjective complaints of recurring discomfort, tenderness and pain, but fails to list any objective orthopedic tests performed, and neglects to adequately, or in some cases, even peripherally explain plaintiff's cessation of treatment, or the preexisting degenerative changes to plaintiff's cervical and lumbar spine and right shoulder delineated in Dr. Totero's report. Dr. Post also fails to list any activity plaintiff was specifically prevented from performing which, in view of the fact that she returned to work approximately one week after the accident, demonstrates that she also had failed to satisfy the 90/180 limitation set forth in Insurance Law § 5102(d).
All concur except Tom, J.P. and Renwick, J. who dissent in a memorandum by Renwick, J. as follows:
RENWICK, J. (dissenting)
I disagree with the majority's conclusion that dismissal was warranted because plaintiff allegedly failed to meet her burden of raising triable issues of fact on the threshold issue of serious injury. Plaintiff alleged in her bill of particulars that she suffered a "permanent consequential limitation of a body organ or member" and "significant limitation of use of a body function." (Insurance Law § 5102(d)). In this case the burden never shifted to plaintiff. A proper analysis of defendants' proof reveals that defendants failed to meet the initial burden for entitlement to summary judgment. Accordingly, I respectfully dissent.
On a motion for summary judgment dismissing the complaint, the defendant bears the initial burden to demonstrate that the plaintiff did not sustain serious injury (see Pommells v Perez, 4 NY3d 566 ; Toure v Avis Rent A Car Sys., 98 NY2d 345 ; Gaddy v Eyler, 79 NY2d 955, 956 ). If the defendant meets this burden by showing that the plaintiff did not suffer "permanent loss," a "consequential" or "significant" limitation under Insurance Law § 5102 (d), the plaintiff can provide a medical expert's designation of a numeric percentage of a loss of range of motion or an expert's qualitative assessment of the plaintiff's condition to raise a triable issue of fact as to whether the plaintiff sustained a serious injury (see Perez v Rodriguez, 25 AD3d 506, 507-508 ). When either party fails to do so, the court is deprived of an indispensable tool for determinating whether a party met its respective burden on the legal question of whether a claim of serious injury is "significant" or "consequential" (Toure, 98 NY2d at 353).
"[W]hether a limitation of use or function is significant' or consequential'(i.e., important . ..) relates to medical significance and involves a comparative determination of the degree or qualitative nature of an injury based on the normal function, purpose and use of the body part." (Toure, 98 NY2d at 353, quoting Dufel v Green, 84 NY2d 795, 798 . As the Court of Appeals explained:
"In order to prove the extent or degree of physical limitation, an expert's designation of a numeric percentage of a plaintiff's loss of range of motion can be used to substantiate a claim of serious injury. An expert's qualitative assessment of a plaintiff's condition also may suffice, provided that the evaluation has an objective basis and compares the plaintiff's limitations to the normal function, purpose and use of the affected body organ, member, function or system. When supported by objective evidence, an expert's qualitative assessment of the seriousness of a plaintiff's injuries can be tested during cross-examination, challenged by another expert and weighed by the trier of fact. By contrast, an expert's opinion unsupported by an objective basis may be wholly speculative, thereby frustrating the legislative intent of the No-Fault Law to eliminate statutorily insignificant injuries or frivolous claims" (Toure, 98 NY2d at 350-351 [internal citations omitted]).
A defendant fails to meet his or her initial burden when he or she relies upon an examining physician's report which identifies limitations or restrictions (or lack thereof) in a part of the body where the plaintiff claims to have sustained a consequential or significant injury, but which does not sufficiently quantify or qualify the resulting limitations so as to establish that they are permanent or significant. For instance, courts have found a defendant's medical expert's report setting forth numerical ranges of motion of a plaintiff's cervical and/or lumbar spine deficient where it fails to compare those findings to the normal range of motion (see e.g. Spektor v Dichy, 34 AD3d 557 ). Failure to provide a comparison to the normal range of motion requires speculation concerning the significance of the numerical results (cf. Vasquez v Reluzco, 28 AD3d 365 ). A medical expert's report describing a decrease of ranges of motion of a plaintiff's cervical and/or lumbar spine as "mild" or "insignificant" are similarly deficient where no quantitative percentage or qualitative assessment of the degree of restriction of the range of motion is provided (see e.g. Yashayev v Rodriguez, 28 AD3d 651 ); Kelly v Rehfeld, 26 AD2d 469 ). Absent such comparative qualification, courts cannot assess whether the described decrease of movements of the cervical and lumbar spine are insignificant in comparison to the normal range of motion expected in a healthy person of the same age, weight and height (id.; cf. Milazzo v Gesner, 33 AD3d 317 ).
In support of their motion for summary judgment, defendants submitted various records of plaintiff and an affirmed report from Dr. Charles M. Totero, M.D., a board certified orthopedic surgeon. Dr. Totero conducted a physical examination of plaintiff and reviewed her medical records, including reports from her treating physicians and MRI reports of her shoulder and back.
Dr. Totero's report falls short of meeting the principles set forth in
Toure. He noted the existence of "limited flexion of [plaintiff's] lumbar
spine," and "mild to moderate decreased of range of motion" in plaintiff's
cervical spine. However, the doctor failed to set forth numerical values for his
observations with respect to plaintiff's lumbar and cervical spine or provide
the normal range of motion so as to permit meaningful comparison. Nor did Dr.
Totero provide a qualitative assessment of plaintiff's condition. Absent such
comparative quantification or qualitative assessment, this Court can only
speculate as to the significance of the findings. As such, we cannot conclude as
a matter of law that such limitations of the lumbar and cervical
spine were "minor, mild or slight" within the meaning of the No-Fault Law (Yashayev, 28 AD3d at 652, quoting Licari v Elliot, 59 NY2d 230, 236 ).
Furthermore, contrary to the majority's contention, Dr. Totero failed to specify what objective tests were used to reach his conclusions, or the result of such tests, a fatal flaw to defendants' summary judgment motion (see e.g. Offman v Singh, 27 AD3d 284, 285  [examining neurologist's reports failed to indicate what, if any, objective tests were employed to examine plaintiff]; see also Dzaferovic v Polonia, 36 AD3d 652, 653  [limitation in the range of motion "was not sufficiently quantified or qualified to establish the absence of a significant limitation of motion"]; cf. Taylor v Terrigno, 27 AD3d 316  [while it set forth measurements for loss of range of motions, affirmation of plaintiff's physician was deficient where it failed to identify the objective tests performed in deriving such results]; Rivera v Benaroti, 29 AD3d 340, 342  [same]).
Finally, plaintiff explained that she discontinued treatment in or about June 2004 due to lapse of insurance coverage and her inability to pay for further treatment (see Wadford v Gruz, 35 AD3d 258 ; Jones v Budhwa, 23 AD3d 154 ; Francovig v Senekis Cab Corp., 41 AD3d 643 ; Williams v New York City Tr. Auth., 12 AD3d 365 ; Black v Robinson, 305 AD2d 438, 439-440 ; cf. Pommells, 4 NY3d at 577 ; Brown v Achy, 9 AD3d 30, 33-34 ). It is clear from the majority's writing that plaintiff's explanation is consistent with subsequent statements to Dr. Post.
Since defendants failed to meet their initial burden of establishing a prima facie case that plaintiff's injuries did not meet the threshold "serious injury," it is unnecessary to consider whether plaintiff's opposition papers were sufficient to raise a triable issue of fact (see Martinez v Pioneer Transp. Corp., 48 AD3d 306, 307 ).
Accordingly, defendants' motion for summary judgment should have been denied and the complaint reinstated.
THIS CONSTITUTES THE DECISION AND ORDER
OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.
ENTERED: SEPTEMBER 2, 2008
In the Matter of Interboro Insurance Company v. Rienzo
Jerrold N. Cohen, Mineola, N.Y., for appellant.
Joseph B. Fruchter, Hauppauge, N.Y. (Samson Freundlich of
counsel), for respondent.
DECISION & ORDER
In a proceeding pursuant to CPLR article 75, inter alia, to permanently stay arbitration of an underinsured motorist claim, the petitioner appeals from a judgment of the Supreme Court, Suffolk County (Tanenbaum, J.), dated March 10, 2008, which denied the petition and, in effect, dismissed the proceeding.
ORDERED that the judgment is modified, on the law, by deleting the provisions thereof denying that branch of the petition which was to direct the respondent, prior to arbitration, to submit to an examination under oath and a physical examination, and to furnish the petitioner with the respondent's pertinent medical documentation or authorizations for the petitioner to obtain that documentation and, in effect, dismissing that branch of the petition, and substituting therefor a provision granting that branch of the petition; as so modified, the judgment is affirmed, without costs or disbursements, and that branch of the petition is reinstated.
The Supreme Court correctly concluded that the respondent was not barred by the doctrines of res judicata or collateral estoppel from pursuing arbitration against the petitioner with respect to her claim for supplementary uninsured/underinsured motorist benefits; accordingly, that branch of the petition which was for a stay of the arbitration on that basis was properly denied (see Matter of State Farm Ins. Co. v Smith, 277 AD2d 390; Kerins v Prudential Prop. & Cas., 185 AD2d 403).
However, the Supreme Court should have granted the alternative branch of the petition, which the respondent, Theresa Rienzo, did not oppose, which was to direct Rienzo to submit to an examination under oath and a physical examination, and to furnish pertinent medical documentation or authorizations for the petitioner to obtain that documentation, prior to arbitration (see 11 NYCRR 60-2.3[f], ; Matter of Interboro Mut. Indem. Ins. Co. v Wiener, 267 AD2d 310).
The petitioner's remaining contentions are either raised for the first time on appeal and thus not properly before this Court, or without merit.