Dear Coverage Pointers Subscribers:
A special greeting to our friends in Connecticut and California with whom we visited this week.
Let us rejoice in the return of our appellate courts to their appointed tasks. New and interesting decisions are beginning to trickle in again and your Coverage Pointers staff is feeling useful once again.
Summer is sadly coming to an end, this being the last issue before autumn arrives. Some of you might prefer the crunch of leaves underfoot. I much prefer the hot sand burning holes in my sole (better that, than my soul, I suppose).
Fijal's Federal Focus
Please join me in welcoming our newest columnist, Kathy Fijal, a senior member of our coverage team, to the Coverage Pointers team. Kathy will be covering the federal courts, primarily the Second Circuit Court of Appeals, in her review of NY cases being considered by the federal appellate bench. Her first contribution will be found in this week's issue.
Additional Insured Highlights
This week's issue presents us with yet another interesting twist in the ongoing judicial discussion about the breadth of the additional insured endorsement. When does a duty to indemnify arise? You'll find a very interesting decision involving a named insured that left an unguarded hole through which an unsuspecting worker fell. A jury later determined that the named insured was negligent in leaving an unguarded hole although the same jury found that the negligence was not a proximate cause of the accident.
A party who claimed additional insured status - the general contractor - wanted indemnity for the judgment against it arising from the fall through the hole. Did the accident arise out of the named insured's operations, even though it may not have arisen out of the named insured's negligence?
You'll find the Bovis decision in the issue attached and you'll have to read it to find the answer!
There was an active discussion about this decision in the New York Insurance LinkedIn group which we created and moderate. By clicking here, you can: come visit us there.
I have three presentations scheduled in the next month where the topic is Additional Insured obligations, tenders under policies and the interplay of insurance policies and indemnity agreements. If you are interested in having us come to your shop and do some claims training on this topic or others, just let us know. We will work it in as soon as time allows.
CMA - the Coverage Mediation Alternative
Do you have an ongoing battle with another carrier or insured over a coverage issue? Is the argument over defense duties or primacy of coverage or a related topic? Are you about to either throw down the gauntlet, or pick it up, and start a declaratory judgment action to resolve it? Are you concerned that if you win, or lose, precedent you create will come back to haunt you next time the issue comes up? Don't do it, until you consider whether coverage mediation is a better alternative. Call us to discuss the Coverage Mediation Alternative.
One Hundred Years Ago Today, Simon and Garfunkel Inspired to Write Lyrics to the 59th Street Bridge (aka Queensboro Bridge) Song aka Feelin' Groovy:
New York Times
September 18, 1909
FIRST CAR OVER QUEENSBORO BRIDGE
Spur Built and Line Placed in Operation Four
Hours after Franchise is Granted
Gresser the Motorman
Borough President and Other Officials
Aboard - Full Line of Cars in Operation Today
In less than four hours after the franchise was granted a trolley car was placed in operation on the new Queensboro Bridge between Manhattan and Long Island City yesterday afternoon. The bridge, so far as the car-line was concerned, had been allowed to lie idle while the question of franchise was thrashed out before the Board of Estimate, which granted the proper authority yesterday.
Editor's Note: The Bridge cost $18 million to build. It may be that Simon & Garfunkel made more money on the royalties.
In this Week's Issue:
KOHANE'S COVERAGE CORNER
Dan D. Kohane
- Reasonable Belief that a Claim Wouldn't be Made Precludes Summary Judgment by Insurer
- Former School Board Members Entitled to Defense Under Policy in Action Brought Against Them by District; Attempt to Rescind Policy Falls Short
- Where Insured Hides Fact that It Had Destroyed SUM Carrier's Subrogation Rights and Insurer Learns More than 20 Days After Filing of Arbitration Demand, Insurer is Excused from Requirement to File Application to Stay Within 20 Days
- Carrier's Failure to Respond to Discovery Orders Leads to Grant of Coverage
- The Battle Over the Breadth of the Additional Insured Endorsement Continues. A Finding by the Jury that the Named Insured's Negligence Was Not a Proximate Cause of the Accident Is Enough to Convince the Court that the Named Insured's Carrier Had No Duty to Indemnify
MARGO'S MUSINGS ON SERIOUS INJURY UNDER NEW YORK NO FAULT
Margo M. Lagueras
- There Is No Objective Basis Upon Which to Attribute Injury to Later Accident if the Physician Does Not Review Records Concerning a Prior Accident
- Failure to Appeal Determination in One Category of Serious Injury Renders Academic the Balance of the Appeal
- A "Subjective Examination Parameter" Must Be Substantiated With Objective Medical Evidence
AUDREY'S ANGLES ON NO-FAULT
- IME Report Scrutinized and MMI Was Conclusion Which Is Not a Valid Defense
- Insurer Did Not Establish Failure to Appear for Scheduled IME
- Plaintiff Did Not Comply with Business Record Rule and Motion Denied
PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper
- Collapse Coverage Precluded When the Loss Is Occasioned Out of Gradual Deterioration and/or Wear and Tear
- Airplane Deemed a Structure for Labor Law §240(1) Purposes
FIJAL'S FEDERAL FOCUS
Katherine A. Fijal
A New Twist on Anti-Subrogation
- Anti-Subrogation Rule Does Not Apply Where Coverage Is Excluded for the Named Insured Under its Commercial General Liability Policy
Earl K. Cantwell
Teeing Off on Professional Claims Notices
We love hearing from you. Stay in touch.
Hurwitz & Fine, P.C. is a full-service law firm
providing legal services throughout the State of New York
Dan D. Kohane
INSURANCE COVERAGE TEAM
Dan D. Kohane, Team Leader
Michael F. Perley
Katherine A. Fijal
Audrey A. Seeley
Steven E. Peiper
Margo M. Lagueras
FIRE, FIRST-PARTY AND SUBROGATION TEAM
Andrea Schillaci, Team Leader
Jody E. Briandi
Steven E. Peiper
Audrey A. Seeley, Team Leader
Margo M. Lagueras
Jody E. Briandi, Team Leader
Scott M. Duquin
Index to Special Columns
Dan D. Kohane
9/15/09 Jaglom v. Insurance Company of Greater New York
Court of Appeals
Reasonable Belief that a Claim Wouldn’t be Made Precludes Summary Judgment by Insurer
In a previous issue of Coverage Pointers, Volume 10, No. 13, we reported on a 3-2 decision from the First Department in connection with this case, and we described it this way:
Split Court Highlights Issues in “Reasonable Belief in Non-Liability” Defense
Plaintiff sought a judgment that his carrier should defend him in a libel suit. The insurer claimed that the insureds failed to give timely notice. Plaintiff responded to the motion by explaining that they did not provide notice to defendant until they were served with a summons and complaint, because until then they believed in good faith that they were not liable for defamation. The three judge majority concluded that there were questions of fact presented regarding the existence and the reasonableness of the insured's professed good-faith belief that the party that has since commenced the defamation action against them would not seek to hold the insured liable.
A strong (and we suggest well-considered) defense disagreed. There is no dispute that the plaintiffs waited a significant amount of time before notifying the defendant of the defamation claim. The question, argued the defense, is whether the insured learned of an occurrence that may result in the assertion of liability against the insured and had a reasonable "good-faith belief of non-liability" not whether the matter could be successfully defended. Here the proof was clear that a claim was coming and accordingly, the notice should have been given.
The Court of Appeals affirmed the First Department’s decision, this week finding that “questions of fact exist whether plaintiffs had a reasonable good-faith belief that the tenants in an underlying libel action against them would not seek to hold them liable, precluding dismissal of their action against the insurer.”
Editor’s Note: A fact-finder might yet determine that the insured did not have a reasonable belief it wouldn’t be sued. At the end of the day, this becomes a question of fact.
9/15/09 Barkan v. New York Schools Insurance Reciprocal
Appellate Division, Second Department
Former School Board Members Entitled to Defense Under Policy in Action Brought Against Them by District; Attempt to Rescind Policy Falls Short
The plaintiffs were former members of the Board of the Roslyn Union Free School District (“District”) sought a declaration that the defendant New York Schools Insurance Reciprocal (“NYSIR”) was obligated to defend and indemnify them in an underlying action commenced against them by the District are two policies issued to the District.
In the underlying lawsuit, it was claimed that over a period of six years, sever District employees stole over $11 million from the District. The District sued the former school board members alleging that they breached their fiduciary duties owed to the District and that there conduct resulted in an exacerbation of the theft and scandal.
NYSIR counterclaimed claiming that the policies should be rescinded because the District failed to disclose misappropriations made by certain District employees or, in the alternative, claimed that the insureds failed to notify NYSIR in time of the pending claims. NYSIR sought a declaration that it had no obligations to defend other School Board members as well, along with the District.
NYSIR raised an exclusion of coverage, which one is not clear from the decision, but the Appellate Division was not convinced that the exclusion was clear and unmistakable. Moreover, NYSIC did not establish by demonstrating underwriting guidelines, that any misrepresentations alleged made by the District were material – that is, that they would have led to the policy not being issued.
As to late notice, NYSIR did not prove, as a matter of law, that the insured’s belief in non-liability was unreasonable. Attorneys fees were awarded the District members who were added to the litigation by NYSIR, since they were placed in a defense position.
9/15/09 In the Matter of Metlife Auto & Home v. Zampino
Appellate Division, Second Department
Where Insured Hides Fact that It Had Destroyed SUM Carrier’s Subrogation Rights and Insurer Learns More than 20 Days After Filing of Arbitration Demand, Insurer is Excused from Requirement to File Application to Stay Within 20 Days
This was an Article 75 proceeding seeking a permanent stay of an arbitration of a claim for Uninsured Motorists benefits (UM benefits).
Zampino was involved in a three-car accident. Her car was first struck by an unidentified hit-an-run vehicle and then Zampino’s car was truck by a car operated by Jenkins and insured by GEICO.
Zampino had an automobile insurance policy with the petitioners MetLife and advised MetLife of her intention to make a claim for underinsured motorists benefits. MetLife for a temporary stay of arbitration to conduct discovery but then the parties agreed on discovery and the petition was withdrawn. Later, MetLife learned that Zampino had settled with Jenkins and GEICO and issued a general release in favor of them, destroying MetLife’s subrogation rights. MetLife then moved for a permanent stay of arbitration, but it was long after the 20-day period of time to move.
In a well-considered decision, the court found that the fact that the application was made after 20 days (usually fatal) was excused by the fact that MetLife had no way of knowing that Zampino had signed a release and damaged subrogation rights.
Editor’s Note: As a reminder, when a UM/SUM insurer believes that there is no right to arbitrate a UM or SUM claim because of a breach of policy condition or for most other reasons, it must go to court within 20 days of the arbitration demand and ask for a permanent stay of arbitration. A failure to do so constitutes a waiver of those legal claims. This was a rare situation where an application to stay, sought beyond the 20-day period, was considered.
9/15/09 AWL Industries, Inc. v. QBE Insurance Corp.
Appellate Division, First Department
Carrier’s Failure to Respond to Discovery Orders Leads to Grant of Coverage
The issue in the case had been whether or not there was a written contract in place prior to the date of the accident promising coverage, in order for “additional insured” status to be in place. However, QBE had failed to comply with court ordered discovery and the First Department determined that a proper sanction for the failure was to strike its Answer to the Complaint. With its Answer stricken, declaratory relief was awarded to the insured, with the court not having to make the factual determination about the existence of the written contract.
9/1/09 Bovis Lend Lease LMB, Inc v. Garito Contracting Inc.
Appellate Division, First Department
The Battle Over the Breadth of the Additional Insured Endorsement Continues. A Finding by the Jury that the Named Insured’s Negligence Was Not a Proximate Cause of the Accident Is Enough to Convince the Court that the Named Insured’s Carrier Had No Duty to Indemnify
Twin City issued a policy to Garito under which Bovis was an additional insured. Armentano was hurt when he fell through a floor opening on the work site. The hole was created was Garito removed a garbage chute during demolition work. Neither Garito nor Bovis could find a copy of the contract so it was unclear whether or not Garito was obligated under the contract to perform temporary protection work.
It had been earlier determined by extrinsic evidence that while the contract could not be found, Bovis was entitled, under the missing contract, to be named as an additional insured d the cross motions. This Court affirmed, finding that "[a]lthough the contract was lost, Bovis properly established, through extrinsic evidence, that it required Garito to procure insurance coverage on its behalf" We reported on that decision here: /news/coverage-pointers-volume-viii-no-19
In the underlying action, the jury found that: (1) Bovis was negligent and that its negligence was a substantial factor in causing Armentano to fall through the hole, and (2) Garito also was negligent but that its negligence was not a substantial factor in causing Armentano to fall. The jury's determination included a finding that Bovis did not prove that Garito agreed to provide temporary protection at the work site.
The insurance policy issued by Twin City provided coverage to Bovis "only with respect to liability arising out of: . . . [Garito's] work' for [Bovis] . . . or . . . [a]cts or omissions of [Bovis] in connection with [its] general supervision of [Garito's] work.'"
In a 3-2 decision, likely headed to the Court of Appeals for review, the majority found that the jury’s finding that Garito’s negligence was not a substantial factor is causing Armentano’s injury leads to the conclusion that Twin City has no obligation to indemnify Bovis for the damages awarded against it: Bovis' liability neither arose out of Garito's work nor out of Bovis' supervision of Garito's work.
The Court compared this case to Worth Constr. Co., Inc. v Admiral Ins. Co. (10 NY3d 411, (2008), a decision we’ve discussed many times in this newsletter. In Worth, the accident occurred on a stairway built by the named insured but there was a later finding that there was no negligence in the construction of the stairway: The Court of Appeals held that once it was conceded that the “claims of negligence against Pacific [the stairway builder] were without factual merit, it conceded that the staircase was merely the situs of the accident. Therefore, it could no longer be argued that there was any connection between the accident and the risk for which coverage was intended
The “hole” was the mere situs of the accident.
A strong dissent argued that a finding of negligence on the Garito’s part was sufficient to establish that the accident arose, at least in part, out of Garito’s operations.
Editor’s Note: This is yet another offering in the ongoing debate over the breadth of “additional insured” coverage. It scores a point for the Worth Construction side of the battle, which construes additional insured status more narrowly. Here, the named insured created the hole during its operations and the plaintiff fell through it. Moreover, the jury’s finding that the creation of the hole and the conduct of the named insured in creating it was negligent. However, since the jury found that the negligence was not a proximate cause of the accident, the court found that the accident did not arise out of the named insured’s operations. It’s a close one and the 3-2 vote by the court reflects the fine lines being drawn. Watch this space.
MARGO’S MUSINGS ON SERIOUS INJURY UNDER NEW YORK NO FAULT
Margo M. Lagueras
9/8/09 Antonio v. Gear Trans Corp.
Appellate Division, First Department
There Is No Objective Basis Upon Which to Attribute Injury to Later Accident if the Physician Does Not Review Records Concerning a Prior Accident
The defendants submitted several affirmations from examining doctors who concluded the plaintiffs’ injuries were either resolved or caused by a prior motor vehicle accident. In addition, both plaintiffs’ own deposition testimony established they only lost, at most, two weeks from school thus defeating their claim under the 90/180-day category.
The plaintiffs failed to sufficiently oppose the defendants’ prima facie showing as their treating physician’s reports were altogether deficient. Among other things, the plaintiff’s physician did not review any prior medical records concerning an ankle injury sustained in a prior motor vehicle accident. Therefore, there was no objective basis by which to attribute any allegedly new injury to this subsequent accident. In addition, no tests were performed on the cervical spine or ankle during the most recent examination, and findings relating to an alleged knee injury were neither quantified or compared to what is normal range-of-motion. As regards the seven-year gap in treatment, the Court determined that the physician’s conclusory opinion that the plaintiffs stopped Physical Therapy because she felt they had reached maximum medical improvement with therapy was insufficient to explain the gap.
The dissent would have denied summary judgment as regarded the lumbar spine injury of one plaintiff and the lumbar and cervical spine injuries of the other, opining that the treating physician sufficiently described the limitations and correlated the findings with the inability to perform normal daily tasks. The dissent further disagreed with the decision regarding the gap in treatment as, according to Pommells, a patient does not need to continue incurring expense merely to establish seriousness or causal relationship once care is deemed to be only palliative.
9/8/09 Swed v. Pena
Appellate Division, Second Department
Failure to Appeal Determination in One Category of Serious Injury Renders Academic the Balance of the Appeal
The result is that the defendants’ appeal is dismissed. The defendants did not take an appeal from that part of the order that granted the plaintiff’s cross-motion for summary judgment on the threshold issue based on the 90/180-day category, but rather they only appealed from the determination as regarded the permanent consequential limitation of use and the significant limitation of use categories. The failure to appeal that portion of the order results in any determination by the Appellate Court being moot as it would not affect the rights of the parties
9/8/09 Moriera v. Durango
Appellate Division, Second Department
A “Subjective Examination Parameter” Must Be Substantiated With Objective Medical Evidence
The defendants’ examining orthopedist found restrictions in the plaintiff’s cervical and lumbar ranges-of-motion which he referred to as “subjective examination parameters” based on his conclusion that the limitations were self-restrictions. He failed, however, to explain or substantiate his conclusion with objective medical evidence and, as a result, the defendants failed to meet their prima facie burden.
9/9/09 Applicant v. Allstate Insurance Company
Arbitrator Veronica K. O’Connor (Erie County)
IME Report Scrutinized and MMI Was Conclusion Which Is Not a Valid Defense
The Applicant, eligible injured person (“EIP”), was involved in a July 18, 2001, motor vehicle accident and sought payment of chiropractic care. The insurer denied chiropractic care based upon an independent medical examination (“IME”) with Thomas Insinna, D.C. Mr. Insinna concluded that the EIP received “maximum benefit from chiropractic treatment.” Further, the EIP advised that she only received a “little bit of progress” from the treatment and that continued care would not provide any further benefit.
The assigned arbitrator determined that Mr. Insinna’s conclusion amounted to maximum medical improvement which is not a valid defense under Hobby v. CNA. Further, the assigned arbitrator determined that the Applicant’s submission supported medical necessity for continued chiropractic treatment provided subsequent to the insurer’s denial of care. Accordingly, the Applicant was entitled to reimbursement for the treatment.
9/1/09 DVS Chiropractic, P.C. a/a/o Sufferine Jones v. Mercury Cas. Co.
Appellate Term, Second Department
Insurer Did Not Establish Failure to Appear for Scheduled IME
The insurer’s summary judgment motion was properly denied as it failed to establish that the assignor did not appear for a scheduled IME. The insurer’s papers failed to establish that the letters scheduling the IME were timely mailed in accordance with standard office practice and procedure regarding mailing.
9/1/09 A.B. Med. Services, PLLC a/a/o Jacques DeLone v. American Transit Ins. Co.
Appellate Term, Second Department
Plaintiff Did Not Comply with Business Record Rule and Motion Denied
The plaintiff’s summary judgment motion was properly denied as plaintiff’s billing manager’s affidavit did not comply with the business record rule – CPLR 4518.
Steven E. Peiper
09/15/08 Rapp B. Properties, LLC v RLI Insurance Company
Appellate Division, First Department
Collapse Coverage Precluded When the Loss Is Occasioned Out of Gradual Deterioration and/or Wear and Tear
Plaintiff submitted a claim as a result of cracking/bulging of the brick facade of one of its properties. Apparently, plaintiff alleged that the building’s wall was in imminent danger of collapse. Upon review of plaintiff’s claim, RLI denied all coverage on the basis of an exclusion which removed coverage for wear and tear and/or gradual deterioration.
In addition to the exclusion, the First Department noted that Collapse Coverage, as defined under the policy at issue, specifically precluded any part of a building that was in the process of falling down. RLI’s coverage position was supported by evidence submitted by plaintiff’ own architect which opined that the wall at issue was in imminent danger of collapse. As the building was standing at the time of the claim, it was clear that it had not, in effect, collapsed.
Armed with this evidence, the First Department ruled that the loss at issue did not fall within the definition of a Collapse under the RLI policy.
09/08/09 Wong v City of New York
Appellate Division, Second Department
Airplane Deemed a Structure for Labor Law §240(1) Purposes
Plaintiff was awarded summary judgment on his Labor Law § 240(1) as a result of injury he sustained in a fall from a height while in the course of his employment with American Airlines. Plaintiff apparently fell from an American Airlines’ plane. In order to reach this conclusion, the Second Department noted that a jet airplane qualified as a structure under the Labor Law.
Katherine A. Fijal
A NEW TWIST ON ANTI-SUBROGATION
Since the Second Circuit did not give us anything to work with since our last edition of Coverage Pointers we decided to address a recent decision from the Supreme Court, Kings County, which believe it or not, does have a small, but significant, connection to Federal Court. The decision addresses the dreaded Anti-Subrogation Rule with a New Twist. We want to thank Mike McMyne of the Burlington Insurance Group for sending us this decision, and Don Grzbowski, house counsel, who managed the suit. We expect that this case will get some Appellate review and we will keep you advised as the case develops.
9/14/09 Martinez v. 970 Kent Avenue Associates, LLC
Supreme Court, Kings County
Anti-Subrogation Rule Does Not Apply Where Coverage Is Excluded for the Named Insured Under its Commercial General Liability Policy.
This case involves four actions. Action 1 is a personal injury claim by Administrator of the Estate for a worker who was killed in a construction accident. In the complaint the plaintiffs allege claims based Labor Law §§240, 241(6), 200 and common law negligence against, among others, the Owner, 970 Kent Avenue Associates, LLC and General Contractor, JI Construction of Brooklyn [collectively referred to as Kent/JI]. Action 2 is a third party claim for common law and contractual indemnification by the Owner and General Contractor against Colasanto Construction Inc, a Construction Company. Action 3 is a third party claim for common law and contractual indemnification by the Owner and General Contractor against Spencer Development Corp., the Construction Manager. Action 4 is a declaratory judgment action between Burlington Insurance Company, in its own right and as Equitable Subrogee of Kent/JI and the State Insurance Fund. Burlington seeks a declaration that its named insured, Colasanto, is entitled to indemnification for any liability assessed it against it in the third-party action against it by Kent/JI -- an additional insured on the Burlington policy. We focus here only on the Court’s decision as it relate to the Anti-Subrogation Rule.
There was a subcontract between JI Construction and Colasanto whereby Colasanto agreed to indemnify and hold the Owner and General Contractor, Kent/JI, harmless for any liability arising out of Colasanto’s work. There was also a rider on the subcontract which required that both Kent and JI be addition as additional insureds on Colasanto’s General Liability Policy which was issued by Burlington Insurance Company. The decedent was an employee of Colasanto at the time of the accident. Since the accident resulted in a “grave injury” both common law and contractual indemnification claims were viable.
After Colasanto tendered its claim to Burlington, the insurer disclaimed to Colasanto based on the Employee Exclusion and the Cross-Liability Exclusion. Shortly thereafter, Kent/JI tendered to Burlington as Additional Insured on the policy. Burlington agreed to defend Kent/JI as additional insureds.
Colasanto later filed a complaint against Burlington in Federal court seeking coverage for the contractual indemnification claim asserted against it by Kent/JI in its third party action. After issue was joined Colasanto chose to voluntary dismiss its complaint against Burlington, with prejudice, under Rule 41(a) of the Federal Rules of Civil Procedure.
The issue to be resolved was who was to be responsible for the decedent’s damages - Burlington Insurance or the State Insurance Fund. Colasanto and the State Insurance Fund argued that the third party action by Kent/JI was barred by the Anti-Subrogation Rule because Burlington insured both Colasanto as the Named Insured on the policy and Kent/JI as additional insureds. Burlington, on the other hand, argued that the Anti-Subrogation Rule does not apply because the Cross-Liability Exclusion, unlike the Employer’s Liability Exclusion and the Contractual Liability Exclusion does not contain an exception for an “insured contract”. The Cross-Liability Exclusion states that “[t]his insurance does not apply to any actual or alleged ‘bodily injury’ [or] . . . ‘personal injury’, to: . . . [a] present employee of any insured . . .”
The Court held that because the Cross-Liability Exclusion was triggered, there is no coverage for Colasanto under the Burlington policy. Since Colasanto was being defended on the third-party action only by the State Insurance Fund and Kent/JI was an additional insured on the Burlington policy, the Anti-Subrogation Rule did not apply and therefore, did not bar Kent/JI’s claim for common-law indemnification against Colasanto.
Further, Colasanto has not contractual liability coverage under the Burlington policy because the Cross-Liability Exclusion precludes such coverage, and Colasanto released all claims to this coverage in the Federal Action.
In conclusion, the Court held that the State Insurance Fund is 100% responsible for indemnification of Colasanto for any common law claims asserted by Kent/JI in the third-party action. In addition, the Court held that Colasanto has no contractual liability coverage under the Burlington policy because the Cross-Liability Exclusion precludes coverage, and because Colasanto released all claims to this coverage is the Federal Action.
We will keep you posted on further developments. If you want a copy of the decision, contact me.
Earl K. Cantwell
Teeing Off on Professional Claims Notices
A recent case decided by the Minnesota appellate courts discusses what constitutes notice of a claim for purposes of professional malpractice liability concerning a claim by a client who was “teed off” that his lawyer did not file an intellectual property suit. Chapman v. Minnesota Lawyers Mutual Insurance Company, 2009 WL 1851901 (Minn. App. 6/30/09).
The client, an artist, created a series of paintings depicting “infamous golf holes” showing fantasy golf holes in locations like the Grand Canyon, Rocky Mountains, etc., although to your author most water hazards look like the Pacific Ocean anyway. The artist apparently sent a proposal to a car company to use the paintings in company advertising, which proposal was apparently rejected. However, a year later the car company aired a television commercial showing a famous golfer playing “fantasy golf holes” similar to those in the paintings. The artist believed that the car company adapted the commercial from his paintings and not from separate but similar nightmares about bad rounds of golf.
The artist went to a friend who was an attorney who wrote a letter to the car company accusing it of copyright infringement without response. During the next two years, the artist asked his lawyer friend and was told that the lawyer would file a suit against the car company, but the lawyer never did so. Eventually, the artist received some information that indicated the statute of limitations for any copyright infringement suit might have expired. The lawyer friend informed the client that no suit had been filed against the car company, and that the artist might have a legal malpractice claim. At least according to the client, the attorney indicated that he would contact his malpractice insurance carrier.
The lawyer, however, did not notify his malpractice insurer of the potential claim by the artist until after expiration of the policy covering the period December 1998 to December 1999. In December 1999, the lawyer renewed his insurance policy which provided coverage on a claims made basis without disclosing the potential claim of the artist. This is like erasing part of the “8” on the golf score card to change it into a “3”. The lawyer should have shouted “Fore” about the claim and listed it on the renewal application, but not having done so the lawyer and client took a bogey.
When the lawyer got into the clubhouse and informed his carrier about the potential claim a few months later, the insurer as official scorer rejected the score card and denied coverage. The insurer contended that the lawyer had violated the rules of golf and also made a material representation on the policy application when he renewed the policy in December 1999 in failing to disclose the claim.
Thereafter, at the 19th hole, the lawyer and his friend the artist entered into a settlement and the lawyer assigned his claim against the insurance company to the artist to pursue. The artist, as assignee of the lawyer, sued the insurer. The trial court granted summary judgment in favor of the insurer, and the appellate court affirmed. The court ruled that the claim of imaginary golfers playing imaginary rounds of golf on imaginary golf holes was real enough to be defined as a potential claim upon renewal of the insurance policy, and failure to disclose plopped the claim into a pot bunker.
The problem, at least on summary judgment, came down to the renewal application because the policy defined a “claim” as a demand or suit received by the insured for money or services. It also meant any incident which could reasonably support such demand, or any communication or notice to the insured of a potential claim. The admissions of both the artist and the lawyer established the absence of a material fact as to whether, prior to renewal the lawyer, and even the artist, believed that the artist was asserting a claim against the attorney for failing to sue the car company before the statute of limitations expired. The ruling was that the lawyer had made a material misrepresentation on the renewal application which was significant because it exposed the insurer to an unknown risk of loss.
This case confirms that policy applications and disclosure forms are important documents. It also confirms that a professional does not need to actually receive a lawsuit or notice of a lawsuit for a claim to be disclosed to an insurer under an existing or potential policy. In any event, the legal malpractice claim here was apparently more real than the imaginary golf holes.
9/04/09 Bergstrom v. Spears Manufacturing Company
Kansas Supreme Court
The Supreme Court of the State of Kansas Eliminates the Incentive for Workers’ Compensation Claimants to Find Alternative Work After They are Injured
In September 2002 Bergstrom injured her back while working for Spears Manufacturing Company. After she was unable to work, a hearing was held before an Administrative Law Judge, awarding temporary total disability and permanent total disability benefits. However, this award was subsequently modified by the Workers’ Compensation Board, allowing only 10% permanent partial disability. As a result, Bergstrom filed notice of appeal with the Kansas Court of Appeals, and the Supreme Court of Kansas assumed jurisdiction on its own motion. The Board’s modification was based upon a finding that Bergstrom did not exercise good faith when she failed to perform alternate job duties that Spears offered her after her injury. Bergstrom contended that the Board erred when it applied the good-faith effort requirement because no such requirement is contained in the applicable Kansas statute. Although the Supreme Court acknowledged that precedential case law read the statute to include a good-faith effort requirement, it found that no such requirement was in the language of the statute. Holding in Bergstrom’s favor, the Court stated that, “a history of incorrectly decided cases does not compel us to disregard plain statutory language and to perpetuate incorrect analysis of workers compensation statutes.” The decision below was reversed and the case remanded for proceedings consistent with the opinion.
Submitted by: Jennifer Johnsen and Hilary Moore of Gallivan, White & Boyd, P.A.
Melito & Adolfsen, P.C., New York (Louis G. Adolfsen of
counsel), for Garito Contracting, Inc., appellant.
Rivkin Radler LLP, Uniondale (Evan H. Krinick of counsel), for
Twin City Fire Insurance Company, appellant.
Newman Myers Kreines Gross Harris P.C., New York (Olivia
M. Gross and Howard Altman of counsel), for respondents.
Order, Supreme Court, New York County (Judith J. Gische, J.), entered March 31, 2008, which, insofar as appealed from, granted the motions of defendant insured Garito Contracting, Inc. (Garito) and defendant insurer Twin City Fire Insurance Co. (Twin City) to renew their prior motions for dismissal of the complaint and summary judgment, respectively, and, upon renewal, adhered to the prior order declaring that plaintiff general contractor Bovis Lend Lease LMB Inc. (Bovis) is an additional insured entitled to coverage, modified, on the law, to the extent of declaring that Bovis is not entitled to indemnification, and otherwise affirmed, with costs.
Bovis is an insured under the policy issued by Twin City to its insured, Garito, which was hired to perform demolition work. The plaintiff in the underlying personal injury action, John Armentano, sought to recover for injuries he sustained when he fell through an opening in the floor of the job site. The hole was created when a garbage chute was removed by Garito during its demolition work. Although Bovis and Garito had entered into a subcontract for the performance of the demolition work, neither party was able to locate a copy of the contract. Thus, the terms of the contract were at issue in the underlying personal injury action. In particular, there was an issue regarding whether or not Garito was obligated under the contract to perform temporary protection work.
In this declaratory judgment action, Bovis moved for summary judgment, arguing that its contract with Garito entitled Bovis to coverage as an additional insured on the policy issued by Twin City to Garito. Garito cross-moved for dismissal of the complaint and Twin City cross-moved for summary judgment. The motion court granted Bovis' motion and denied the cross motions. This Court affirmed, finding that "[a]lthough the contract was lost, Bovis properly established, through extrinsic evidence, that it required Garito to procure insurance coverage on its behalf" (Bovis Lend Lease LMB Inc. v Garito Contr., Inc., 38 AD3d 260, 261 ) (Bovis I). Our decision finding that a contract existed requiring Garito to procure coverage for Bovis as an additional insured said nothing with regard to the additional terms of the contract, as those terms properly were an issue for the jury in the underlying action.
In the underlying action, the jury found that: (1) Bovis was negligent and that its negligence was a substantial factor in causing Armentano to fall through the hole, and (2) Garito also was negligent but that its negligence was not a substantial factor in causing Armentano to fall. The jury's determination included a finding that Bovis did not prove that Garito agreed to provide temporary protection at the work site. Thereafter, in this action, Twin City moved to renew its motion for summary judgment and Garito joined in the motion. The court granted renewal but adhered to its prior determination.
Upon renewal, the court should have granted the motions based on the jury's determination in the personal injury action. The insurance policy issued by Twin City provided coverage to Bovis "only with respect to liability arising out of: . . . [Garito's] work' for [Bovis] . . . or . . . [a]cts or omissions of [Bovis] in connection with [its] general supervision of [Garito's] work.'" As is apparent from the jury's verdict, Bovis' liability neither arose out of Garito's work nor out of Bovis' supervision of Garito's work.
This case is controlled by Worth Constr. Co., Inc. v Admiral Ins. Co. (10 NY3d 411 ). In Worth, Murphy, the plaintiff in the underlying action, fell on stairs constructed by a subcontractor, Pacific, having slipped on fireproofing that had been applied to the stairs by another subcontractor. Supreme Court initially declared that the general contractor, Worth, was entitled to a defense and indemnification as an additional insured under the policy issued to Pacific, which provided coverage to Worth "only with respect to liability arising out of [Pacific's] operations" (10 NY3d at 415). Worth subsequently conceded, however, that the negligence claim it had asserted against Pacific in its third-party action was without merit and should be dismissed. Pacific's insurer then moved to renew its motion for summary judgment in the declaratory judgment action brought by Worth; Supreme Court granted the motion, holding that "Worth's concession that Pacific was not negligent established as a matter of law that Murphy's accident did not arise out of Pacific's operations and therefore [Pacific's insurer] was not required to defend or indemnify Worth under the terms of the policy" (10 NY3d at 415).
A divided panel of this Court reversed (40 AD3d 423 ), but the Court of Appeals reversed and reinstated the order of Supreme Court awarding summary judgment to Pacific's insurer (10 NY3d at 415). As the Court held, "[o]nce Worth admitted that its claims of negligence against Pacific were without factual merit, it conceded that the staircase was merely the situs of the accident. Therefore, it could no longer be argued that there was any connection between Murphy's accident and the risk for which coverage was intended" (id. at 416). Notably, the policy defined the term "[y]our work" to include "[m]aterials, parts or equipment furnished in connection with [Pacific's] work or operations" (id.). The Court nonetheless held that "the fact that the stairs constituted [m]aterials, parts or equipment furnished in connection with [Pacific's] work or operations' under the Your work' provision, [did not] entitle Worth to defense and indemnification where, as here, Worth conceded that the stairs themselves were not a proximate cause of Murphy's injury" (id. [first and second brackets in original]).
As Twin City argues, the jury's finding that Garito's negligence was not a substantial factor in causing Armentano to fall is as conclusive as the admission by Worth that Pacific's activities were not a proximate cause of the underlying accident. That finding, after all, established that Bovis' liability did not arise out of Garito's work for Bovis or out of acts or omissions of Bovis in connection with its general supervision of Garito's work. To the contrary, the jury found that Bovis' liability arose out of its own work (see also Harriman Estates Dev. Corp. v General Acc. Ins. Co., 309 AD2d 575 ). Just as the staircase created by Pacific was "merely the situs" of the accident, so, too, the hole created by Garito was "merely the situs" of the accident. Thus, as Worth makes clear, "liability arising out of" a named insured's work is absent where, as here, the named insured is absolved of liability. Accordingly, to require Twin City to indemnify Bovis is to confer a windfall on Bovis' insurer, plaintiff National Union Fire Insurance Co.
Our decision in Bovis I does not require a different result. We neither required Twin City to indemnify Bovis nor found that Bovis would be entitled to indemnification for its own negligence. As the broad duty to defend " arises whenever the allegations within the four corners of the underlying complaint potentially give rise to a covered claim'" (Worth, 10 NY3d at 415, quoting Frontier Insulation Contrs. v Merchants Mut. Ins. Co., 91 NY2d 169, 175 ), we properly held that Twin City was obligated to provide Bovis with a defense. In the absence of a jury finding in the underlying action, any claim of an entitlement to indemnification would be premature. To the extent that our opinion may be interpreted as providing for defense and indemnification, we clarify that we required only coverage for a defense. The possibility of a jury finding that would obligate Garito to indemnify Bovis was sufficient to trigger Twin City's obligation to provide a defense (BP A.C. Corp. v One Beacon Ins. Group, 8 NY3d 708, 715 ).
What justified our holding in Bovis I — the possibility of a jury finding that would obligate Garito to indemnify Bovis — cannot justify a holding that Garito is obligated to indemnify Bovis. To the contrary, the negation of that possibility by the jury's actual finding should be given effect on the issue of indemnity (see Harriman Estates, 309 AD3d at 575-576; City of Niagara Falls v Merchants Ins. Group, 34 AD3d 1263 ).
The dissent loses sight of the well-settled principle that the duty to defend is broader than the duty to indemnify (BP A.C., 8 NY3d at 714-715; Automobile Ins. Co. of Hartford v Cook, 7 NY3d 131, 137 ; Technicon Elecs. Corp. v American Home Assur. Co., 74 NY2d 66, 73 ). As has long been recognized,
"[t]he insured's right to representation and the insurer's correlative duty to defend suits . . . are in a sense litigation insurance' expressly provided by the insurance contract" no matter how baseless the allegations contained in the complaint may be (Servidone Constr. Corp. v Security Ins. Co. of Hartford, 64 NY2d 419, 423-424 ). "A declaration that an insurer is without obligation to defend a pending action could be made only if it could be concluded as a matter of law that there is no possible factual or legal basis on which [the insurer] might eventually be held to be obligated to indemnify [the insured] under any provision of the insurance policy'" (id. at 424, quoting Spoor-Lasher Co. v Aetna Cas. & Sur. Co., 39 NY2d 875, 876 ). "The duty to indemnify is, however, distinctly different" because "the duty to pay is determined by the actual basis for the insured's liability to a third person" and is not measured by the allegations of the pleadings (Servidone, 64 NY2d at 424).
The dissent would hold that Twin City is obligated to indemnify Bovis on the basis of nothing more than the facts that triggered Twin City's duty to defend. Thus, the dissent points to the "causal relationship" between Armentano's injuries, "sustained when he fell through a hole undisputably created by Garito," and "the risks of demolition work for which coverage was intended." Putting aside a jury verdict completely exonerating Bovis, under the dissent's [*4]approach it is far from clear whether any jury verdict could have terminated the additional insured coverage obligations of Twin City to Bovis. If not, what triggers the duty to defend also triggers the duty to indemnify, even though the latter duty is distinct from the former. It may be, however, that the dissent would conclude that Twin City would not be obligated to indemnify Bovis if the jury had found that Armentano was not injured by falling through the hole created by Garito. But such a verdict and the actual verdict -— that Bovis' own negligence, not the hole created by Garito, was the proximate cause of Armentano's injuries —- are legal equivalents. As the "actual basis for the insured's [i.e., Bovis'] liability to a third person [i.e., Armentano]" (Servidone, 64 NY2d at 424) is Bovis' own negligence, Twin City has no duty to pay.
Because we find that Twin City is not obligated to indemnify Bovis, we need not reach defendants' additional arguments.
All concur except Andrias, J.P. and DeGrasse, J. who dissent in a memorandum by Andrias, J.P. as follows:
ANDRIAS, J.P. (dissenting)
This appeal involves the question of whether general contractor Bovis is still entitled to a declaration that it is an additional insured under a policy issued to its subcontractor Garito Contracting by Twin City Fire Insurance, after the jury in the underlying personal injury action has found that both Garito and Bovis were negligent, but that Garito's negligence was not a substantial factor in causing the plaintiff's accident. For the following reasons, I dissent and would affirm the declaration that Bovis is an additional insured under the Twin City policy issued to Garito and that such policy provides Bovis with primary coverage for the underlying claim.
As part of a project to add a J.C. Penney Store to the Broadway Mall in Hicksville, New York, Garito was hired by Bovis to perform demolition work and, pursuant to its subcontract with Bovis, obtained a primary commercial general liability insurance policy, which named Bovis as an additional insured and afforded coverage to Bovis "with respect to liability arising out of" Garito's work for Bovis. Garito's demolition work included the removal of a garbage chute enclosure down to the concrete floor slab. As a result, there was a hole left in the concrete slab. At some subsequent time, John Armentano, a union carpenter working for another subcontractor, lifted a four by eight-foot sheet of plywood that was covering the hole and, not seeing the hole, fell through the hole onto a concrete floor 18 feet below. He and his wife brought a personal injury action in Nassau County against the mall's owner, its manager, Bovis and J.C. Penney in which Garito was named as a third-party defendant. On a prior appeal in this declaratory judgment action, we held that Bovis was entitled to coverage under Garito's policy and that the liability issues raised in the underlying personal injury action need not be determined for the purpose of determining coverage (38 AD3d 260 ).
The personal injury action was subsequently tried and there was a dispute as to whether Garito, Bovis, or another subcontractor hired by Bovis was responsible for temporarily covering the hole in the slab. The jury found that both Garito and Bovis were negligent, but that Garito's negligence was not a substantial factor in causing the accident. The jury also found that Bovis failed to prove that Garito agreed to provide the temporary protection of the work site that caused the accident.
Garito and Twin City relying upon Worth Constr. Co., Inc. v Admiral Ins. Co. (10 NY3d [*5]411 ) then moved in this action to renew the coverage issue on the ground that the jury's verdict absolving Garito from liability should result in a declaration that Twin City has no obligation to indemnify Bovis in the underlying action. The motion court ruled in favor of Bovis and this appeal followed.
In Worth, the general contractor of an apartment complex under construction contracted with Pacific Steel, Inc. for the construction of the staircase and hand railings. Pacific provided commercial general liability insurance naming Worth as an additional insured and providing coverage arising out of Pacific's work. After Pacific installed the staircase, which consisted of two "stringers" (sides) welded to a steel pan, the project was turned over to Worth, who hired a concrete subcontractor to fill the pans. Once the concrete had been poured and walls were erected around the stairs, Pacific was to return to complete its portion of the project by affixing the hand railings to the walls. Pacific was not on the job, had completed construction of the stairs and was awaiting word from Worth before returning to affix the handrails at the time an ironworker sustained injuries when he slipped on some fireproofing material on the staircase.
Worth sought defense and indemnification from Pacific's insurer, contending that the simple fact that the ironworker slipped on the staircase established as a matter of law that his accident arose out of Pacific's work because the staircase was part of the "materials" that Pacific was utilizing to fulfill its subcontract. The Court of Appeals disagreed and found that the focus of the additional insured clause "is not on the precise cause of the accident but the general nature of the operation in the course of which the injury was sustained" (10 NY3d at 416) (internal quotation marks and citation omitted). The only basis in the complaint for asserting any significant connection between Pacific's work and the accident was the allegation that the stairway was negligently constructed. Once Worth admitted that its claims of negligence against Pacific were without factual merit, it conceded that the accident was not caused by the stairs but merely happened there. Therefore, the Court found, "it could no longer be argued that there was any connection between [the] accident and the risk for which coverage was intended" (id.).
Here on the other hand, Twin City's argument and the majority's conclusion, that the jury's finding that Garito's negligence was not a substantial factor in causing Armentano to fall is as conclusive as Worth's admission that Pacific's work was not the cause of the underlying accident in that case, is unconvincing. Moreover, Harriman Estates Dev. Corp. v General Acc. Ins. Co. (309 AD2d 575 ) cited by the majority, is clearly distinguishable on its facts. Unlike Worth, where it was conceded that Pacific was not negligent, the jury here found Garito negligent. Armentano's accident and Bovis's liability clearly "arose out of" or "in connection" with Garito's work withing the meaning of Worth since, in concluding that Garito was negligent, the jury necessarily found that its work was somehow involved in the accident. Under the circumstances presented in this case, the hole was more than the mere situs of the accident and it cannot be said that there was no connection between the accident and the risk for which coverage was intended. The causal relationship between the underlying plaintiff's injuries, sustained when he fell through a hole undisputedly created by Garito in performing its demolition work, and the risks of demolition work for which coverage was intended, is clear (see Worth at 415; see also id. at 416 [["g]enerally, the absence of negligence, by itself, is insufficient to establish that an accident did not arise out of' an insured's operations"]; cf. Pepe v Center for Jewish History, Inc., 59 AD3d 277 ). The motion court also properly adhered to its determination on the priority of coverage issues since no new facts or issues of law were raised by Twin City on its motion to renew.
Submitted by Thomas D. Hughes, for appellant.
Submitted by Michael D. Brown, for respondents.
The order of the Appellate Division should be affirmed, with costs, and the certified question answered in the affirmative. Questions of fact exist whether plaintiffs had a reasonable good-faith belief that the tenants in an underlying libel action against them would not seek to hold them liable, precluding dismissal of their action against the insurer (see Argentina v Otsego Mut. Fire Ins. Co., 86 NY2d 748, 750 ).
AWL Industries, Inc., v. QBE Insurance Corp.
Newman Myers Kreines Gross Harris, P.C., New York (Olivia
M. Gross and Howard B. Altman of counsel), for appellant.
Rafter and Associates PLLC, New York (Howard K. Fishman of
counsel), for respondents.
Order, Supreme Court, New York County (Milton A. Tingling, J.), entered October 17, 2007, which granted plaintiffs' motion for a declaration that defendant is obligated to defend and indemnify AWL Industries, Inc. in the underlying action, unanimously affirmed, with costs. Order, same court and Justice, entered December 22, 2008, which denied defendant's motion to renew, unanimously affirmed, with costs.
Plaintiff AWL served as the general contractor on a demolition and construction project and retained River Trucking & Rigging, Inc. as a subcontractor. An employee of River was injured while working on the project and commenced an action against AWL to recover damages for his injuries. A contract between AWL and River required River to name AWL as an additional insured on River's insurance policy. The insurance policy that QBE Insurance Corp., the defendant in this action, issued to River has an additional insured endorsement that applies only "[a]s required by written contract." The parties dispute whether, prior to the date of the employee's accident, the contract had been executed by the parties.
Plaintiffs (AWL and its insurer) commenced this action against QBE for a declaration that AWL is an additional insured under River's policy. Plaintiffs moved for summary judgment on the complaint. Plaintiffs also sought to strike QBE's answer based on its failure to comply with a conditional order requiring it to provide responses to certain disclosure demands. QBE opposed the motion. By an order dated October 11, 2007, Supreme Court granted that portion of the motion seeking summary judgment and declared that QBE was required to defend AWL in the personal injury action and indemnify AWL for any judgment resulting from that action. The court left "unaddressed" that portion of the motion seeking to strike QBE's answer. Supreme Court denied QBE's subsequent motion to renew plaintiffs' prior motion. This appeal by QBE from both orders ensued.
We need not decide whether Supreme Court correctly granted plaintiffs summary judgment, because plaintiffs were entitled to have QBE's answer struck. Plaintiffs made a motion to strike QBE's answer based on its failure to respond to several of plaintiffs' disclosure demands. By an order dated October 16, 2006, Supreme Court resolved that motion by requiring [*2]QBE to respond to those demands within 30 days of the date of the order. The order stated that "In the event that defendant does not comply with this [order] with[in] this 30 Day period, the answer will be struck." By an order dated November 8, 2006, the court extended to December 8, 2006 QBE's time to comply with the conditional order. In their motion papers, dated February 20, 2007, plaintiffs asserted that QBE, in violation of the conditional order, had not provided plaintiffs with numerous documents they had demanded, including documents in QBE's claims file regarding the personal injury action, and documents, notes and correspondence pertaining to AWL's tender of the defense in the personal injury action to QBE. In opposition to that motion, QBE did not dispute that it had failed to comply with the conditional order. Thus, the self-executing conditional order became absolute on December 8, 2006 (see e.g. Wilson v Galicia Contr. & Restoration Corp., 10 NY3d 827 ; Ensley v Snapper, Inc., 62 AD3d 403 ; Tejeda v 750 Gerard Prop. Corp., 272 AD2d 124 ; VSP Assoc. v 46 Estates Corp., 243 AD2d 373 ; see also Foster v Dealmaker, SLS, LLC, 63 AD3d 1640 ).
Accordingly, QBE was required to demonstrate both a reasonable excuse for its failure to comply with the order and a potentially meritorious defense to the action (see Ensley, supra; Tejeda, supra). QBE asserted that its prior counsel failed to notify QBE's claims handling company that the court had ordered QBE to provide the disclosure requested in plaintiffs' demand for disclosure. QBE, however, acknowledged that its claims handling company had received QBE's prior counsel's affirmation opposing plaintiffs' motion to strike QBE's answer, the motion that generated the October 16 conditional order. QBE, through its claims handling company, was therefore aware that plaintiffs had asserted that QBE failed to respond to plaintiffs' disclosure demands and were seeking to have QBE's answer struck. At bottom, QBE offered nothing more than a perfunctory claim of law office failure by its prior counsel, which was insufficient to excuse its failure to comply with the conditional order (see generally Okun v Tanners, 11 NY3d 762 ; Walker v City of New York, 46 AD3d 278, 280-281 ).
We note, too, that the excuse for QBE's failure to comply with the conditional order came from QBE's subsequent counsel, who did not assume representation of QBE until February 2007, approximately two months after QBE's deadline to comply with the conditional order passed. Thus, QBE's subsequent counsel's assertions as to why QBE failed to comply with the conditional order were not based on personal knowledge.
In sum, the conditional order striking QBE's answer became absolute, QBE failed to demonstrate a reasonable excuse for its failure to comply with that order, and consequently plaintiffs are entitled to judgment in their favor. Because we conclude that QBE's answer should have been struck and that plaintiffs are entitled to judgment on the complaint (and a declaration in their favor) for that reason, we need not and do not pass on whether a triable issue of fact exists regarding whether a "written contract" between AWL and River existed on the date of the worker's accident.
Eric H. Green, New York (Hiram Anthony Raldiris of counsel),
Baker, McEvoy, Morrissey & Moskovits, P.C., New York
(Stacy R. Seldin of counsel), for respondents.
Order, Supreme Court, New York County (Kenneth L. Thompson, Jr., J.), entered April 3, 2008, which granted the motion of defendants Gear Trans Corp. and Niamke Agniman for summary judgment dismissing the complaint on the ground that plaintiffs did not sustain serious injuries within the meaning of Insurance Law § 5102(d), affirmed, without costs.
Defendants met their burden of establishing prima facie that plaintiffs did not sustain permanent consequential or significant limitations by submitting the affirmations of several doctors who, upon examining plaintiffs and performing objective tests, concluded that plaintiffs' injuries were resolved and, in plaintiff Ventura's case, that her right ankle injury was caused by a prior car accident (see e.g. Charley v Goss, 54 AD3d 569, 570-571 , affd 12 NY3d 750 (2009); Figueroa v Castillo, 34 AD3d 353 ). Defendants also established that plaintiffs had no 90/180-day injury through plaintiffs' deposition testimony indicating that Antonio returned to school a week after the accident and was confined to home for one week, and that Ventura was confined to bed and home for only two weeks (see Lloyd v Green, 45 AD3d 373 ; Guadalupe v Blondie Limo, Inc., 43 AD3d 669 ).
Plaintiffs failed to raise an issue of fact with respect to their 90/180-day claims. Their treating physician's statements that they were "medically disabled" throughout the time they were under her care and that she advised them to, among other things, refrain from any work or other activities that might cause them discomfort or pain are too general to raise the inference that plaintiffs were unable to perform their usual and customary activities during the statutorily required time period or that their confinement to bed and home was medically required (see Gorden v Tibulcio, 50 AD3d 460, 463 ).
Plaintiffs failed to raise a triable issue of fact whether Ventura sustained a significant or permanent consequential limitation to her cervical spine or right ankle, since their treating physician did not perform any tests on those body parts during her most recent examination of Ventura (see Thompson v Abbasi, 15 AD3d 95, 97 ). Further, since the physician failed to review Ventura's medical records concerning her prior right ankle injury, there is no objective basis by which to attribute any new injuries to the later accident (Gorden, 50 AD3d at 464). Plaintiffs also failed to raise an issue of fact regarding a significant or consequential limitation of use of Antonio's right knee since their physician failed to quantify her initial findings, identify any objective tests and compare her findings to normal ranges, and failed to perform any tests on Antonio's right knee in her last two examinations (see Lattan v Gretz Tr. Inc., 55 AD3d 449, 449-450 ).
As to plaintiffs' alleged additional spinal injuries, their physician's conclusory findings on her September 24, 2007 examination of Ventura's lumbar spine and Antonio's cervical and lumbar spine, using an inclinometer, that Antonio had "significant limitations when comparing [her] cervical and lumbar spine to what would be considered normal" and that Ventura had "permanent consequential limitation of use of her neck, back and right ankle when compared to what would be considered normal," were insufficient to raise an issue of fact as to serious injury. Moreover, the physician's conclusion, arrived at seven years later, that those injuries, namely bulging discs, were causally related to plaintiff's May 14, 2000 accident and were permanent, consequential and significant failed to offer any quantitative assessment of the range of motion in terms of numeric percentage, or of how the accident reduced the functioning of plaintiffs' spines below the level of function that existed immediately before the accident (see Suarez v Abe, 4 AD3d 288 ).
With respect to the seven-year gap in plaintiffs' respective treatment, aside from the fact that these paragraphs of the physician's affidavits are identical except for a reference to the right ankle in the affidavit concerning Ventura and to the right knee in the affidavit concerning Antonio, the physician's conclusory opinion that, after five or six months of "active physical therapy," plaintiffs "reached a plateau" and physical therapy "was discontinued on [her] recommendation because [she] felt [plaintiffs] had reached maximum medical improvement with therapy" is insufficient under the circumstances to explain this gap (see Eichinger v Jone Cab Corp., 55 AD3d 364, 364-365  [14-month gap in treatment]; see also Franchini v Palmieri, 1 NY3d 536  [plaintiff's experts provided "no foundation or objective medical basis supporting the conclusions they reached"]).
All concur except Acosta, J. who dissents in part in a memorandum as follows:
ACOSTA, J. (dissenting in part)
I dissent only to the extent that I would deny defendants' motion with respect to the alleged injuries to plaintiff Ventura's lumbar spine and plaintiff Antonio's lumbar and cervical spine.
Contrary to the majority's holding, plaintiffs raised an issue of fact with respect to Ventura's alleged lumbar spine injury. Their physician's conclusion that Ventura's injuries, i.e., bulging lumbar discs, were causally related to the accident and were permanent, consequential and significant was supported by objective evidence, namely, the MRI and CT scan reports and the positive straight leg raising tests (see Toure v Avis Rent a Car Sys., 98 NY2d 345, 355 ; Brown v Achy, 9 AD3d 30, 32 ). While the physician did not ascribe a specific percentage to the loss of range of motion in Ventura's lumbar spine, she sufficiently described Ventura's limitations qualitatively on the basis of the lumbar spine's normal function, in particular, by correlating Ventura's bulging discs with her inability to perform such normal daily tasks as sitting, standing, walking and driving for long periods of time and such household chores as laundry, cleaning floors, and carrying groceries (see Toure at 355).
Plaintiffs also raised an issue of fact with respect to Antonio's alleged lumbar and cervical spine injuries. Their physician's conclusion that those injuries, namely bulging discs, were causally related to the accident and were permanent, consequential and significant was supported by objective medical evidence, including the MRI reports, the positive straight leg raising tests, and her observations of muscle spasms during her examination of Antonio's cervical spine (see Toure, 98 NY2d at 353, 355; Brown, 9 AD3d at 32). As in Ventura's case, the physician did not quantify the loss or limitation in Antonio's lumbar and cervical spine during her most recent examination, but she sufficiently described Antonio's limitations qualitatively "based on the normal function, purpose and use of the body part[s]" (see Toure, 98 NY2d at 353, 355).
With respect to the seven-year gap in treatment, the physician's explanation that plaintiffs had reached maximum medical improvement with physical therapy and that she had advised them to continue home therapy was sufficient to raise an issue of fact (see Pommells v Perez, 4 NY3d 566, 577  [doctor's explanation that, once he determined further medical therapy would "be only palliative in nature," he terminated treatment and instructed plaintiff to continue exercises at home was sufficient. "A plaintiff need not incur the additional expense of consultation, treatment or therapy, merely to establish the seriousness or causal relation of his injury."]).
THIS CONSTITUTES THE DECISION AND ORDER
OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.
Moriera v. Durango
Baker, McEvoy, Morrissey & Moskovits, P.C., New York, N.Y.
(Stacy R. Seldin of counsel), for appellants.
Schwartz Goldstone & Campisi, LLP, South Salem, N.Y.
(Annette G. Hasapidis of counsel), for
DECISION & ORDER
In an action to recover damages for personal injuries, etc., the defendants appeal from an order of the Supreme Court, Kings County (Kramer, J.), dated September 22, 2008, which denied their motion for summary judgment dismissing the complaint on the ground that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d).
ORDERED that the order is affirmed, with costs.
The defendants failed to meet their prima facie burden of showing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident (see Toure v Avis Rent A Car Sys., 98 NY2d 345; Gaddy v Eyler, 79 NY2d 955, 956-957). The defendants' orthopedist found restrictions in the range of motion of the cervical and lumbar regions of the plaintiff's spine which he described as "a subjective examination parameter." However, he failed to explain or substantiate, with any objective medical evidence, the basis for his conclusion that the noted limitations were self-restricted (see Busljeta v Plandome Leasing, Inc., 57 AD3d 469). Accordingly, the Supreme Court properly denied the defendants' motion for summary judgment without considering the sufficiency of the plaintiff's opposition papers (see Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853).
SPOLZINO, J.P., SANTUCCI, ANGIOLILLO, LEVENTHAL and LOTT, JJ., concur.
Swed v. Pena
Baker, McEvoy, Morrissey & Moskovits, P.C., New York, N.Y.
(Stacy R. Seldin of counsel), for appellants.
Wittenstein & Associates, P.C., Brooklyn, N.Y. (Harlan
Wittenstein of counsel), for respondent.
DECISION & ORDER
In an action to recover damages for personal injuries, the defendants appeal, as limited by their brief, from so much of an order of the Supreme Court, Kings County (Schack, J.), dated February 13, 2009, as denied those branches of their motion which were for summary judgment dismissing the complaint on the ground that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) because he did not sustain a "permanent consequential limitation of use of a body organ or member" or a "significant limitation of use of a body function or system."
ORDERED that the appeal is dismissed as academic, with costs.
The defendants appeal from so much of the Supreme Court's order as denied those branches of their motion which were for summary judgment dismissing the complaint on the ground that the plaintiff did not sustain a serious injury because he did not sustain a "permanent consequential limitation of use" or "significant limitation of use" under Insurance Law § 5102 (d). However, the defendants do not appeal from that portion of the order which granted that branch of the plaintiff's cross motion which was for summary judgment on the serious injury threshold issue based on his contention that he sustained "a medically determined injury or impairment of a non-permanent nature which prevents the injured person from performing substantially all of the material acts which constitute such person's usual and customary daily activities for not less than ninety days during the one hundred eighty days immediately following the occurrence of the injury or impairment" (Insurance Law § 5102[d]). Therefore, since the defendants did not dispute that the plaintiff made out a prima facie case of serious injury pursuant to this last category, the plaintiff is entitled to seek recovery for all injuries he allegedly incurred as a result of the accident (see Marte v New York City Tr. Auth., 59 AD3d 398, 399; Obdulio v Fabian, 33 AD3d 418, 419; Rizzo v DeSimone, 6 AD3d 600, 601). Accordingly, the defendants' failure to appeal from that portion of the order has rendered the instant appeal academic, since any determination made by this Court on the appeal would not affect the rights of the parties with respect to this action, nor is there any basis in this case for invoking an exception to the mootness doctrine (see Matter of Hearst Corp. v Clyne, 50 NY2d 707, 714).
MASTRO, J.P., FISHER, MILLER, DICKERSON and CHAMBERS, JJ., concur.
Rapp B. Properties, LLC v RLI Insurance Company
Havkins Rosenfeld Ritzert & Varriale, LLP, White Plains
(Tara C. Fappiano of counsel), for RLI Insurance Company and
Alea North America Insurance Company, appellants-
Marcia Goffin, New York, for City Outdoor, Inc. and NPA East
Billboard, Inc., appellants-respondents.
Weg and Myers, P.C., New York (Dennis T. D'Antonio of
counsel), for respondent-appellant.
Order, Supreme Court, New York County (Edward Lehner, J.), entered November 10, 2008, which denied the parties' respective motions for summary judgment, unanimously modified, on the law, the motion by RLI and Alea North America (the insurers-defendants) granted and the complaint and all cross claims dismissed as against them, and otherwise affirmed, without costs. The Clerk is directed to enter judgment accordingly in favor of said defendants.
Plaintiff seeks indemnification under the insurers' policies for damage to its building's south wall as a result of collapse, an allegedly covered peril, which occurred "[o]n or about July 19, 2005 and continuing thereafter." The complaint cites damage consisting of "severe cracking, bulging, splaying and displacement of the exterior brick facade." The insurers disclaimed coverage on the ground that the damage was "due to wear & tear and gradual deterioration not collapse." Collapse with respect to buildings is defined as follows under the policies' additional coverage provisions:
a. Collapse means an abrupt falling down or caving in of a building or any part of a building with the result that the building or part of the building cannot be occupied for its intended purpose;
b. A building or any part of a building that is in danger of falling down or caving in is not considered to be in a state of collapse;
c. A part of a building that is standing is not considered to be in a state of collapse even if it has separated from another part of the building;
d. A building that is standing or any part of a building that is standing is not considered to be in a state of collapse even if it shows evidence of cracking, bulging, sagging, bending, leaning, settling, shrinkage or expansion.
The interpretation of an unambiguous provision of an insurance contract is a question of law for the court (White v Continental Cas. Co., 9 NY3d 264, 267 . Accordingly, regardless of the cause or causes of the damage, it was error for the court to deny the insurers' motion, because there was no collapse within the meaning of the policies. Michael H. Rappaport, plaintiff's managing member, testified that the building and its south wall were still standing three months after the damage was observed in July 2005. Standing alone, Rappaport's testimony suffices to belie any claim that the wall's collapse was "abrupt" within the meaning of the additional coverage provisions. John Paul Murray, plaintiff's architect, observed displacement of brick masonry units and opined that there was an "imminent risk that the wall would completely collapse." In light of subparagraph b above, which excludes imminent collapse from the definition, Murray's affidavit does not bring the occurrence within the coverage of the policies. In Rector St. Food Enters., Ltd. v Fire & Cas. Ins. Co. of Conn. (35 AD3d 177 ), this Court held that a building that was "shown to have had two-to-three-inch-wide cracks in its facade and was sinking, out of plumb, and leaning" did not meet a materially identical definition of collapse. Rappaport's affidavit is also unavailing insofar as he claims to have discovered that bricks had fallen from the inside of the wall where it was covered by sheetrock and tile. As noted above, the wall was still standing. Tellingly, Rappaport describes the condition as hidden "decay," a phenomenon which, by definition, does not occur abruptly.
There exists, however, a triable issue of fact as to whether the damage to the building was caused by a 624 square foot vinyl outdoor sign installed by defendants City Outdoor and NPA East Billboard (the sign defendants). In this regard, Murray opined that the tension created by tightly stretching the sign against its fasteners contributed to the failure of the south wall. According to Murray, the vinyl is stretched to a pressure of up to 170 pounds per square inch. The sign defendants' assertion that Murray, an architect, is unqualified to render such an opinion lacks merit. The profession of architecture involves "the application of the art, science, and aesthetics of design and construction of buildings . . . including their components and appurtenances . . . wherein the safeguarding of life, health, property and public welfare is concerned" (Education Law § 7301). THIS CONSTITUTES THE DECISION AND ORDER
OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.
ENTERED: SEPTEMBER 15, 2009
Wong v City of New York
Rutherford & Christie, LLP, New York, N.Y. (L. Diana Mulderig
and David Rutherford of counsel), for appellants.
Robert J. Renna, P.C., Brooklyn, N.Y., for respondent.
DECISION & ORDER
In an action to recover damages for personal injuries, the defendants City of New York and Port Authority of New York and New Jersey appeal, as limited by their brief, from so much of an order of the Supreme Court, Queens County (Flug, J.), dated March 11, 2008, as denied the motion of the City of New York, in effect, pursuant to CPLR 3211(a)(1) and (7) to dismiss the complaint insofar as asserted against it, and that branch of the separate motion of the defendants Port Authority of New York and New Jersey and American Airlines, Inc., which was, in effect, pursuant to CPLR 3211(a)(1) and (7) to dismiss the complaint insofar as asserted against the defendant Port Authority of New York and New Jersey.
ORDERED that the order is modified, on the law, (1) by deleting the provision thereof denying that branch of the motion of the defendants Port Authority of New York and New Jersey and American Airlines, Inc., which was to dismiss the complaint insofar as asserted against the defendant Port Authority of New York and New Jersey and substituting therefor a provision granting that branch of that motion, and (2) by deleting the provision thereof denying that branch of the motion of the defendant City of New York which was to dismiss the Labor Law § 200 and common-law negligence causes of action insofar as asserted against it and substituting therefor a provision granting that branch of that motion; as so modified, the order is affirmed insofar as appealed from, without costs or disbursements.
The plaintiff was injured when he fell from a lift/ramp near the cargo door of an airplane owned by his employer, American Airlines, Inc. The plaintiff commenced the instant action against, among others, the defendants City of New York and the Port Authority of New York and New Jersey (hereinafter the Port Authority), asserting causes of action alleging violations of Labor Law §§ 240(1) and 200, and to recover damages for common-law negligence.
Labor Law § 240(1) imposes a nondelegable duty upon owners and general contractors to provide safety devices to protect workers from elevation-related risks encountered while working, inter alia, upon a structure (see Ross v Curtis-Palmer Hydro-Elec. Co., 81 NY2d 494, 500; Smith v Cari, LLC, 50 AD3d 879, 880). An airplane is a structure for the purposes of Labor Law § 240(1) (see Rooney v Port Auth. of N.Y. and N.J., 875 F Supp 253, 254; see also Garcia v Delta Air Lines, Inc., 2001 WL91619, *2 n2, 2001 US DIST LEXIS 621, *7 n2 [EDNY 2001]). Contrary to the City's contention, it may be liable under Labor Law § 240(1) as the fee owner of the premises where the plaintiff's injury occurred, even though it leased the premises to the Port Authority, which in turn leased the premises to American Airlines, Inc. (see Sanatass v Consolidated Inv. Co., Inc., 10 NY3d 333, 340-341; Coleman v City of New York, 91 NY2d 821, 823; Gordon v Eastern Ry. Supply, 82 NY2d 555, 560). Accordingly, the Supreme Court properly denied that branch of the City's motion which was to dismiss the cause of action alleging a violation of Labor Law § 240(1) insofar as asserted against it.
However, the plaintiff failed to state a cause of action to recover damages against the City on his causes of action alleging a violation of Labor Law § 200 and to recover damages for common-law negligence. The plaintiff did not allege sufficient facts in either the complaint or the amended complaint to support the conclusion that the City had the authority to supervise or control the method or manner of the work being performed by the plaintiff (see Ortega v Puccia, 57 AD3d 54, 61). Accordingly, the Supreme Court should have granted that branch of the City's motion which was to dismiss the causes of action alleging a violation of Labor Law § 200 and to recover damages for common-law negligence insofar as asserted against it.
The branch of the motion which was to dismiss the complaint insofar as asserted against the Port Authority should have been granted since the Port Authority is not the owner of the subject premises and is not a general contractor (see Labor Law §§ 200, 240; Imling v Port Auth. of N.Y. & N.J., 289 AD2d 104, 105).
FISHER, J.P., DICKERSON, ENG and HALL, JJ., concur.
Economou & Economou, P.C., Syosset, N.Y. (David J. Tetlak
and Albert J. Galatan of counsel), for appellant.
Congdon, Flaherty, O'Callaghan, Reid, Donlon, Travis &
Fishlinger, Uniondale, N.Y. (Kathleen
D. Foley of counsel), for respondents.
DECISION & ORDER
In a proceeding pursuant to CPLR article 75 to permanently stay arbitration of a claim for uninsured motorist benefits, Debra A. Zampino appeals from an order of the Supreme Court, Nassau County (Galasso, J.), entered August 8, 2008, which, after a hearing, and, upon a decision of the same court dated June 5, 2008, granted the petition.
ORDERED that the order is affirmed, with costs.
The appellant, Debra A. Zampino, was involved in a three-car collision on September 8, 2006. Her vehicle was first struck by an unidentified vehicle that subsequently left the scene of the accident. Zampino's vehicle was then struck by a vehicle owned and operated by nonparty Lesley Jenkins and insured by nonparty GEICO Indemnity Company (hereinafter GEICO). Zampino had an automobile insurance policy with the petitioners MetLife Auto & Home and Metropolitan Group Property and Casualty Insurance Company (hereinafter together MetLife), which included Supplemental Uninsured/Underinsured Motorist (hereinafter SUM) coverage. Zampino notified MetLife of her intent to pursue a SUM claim. She subsequently submitted to MetLife a demand for arbitration. MetLife filed a petition for a permanent stay of arbitration. However, once the parties stipulated to certain discovery, that petition was withdrawn. Thereafter, MetLife learned that Zampino had settled with, and executed a general release in favor of, Jenkins and GEICO. MetLife then filed the instant petition to permanently stay arbitration.
An insurer that fails to seek a stay of arbitration within 20 days after being served with a demand to arbitrate a claim generally is precluded from thereafter objecting to the arbitration (see Matter of Fiveco, Inc. v Haber, 11 NY3d 140, 144; Matter of Land of Free, Inc. v Unique Sanitation, 93 NY2d 942, 943; Matter of Steck [State Farm Ins. Co.], 89 NY2d 1082, 1084; Matter of Spychalski [Continental Ins. Cos.], 45 NY2d 847, 849; Matter of Hermitage Ins. Co. v. Escobar, 61 AD3d 869). It is undisputed that the instant petition was filed more than 20 days after MetLife was served with Zampino's demand for arbitration. Under the particular circumstances of this matter, however, where Zampino failed to disclose the fact that she reached a settlement with Jenkins and GEICO without MetLife's knowledge or consent allegedly in violation of the SUM endorsement, where MetLife did not discover these facts until after the expiration of the 20-day period set forth in CPLR 7503(c), and where MetLife filed its petition promptly upon learning of these facts, we find that MetLife's failure to file its petition within that 20-day period does not bar this proceeding (see State Farm Mut. Auto. Ins. Co. v Isler, 38 AD2d 966; cf. Matter of Hermitage Ins. Co. v Escobar, 61 AD3d 869; Matter of Allstate Ins. Co. v Barbera, 117 AD2d 801, 802; Matter of CNA Ins. Co. v Glass, 75 AD2d 600).
"Where an automobile insurance policy expressly requires the insurer's prior consent to any settlement by the insured with a tortfeasor, failure of the insured to obtain such prior consent from the insurer constitutes a breach of a condition of the insurance contract and disqualifies the insured from availing himself of the pertinent benefits of the policy unless the insured can demonstrate that the insurer, either by its conduct, silence, or unreasonable delay, waived the requirement of consent or acquiesced in the settlement" (Matter of State Farm Auto. Ins. Co. v Blanco, 208 AD2d 933, 934 [citations omitted]; see Matter of Integon Ins. Co. v Battaglia, 292 AD2d 527; Matter of State Farm Auto. Ins. Co. v Blanco, 208 AD2d 933; Matter of State Farm Mut. Ins. Co. v Lopez, 163 AD2d 390; Matter of State Farm Mut. Ins. Co. v Parker, 160 AD2d 882; State Farm Mut. Auto. Ins. Co. v Taglianetti, 122 AD2d 40; cf. Matter of State Farm Mut. Auto. Ins. Co. v Lucano, 11 AD3d 548; Friedman v Allstate Ins. Co., 268 AD2d 558). It is undisputed that Zampino entered into the settlement with Jenkins and GEICO and executed a release in their favor (which Zampino did not include in the record) without MetLife's consent. Under the circumstances presented here, because it cannot be said as a matter of law that Zampino's settlement with Jenkins and GEICO, and the release executed in connection therewith, protected MetLife's subrogation rights, Zampino may not be excused from her failure to obtain MetLife's written consent prior to entering into the settlement and issuing the release (see Matter of State Farm Mut. Ins. Co. v Lopez, 163 AD2d 390). Contrary to Zampino's contention, the fact that she claims to seek only uninsured motorist benefits in connection with the unidentified vehicle that left the scene of the accident, and not underinsured motorist benefits in relation to Jenkins, does not establish, as a matter of law, that her settlement with Jenkins and GEICO and her release executed pursuant thereto could not have any effect on MetLife's subrogation rights. Accordingly, the Supreme Court properly granted MetLife's petition to permanently stay arbitration.
The parties' remaining contentions are without merit or need not be reached in light of our determination.
Farrell Fritz, P.C., Uniondale, N.Y. (James M. Wicks, Thomas J.
Killeen, and Aaron E. Zerykier of counsel), for third-party
defendant-respondent-appellant Roslyn Union Free School District, sued
herein as Roslyn Public Schools.
Spellman Rice Schure Gibbons McDonough & Polizzi, LLP,
Garden City, N.Y. (John P. Gibbons,
Jr., of counsel), for third-party
Kushnick & Associates, P.C., Melville, N.Y. (Lawrence A.
Kushnick and Vincent T. Pallaci of
counsel), for plaintiffs-respondents.
DECISION & ORDER
In an action, inter alia, for a judgment declaring that the defendant is obligated to defend and indemnify the plaintiffs in an underlying action entitled Roslyn Union Free School District v Barkan, pending in the Supreme Court, Nassau County, under Index No. 05-5946, the defendant third-party plaintiff appeals (1) from a decision of the Supreme Court, Nassau County (Cozzens, Jr., J.), dated March 22, 2007, and (2), as limited by its brief, from so much of an order of the same court entered April 26, 2007, as, upon the decision, denied its cross motion for summary judgment declaring that it is not obligated to defend the plaintiffs and the third-party defendants Carol Margaritis and Asenath Anderson in the underlying action, and granted those branches of the plaintiffs' motion and the separate motions of the third-party defendants Roslyn Public Schools, Carol Margaritis, and Asenath Anderson which were for summary judgment declaring that it is so obligated; the third-party defendant Roslyn Public Schools cross-appeals (1) from the decision dated March 22, 2007, and (2), as limited by its brief, from so much of the order entered April 26, 2007, as, upon the decision, denied that branch of its cross motion which was for an award of an attorney's fee and costs; and the third-party defendant Carol Margaritis separately cross-appeals (1) from the decision dated March 22, 2007, and (2), as limited by her brief, from so much of the order entered April 26, 2007, as, upon the decision, denied those branches of her separate motion which were for summary judgment declaring that the defendant is obligated to indemnify her in the underlying action and for an award of an attorney's fee and costs.
ORDERED that the appeal and the cross appeals from the decision are dismissed, as no appeal lies from a decision (see Schicchi v Green Constr. Corp., 100 AD2d 509); and it is further,
ORDERED that the order is modified, on the law, by deleting the provision thereof denying that branch of the motion of the third-party defendant Carol Margaritis which was for an award of an attorney's fee and costs and substituting therefor a provision granting that branch of the motion; as so modified, the order is affirmed insofar as appealed and cross-appealed from; and it is further,
ORDERED that one bill of costs is awarded to the plaintiffs and the third-party defendants appearing separately and filing separate briefs, payable by the defendant.
The plaintiffs, former members of the Board of the Roslyn Union Free School District, sued herein as Roslyn Public Schools (hereinafter the School District) commenced this action seeking, inter alia, a declaration that the defendant New York Schools Insurance Reciprocal (hereinafter NYSIR) was obligated to defend and indemnify them in an underlying action entitled Roslyn Union Free School District v Barkan, pending in the Supreme Court, Nassau County, under Index No. 05-5946 (hereinafter the underlying action), pursuant to two insurance policies issued to the School District.
The underlying action involves allegations that during the period from 1998 until 2004, several employees of the School District stole more than $11,000,000 of School District funds. The plaintiffs are alleged to have breached their fiduciary duties as members of the Board of Education of the School District and negligently performed their duties, which resulted in the exacerbation of the theft and scandal faced by the School District.
NYSIR counterclaimed to rescind the policies based upon alleged misrepresentations made by the School District to NYSIR in the 2002-2003 renewal applications for the policies, specifically, that the School District failed to disclose misappropriations allegedly made by Pamela Gluckin, the School District's former Assistant Superintendent for Business. In the alternative, NYSIR sought a judgment declaring that it was not obligated to defend or indemnify the plaintiffs in the underlying action because, inter alia, the insureds failed to timely provide it with notice of the claims alleged in the underlying action. NYSIR also commenced a third-party action against, among others, the School District and former Board members Carol Margaritis and Asenath Anderson seeking rescission and a declaration of no coverage on the same grounds.
The Supreme Court determined that NYSIR was obligated to defend the plaintiffs, Margaritis, and Anderson in the underlying action. We agree.
Generally, it is for the insured to establish coverage and for the insurer to prove that an exclusion in the policy applies to defeat coverage (see Consolidated Edison Co. of N.Y. v Allstate Ins. Co., 98 NY2d 208, 218; see also Belsito v State Farm Mut. Ins. Co., 27 AD3d 502, 503). An insurer's duty to defend is broader than the duty to indemnify and arises whenever the allegations of the complaint against the insured, liberally construed, potentially fall within the scope of the risks undertaken by the insurer (see New York City Hous. Auth. v Commercial Union Ins. Co., 289 AD2d 311, 312, citing Frontier Insulation Contrs. v Merchants Mut. Ins. Co., 91 NY2d 169). "[T]he duty of an insurer to defend its insured arises whenever the allegations within the four corners of the underlying complaint potentially give rise to a covered claim" (Physicians' Reciprocal Insurers v Loeb, 291 AD2d 541, 542). If any of the claims against the insured arguably arise from covered events, the insurer is required to defend the entire action (see Fitzpatrick v American Honda Motor Co., 78 NY2d 61). Nonetheless, "an insurer can be relieved of its duty to defend if it establishes as a matter of law that there is no possible factual or legal basis on which it might eventually be obligated to indemnify its insured under any policy provision" (Allstate Ins. Co. v Zuk, 78 NY2d 41, 45; see Continental Cas. Co. v Rapid-American Corp., 80 NY2d 640, 652).
The Supreme Court properly determined that NYSIR has an obligation to defend the plaintiffs, Margaritis, and Anderson in the underlying action. The plaintiffs, Margaritis, and Anderson demonstrated, prima facie, that the allegations of the complaint in the underlying action potentially give rise to a claim covered by the policy (see e.g. Belsito v State Farm Mut. Ins. Co., 27 AD3d at 503), and NYSIR failed to raise a triable issue of fact (see generally Zuckerman v City of New York, 49 NY2d 557, 563; Serrano v Republic Ins., 48 AD3d 665, 666).
In order for a policy exclusion to be enforced, the insurer bears the burden of demonstrating that the language is clear and unmistakable, and that the exclusion applies in the particular case and is subject to no other reasonable interpretation (see Seaboard Sur. Co. v Gillette Co., 64 NY2d 304, 311; Guishard v General Sec. Ins. Co., 32 AD3d 528, 529). On this record, NYSIR failed, prima facie, to satisfy that burden (see Junius Dev., Inc. v New York Mar. & Gen. Ins. Co., 48 AD3d 426, 427). Consequently, the Supreme Court also properly denied NYSIR's cross motion for summary judgment (see generally Alvarez v Prospect Hosp., 68 NY2d 320, 324; Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853).
Contrary to NYSIR's contentions, NYSIR failed to demonstrate its entitlement to summary judgment based on a material misrepresentation in the renewal applications for the insurance policies (see generally Winegrad v New York Univ. Med. Ctr., 64 NY2d at 853; see Carpinone v Mutual of Omaha Ins. Co., 265 AD2d 752). "[T]o establish its right to rescind an insurance policy, an insurer must demonstrate that the insured made a material misrepresentation. A misrepresentation is material if the insurer would not have issued the policy had it known the facts misrepresented' (Zilkha v Mutual Life Ins. Co. of N.Y., 287 AD2d 713, 714; see Insurance Law § 3105[b]). Material misrepresentations, if proven, would void the insurance policy ab initio (see Taradena v Nationwide Mut. Ins. Co., 239 AD2d 876). However, whether a misrepresentation is material is generally a question of fact for the jury (see Parmar v Hermitage Ins. Co., 21 AD3d 538, 540; see also Process Plants Corp. v Beneficial Natl. Life Ins. Co., 53 AD2d 214, 216, affd 42 NY2d 928). To establish materiality as a matter of law, the insurer must present documentation concerning its underwriting practices, such as underwriting manuals, bulletins, or rules pertaining to similar risks, which show that it would not have issued the same policy if the correct information had been disclosed in the application (see Insurance Law § 3105[c]; Parmar v Hermitage Ins. Co., 21 AD3d at 540-541; Curanovic v New York Cent. Mut. Fire Ins. Co., 307 AD2d 435, 437; Tuminelli v First Unum Life Ins. Co., 232 AD2d 547). Conclusory statements by insurance company employees, unsupported by documentary evidence, are insufficient to establish materiality as a matter of law (see Parmar v Hermitage Ins. Co., 21 AD3d 538). Having failed to offer any of the aforementioned documents, NYSIR has failed to meet its evidentiary burden.
We reject the further contention by NYSIR that late notice of the claims of the underlying action was provided. "When the facts of an occurrence are such that an insured acting in good faith would not reasonably believe that liability on his part will result, notice of the occurrence given by the insured to the insurer is given as soon as practicable' if given promptly after the insured receives notice that a claim against him will in fact be made" (Merchants Mut. Ins. Co. v Hoffman, 56 NY2d 799, 802). An insured's good faith belief in nonliability, when reasonable under the circumstances, may excuse a delay in notifying his insurer (see White v City of New York, 81 NY2d 955, 957). NYSIR could have established its entitlement to summary judgment on this issue by demonstrating as a matter of law, that the insureds' belief that a claim would not be asserted against them was unreasonable (see SSBSS Realty Corp. v Public Serv. Mut. Ins. Co., 253 AD2d 583, 584, citing Mighty Midgets v Centennial Ins. Co., 47 NY2d 12). We find that the record does not support such a conclusion.
With respect to the recovery of an attorney's fee and costs for the third-party defendants, Margaritis was cast in a defensive posture by virtue of NYSIR's third-party action against her. Implicit in this declaratory judgment action is the dispute over whether NYSIR has a duty to defend and indemnify Margaritis in the underlying action. Further, Margaritis successfully defended against NYSIR's summary judgment motion on the issue of the duty to defend. Accordingly, Margaritis is entitled to recover an attorney's fee and costs incurred in this declaratory judgment action (see U.S. Underwriters Ins. Co. v City Club Hotel, LLC, 3 NY3d 592; Mighty Midgets v Centennial Ins. Co., 47 NY2d 12). As in U.S. Underwriters, "[Margaritis's] recovery of attorneys' fees is incidental to the insurer's contractual duty to defend" (U.S. Underwriters Ins. Co. v City Club Hotel, LLC, 3 NY3d at 598). However, contrary to the School District's contentions, it is not entitled to recover an attorney's fee and costs. "The reasoning behind Mighty Midgets is that an insurer's duty to defend an insured extends to the defense of any action arising out of the occurrence, including a defense against an insurer's declaratory judgment action" (U.S. Underwriters Ins. Co. v City Club Hotel, LLC, 3 NY3d at 597). Here, the question of NYSIR's duty to defend the School District in the underlying action was not raised in this action.