Coverage Pointers - Volume XI, No. 7
Dear Coverage Pointers Subscribers:
This week's offering is attached. It's chock full of interesting cases.
It's truly a sad day for your editor as the summer comes to an end with this issue. We have a summer cottage in Fort Erie, Ontario, some 15 minutes from the office and from mid-April to mid-October, we live up in Crescent Dreams, our cottage on the north shore of Lake Erie, making the international commute each day. However, the Canadian authorities insist that we not live here for longer than one day short of six months or they will begin to require the payment of income taxes. So, after we celebrate Canadian Thanksgiving on 10/10/10, we will pack up our stuff, load up the cars and return to Buffalo. If you find tears on the pages of our next issue, you'll understand why. So for now, I'll gaze at the Lake and celebrate the end of an absolutely beautiful summer.
Law School for Claims Professionals - Welcome New Subscribers
Steve Peiper spoke at the Law School for Claim Professionals seminar in Syracuse this week and brought back ten new Coverage Pointers subscribers (which made his car very, very crowded). We welcome those and about 10 others to our publication. Use us as a resource and remember that you can find past issues on our firm website. We have reviewed every New York appellate coverage decision for the past 11+ years, so if you're looking for a summary of that important (or peculiar) decision you've heard someone speak about, we've reviewed it (and perhaps critiqued it).
A Notable Century Birthday
Bonnie Parker was born 100 years ago today. She didn't quite make it to 100, nor did her companion Clyde Barrow. They were gunned down on May 23, 1934, with Bonnie not quite 24 years old In the words of George Fame:
Acting upon reliable information
A fed'ral deputation laid a deadly ambush.
When Bonnie and Clyde came walking in the sunshine
A half a dozen carbines opened up on them.
Bonnie and Clyde, they lived a lot together
And finally together they died.
Editor's Note: In fact, they were not "walking in the sunshine" when they were killed by the police, they were in a car.
Bad Faith Almost Rears its Ugly Head
In our last issue of the year in December, we provided statistical information on the number and kind of cases reviewed. We also provided a short summary of the number of bad faith cases upheld by our appellate courts over that concluding year.
The reason the report is "short," is because there haven't been any bad faith cases upheld by the New York appellate courts in the past four years or so. Not one. In this issue, we review an interesting case involving bad faith allegations that keeps the streak alive. We commend to your attention Cirone v. Tower Insurance Company of New York, a September 21 decision out of the First Department, where a 4-1 panel ruled that an injured party did not have standing, as an assignee of an insured, to commence and prosecute a bad faith case.
In Cirone, the insured had previously been unable to establish that he gave timely notice of an accident and thus, suing only as an assignee of those rights only, the injured party could not prosecute the bad faith case. The injured parties could have no greater rights, as assignee, than the insured. The New York Insurance Law permits an injured party to give notice of an accident and in an earlier decision, the injured parties had been able to establish that they gave timely notice of the accident. However, the court did not reach the question as to whether they had standing on their own to prosecute the bad faith case.
One Hundred Years Ago Today:
For those who need a break from the delight of coverage decisions, we offer our bi-weekly historical dross:
Reno State Journal
October 1, 1910
GAMBLING CLOSES IN NEVADA
WITH RENO RESORTS CROWDED TO THE DOORS LAST NIGHT
Women on Last Day Visit Gambling Houses and Wager Spare Coin on Roulette Wheel
Stilled forever is the click of the roulette wheel, the rattle of the dice and the swish of the cards in the gambling houses in Nevada.
Promptly at midnight last night, the play ceased, the dealers were paid off, the lights were extinguished and the doors were locked, the roulette, crap and faro tables were covered with sheeting..
Editor's Note: The Progressive Era, sweeping the nation in the early part of the 20th century reached Nevada and state legislation led to the criminalization of gambling and the shuttering of gambling houses. It took until 1931 when Nevada legalized gaming, to solve a short term economic crisis facing the state. Nevada never looked back
Speaking of Steve Peiper, here are his words of greeting for this issue:
We start this week by offering a special thanks to those of you who joined us at the Syracuse version of the Law School for Claims Professionals. It was a distinct honor to be part of the panel, and we certainly hope that you found it useful and informative. In that regard, I offer a special welcome to the 10 newcomers that have been added to this subscriber list. We trust you'll enjoy the note as much as we enjoy writing it every two weeks.
In any event, another two weeks of relative silence from the Appellate Courts. We trust a flood of decisions are just around the next corner. In the meantime, take a moment to look at the First Department's recent decision on the anti-subrogation rule. See you in two weeks.
DRI Insurance Coverage and Practice Symposium
As Program Chair for this blockbuster program, I'm delighted to report that our registration numbers to date are ahead of last year's pace. This is a must attend for insurers and coverage practitioners alike.
The DRI Insurance Coverage and Practice Symposium is being held in NYC from Thursday, November 18, 2010 - Friday, November 19, 2010. The theme is "Autumn in New York" and the keynote speakers are insurance regulators from New York and New Jersey. The offerings including the latest in bad faith (both first and third party), handling SIR's and deductibles, witness preparation for insurance industry personnel, EPLI coverage, construction defect litigation as well as ethics offerings.
There are plenty of networking opportunities and we can expect in excess of 400 attendees. Click here for registration information and the program brochure. If you have any questions, contact me. If you are an insurer and would like information about incentives to hold panel counsel meetings, we advise you that there are GREAT benefits to doing so. Again, contact me with questions.
This from Audrey Seeley, the undisputed Queen of No Fault:
We are back in business this edition and with some interesting arbitration decisions! Please ensure you review the decision on chiropractic manipulation under anesthesia as I have not seen one from the Upstate arbitrators yet. If you would like a full copy of the decision please let me know as I argued it on behalf of the insurer. There are also a few decisions regarding the sufficiency of peer reviews for durable medical equipment and diagnostic testing. These seem to be areas of growing decisions and considerable scrutiny is being placed upon the peer reviewer to demonstrate the standard of care, deviation from it, and recitation to specific treatment records to support deviation from the standard of care. Sounds like a good training issue....
A Century Ago: The Bombing of the Los Angeles Times and Darrow for the Defense
From 1886 to 1917, Harrison Gray Otis was the owner and publisher of the Los Angeles Times. The newspaper was a conservative publication with strong anti-union editorials.
On October 1, 1910, in the middle of a strike called to unionize the metal trades of the city, Los Angeles Times building was dynamited. At least 20 were killed There was a loss of life of at least 20, and about the same number injured, and the event was called, the "crime of the century" for many years thereafter.
The mayor hired a private investigator who was able to implicate a number of men in the bombing, including Ortie McManigal, James B. McNamara, and his brother John J. McNamara (secretary-treasurer of the International Union of Bridge and Structural Iron Workers). McManigal agreed to testify against the McNamara brothers.
Samuel Gompers, president of the American Federation of Labor and other union officials looked at the criminal prosecution as an attack on the union movement, and hired Clarence Darrow to defend the brothers. However, by the time the trial began, however, Darrow had come to the conclusion that the brothers were guilty. He convinced the brothers to plead guilty. That decision stunned the city and angered the union leadership.
James McNamara received a life sentence, while his brother received a sentence of 15 years. Two others were later implicated and received life sentences. The damage from the trial was to plague Clarence Darrow for the rest of his life. Darrow himself was tried twice on charges that he attempted to bribe jurors in the case. He was acquitted in the first trial and there was a hung jury in the second. The prosecution agreed to forgo a third prosecution if Darrow promised never to practice law in California.
This Week's Headlines:
KOHANE'S COVERAGE CORNER
Dan D. Kohane
- In an Application to Stay Uninsured Motorist Arbitration, UM Carrier Establishes that Other Carrier Did Not Disclaim Promptly
- Injured Party That Sues as Assignee of Insured, Not Permitted to Sue for Bad Faith Where Insured Established Carrier Properly Denied Coverage on Basis of Late Notice
- If Insured Knows of Accident, It Must Investigate and Notify Insurer or Cannot Proffer "Good Faith Belief in Non Liability" as Excuse for Late Notice.
MARGO'S MUSINGS ON SERIOUS INJURY UNDER NEW YORK NO FAULT
Margo M. Lagueras
- Plaintiff Rebuts Claim That Injuries Were Caused by Degenerative Disc Disease
- Opinion That Significant ROM Limitations Are Due to Symptom Magnification Must Be Substantiated With Objective Medical Evidence
- Defendant's Experts Fail to Address 90/180-Day Claim Set Forth in Plaintiff's Bill of Particulars
- Defendants Rely on Medical Reports of Plaintiff's Treating Physicians and Fail to Meet Their Burden
- Defendants' Examining Doctors Fail to Relate Findings to Claims in Plaintiff's Bill of Particulars
AUDREY'S ANGLES ON NO-FAULT
Audrey A. Seeley
- Failure To Specifically Opine Lack of Medical Necessity Fatal To Denial
- One Year Rule Not Properly Invoked By Insurer
- The Best Practice Is To Adhere To The Medical Arguments For Necessity Of Treatment
- Peer Reviews Regarding Durable Medical Equipment Must Be Properly Documented
- Conducting Second MRI Because No Time Taken To Locate The First Improper Waste
- Treatment Post Accident Not Causally Related Based Upon Objective Findings
- Facility Charge For Chiropractic Manipulation Under Anesthesia Properly Denied
- Motion For Leave Granted On Failure To Timely Submit Claim
- Insurer's Contention of Failure to Submit Timely Claim Insufficient to Create Issue of Fact Precluding Summary Judgment
- Insurer Demonstrated Lack Of Insurance Coverage; Claimant Must Provide Sufficient Information On NF-2
- Insurer Demonstrated Lack Of Insurance Coverage; Claimant Must Provide Sufficient Information On NF-2.
PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper
- Anti-Subrogation Rule Does Not Bar Claims Against Additional Insureds Where the AI's Where Not Insured Under the St. Paul Policy for the Damages Paid by St. Paul to Its Named Insured
- Defendant's Motion to Dismiss is Rejected Where Warranties and Assertions Allegedly Made By Defendant Were Detrimentally Relied Upon by Plaintiff
FIJAL'S FEDERAL FOCUS
Katherine A. Fijal
- Applying Federal Statutes - Another Maritime Case about a Train Wreck
- Applying Arkansas Law- Duty to Defend.
Jennifer A. Ehman
- Court Holds that a Non-Insured Lacked Standing to Contest the Timeliness of the Disclaimer to the Named Insured
- Facebook Follies: Broad Disclosure Permitted of Social Media Accounts
- Breach of Contract by Subcontractor Does Not Nullify Requirement to Name the General Contractor as an Additional Insured
- Court finds a Question of Fact and Avoids Determining Whether Carrier is Estopped to Deny Coverage for Plaintiffs
- Court Denies Summary Judgment Motion where it finds a Question of Fact as to whether the Insured diligently investigated the Facts surrounding the Summons and Complaint it received prior to Deciding that it was Erroneously Named as a Party
Earl K. Cantwell
UPDATE ON SPOLIATION
That's it for this week. You can see that the courts are back in full swing and we're delighted to be here for you.
Special kudos to our ace 3-L law clerk, Kate Feroleto, for her submission of "Facebook Follies," which is included in Jen's column, and is an interesting decision involving the developing area of discovery of social media data.
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
Jennifer A. Ehman
Diane F. Bosse
FIRE, FIRST-PARTY AND SUBROGATION TEAM
Andrea Schillaci, Team Leader
Jody E. Briandi
Steven E. Peiper
Audrey A. Seeley, Team Leader
Margo M. Lagueras
Jennifer A. Ehman
Jody E. Briandi, Team Leader
Scott M. Duquin
Diane F. Bosse
Index to Special Columns
Kohane’s Coverage Corner
Margo’s Musings on “Serious Injury”
Audrey’s Angles on No Fault
Peiper on Property and Potpourri
Fijal’s Federal Focus
KOHANE’S COVERAGE CORNER
Dan D. Kohane
Appellate Division, Second Department
In an Application to Stay Uninsured Motorist Arbitration, UM Carrier Establishes That Other Carrier Did Not Disclaim Promptly
This was a case involving an application by NY Central to permanently stay an uninsured motorists arbitration. GEICO had disclaimed coverage claiming that the insured had not provided it with timely notice of the accident so the claimant, an NY Central insured, filed a claim for uninsured motorists arbitration. NY Central moved for a stay, within 20 days of the demand for arbitration, claiming that GEICO’s disclaimer was invalid because it was not sent out in a timely manner. GEICO argued that its delay is disclaiming was based on an ongoing investigation as to whether or not the insured vehicle was involved in an accident and whether or not the named insured’s wife was operating it.
The court found that GEICO did not establish that the delay was justified by a necessary or diligently conducted investigation into the possible grounds for the disclaimer.
Editor’s Note: My monthly reminder that a UM carrier that seeks to contest an disclaimer by another insurer (that purportedly led to the uninsured motorist status) or otherwise contests arbitrability, must make petition a court within 20 days of the demand for arbitration, or lose the right.
9/21/10 Cirone v. Tower Insurance Company of New York
Appellate Division, First Department
Injured Party That Sues as Assignee of Insured, Not Permitted to Sue for Bad Faith Where Insured Established Carrier Properly Denied Coverage on Basis of Late Notice
An employee of Navana Restaurant struck Cirone while the plaintiffs were making deliveries on a bicycle. Cirones sued Navana. Tower had denied coverage to Navana on the grounds of late reporting and then commenced a declaratory judgment action against Navana to confirm that denial.
In the meantime, Cirones took a personal injury judgment against Navana and brought a direct action against Tower to enforce it up to the policy limits. Cirone argued that they, as claimants, gave proper notice of the accident to Tower. Cirone was successful in establishing that the claimants notice was proper and that finding was affirmed on appeal.
[Editor’s Interlocutory Note: We criticized the early appellate decision in Cirone in our May 18, 2007 issue]
Navana then assigned its rights and claims against Tower to the Cirones and Cirones, as Navana’s assignees, sued Tower claiming bad faith because of Tower’s refusal to settle the personal injury case within Tower’s policy limits.
Tower moved to dismiss the bad faith claims and the lower court granted the motion. Since the Cirones were acting only as Navana’s assignees, they could have no greater rights that Navana. Since Navana lost its coverage case, Tower could not have been acting in bad faith to Navana in not negotiating the case within Navana’s policy limits.
The four-judge majority discussed, and the lone dissenter, reviewed an earlier Second Department decision in Zeldin which we reviewed in an October 2007 edition of CP:
10/2/07 Zeldin, as assignee of Markman v. Interboro Mut. Ins. .
Appellate Division, Second Department
Bad Faith Case Fails Where Insured Failed to Give Timely Notice of Accident. Injured Party’s Strategy Backfires
Zeldin was a passenger in car owned and operated by Markman when injured in an auto accident on March 8, 1998. He sued Markman, who was injured by Interboro with a $25,000 liability policy. A default was taken against Markman in August of 1999, and an inquest led to a default verdict of over $2 million. Markman assigned his rights against Interboro to Zeldin, and Zeldin commenced a bad faith case against Interboro, alleging that its refusal to defend Markman gave rise to extra-contractual liability.
Zeldin gave notice to Interboro on June 1, 1988, but Markman breached his obligation under the contract to provide prompt notice. The court finds that as plaintiff seeks to stand in the insured’s shoes in this action, the plaintiff is bound by the insured’s policy breach. The plaintiff, of course, had a separate right to give notice of the accident and, perhaps, his notice in June 1988 was timely. However, the court notes that the plaintiff did not commence a declaratory judgment action against Interboro in her capacity as the injured party, seeking a declaration that Interboro was obligated to defend Markman.
As indicated, the majority held that since the Cirones (like Zeldin) was suing as assignee, it could have no greater rights that the party that assigned the claim to him, the insured.
The dissent took a different approach. The dissenting judge argued that the plaintiffs had standing on their own to commence a bad faith case since the injured party had established their notice was timely. In the dissenting judge’s view, the case is significantly distinguishable from the facts of Zeldin because the plaintiffs are not relying on notice provided by the insured, Navana, but rather their own timely notice. Therefore, the dissent felt that the bad-faith claim was not barred by the rationale of Zeldin.
Editor’s Note: Attaboy Max. This one cannot be reviewed further without permission from the Appellate Division or Court of Appeals. In our opinion, the decision is a sound one because the action was commenced by the Cirones, only in their capacity as assignees. Contrary to the dissent’s view, we question whether the injured parties would have standing to pursue a direct claim for bad faith.
9/21/10 Hermany Farms, Inc. v. Seneca Insurance Company, Inc.
Appellate Division, First Department
If Insured Knows of Accident, It Must Investigate and Notify Insurer or Cannot Proffer “Good Faith Belief in Non Liability” as Excuse for Late Notice
Hermany owns and operates a milk processing plant in the Bronx, owned by two families, the Marrows and the Schwartzes. Broome was a milkman, employed by Knoll Creek and Knoll distributed Hermany’s milk. Knoll is owned by one of the Marrow’s and its office’s are on Hermany’s premises.
Broome fell at the Hermany plant and secured workers compensation benefits from Knoll. The following year, Broome sued Hermany and Hermany’s chief operating officer (you guess it) Robert Marrow, notified Seneca Insurance Company, Hermany’s liability carrier. Seneca denied coverage on the ground that Hermany had failed to give proper and timely notice of the occurrence.
Hermany argued that it had a good faith belief in non-liability and that excused its delay in notifying Seneca. Hermany argued that Robert Marrow was the person charged with overseeing daily operations, and thus solely responsible for the policy notification. It further argues that Robert Marrow first became aware of the accident one year later in August of 2006 when he was served with a summons and complaint. He testified that, it was only upon receipt of the summons and complaint that he ascertained that Broome "fell off a truck that he had been working on while it was parked at the Harmony platform."
The court sides with Seneca, finding that several Hermany employees knew of the accident the day it occurred and failed to conduct any investigation to assess liability. Indeed, it knew that a worker’s compensation claim had been filed. Hermany failed in its burden of establishing the reasonableness of its excuse.
9/23/10 Jacobs v. Rolan
MARGO’S MUSINGS ON SERIOUS INJURY UNDER NEW YORK NO FAULT
Margo M. Lagueras
Appellate Division, First Department
Plaintiff Rebuts Claim That Injuries Were Caused by Degenerative Disc Disease
On appeal, the complaint is reinstated. Defendant’s orthopedic surgeon examined plaintiff 2½ years after the accident and found only an insignificant reduction in range-of-motion in plaintiff’s lumbar spine and full range-of-motion in all other areas. In addition, defendant’s radiologist opined that any reductions in range-of-motion were due to degenerative disc disease.
However, the radiologist who took MRIs at the time of the accident did not make any mention of degenerative disc disease and plaintiff’s treating physician determined she had significant limitations both immediately after the accident and three years later, and that the limitations were not due to degenerative conditions but rather causally related to the accident. As such, and given that plaintiff had no prior symptoms, the court found that plaintiff sufficiently rebutted defendant’s claim of lack of causation. In addition, the two-year gap in treatment was explained by plaintiff’s inability to pay for treatment following termination of no-fault benefits and the denial by her health insurance to pay for her physical therapy.
9/21/10 Cheour v. Pete & Sals Haborview Transportation, Inc.
Appellate Division, Second Department
Opinion That Significant ROM Limitations Are Due to Symptom Magnification Must Be Substantiated with Objective Medical Evidence
On appeal, the complaint is reinstated as defendants failed to meet their prima facie burden. Their orthopedist failed to compare his findings with what is normal. He also noted significant limitations in range-of motion in plaintiff’s cervical spine, left knee and left shoulder which he attributed to extreme symptom magnification but he did not substantiate his conclusions with any objective medical evidence. In addition, defendants’ neurologist also found significant limitations in plaintiff’s lumbar range-of-motion making it unnecessary to consider the sufficiency of plaintiff’s opposing papers.
9/21/10 Kelly-Harewood v. Criollo
Appellate Division, Second Department
Defendant’s Experts Fail to Address 90/180-Day Claim Set Forth in Plaintiff’s Bill of Particulars
Plaintiff’s bill of particulars set forth a claim under the 90/180-day category of serious injury and she testified, at her deposition, that she never returned to work. Neither defendant’s orthopedist nor neurologist related their findings to this category. As such, the complaint was reinstated.
9/21/10 Ortiz v. Orlov
Appellate Division, Second Department
Defendants Rely on Medical Reports of Plaintiff’s Treating Physicians and Fail to Meet Their Burden
All 3 defendants relied upon the medical reports of plaintiff’s treating physicians, at least two of which found significant range-of-motion restrictions of the cervical and lumbar spine more than seven months after the accident. Because defendants did not meet their prima facie burden, their motion should have been dismissed regardless of the sufficiency of plaintiff’s opposing papers.
9/21/10 Udochi v. H & S Car Rental, Inc.
Appellate Division, Second Department
Defendants’ Examining Doctors Fail to Relate Findings to Claims in Plaintiff’s Bill of Particulars
Yet another case where defendants’ experts do not address the claims set forth in plaintiff’s bill of particulars and, as a result, defendants’ fail to meet their prima facie burden on summary judgment.
In her bill of particulars, plaintiff claimed under the 90/180-day category of serious injury alleging she was out of work for over five months. The accident occurred in January 2004, and, at her deposition, she testified that she did not return to work until May 2005. Both defendants’ experts, a neurologist and an orthopedic surgeon, who examined plaintiff over five years after the accident, failed to relate their findings to the period immediately following the accident. As such, the trial court’s order denying defendants’ motion was affirmed.
9/28/10 Rochester Chiropractic Associates v. Liberty Mutual Ins. Co.
Arbitrator Thomas J. McCorry, Erie County
Failure to Specifically Opine Lack of Medical Necessity Fatal to Denial
The insurer denied chiropractic care the Applicant, medical provider, rendered to the eligible injured person based upon the independent examination conducted by Sean Higgins, D.C. The independent examination report indicated that the eligible injured person had “plateaued” with chiropractic care. The assigned arbitrator determined that the insurer had not demonstrated lack of necessity:
Usually, I would find a measured approach, such as was utilized by Dr. Higging, to be persuasive. However by saying that a patient has “plateaued”, it is very similar to saying that a patient has reached “maximum medical improvement”. What was needed from Dr. Higgins was an affirmative impression, that further chiropractic care was not “medically necessary” [sic]
9/22/10 Buffalo Neurosurgery Group v. Respondent
Arbitrator Kent L. Benziger, Erie County
One Year Rule Not Properly Invoked by Insurer
The issue in this arbitration was whether the eligible injured person’s injuries and neurological treatment and MRI were ascertainable within one year from the October 16, 2008, accident. The eligible injured person’s medical records documented complaints of pain and treatment for neck and back pain, jaw pain, left arm pain, bilateral shoulder pain. The eligible injured person obtained updated MRI films of his cervical and thoracic spine as well as consultations with a neurologist. The insurer denied these services based upon the one year rule.
The assigned arbitrator determined that the one year rule was not properly invoked in this case. He relied upon Stanavich v. General Accident, 229 AD2d 872 (2d Dept. 1996) which held that the one year rule can be invoked by the insurer if there is no evidence presented to the insurer that an injury is ascertainable within a year of the accident. In Stanavich, the example was provided of an eligible injured person submitting expenses for a cervical spine injury within one year from the accident and then three years post accident submitted expenses for a knee injury. The knee injury is not ascertainable within the first year and the insurer can validly deny that claim.
Here, there was evidence submitted to the insurer within a year of the accident that he had complaints of cervical spine, lumbar spine, and shoulder injuries and treated for same. The one year rule does not require that the type of treatment, i.e., need for an MRI or consultation with a neurologist, be ascertained within one year from the accident.
9/21/10 Timothy DelMedico, D.C. v. Respondent
Arbitrator Kent L. Benziger, Erie County
The Best Practice Is to Adhere to the Medical Arguments for Necessity of Treatment
The Applicant conducted an upper extremity EMG/NCV test upon his patient on February 1, 2010, and sought reimbursement for same. The Applicant’s letter of medical necessity stated that the testing was being conducted to check for nerve root impingement.
The insurer denied the testing based upon a peer review conducted by Kevin Portnoy, D.C. Mr. Portnoy opined, after reviewing the records, that there was no indication the study would change the course of treatment or enhance the eligible injured person’s prognosis. Mr. Portnoy further opined that decisions regarding chiropractic care can be made without conducting an invasive test and rather upon clinical judgment.
Mr. DelMedico rebutted the peer review report and the assigned arbitrator determined that he did not:
constructively advance his position by lecturing the insurance carrier as to the peer reviewer in the following manner:
By the time you pay this ‘paid endorser of your policies’, as well as a lawyer to defend his skewed and flawed position in arbitration, you could have paid for Mrs. “K” bills.
The assigned arbitrator determined that the peer review report was sufficient to establish lack of medical necessity. Further, Mr. DelMedico’s rebuttal failed to rebut the reviewer’s specific contentions. Instead, Mr. DelMedcio spoke in generalities and his tone and argument that because he was the treating chiropractor that examined his patient and knows her best interests the bill must be paid is legally inaccurate.
9/21/10 Elite Medical of WNY v. Respondent
Arbitrator Kent L. Benziger, Erie County
Peer Reviews Regarding Durable Medical Equipment Must Be Properly Documented
The insurer’s denial of a cervical traction unit based upon the peer review of Robert Snitkoff, D.C. was not upheld. The assigned arbitrator reasoned that Mr. Snitkoff’s report admitted that the cervical traction unit may be used during physical therapy with the patient properly instructed for home use. However, a cervical traction unit is not a stand alone treatment modality and should be performed with range of motion exercises. The peer review, while it cited to medical journals to support this opinion, failed to apply the article to the specific treatments in this case and further found that the medical journal did not support his contention as to the standard of care.
9/21/10 Proscan Radiology v. Respondent
Arbitrator Kent L. Benziger, Erie County
Conducting Second MRI Because No Time Taken to Locate the First Is Improper Waste
On May 18, 2009, the eligible injured person sustaining injuries to his cervical and lumbar spine from an accident while a bus passenger. The eligible injured person was taken to the emergency room where x-rays were taken. On August 7, 2009, MRIs of the cervical and lumbar spine were taken as prescribed by the family nurse practitioner. Thereafter, the eligible injured person came under the care of Scott Croce, D.C. Mr. Croce acknowledged that his patient had an MRI of the lumbar spine in August but it was not available for his review. It was further noted that Mr. Croce’s patient did not disclose to him that he underwent a prior cervical spine MRI. Mr. Croce prescribed a second lumbar spine MRI as well as a cervical spine MRI.
The insurer denied the MRI studies based upon a peer review by Louis Marconi, D.C. Mr. Marconi opined that the two sets of MRIs demonstrated the same injuries and there was no reason for duplicate MRIs.
The assigned arbitrator determined that the peer review was persuasive. He reasoned that both Mr. Croce and his patient had an obligation to prevent unnecessary duplicate treatment. Mr. Croce was aware of the prior lumbar spine MRI and should have attempted to obtain the first set. With regard to the cervical spine MRI, the assigned arbitrator determined that the eligible injured person’s failure to advise a treating chiropractic of the existence of one is inexcusable. Likewise, Mr. Croce should have made better inquiries and obtained the records. The assigned arbitrator stated:
Such a practice promotes waste and demonstrates a callous disregard for the costs of medical care and insurance coverage which are ultimately passed on to all consumers…Health care in this country including the No-Fault system has been critized for the duplication of care and lack of coordination between numerous entities. In this instance, the responsibility for preventing such duplication will fall upon the treating chiropractor, the MRI facility and the Eligible Injured Party.
9/21/10 Perkins Medical Practice v. Kemper
Arbitrator Kent L. Benziger, Erie County
Treatment Post Accident Not Causally Related Based Upon Objective Findings
The eligible injured person was involved in an August 2008, motor vehicle accident and was hospitalized for a few days due to low back pain. The eligible injured person had a pre-existing low back injury and had undergone lumbar spine surgery resulting in the implantation of screws and other hardware. The medical records pre-accident revealed evidence that the screws were fractured. Further, the eligible injured person had been involved in a head on collision in July 2008.
The insurer denied the subsequent neurological treatment rendered in August 2009, based upon the independent examination by Dr. John Perry. Dr. Perry opined that in reviewing the Applicant’s treatment note within seven dates after his patient was released from the hospital, the Applicant opined that there was no significant change in his patient’s condition from the last time he examined his patient prior to the August 2008, accident. The Applicant’s record also documented his review if the MRI of the lumbar spine taken during his patient’s hospitalization. The Applicant opined that there was no evidence of an epidural hematoma, which he believed would be the most likely injury from the August 2008, accident. Further, the hardware was unchanged and that no other injuries could be seen.
Also, Dr. Perry’s objective examination of the eligible injured person did not reveal any new lumbar spine condition. In short, Dr. Perry could not find any objective evidence of a new injury or aggravation that could be substantiated objectively. Dr. Perry did note that the eligible injured person could have experienced an aggravation to his lumbar spinal condition but that aggravation could not be substantiated.
9/17/10 Buffalo Ambulatory Surgery Center v. Allstate Ins. Co.
Arbitrator Veronica K. O’Connor, Erie County
Facility Charge for Chiropractic Manipulation Under Anesthesia Properly Denied
The eligible injured person was involved in an August 29, 2008, motor vehicle accident and came under the care of John Ward, D.C. From July 29-31, 2009, Mr. Ward performed at the Applicant’s facility chiropractic manipulation under anesthesia of his patient to her cervical, thoracic, and lumbar spine as well as both of her hips.
The assigned arbitrator determined that the Applicant failed to establish this type of treatment was medically necessary or casually related to injuries from the accident. The Applicant did not submit any medical records to document findings to refute the multiple independent medical examination reports from John Gaiser, D.C. Likewise, the assigned arbitrator determined that there was no evidence that Mr. Ward adhered to the protocols and standards set forth by the National Academy of Manipulation Under Anesthesia Physicians as he claimed.
9/21/10 Wyckoff Hgts. Med. Ctr. v. Countrywide Ins. Co.
New York State Court of Appeals, Motion Decision
Motion for Leave Granted on Failure to Timely Submit Claim
We previously reported this decision and are pleased to advise that the Court of Appeals has granted leave to appeal. The following is the summary and we will be sure to look for the Court of Appeals’ decision:
3/23/10 Wyckoff Heights Med. Ctr. a/a/o Ramona Rodriguez v. Country Wide Ins. Co.
Appellate Division, Second Department
Insurer's Contention of Failure to Submit Timely Claim Insufficient to Create Issue of Fact Precluding Summary Judgment
The insured established its prima facie case entitlement to summary judgment through the submission of the billing forms and that payment was overdue. The insurer failed to rebut that presumption and the contention that the plaintiff failed to submit its claim in a timely fashion was rejected.
9/21/10 Lenox Hill Radiology v. GEICO
Appellate Term, First Department
Insurer Demonstrated Lack of Insurance Coverage; Claimant Must Provide Sufficient Information on NF-2
The insurer denied the plaintiff’s assignor’s No-Fault claim on the ground that there was no No-Fault coverage since this accident occurred in Louisiana, which does not have No-Fault laws. At trial, the insurer called one witness – its senior underwriter – and the court rendered judgment in plaintiff’s favor. The trial court in rendering judgment held that the insurer’s lack of insurance coverage defense was solely predicated upon inadmissible hearsay. Further, the insurer was obligated to produce a witness with personal knowledge of the underlying accident.
The appellate court disagreed and held that the insurer submitted admissible evidence in the form of business records on the underlying accident. Further, the plaintiff’s apparent clerical error of listing the assignor as the insured party on its claim form did not obligate the insurer to conduct an exhaustive search to exclude the possibility of the assignor’s insured status. This particularly so when the assignor never asserted to hold such status.
The judgment was vacated and the complaint dismissed as the insurer demonstrated lack of insurance coverage. The court further reasoned in making this determination that it is the claimant’s obligation to supply sufficient information on the NF-2 to the insurer in order to allow the insurer to determine whether the injured party is actually insured.
9/17/10 Dover Acupuncture, P.C. a/a/o Jorge Brista v. State Farm Mut. Auto. Ins. Co.
Appellate Term, First Department
Insurer Demonstrated Lack of Insurance Coverage; Claimant Must Provide Sufficient Information On NF-2
The insurer established that it mailed the requisite notices requiring the plaintiff’s principal to appear for an examination under oath. The insurer was not required to produce the automobile insurance policy at issue in this case to establish the existence of No-Fault coverage and the ability to conduct such an examination. Likewise, the court further held that the examination does not have to be scheduled within 30 days of the insurer’s receipt of the claim. Accordingly, the insurer’s summary judgment motion should have been granted.
9/30/10 St. Paul Fire and Marine Ins. Co. a/s/o Chelsea 27th Street Apartments, LLC v. FD Sprinkler Inc.
Appellate Division, First Department
Anti-Subrogation Rule Does Not Bar Claims Against Additional Insureds Where the AI’s Where Not Insured Under the St. Paul Policy for the Damages Paid by St. Paul to Its Named Insured
In this matter, St. Paul paid approximately $715,000 in damages to its named insured Chelsea as a result of an unintentional sprinkler discharge. Thereafter, St. Paul sought to recover the damages via the instant subrogation action against FD Sprinkler (sprinkler subcontractor) and Woodworks (drywall subcontractor).
Importantly, FD Sprinkler and Woodworks were named as additional insureds under the St. Paul policy, but only to the extent of their interest in the building, to wit tools, labor, materials furnished or owned. FD Sprinkler and Woodworks immediately moved to dismiss the action on the basis of the anti-subrogation rule, and the Trial Court agreed.
On appeal, however, the First Department modified the Trial Courts decision. In essence, the Court ruled that the anti-subrogation clause only barred recovery for damages to property in which either FD Sprinkler or Woodworks had an interest. As such, St. Paul was barred from seeking approximately $52,000 in damages sustained to property owned by Woodworks. As neither FD Sprinkler, nor Woodworks, had an interest in any other damage sustained at the premises, they were not insured under the terms of the policy. It follows that the anti-subrogation law would not preclude a claim for the remainder of the damages.
9/21/10 Forman v The Guardian Life Insurance Company of America
Appellate Division, First Department
Defendant’s Motion to Dismiss Is Rejected Where Warranties and Assertions Allegedly Made by Defendant Were Detrimentally Relied Upon by Plaintiff
Prior to this action, plaintiff formed an auditing company wherein he would review invoices and bills from medical providers on behalf of Insurance Companies with an aim at uncovering over-billing and/or fraud. Under the terms of his agreement with defendant Guardian, plaintiff was to be paid 25% of the fees Guardian recovered as a result of plaintiff's auditing efforts.
From 2002-2008, plaintiff uncovered tens of millions of dollars in over-billings. Indeed, plaintiff’s efforts were alleged to have resulted in Guardian changing its fraud prevention program. However, unbeknownst to plaintiff, Guardian had executed several agreements with providers whereby Guardian agreed to waive post-payment claims. As such, Guardian chose to forego its rights to collect one penny of the over-billed money.
As one can imagine, plaintiff was not pleased with Guardians generosity. As a result, plaintiff commenced the instant action alleging breach of contract, breach of the implied covenant of good faith and fair dealing, quantum meruit, promissory estoppel and equitable estoppel. In response, Guardian moved to dismiss the claims under CPLR 3211 on the grounds that Guardian was under no contractual obligation to pursue the over-billing uncovered by plaintiff.
The Trial Court denied Guardians motion, and the Appellate Division affirmed that ruling. In support of plaintiff's breach of contract argument, the First Department noted that a warranty clause found within the agreement between the parties provided that Guardian had not entered into any agreements which would conflict or interfere with plaintiff's auditing work and/or the payment arrangement.
Further, the Appellate Division refused to dismiss plaintiff's claim premised upon a violation of the implied duty of good faith. In so holding, the Court found that plaintiff's allegations sufficiently alleged that Guardian's unilateral actions to waive recovery could be construed as frustrating the purpose of the agreement with plaintiff.
Moreover, plaintiff's claims of quantum meruit survived where plaintiff alleged that Guardian changed its fraud prevention protocol in response to the data provided by plaintiff. Plaintiff's promissory estoppel argument was upheld where plaintiff alleged that Guardian made a promise to prosecute any over-billings uncovered by the efforts of plaintiff. Finally, plaintiff's equitable estoppel claim survived due to plaintiff's allegations that Guardian improperly concealed the existence of their waiver of claims against entities shown to have been over-billed.
United States District Court for the Second Circuit
Applying Federal Statutes – Another Maritime Case about a Train Wreck
The Court was asked to determine which federal statutory scheme governs the extent of the parties’ liability: the Carmack Amendment, 49 U.S.C. §11706, which imposes something akin to strict liability on shippers; or the Carriage of Goods and Sea Act (“COGSA”), 46 U.S.C. §30701, which creates negligence based liability with a $500 per-package damages cap.
Relying on the Second Circuit’s decision in Sampo Japan Ins. Co. of America v. Union Pacific Railroad Co., 456 F.3d 54 (2nd Cir. 2006), the district court held that the Carmack Amendment applied. However, since the district court’s decision the Supreme Court held otherwise and abrogated Sampo in a case which is materially indistinguishable from the present matter. Kawasake Kisen Kaisha Ltd. v. Regal-Beloit Corp., 130 S.Ct. 2433 (2010). As a result the Second Circuit vacated the judgment of the district court and remanded for further proceedings.
Mitsui Simitomo Insurance Co. [“Mitsui”] commenced this action as subrogor of non-party Asmo North Carolina, Inc. [“Asmo”]. Asmo imports, manufacturers, and distributes motorized automotive parts. In March 2006, Asmo purchased on FOB terms a shipment of motors and other parts from an affiliate in Japan. The affiliate arranged for the cargo to be shipped from Shimizu, Japan to Asmo’s facilities in Statesville, North Carolina.
Evergreen Marine Corp. [“Evergreen”] was hired to transport the Cargo. The job required ocean carriage from Japan to the Port of Los Angeles and rail carriage from the port to North Carolina. Evergreen – a vessel operating common carrier issued an intermodal through waybill related to the entire shipment from Japan to North Carolina. [“The Waybill”]. The Waybill did not reference the Carmack Amendment. Instead, it contained provisions that: (1) indicated that COGSA’s terms governed the carriage; (2) authorized Evergreen to enter into subcontracts to complete the shipment; and (3) extended the defenses and liability limitations available under the Waybill to any subcontractors engaged by Evergreen.
Evergreen entered into a subcontract with the Union Pacific Railroad company [“UP”] which agreed to ship the cargo by rail from the Port of Los Angeles to North Carolina under the terms of a standing contract titled the “Exempt Rail Transportation Agreement [“ERTA”]. The ERTA incorporated by referenced the then existing version of UP’s “Exempt Circular Master Intermodal Transportation Agreement [“MITA-2A”]. Like the Waybill, the MITA 2-A sought to limit UP’s liability exposure in the event of damage to the cargo.
In practice almost all shippers decline to declare a value, because a maritime insurance company is generally willing to assume the risk of loss of damage for a cheaper price than the carrier would be. That is what happened here, neither ASMO nor its affiliate declared the full value of the cargo or paid increased shipping rates, and Asmo instead purchased insurance on the shipment from Mitsui. Evergreen subsequently took possession of the cargo in Japan, delivered it to the Port of Los Angeles via a vessel known as the “Ever Union,” and transferred it to UP without incident. However, UP’s train derailed near Nigginson, Arkansas, caused the property damage at the center of this dispute. Mitsui paid Asmo $385,105.70. The only issue remaining is the amount of damages owed.
Mitsui argued that Evergreen and UP were liable for the full value of the damages under the Carmack Amendment. Evergreen and UP argued that under COGSA their financial exposure was capped at $500 per package.
The Second Circuit, in analyzing the Supreme Court’s decision in Regal-Beloit, noted that the Supreme Court held that the Carmack Amendment did not apply to an intermodal shipment that originated outside the U.S. and was performed pursuant to a single through bill of lading by a VOCC. Rather Carmack applies only to a shipment of goods where a “receiving rail carrier” as opposed to a “delivering” or connecting rail carrier is required to issue a Carmack compliance contract for the carriage of goods.
The new standard requires that two conditions be met before the Carmack Amendment applies to a shipment: (1) the rail carrier must provide transportation or service subject to the jurisdiction of the Surface Transportation Board; (2) the carrier must receive the property for transportation under this part, where this part is the Surface Transportation Board’s jurisdiction over domestic rail transport.
Because the court held that a rail carrier does not become a receiving carrier simply by accepting goods for further transport from another carrier in the middle of an international shipment under a through bill, the Carmack Amendment did not apply to either Evergreen or UP. The court did point out that it would be a different case if the bills of lading for the overseas transport ended at this country’s ports and the cargo owners then contacted with UP to complete a new journey to an inland destination of the U.S.
9/17/10 Landers Auto Group Number One v. Continental Western Ins. United States District Court for the Eighth Circuit
Applying Arkansas Law– Duty to Defend
In 2003, Landers sold a car to Latwanna Clark. The car was financed through Toyota Motor Corporation [“TMC”] and Landers guaranteed the load as part of a special financing incentive it was offering to buyers at the time. Clark alleged that TMC failed to credit several of her payments and listed her as delinquent on the loan. When TMC contacted Landers as the guarantor, Landers paid the loan in full and repossessed the car.
Clark sued Landers and TMC, alleging wrongful repossession and conversion and violations of the Arkansas Deceptive Trade Practices Act.
Landers filed a claim with Continental and requested defense and indemnification. Landers also requested permission to use its own attorney for the case. Continental provided a defense under a reservation of rights taking the position that most of the claims were not covered, but agreed to defend because the complaint may state a claim under the Truth in Lending Act [“TLA”], which would trigger coverage under its errors & omissions policy. Continental also took the position that there was no conflict of interest and assigned panel counsel.
Landers claimed coverage under three policies: (1) the commercial garage coverage policy; (2) the automobile dealer’s errors & omissions policy; and, (3) the commercial general liability policy.
Landers brought a declaratory judgment action and requested a declaration that Continental had a duty to defend the Clark suit under the policy, the reservation of rights created an inherent conflict which triggered a right for Landers to select counsel, and that Continental had a duty to indemnify.
In Arkansas, a duty to defend is determined by the allegations in the pleadings and the duty to defend is broader than the duty to indemnify.
Under the errors & omissions policy the Court determined that the claims are being brought for failure to credit payments and for repossessing the car, not for failure to comply with the TLA. The court held that since the court did not set forth a TLA claim, Continental had no duty defend under the provisions of that policy.
As to the garage policy, the “loss” which Landers argued was covered under the garage policy was Clark’s alleged loss of use of her car after it was repossessed. She did not make a claim for physical damage to her car. No coverage exists under the garage policy because the loss arises from the allegedly improper repossession, which is not an activity associated with operation of a garage but of the financing activities of the dealership. The court also held that the claims fell under the exclusion for expended or intended loss, since Landers expected or intended that Clark would lose the use of her automobile when it was repossessed.
As to the commercial general liability policy the court held that the loss did not occur as a result of an “accident”. The court held: (1) the plain language of the word “accident” when read in context with the garage policy and with the definition in the Commercial policy makes it clear the policy refers to physical accidents – not accounting errors; (2) the claims against Landers to not arise from the accounting errors but from intentional acts taken by Landers with respect to its rights and obligation under the financing agreement, i.e., the repossession of the car and alleged failure to negotiate in good faith. The court held that those were intentional acts that would not fit the ordinary definition of an accident; and, (3) the incident is also excluded from coverage under the commercial general liability policy because the loss of use was a loss Landers “expected” would occur when it took the action of repossessing the car.
The court concluded that Continental had neither an obligation to defend, nor an obligation to indemnify Landers for the allegations in Clark’s complaint.
Supreme Court, New York County
Court Holds Non-Insured Lacked Standing to Contest Timeliness of Disclaimer to Named Insured
The underlying action was the result of an injury to Franklin Edwards, an employee of non-party CIA, a subcontractor hired by defendant RJR Maintenance Group, Inc. As a result of the injury, Edwards commenced an action against the projects general contractor RJR and St. John’s University (presumably the property owner).
St. John’s tendered its defense to RJR who was insured under a commercial liability policy issued by plaintiff. The policy’s blanket additional insured endorsement provided that an additional insured included any person or organization that RJR was required to named as an additional insured under a written contract or agreement.
Plaintiff disclaimed coverage to both RJR and St. John’s. With respect to RJR, plaintiff cited an employee exclusion, which excluded injuries to contractors and/or employees of contractors hired or retained by or for the insured. With regard to St. John’s, plaintiff asserted that the agreement between St. John’s and RJR contained no requirement that St. John’s be named as an additional insured on plaintiff’s policy. Thereafter, plaintiff commenced this suit and moved for summary judgment. Notably, RJR never appeared in the coverage action.
In opposition to the motion, St. John’s argued that it was an additional insured under plaintiff’s policy. Specifically, it submitted a certificate of insurance provided to it by RJR. St. John’s also argued that plaintiff failed to disclaim in a timely fashion and that the employee exclusion did not apply to St. John’s as Franklin Edwards was not an employee of St. John’s or any of its contractors.
After reviewing all the evidence submitted, the court held that St. John’s was not an additional insured under plaintiff’s policy as RJR was not required to name it as such. Also, in the most interesting part of the decision, the court held that St. John’s, as a non-insured under the policy, had no standing to challenge whether plaintiff’s disclaimer letter to RJR was in compliance with Insurance Law §3420(d). The court’s decision relied upon Batchie v. Travelers Inc. Co., a Second Department case in which the insurer failed to provide a copy of the disclaimer to the injured party and the court held that an insured did not have standing to challenge the insurer’s failure to comply with the statute as to the injured party.
9/21/10 Romano v. Steelcase Inc.
Supreme Court, Suffolk County
Facebook Follies: Broad Disclosure Permitted of Social Media Accounts
Last week, a Suffolk County Judge set a new legal precedent for discovery of information on the social networking sites Facebook and MySpace. In a personal injury action, plaintiff Kathleen Romano claimed a loss of enjoyment of life due to herniated discs and restricted motion in her neck. The defendant, Steelcase, Inc., found public portions of Ms. Romano’s Facebook page to contradict her allegations. As a result, Steelcase requested authorizations to obtain full access to and copies of the plaintiff’s current and historical records and information on her Facebook and MySpace accounts. After the plaintiff refused, the defendant moved by order to show cause to obtain access to Romano’s accounts. Facebook fought the subpoena saying that turning over Romano’s info would be a violation of federal law.
Justice Jeffrey Arlen Spinner stated in his decision “Both Facebook and MySpace are social networking sites where people can share information about their personal lives, including posting photographs and sharing information about what they are doing or thinking. Indeed, Facebook policy states that ‘it helps you share information with your friends and people around you,’ and that ‘Facebook is about sharing information with others,’” Judge Spinner wrote “To permit a party claiming very substantial damages for loss of enjoyment of life to hide behind self-set privacy controls on a website, the primary purpose of which is to enable people to share information about how they lead their social lives, risks depriving the opposite party of access to material that may be relevant to ensuring a fair trial.”
The Plaintiff argued she had a reasonable expectation of privacy within her home computer and within electronic posting and messages she had marked as private. However, the Judge disagreed, “When Plaintiff created her Facebook and MySpace accounts, she consented to the fact that her personal information would be shared with others, notwithstanding her privacy settings. Indeed, that is the very nature and purpose of these social networking sites else they would cease to exist. Since Plaintiff knew that her information may become publicly available, she cannot now claim that she had a reasonable expectation of privacy.” Romano’s lawyer has said they will appeal the decision.
Editor’s Note: We thank our law clerk, Kathleen Feroleto for spotting this case and preparing this summary. Kate is a third year law student at the University at Buffalo Law School and has been a stellar addition to our legal team.
9/16/10 York Hunter Constr. Serv., Inc. v. Great Am. Custom
Supreme Court, New York County
Breach of Contract by Subcontractor Does Not Nullify Requirement to Name General Contractor as Additional Insured
This case arises out of an incident in which a plumber sustained injury when he stepped on, and got tangled in, wire mesh while on a construction site. Plaintiff, the project’s general contractor and construction manager, brought this motion seeking an Order that it was an additional insured under a policy of insurance issued by defendant Utica Fire Ins. Co. to High Tech Enterprises & Electrical Services of N.Y., Inc. (“High Tech”), a subcontractor on the site.
Per the facts of the case, plaintiff was hired by the property owner to serve as the project’s general contractor and construction manager. Plaintiff then subcontracted some of the work to James. M. Inman Construction Corp. (“Inman”), who, in turn, subcontracted the concrete work to High Tech. Pursuant to the Inman/High Tech subcontract, High Tech was responsible for the work broadly stated as “concrete.” Specifically, the purchase order indicated that High Tech was to provide “all labor, material, taxes, equipment, tracking, hoisting, supervision, layout, clean-up, insurance…for complete performance of the concrete work in its entirety…” As part of its work, High Tech brought in another subcontractor, Crown Contracting Industries, to, among other things, purchase and place the rebar and wire mesh necessary for the concrete work.
- (Property owner [contract] à Plaintiff [subcontract] à Inman [subcontract] à High Tech [subcontract] à Crown)
Utica issued a policy of insurance to High Tech that contained a “blanket additional insured” endorsement, which provided coverage for any person or organization whom High Tech was required to named as an additional insured pursuant to a written contract. Notably, the endorsement stated that coverage for additional insureds was limited to liability arising out of High Tech’s work for that additional insured.
Thereafter, Inman walked off the job and Crown became insolvent. High Tech, in turn, stepped in and finished the job.
In opposition to this motion, Utica argued that High Tech’s policy required that there be an effective written contract with High Tech before the additional insured provision was triggered. In addition, Utica asserted that there was no contract in place between plaintiff and High Tech requiring that plaintiff be named as an additional insured. Further, Utica argued that although this may have been required in the Inman/High Tech subcontract, when Inman walked off the job, the was contract was “nullified,” excusing the obligation to procure insurance for plaintiff. Lastly, Utica argued that if plaintiff was an additional insured the accident did not arise out of High Tech’s work.
The court held that by walking of the job Inman may have breached the contract; but, a breached contract does not render it a nullity. Specifically, the court reasoned that it could not identify one provision in the Inman/High Tech agreement that would excuse High Tech of its separate obligation to name plaintiff as an additional insured in the event Inman defaulted under its contract with High Tech. In addition, as Utica was not a party to any subcontract, the court held that the breach of contract argument raised by Utica, actually belonged to its insured, High Tech. Thus, according to the court, not only are the Inman contracts, enforceable, Utica cannot disavow its insurance agreement with High-Tech based on Inman’s default. Accordingly, Utica’s argument that Inman’s breach relieved Utica from providing its additional insured with coverage was erroneous. Lastly, the court held that Utica failed to meet its burden of proving that the injury did not arise out of High Tech’s work. It reasoned that whether or not High-Tech actually installed the wire mesh where the plumber sustained injury was not decisive as, based on the High Tech’s contract, it was responsible for that work.
9/14/10 Yoda, LLC v. National Union Fire Ins. Co. of Pittsburgh, P.A.
Supreme Court, New York County
Court Finds Question of Fact and Avoids Determining Whether Carrier Is Estopped from Denying Coverage to Plaintiffs
This decision arises out of a heavily litigated claim. In December 2002, defendant Han Soo Lee was allegedly injured while working at a construction site. His employer, Queens Stainless, was subcontracted to perform work on the site. Pursuant to the agreement entered into by Queens Stainless and the general contractor, Queens Stainless was required to purchase three types of insurance: workers’ compensation, comprehensive general liability, and umbrella liability.
In 2003, Lee commenced an action against the owner and general contractor. The general contractor had both a primary and excess policy. There is no dispute that these policies provide coverage for the owner and general contractor.
The dispute that eventually arose was whether the owner and general contractor were insureds under Queens Stainless’ primary policy, issued by First Specialty Insurance Company (“First”), and excess policy, issued by National Union Fire Insurance Company of Pittsburgh, PA (“National Union”). The owner and general contractor allege that Queens Stainless, pursuant to a contract, agreed to, and did in fact, name them as additional insureds on its policies. Specifically, it is alleged that Queens Stainless contacted its insurance broker who, in turn, contacted another insurance agent (allegedly an agent of National Union) who helped set up the policies. Thereafter, certificates of insurance were issued naming the owner and general contractor.
It appears that on three separate occasions, defense counsel for the owner and general contractor tendered their defense to Queens Stainless and its insurers. Thereafter, First accepted the tender and agreed to defend and indemnify the owner and general contractor. However, allegedly, National Union never responded. It is noted that although National Union did not accept the tender it did set up a claims file to monitor the case’s status. It is also alleged that an adjuster at National Union indicated to plaintiffs that she thought it was an excess carrier for the occurrence, whose coverage would not be triggered until the primary insurance was exhausted.
In April 2006, mediation was held in the underlying case. It is alleged that the National Union adjuster and First adjuster agreed that just the National Union adjuster would attend. Additionally, the First adjuster authorized National Union to make an offer of First’s policy limit at the mediation. The offer was rejected.
In June of 2006, National Union allegedly for the first time discovered that neither the general contractor, nor the owner, was an additional insured under the First policy or its policy. On December 1, 2006, National Union disclaimed coverage for the first time.
Around the same time, the owner and general contractor commenced this suit seeking a declaratory judgment that National Union was obligated to defend and indemnify them for the Lee claim.
In this motion, National Union’s primary contention is that it is not liable for indemnification of any liability incurred by the owner or general contractor in the underlying action as neither was named as an insured or as an additional insured under either its policy or the policy issued by First. In opposition, the owner and general contractor cross moved and asserted that because National Union participated in the underlying action for years, both monitoring its progress and attending the mediation, it was estopped from denying coverage.
In analyzing this matter, the court noted that that whereas a certificate of insurance standing alone is not conclusive proof of coverage, it is evidence of a carrier’s intent to provide coverage, and, along with other factors, may be sufficient to bind the insurer. In addition, according to the court, if the insurer was in a position to know that the claimants were not covered by the policy in question, but participated in the underlying action, it may be estopped from denying coverage. In the end, without much analysis, the court denied both parties’ motions stating that even though discovery in this action was complete, questions still remained unanswered with respect to the parties’ intentions and beliefs, and whether the insurance agent used to set up Queens Stainless’ policies had the authority, expressed or apparent, to bind National Union, thereby making the owner and general contractor additional insureds under Queens Stainless’ policy.
9/10/10 Holiday Organization, Inc. v. State Farm Fire & Cas. Co.
Supreme Court, Suffolk County
Court Denies Summary Judgment Motion Where It Finds Question of Fact as to Whether Insured Diligently Investigated Facts Surrounding Summons and Complaint Prior to Deciding It Was Erroneously Named as a Party
The plaintiffs (collectively “Holiday”) are owners and developers of real property located at 97 Hamlet Drive. Holiday contracted with defendant Kuhn Brothers Construction, Inc. to perform carpentry work on its development project at the subject premises. Unbeknownst to Holiday, Kuhn orally subcontracted some of the work to Liny Homebuilders Corp.
On March 15, 2005, an employee of Liny’s sustained injury at the development site and, subsequently, brought an action against Holiday. When Holiday received the Summons and Complaint, it failed to forward the documents on to its insurer as it felt it was incorrectly named. Specifically, the Complaint made no reference to Kuhn and it indicated the accident happened on real property on County Road 83, Suffolk County. Notably, 97 Hamlet Drive is located on Country Road 83.
Holiday asserts that it did not become aware that Kuhn subcontracted a portion of the work to Liny until March 28, 2007. Alleging that it qualified as an additional insured under defendant’s policy issued to Kuhn, Holiday submitted the claim to Kuhn and defendant for consideration. Thereafter, defendant disclaimed coverage citing Holiday’s failure to provide timely notice of claim and suit.
Holiday then commenced this action and moved for summary judgment. In support of its motion, among other documents, Holiday submitted an affidavit from its chief financial officer swearing that he was not aware of the accident prior to receipt of the Summons and Complaint and that a search of its corporate records and conversations with its employees failed to reveal any connection to the development project. In addition, Holiday submitted an affidavit of its attorney who swore that the injured party’s attorney was initially unable to shed light on the connection. In addition, it was not until she received a medical record containing a reference to Kuhn that she was able to discover the connection.
After considering the matter, the court found an issue of fact sufficient to defeat summary judgment. The court reasoned that whether Holiday reasonably and diligently investigated the issues regarding coverage in the underlying action and when it was reasonably possible to give notice were questions for a jury. Likewise, the court also denied defendant’s cross-motion stating that it failed to establish its entitlement to summary judgment.
UPDATE ON SPOLIATION
When confronted with a claim of evidence spoliation, courts try to “level the playing field” due to the impairment or absence of evidence. Factors typically considered may be degree of fault, prejudice to other parties, and whether lesser sanctions exist to remedy the situation. A recent New Jersey case provides a useful update on the spoliation issue, and indicates that harsh sanctions such as dismissal of claims or judgment against a party are frequently not necessary. The case of Robertet Flavors, Inc. v. Tri-Form Construction, Inc., 2010 New Jersey LEXIS 747 (August 3, 2010), alleged that construction defects – leaky windows – were already remediated and the original evidence of the leaky windows and their installation was lost and “spoliated”.
The court considered the when of the spoliation to be as important as the who and why, because spoliation may occur in situations (such as construction) where the defective component may threaten the integrity of the building or be repaired as construction proceeds. The court also considered whether other sources of information concerning the alleged defect existed since major purchases and construction projects usually have a great wealth of information and documents. In addition, the court examined the possible role of the non-spoliating party as having some responsibility for lost evidence.
Robertet complained to Academy Glass for two years about leaks in the windows. Legal action was filed against Academy Glass and the project manager, but in the meantime Robertet proceeded with disassembly and remediation of the windows. Academy Glass alleged Robertet had destroyed “all the evidence” concerning the alleged defects.
The trial court barred all evidence relating to the windows, but an intermediate appellate court found this remedy too harsh and shifted some responsibility to Academy Glass. The court pointed out that the contractor had the opportunity to inspect the alleged defects during two years when it responded to the leak complaints. In addition, the contractor “enjoyed superior knowledge” about the window products and their installation, and had other evidence on which it could rely, such as shop drawings and documentation. The appellate court limited the allowable evidence to that which was obtained or created prior to disassembly of the windows.
The New Jersey Supreme Court basically agreed with the appeal court. Despite some spoliation, there was still sufficient evidence of the window defect claim which could be confirmed through Academy Glass’ own visual inspections and documents. For example, Robertet believed that one cause of the leaks was the use of non-approved window frames. Whether or not Academy Glass purchased the correct window frames could be reviewed by looking at contract documents and purchase orders, and such information was still within the contractor’s control.
Although the Court allowed the claim against Academy Glass, it did dismiss the claim against the project manager who had no opportunity to inspect the leaky windows before remediation and, therefore, had no independent source of evidence to help in its defense.
One lesson of Robertet is that, when faced with a spoliation argument, ultimate sanctions and penalties such as dismissal or default judgment may be too harsh and lesser sanctions or penalties can be fashioned. This case also recognizes the possibility that the non-spoliating party may have some responsibility for the loss such as a failure to timely investigate, failure to repair, or multiple opportunities to remedy a problem which fails to achieve a solution.
Some courts require intentional destruction of evidence before imposing severe spoliation sanctions. New Jersey apparently followed a current trend of making intent only one factor. An intentional spoliation destruction can even give rise to a separate cause of action.
Generally, the issue of spoliation only arises once litigation has started or is imminent. If papers, documents or materials are discarded routinely after a job or after a set period of time under regular business practices, following such policies should not generally lead to spoliation sanctions.
Massachusetts Court of Appeals
Unfair Insurance Practices Failure to Timely Respond to Demand Letter Where Liability Clear
Arbella was found to have committed unfair insurance practices against both its insured Anthony Caban, and the person injured by Caban in an auto accident, Angelina Dattilo. Datillo’s attorney sent Arbella a 30-day policy-limit demand letter, to which Arbella responded after five months by advising that it was seeking to determine if there were other claims likely to arise from the accident. Two months later, Arbella offered to pay its $ 20,000 policy limit in exchange for a release, which offer was rejected. Dattilo had filed suit at the expiration of the 30 day period stated in the demand letter. Shortly thereafter, Arbella informed Caban that he had exposure in excess of the policy limits, but incorrectly indicated that no formal demand had been received, and did not mention the policy-limit settlement demand. Dattilo and Caban reached a stipulated settlement of the suit for $ 450,000, and Caban assigned to Dattilo his rights against Arbella. The trial judge found that Arbella had failed to promptly respond to the demand letter and failed to promptly settle the case in which liability was clear, and that the failures were “willfully reckless, and in that sense, intentional.” Arbella was therefore subject to double damages on the $ 20,000 claim by Caban (plus double legal fees and expenses); and was subject to multiple damages on the $ 430,000 in excess of the policy limits, with interest running from the date suit was filed. The case was remanded solely to determine whether the damages should be doubled, or tripled.
Submitted by: Scott Machanic of Cunningham, Machanic, Cetlin, Johnson & Harney, LLP
9/28/2010 Oldenkamp v. United American Insurance Company
Tenth Circuit Court of Appeals
Insurance Company’s Denial of Medical Coverage for Pre-existing Congenital Condition Was Reasonable and Dismisses Claims for Breach of Contract and Bad Faith
Plaintiffs’ son was born with a congenital condition in the form of a cyst above his right eye. Surgery to excise the cyst could not be conducted at birth due to the infancy of the patient. The parents later purchased a “Limited Benefit Hospital and Surgical Expense Policy” from defendant United American Insurance. After surgery to excise the cyst was performed, the parents tendered the surgery bills to United American Insurance. The bills were denied based on a determination that the cyst was a pre-existing condition which was excluded under the policy. However, under Oklahoma law a health insurer is not permitted to exclude coverage based on pre-existing congenital anomalies of children. The court ruled that United American issued a limited benefit policy not a health insurance policy. Denial of coverage was thus appropriate under the contract terms and the bad faith claim dismissed.
Submitted by: Peter Doody and Laura Heyne of Higgs, Fletcher & Mack.
Godosky & Gentile, P.C., New York (Brian J. Isaac of
counsel), for appellants.
Law Office of Max W. Gershweir, New York (Max W.
Gershweir of counsel), for respondent.
Order, Supreme Court, New York County (Debra A. James, J.), entered February 3, 2009, which granted defendant Tower Insurance Company's motion for summary judgment dismissing the complaint, affirmed, without costs.
Plaintiffs were injured when struck by an employee of Navana Restaurant, Inc., who was making deliveries on a bicycle. Plaintiffs commenced a personal injury action against Navana, who was insured under a policy issued by Tower. Tower brought a declaratory judgment action against Navana to confirm the propriety of its disclaimer of coverage, and the court granted Tower summary judgment on the grounds that Navana's delay in notifying Tower of the occurrence was not reasonably excusable, thereby relieving Tower of the duty to defend and indemnify Navana in the underlying action.
Plaintiffs obtained a judgment in the personal injury action against Navana and proceeded to bring a direct action against Tower as injured parties suing under Insurance Law § 3420(b)(1). In that action, the motion court granted summary judgment to plaintiffs, holding that they gave Tower proper notice of the accident. Tower appealed, and this Court affirmed (39 AD3d 435 , lv denied 9 NY3d 808 ).
Thereafter, Navana assigned all of its rights and claims against Tower to plaintiffs, who, as Navana's assignees, commenced this action based upon claims that Tower refused to settle the personal injury action within the policy limits in bad faith.
The motion court properly granted Tower's motion and dismissed the bad-faith claims. Given that Navana failed to comply with the notice provisions of the policy at issue, it would be estopped from contending that Tower improperly refused to settle the underlying personal injury action within the applicable policy limits. As Navana's assignees, plaintiffs are now suing upon a claim which is subject to the same defenses Tower could have asserted against Navana (see e.g. Madison Liquidity Invs. 119, LLC v Griffith, 57 AD3d 438, 440 ). For example, Zeldin v Interboro Mut. Indem. Ins. Co. (44 AD3d 652 ) involves an action brought by claimant/assignee standing in the shoes of an insured who had inexcusably failed to notify the carrier of the underlying accident. The Court held that the insurer's defenses against the insured were good as against the claimant (id. at 653; see also Daus v Lumbermen's Mut. Cas. Co., 241 AD2d 665, 666 , lv denied 90 NY2d 812 ). We disagree with the dissent's view that Zeldin should be distinguished because the assignee in that case, unlike plaintiffs in this action, did not bring a separate declaratory action against the insurer. That factor is of no moment because plaintiffs in this action are suing solely in their capacity as assignees. Therefore, their status is unaffected by their prior declaratory judgment action against Tower. "[A]n assignee never stands in any better position than his assignor" (Madison Liquidity Invs. 119, LLC, 57 AD3d at 440) [internal quotation marks and Citations omitted]. We further disagree with the dissent's position that Zeldin is distinguishable because plaintiffs in this case are relying on their own notice to Tower as opposed to notice provided by Navana, the insured. "The obligation of the injured party to protect his interests by seeing that proper notification is given to the wrongdoer's carrier is independent of the contractual duties of the insured" (Agway Ins. v Alvarez, 258 AD2d 487, 488 ).
Furthermore, plaintiffs' failure to litigate the bad-faith claims in the Insurance Law § 3420 action against Tower bars litigation of those claims in this action, as both sets of claims arise from the same series of transactions (see generally O'Brien v City of Syracuse, 54 NY2d 353, 357 ).
All concur except Catterson, J. who dissents in a memorandum as follows:
CATTERSON, J. (dissenting)
Because I believe that the plaintiffs, as injured parties in a motor vehicle accident, have standing to pursue a bad-faith claim against the insurer, I respectfully dissent.
Tower and the majority rely on Zeldin v. Interboro Mut. Indem. Ins. Co. (44 AD3d 652, 834 N.Y.S.2d 366 (2d Dept. 2007)) for the proposition that plaintiffs stand in the shoes of the underlying insured Navana and are thus estopped from asserting a bad faith claim against the insurer. This is a misreading of the import of Zeldin.
In Zeldin, the plaintiff was injured while a passenger in the car of the insured Markman; she sued Markman and obtained a default judgment for over $2 million. At the time of the accident, Markman had a $25,000 liability policy with Interboro, but he failed to timely notify Interboro of the claim pursuant to the terms of the policy. Markman ultimately assigned his claim against Interboro to the plaintiff. The plaintiff then commenced a bad faith action against Interboro. The Second Department, as the majority correctly recognized, held that the plaintiff, who stood in Markman's shoes, could not contend that the disclaimer was improper. 44 AD3d at 653, 834 N.Y.S.2d at 368.
However, more importantly for purposes of the instant case, the Zeldin court went on to hold: "Significantly, the plaintiff did not commence a declaratory judgment action against Interboro in her capacity as the injured party, seeking a declaration that Interboro was obligated to defend Markman . . . As a result, any defenses Interboro might have had against Markman were good against the plaintiff." Id. The exact opposite is true in this case. Plaintiffs succeeded on their declaratory judgment claim both in the trial court and on the prior appeal in this Court. See Cirone v. Tower Ins. Co. of New York, 39 AD3d 435, 835 N.Y.S.2d 111 (1st Dept. 2007), lv. denied, 9 NY3d 808, 844 N.Y.S.2d 784, 876 N.E.2d 513 (2007). The holding in Zeldin is therefore favorable to plaintiffs' position.
Before the motion court and in their briefs to this Court, plaintiffs pointed out that Tower failed to pay the judgment both before and after the entry of Justice Karen S. Smith's decision in the underlying action and that Tower's counsel's attempt to negotiate a judgment two times higher than the policy limits showed further evidence of bad faith. Thus, plaintiffs were not seeking to relitigate the declaratory judgment action between Tower and its insured, but rather to obtain recovery for the amount Navana was exposed to because of Tower's disregard of its duties to its insured even after it was established that Tower had to perform under the policy because the plaintiffs gave timely notice.
In my view, this case is significantly distinguishable from the facts of Zeldin because the plaintiffs are not relying on notice provided by the insured, Navana, but rather their own timely notice. Therefore, the bad-faith claim is not barred by the rationale of Zeldin.
Hermany Farms, Inc. v. Seneca Insurance Company, Inc.
Tese & Milner, New York (Michael M. Milner of counsel), for
Christopher E. Finger, Bronx for respondent.
Order, Supreme Court, Bronx County (Norma Ruiz, J.), entered February 2, 2010, which, in this action seeking a declaration as to insurance coverage, inter alia, granted plaintiff's cross motion for summary judgment declaring that defendant is obligated to defend and indemnify it in the underlying personal injury action, unanimously reversed, on the law, without costs, and the cross motion denied.
Plaintiff Hermany Farms Inc. ("Hermany"), is the owner and operator of a milk processing plant in the Bronx owned by two families, the Marrows and the Schwartzes. Gregory Broome, the plaintiff in the underlying action, was a milkman employed by Knoll Creek, a distributor of milk bottled by Hermany. Knoll Creek is owned by Norman Marrow, a part owner and treasurer of Hermany, whose office is located on Hermany's premises.
On August 23, 2005, with no witnesses present, Broome fell at the milk processing plant at Hermany. Through his employer, Broome applied for workers' compensation on August 30, 2005 — seven days after the accident. One year later, on August 7, 2006, Broome commenced a personal injury action against Hermany. Upon receiving the summons and complaint, Robert Marrow, chief operating officer of Hermany notified defendant Seneca Insurance Company of the claim.
Seneca disclaimed coverage on the grounds that Hermany had failed to provide notice to Seneca as soon as practicable after the occurrence giving rise to the lawsuit. Seneca asserted that its own investigation into the accident had revealed that "Knoll Creek Dairy was aware of the incident on the day it occurred, August 23, 2005 and filed a Worker's Compensation report." Seneca maintained that the knowledge of the accident should be imputed to Hermany because not only is Norman Marrow the owner and President of Knoll Creek Dairy, but "he is also an officer [sic] of Hermany."
Hermany instituted the present declaratory judgment action demanding that Seneca defend and indemnify it in the underlying lawsuit. On August 21, 2009, Seneca moved for summary judgment declaring that Seneca properly disclaimed coverage of the claim due to Hermany's unreasonable delay in notifying Seneca. On October 26, 2009, Hermany cross-moved for summary judgment on the grounds that Seneca is obligated to defend and indemnify since the failure to give Seneca timely notice of the incident was excused by a good-faith belief in non-liability.
The court denied Seneca's motion and granted Hermany's cross motion for summary judgment declaring that Seneca was obligated to defend and indemnify Hermany in the underlying personal injury action. We now reverse for the reasons set forth below.
It is well established that when a policy of liability insurance requires notice of an occurrence be given as soon as practicable, such notice must be provided within a reasonable period of time, and the failure to give such notice relieves the insurer of its obligations under the contract (see Great Canal Realty Corp. v Seneca Ins. Co., Inc., 5 NY3d 742 ). We note that, in the absence of an excuse, even a 60-day delay in notifying the insurer is not "as soon as practicable." Such late notice would violate the notice condition of the insurance policy as a matter of law (see Steinberg v Hermitage Inc. Co., 26 AD3d 426, 427 ).
There are, however, circumstances which excuse a failure to give timely notice. Where the insured has "a good-faith, reasonable belief of non-liability," the Court of Appeals has found that a violation of the prerequisite of "timely notice" may not exclude an insurer from defending and indemnifying the
insured (see Great Canal Realty Corp., 5 NY3d at 743-744, citing Security Mut. Ins. Co. of N.Y. v Acker-Fitzsimons Corp., 31 NY2d 436, 441 ). When an insured claims a good-faith belief of non-liability, "the insured bears the burden of establishing the reasonableness of the proffered excuse" (Great Canal Realty Corp., 5 NY3d at 744).
On appeal, Hermany argues that Robert Marrow was the person charged with overseeing daily operations, and thus solely responsible for the policy notification. It further argues that Robert Marrow first became aware of the accident one year later in August of 2006 when he was served with a summons and complaint. He testified that, it was only upon receipt of the summons and complaint that he ascertained that Broome "fell off a truck that he had been working on while it was parked at the Harmony platform."
We find this argument unavailing. The employees of both businesses, Knoll Creek and Hermany, testified at deposition that they knew the accident occurred. Indeed, Hermany's platform supervisor, Edward Barry, testified that he was immediately summoned to the scene of the incident. When he was informed Broome fell, he "went over to the end of the platform, and I seen him laying on the ground, and right away I called 911, and the ambulance came." Further, Norman Marrow confirmed that he saw the workers' compensation form that was prepared by Knoll Creek's bookkeeper. He testified, "I saw it some days later when [the bookkeeper] mailed it in." He acknowledged that the form stated that Broome had "stepped off back of platform." That admission is fatal to Hermany's argument since it is reasonable to believe that Hermany, through its owners, knew of the incident within days of its happening and long before receipt of the summons and complaint. Given that the incident occurred on Hermany's property, Hermany could reasonably believe that a claim for liability would arise. At the very least, the workers' compensation form should have prompted Hermany to obtain a clarification of how the incident occurred (see White v City of New York, 81 NY2d 955, 958 ). Hence, we find that Hermany has failed in its burden of establishing the reasonableness of its proferred excuse, and therefore the court erred in granting Hermany summary judgment.
Marcel Weisman, LLC, New York (Ezra Holczer of counsel),
Kay & Gray, Westbury (Rodney A. Mohammed of counsel),
Order, Supreme Court, Bronx County (Cynthia S. Kern, J.), entered June 17, 2009, which granted defendant's motion for summary judgment dismissing the complaint, unanimously reversed, on the law, without costs, the motion denied, and the complaint reinstated.
Defendant met his initial burden of proof on the motion. He established that plaintiff's injuries were not, as a matter of law, serious (Insurance Law § 5102[d]) through the report of an orthopedic surgeon, who determined that, two-and-a-half years after the subject motor vehicle accident, plaintiff demonstrated only an insignificant reduction in range of motion in her lumbar spine and exhibited full range of motion in all other areas. Defendant also demonstrated that plaintiff's injuries were not causally related to the accident through the report of a radiologist, who opined that any reduction in range of motion in her lumbar spine was attributable to degenerative disc disease (see Tuberman v Hall, 61 AD3d 441, 441 ; Santos v Taveras, 55 AD3d 405, 405 ; Shinn v Catanzaro, 1 AD3d 195, 197 ).
Plaintiff, however, raised issues of fact as to whether her injuries met the statutory definition of "serious" and were causally related to the accident sufficiently to defeat summary judgment. Plaintiff's treating physician determined, based on objective, quantitative tests, that plaintiff had significant limitations in range of motion in both her lumbar and cervical spine, both immediately following the accident and three years later (see Toure v Avis Rent A Car Sys., 98 NY2d 345, 350 ), and that her impairments were not degenerative in nature but were causally related to the accident. These findings clearly conflict with those of defendants' experts (see e.g. Vera v Islam, 70 AD3d 525, 525 ; Colon v Bernabe, 65 AD3d 969, 970 ). Plaintiff's treating physician's conclusion as to causation was no more speculative than that of defendant's radiologist, given that plaintiff had no prior history or ever exhibited any symptoms of degenerative disc disease or any other condition, and the report of the radiologist who took the MRI films contemporaneously with the accident made no mention of degeneration (see Harris v Boudart, 70 AD3d 643, 644-45 ; Linton v Nawaz, 62 AD3d 434, 439-441 , affd 14 NY3d 821 ). Thus, contrary to defendant's contention, plaintiff's physician adequately rebutted defendant's radiologist's claim of degenerative disc disease as the cause of plaintiff's injuries.
Finally, plaintiff adequately explained her two-year gap in treatment through her affidavit in which she averred that she continued physical therapy with her treating physician until her no-fault benefits ceased, that she was told that her health insurance would not cover continued treatment, and that she could not afford to pay for treatment out-of-pocket (see Perez v Vasquez, 71 AD3d 531, 532 ; Wadford v Gruz, 35 AD3d 258, 259 ).
Nicholas Rose, PLLC (Mischel & Horn, P.C., New York, N.Y.
[Scott T. Horn], of counsel), for appellant.
Baker, McEvoy, Morrissey & Moskovits, P.C., New York,
N.Y. (Stacy R. Seldin of counsel), for
DECISION & ORDER
In an action to recover damages for personal injuries, the plaintiff appeals from an order of the Supreme Court, Kings County (Balter, J.), dated November 5, 2009, which granted the defendants' motion for summary judgment dismissing the complaint on the ground that she did not sustain a serious injury within the meaning of Insurance Law § 5102(d).
ORDERED that the order is reversed, on the law, with costs, and the defendants' motion for summary judgment dismissing the complaint is denied.
Contrary to the Supreme Court's determination, the defendants failed to demonstrate, prima facie, 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). In support of their motion, the defendants relied on, inter alia, the affirmed medical report of Dr. S. Farkas. In his report, Dr. Farkas, an orthopedist, noted during lumbar testing that the plaintiff had a "jog" of flexion and lateral bending, but he failed to compare those findings to what is normal (see Spanos v Harrison, 67 AD3d 893; Gibson-Wallace v Dalessandro, 58 AD3d 679). Furthermore, Dr. Farkas noted during his examination of the plaintiff that she had significant limitations in cervical spine, left knee, and left shoulder range of motion (see Mondevil v Kumar, 74 AD3d 1295; Smith v Hartman, 73 AD3d 736; Quiceno v Mendoza, 72 AD3d 669; Giacomaro v Wilson, 58 AD3d 802; McGregor v Avellaneda, 50 AD3d 749; Wright v AAA Constr. Servs., Inc., 49 AD3d 531). While Dr. Farkas stated that the plaintiff presented with "extreme exaggeration of symptoms" and that the decreased ranges of motion noted by him were "not true pathologic findings" and were instead exaggerated subjective complaints, he failed to explain or substantiate those conclusions with any objective medical evidence (see Reitz v Seagate Trucking, Inc., 71 AD3d 975; Bengaly v Singh, 68 AD3d 1030; Ortiz v S & A Taxi Corp., 68 AD3d 734).
The defendants also relied on the affirmed medical report of Dr. Sarasavani Jayaram, a neurologist, which also set forth significant limitations in the plaintiff's lumbar spine range of motion when the plaintiff was examined (see Mondevil v Kumar, 74 AD3d at 1295; Smith v Hartman, 73 AD3d at 736; Quiceno v Mendoza, 72 AD3d at 669; Giacomaro v Wilson, 58 AD3d at 802).
Since the defendants failed to meet their prima facie burden, it is unnecessary to consider whether the plaintiff's papers in opposition to the defendants' motion were sufficient to raise a triable issue of fact (see Coscia v 938 Trading Corp., 283 AD2d 538).
Baker, McEvoy, Morrissey & Moskovits, P.C., New York, N.Y.
(Timothy M. Sullivan of counsel), for appellant.
Simon & Gilman, LLP, Elmhurst, N.Y. (Keith A. Gilman of
counsel), for respondent.
DECISION & ORDER
In an action to recover damages for personal injuries, the defendant appeals from an order of the Supreme Court, Kings County (Schmidt, J.), dated March 25, 2010, which denied his 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 defendant failed to meet his 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 defendant's motion papers failed to adequately address the plaintiff's claim, clearly set forth in her bill of particulars, that she sustained a medically-determined injury or impairment of a nonpermanent nature which prevented her from performing substantially all of the material acts which constituted her usual and customary daily activities for not less than 90 days during the 180 days immediately following the subject accident (see Strilcic v Paroly, 75 AD3d 542; Encarnacion v Smith, 70 AD3d 628; Alvarez v Dematas, 65 AD3d 598; Smith v Quicci, 62 AD3d 858; Alexandre v Dweck, 44 AD3d 597; Sayers v Hot, 23 AD3d 453, 454). The plaintiff testified at her deposition that since September 30, 2004, the date of the subject accident, she never returned to work. The plaintiff was examined by Dr. Sarasavani Jayaram and Dr. Robert Israel, the defendant's neurologist and orthopedist, respectively, in February 2009, some four years and five months after the accident. Both Dr. Israel and Dr. Jayaram failed to relate their findings to the 90/180-day category of serious injury for the period of time immediately following the accident.
Moreover, when Dr. Jayaram examined the plaintiff in February 2009, Dr. Jayaram noted significant limitations in the plaintiff's lumbar spine range of motion (see Mondevil v Kumar, 74 AD3d 1295; Smith v Hartman, 73 AD3d 736; Quiceno v Mendoza, 72 AD3d 669; Giacomaro v Wilson, 58 AD3d 802; McGregor v Avellaneda, 50 AD3d 749; Wright v AAA Constr. Servs., Inc., 49 AD3d 531). In her bill of particulars, the plaintiff alleged that her lumbar spine was injured as a result of the accident. Contrary to the defendant's contentions on appeal, the limitations noted in Dr. Jayaram's report concerning the plaintiff's lumbar spine were not insignificant within the meaning of the no-fault statute.
Since the defendant did not sustain his prima facie burden, it is unnecessary to determine whether the papers submitted by the plaintiff in opposition were sufficient to raise a triable issue of fact (see Strilcic v Paroly, 75 AD3d at 542; Mondevil v Kumar, 74 AD3d at 1295; Coscia v 938 Trading Corp., 283 AD2d 538).
Annette G. Hasapidis, South Salem, N.Y., for appellant.
Morris Duffy Alonso & Faley, New York, N.Y. (Anna J.
Ervolina of counsel), for respondents Elvin
Elias, Sean Portillo, and Danis D.
DECISION & ORDER
In an action to recover damages for personal injuries, the plaintiff appeals from an order of the Supreme Court, Kings County (F. Rivera, J.), entered August 17, 2009, which granted the motion of the defendant Andrei Orlov, and the separate motion of the defendants Elvin Elias Sean Portillo and Danis D. Saenz, for summary judgment dismissing the complaint insofar as asserted against them on the ground that she did not sustain a serious injury within the meaning of Insurance Law § 5102(d).
ORDERED that the order is reversed, on the law, with one bill of costs payable by the respondents, and the motion of the defendant Andrei Orlov, and the separate motion of the defendants Elvin Elias Sean Portillo and Danis D. Saenz, for summary judgment dismissing the complaint insofar as asserted against them are denied.
The defendants, all of whom relied on the same submissions in support of their respective motions, failed to meet their prima facie burdens 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 NY 345; Gaddy v Eyler, 79 NY2d 955, 956-957). In support of their motions, they relied upon, inter alia, the medical reports of the plaintiff's treating physicians. At least two of those reports revealed that the plaintiff had significant limitations in her cervical and lumbar spine range of motion more than seven months post-accident (see Guerrero v Bernstein, 57 AD3d 845; Mendola v Demetres, 212 AD2d 515).
Since the defendants did not meet their prima facie burdens, it is unnecessary to decide whether the papers submitted by the plaintiff in opposition were sufficient to raise a triable issue of fact (see Guerrero v Bernstein, 57 AD3d at 845; Coscia v 938 Trading Corp., 283 AD2d 538).
Baker, McEvoy, Morrissey & Moskovits, P.C., New York, N.Y.
(Stacy R. Seldin of counsel), for appellants.
Lurie & Flatow, P.C., New York, N.Y. (Jay Flatow of
counsel), for respondent.
DECISION & ORDER
In an action to recover damages for personal injuries, the defendants appeal, as limited by their brief, from so much of an order of the Supreme Court, Kings County (Jacobson, J.), dated February 1, 2010, as 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 insofar as appealed from, with costs.
While we affirm the order insofar as appealed from, we do so on a ground other than that relied upon by the Supreme Court. 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' motion papers failed to adequately address the plaintiff's claim, clearly set forth in her bill of particulars, that she sustained a medically-determined injury or impairment of a nonpermanent nature which prevented her from performing substantially all of the material acts which constituted her usual and customary daily activities for not less than 90 days during the 180 days immediately following the subject accident (see Strilcic v Paroly, 75 AD3d 542; Encarnacion v Smith, 70 AD3d 628; Alvarez v Dematas, 65 AD3d 598; Smith v Quicci, 62 AD3d 858; Alexandre v Dweck, 44 AD3d 597; Sayers v Hot, 23 AD3d 453, 454). The subject accident occurred on January 14, 2004. In her bill of particulars, the plaintiff alleged that after the subject accident she was unable to resume working for more than five months. She testified at her deposition that she did not return to work until May 9, 2005. The plaintiff was examined by Dr. Andrew Miller, an orthopedic surgeon, on April 17, 2009, and by Dr. Vladimir Zlatnik, a neurologist, on April 8, 2009. Both Dr. Miller and Dr. Zlatnik failed to relate their findings to this category of serious injury for the period of time immediately following the subject accident.
Since the defendants failed to meet their prima facie burden, it is unnecessary to determine whether the papers submitted by the plaintiff in opposition were sufficient to raise a triable issue of fact (see Strilic v Paroly, 75 AD3d at 542; Coscia v 938 Trading Corp., 283 AD2d 538).
Leader & Berkon LLP, New York (Glen Silverstein of
counsel), for appellant.
Kenneth L. Kutner, New York for respondents.
Order, Supreme Court, New York County (Eileen Bransten, J.), entered October 5, 2009, which denied defendant's motion pursuant to CPLR 3211 to dismiss the complaint, unanimously affirmed, without costs.
Plaintiff Berton Forman is a licensed anesthesiologist and the sole officer, director and shareholder of plaintiff Rockville Recovery Associates, Ltd. Forman and Rockville offer the service of auditing insurance claims of physicians and hospitals for possible fraud and assisting in the recovery of insurance funds fraudulently received by them. Defendant The Guardian Life Insurance Company of America is a health insurer.
Commencing in or about May 2003, Rockville and Guardian entered into a series of written contracts pursuant to which Rockville provided claim auditing services for Guardian. Under the agreements, Rockville was responsible for investigating claims of health care providers identified by Guardian to determine whether the claims were fraudulent. Rockville's services under the contracts included investigating the claims for fraudulent activity, contacting providers that Rockville determined had engaged in fraud, and negotiating the return of the amounts owed. The contracts provided that Rockville was entitled to a fee of 25% of all funds it successfully recovered. The parties' most recent contract expired in 2006, but plaintiffs allege that the agreements nevertheless continued to be in effect based on the parties' course of conduct.
According to the complaint, from 2003 to 2008, plaintiffs uncovered significant overbilling by medical providers totaling tens of millions of dollars. Plaintiffs allege that they provided their findings to Guardian but Guardian did not commence litigation against the providers to recover the funds. The complaint further states that the reason Guardian failed to pursue claims against certain health care providers was because, unbeknownst to plaintiffs, Guardian had entered into a contract waiving its right to conduct post-payment claim audits of those providers. The complaint asserts causes of action for breach of contract, breach of the implied covenant of good faith and fair dealing, quantum meruit, unjust enrichment and promissory and equitable estoppel.
Guardian's decision not to pursue litigation to recover on the fraudulent claims does not constitute a breach of the agreements. The complaint does not allege that Guardian was under any contractual obligation to commence such litigation. Even if the complaint could be construed to allege such an obligation, the contracts between the parties do not contain any language requiring Guardian to bring suit or to take any other action to collect on the fraudulent billings (Ark Bryant Park Corp. v Bryant Park Restoration Corp., 285 AD2d 143, 150  ["the provisions of the contract delineating the rights of the parties prevail over the allegations set forth in the complaint"]).
Nevertheless, the breach of contract claim was properly sustained based upon a warranty clause contained in the 2005 agreement. Under that contract, Rockville was entitled to receive a fee of 25% of all funds it successfully recovered as a result of its audits. The complaint alleges that Guardian entered into a separate contract with a certain health care plan not to conduct post-payment audits and that Guardian did not inform plaintiffs of this agreement. Plaintiffs further allege that, despite the agreement with the health care plan, Guardian asked Rockville to perform audits of claims from providers in that plan. Plaintiffs contend that this contractual obligation prohibited Guardian from conducting post-payment audits as to approximately 90% of its claims. These allegations state a breach of the warranty clause in which Guardian represented that there were no agreements "that might conflict or interfere with, limit, or be inconsistent with or otherwise affect any of the provisions of this Agreement." Because the alleged third-party contract effectively precluded any possibility of recovery by Rockville for certain claims that Guardian asked Rockville to audit, plaintiffs have pleaded a breach of the warranty clause.
The complaint also states a cause of action for breach of the implied covenant of good faith and fair dealing. It is axiomatic that all contracts imply a covenant of good faith and fair dealing in the course of performance (511 W. 232nd Owners Corp. v Jennifer Realty Co., 98 NY2d 144, 153 ). "This covenant embraces a pledge that neither party shall do anything which will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract'" (id., quoting Dalton v Educational Testing Serv., 87 NY2d 384, 389 , quoting Kirke La Shelle Co. v Armstrong Co., 263 NY 79, 87 ). In essence, the complaint alleges that Guardian frustrated the basic purpose of the parties' contracts by providing Rockville with claims to audit while at the same time entering into an agreement preventing Rockville from pursuing recovery of funds relating to those claims. Thus, the work given to Rockville to perform would be work for which, from the inception, it could never recover. These allegations are sufficient to sustain the claim for breach of the implied covenant. No basis exists to dismiss this cause of action as duplicative of the breach of contract claim because the warranty clause appears in only the 2005 contract and not in all the agreements at issue here.
Plaintiffs are entitled to proceed in the alternative upon quasi-contractual theories because there is a question whether the parties' course of conduct evidenced their assent to continue the terms of the 2005 contract after its expiration (see Halliwell v Gordon, 61 AD3d 932, 934 ; Winick Realty Group LLC v Austin & Assoc., 51 AD3d 408 ). The quantum meruit claim was properly sustained because the complaint alleges the performance of claim auditing services by plaintiffs in good faith, the acceptance of such services by Guardian, plaintiffs' expectation of compensation, and the reasonable value of the services (see Tesser v Allboro Equip. Co., 302 AD2d 589, 590 ). The allegation that Guardian changed its fraud prevention policies as a result of plaintiffs' auditing services resulting in millions of dollars in savings to Guardian states a claim for unjust enrichment (see Nakamura v Fujii, 253 AD2d 387, 390 ). Although the terms of the 2005 contract might appear to preclude this claim, there is, as indicated, a question whether that contract expired or continued based on the parties' course of conduct.
Reading the complaint in a light most favorable to plaintiffs, the cause of action for promissory estoppel was correctly sustained. The pleadings allege that defendants made a clear and unambiguous promise to pursue claims plaintiffs identified as fraudulent, that plaintiffs reasonably relied on this promise in performing their work, and that they were injured by defendant's failure to pursue the claims (see Arfa v Zamir, 55 AD3d 508 ). The allegations concerning Guardian's concealment of the third-party contract from plaintiffs also are sufficient, for pleading purposes, to support the claim for equitable estoppel (see De Angelis v American Capital Access, 280 AD2d 409 ).
We have considered the parties' remaining contentions and find them unavailing.
THIS CONSTITUTES THE DECISION AND ORDER
OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.
St. Paul Fire and Marine Ins. Co. v. FD Sprinkler Inc.
Sheps Law Group, P.C., Melville (Robert C. Sheps of counsel),
Fiedelman & McGaw, Jericho (Dawn C. DeSimone of
counsel), for respondents.
Order, Supreme Court, New York County (Doris Ling-Cohan, J.), entered September 9, 2009, which granted the motion by defendants FD Sprinkler and Woodworks Construction for summary judgment dismissing the complaint as against them on the ground that plaintiff's claims were barred by the antisubrogation rule, unanimously modified, on the law, to reinstate the complaint, except as to $52,323 sought against Woodworks, and otherwise affirmed, without costs.
In this subrogation action, St. Paul seeks to recover monies it paid on a claim filed by Chelsea 27th Street Apartments, its named insured on a builder's risk insurance policy, for property damage caused by the unintended discharge of a sprinkler on or about December 24, 2003, at 800 Sixth Avenue in Manhattan, which premises were under construction. FD Sprinkler and Woodworks, respectively the sprinkler and drywall subcontractor, are alleged to have been responsible for the damages. St. Paul paid Chelsea a total of $714,438 on the subject claim, with $52,323 of said amount attributable to work performed by Woodworks.
The antisubrogation rule provides that an insurer has "no right of subrogation against its own insured for a claim arising from the very risk for which the insured was covered" (North Star Reins. Corp. v Continental Ins. Co., 82 NY2d 281, 294 ).
The subcontractors here are additional insureds on the policy, pursuant to a Special Provisions Endorsement that amended the Contractor's and Owner's Property Protection to include "All subcontractor's [sic] as Additional Insureds, ATIMA [as their interests may appear]." ATIMA thus provided the subcontractors with protection only to the extent of their property interest in the building under construction, to wit, the tools, labor and
material furnished or owned by the subcontractor (see Paul Tishman Co. v Carney & Del Guidice, 34 NY2d 941 ); Matter of Lurgi Metallurgie GmbH v Industrial Risk Insurers, 262 AD2d 75 , lv denied 93 NY2d 818 ). The policy did not provide the subcontractors with coverage for any damage they may have caused to property in which they had no interest. The subcontractors' obligation to replace work damaged by them speaks to their potential liability and does not create an insurable interest in the entire building (see Paul Tishman Co., 34 NY2d at 942-943). To the extent St. Paul seeks recovery of the $52,323 paid on the claim that is attributable to work performed by Woodworks, such recovery is barred by the antisubrogation rule. Inasmuch as St. Paul did not make any payments in connection with FD Sprinkler's work, the antisubrogation rule does not apply to this subcontractor.
The subcontactors, who are neither signatories nor parties to the main contract between the owner and the general contractor, cannot avail themselves of the waiver-of-subrogation clause contained therein (see Gulf Ins. Co. v Quality Bldg. Contr., Inc., 58 AD3d 595 ).
In the Matter of New York Central Mutual v. Ramirez
Law Office of Gail S. Lauzon (Montfort, Healy, McGuire & Salley,
Garden City, N.Y. [Donald S. Neumann, Jr.], of counsel), for
Marshall & Marshall, Jericho, N.Y. (Jeffrey D. Kadushin of
counsel), for petitioner-respondent.
Steven D. Dollinger, Melville, N.Y. (Susan R. Nudelman of
counsel), for respondent-respondent.
DECISION & ORDER
In a proceeding pursuant to CPLR article 75, inter alia, to permanently stay arbitration of a claim for uninsured motorist benefits, GEICO General Insurance Company appeals from an order of the Supreme Court, Suffolk County (Tanenbaum, J.), dated May 13, 2009, which, after a framed-issue hearing, and upon a determination that its disclaimer of coverage was invalid, granted that branch of the petition which was to permanently stay arbitration.
ORDERED that the order is affirmed, with costs.
Contrary to the contention of GEICO General Insurance Company (hereinafter GEICO), the Supreme Court properly determined that its notice of disclaimer on the ground that its insured had not furnished it with timely notice of the incident in question was itself untimely. Indeed, whether GEICO's delay in disclaiming is measured from the date when it first received notice that its insured's vehicle was involved in an accident, or from the date when its insured admitted that his wife had been operating his vehicle at the time of the collision, the period of delay was unreasonable as a matter of law (see e.g. First Fin. Ins. Co. v Jetco Contr. Corp., 1 NY3d 64, 69; Morath v New York Cent. Mut. Fire Ins. Co., 49 AD3d 1245, 1246; Sirius Am. Ins. Co. v Vigo Constr. Corp., 48 AD3d 450, 452; Matter of Allstate Ins. Co. v Cruz, 30 AD3d 511; West 16th St. Tenants Corp. v Public Serv. Mut. Ins. Co., 290 AD2d 278, 279). GEICO did not establish that the delay was justified by a necessary or diligently conducted investigation into the possible grounds for the disclaimer (see New York City Hous. Auth. v Underwriters at Lloyd's, London, 61 AD3d 726, 727; Quest Bldrs. Group, Inc. v Deco Interior Constr., Inc., 56 AD3d 744; Quincy Mut. Fire Ins. Co. v Uribe, 45 AD3d 661, 662; McGinnis v Mandracchia, 291 AD2d 484, 485; West 16th St. Tenants Corp. v Public Serv. Mut. Ins. Co., 290 AD2d at 279).
In view of the foregoing, we need not reach GEICO's remaining contentions.
MASTRO, J.P., SANTUCCI, ROMAN and SGROI, JJ., concur.