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Coverage Pointers - Volume XI, No. 8

Dear Coverage Pointers Subscribers:

It’s so nice to write to you again with this week’s issue of Coverage Pointers. 

Mediation of Coverage Disputes

This has been a week for mediations, both as a participant in a construction defect case in midtown Manhattan and prepping for a mediation where as a neutral, I will try to bring two good carriers to a resolution on a coverage dispute.  We’ve mentioned it before – consider, in the right case, the alternative of early mediation of insurance coverage problems, rather than engaging in the expense of a long, drawn out declaratory judgment action. The precedent you create in court in winning the one you are litigating this time may come back to sink you in the next case.

Another alternative is binding arbitration of coverage disagreements and that can be handled through single or three member panels, either privately or through organizations such as the AAA or Arbitration Forums.

This Week’s Hot One

The big talk this week among the coverage mavens was the First Department’s spanking of AIG and its counsel in the Osowski case.  Here, we offer you the down and dirty version.  See a more extensive summary in the issue attached.

Basically, AIG is behind an OCIP (Owner Controlled Insurance Program) that wraps up most of the contractors and subs under one policy.  Waivers of subrogation abound. A subcontractor’s employee is seriously injured and a lawsuit is commenced against the owner and general contractor, both part of the program.  AIG is the first layer excess carrier.  AIG denies coverage to all insureds based on an auto exclusion. 

Because AIG denied coverage to DCM (the injured worker’s employer), the owner and GC sued DCM for common law and contractual indemnification.  Had coverage been provided to the owner, GC and DCM by AIG, the anti-subrogation rule would have precluded the suit.

The plaintiff, owner and GC then settle the case for $12 million in a confidential agreement and continue to pursue the third-party action against DCM.  DCM’s counsel presses for the release of the settlement agreement and after the trial court reviews it in camera the court finds that AIG had funded the settlement to the tune of $10 million (over the primary policy)

The settlement agreement provided, (so that the action against DCM could continue) that AIG’s disclaimer of coverage was in full force and effect (nice to pay $10 million when one contends that there is no coverage).  The court then dismissed the third party action against DCM holding, in effect, that AIG’s funding of the settlement was the equivalent of providing coverage and thus the anti-subrogation rules barred the third party action.

The appellate court was angered at AIG’s conduct in hiding the settlement funding so that it could pursue the third party action against its own insured (to try to get the money back from another carrier, no doubt).  The disclaimer became a fiction and, a “clear attempt to perpetrate a fraud on the court. “
The court was so critical of AIG’s conduct in allegedly trying to hide the AIG payment from the court and parties, that it referred the conduct of the AIG’s outside counsel to the Disciplinary Committee to consider sanctions against the attorney.

I’ve never seen an appellate court refer a matter to a disciplinary committee.  Tough sanction.  Ouch.

This Week’s Interesting One
There’s another interesting decision today involving default judgments in declaratory judgment actions.  The carrier defaulted in appearance and the lower court granted the declaratory relief that was sought in the complaint.  The Appellate Division held that it was inappropriate to grant declaratory relief on default without some proof that there was a substantive right to it. 

One Hundred Years Ago Today

Think about it – why would you allow automobile owners to buy auto insurance anyway?  Wouldn’t that just make them less cautious when they drove their own cars, knowing that any injuries caused could be passed onto an unsuspecting automobile insurer?

A century ago, in the State of Iowa, the Attorney General announced that he agreed with the Insurance Department that automobile insurance would not be sold in that state:
Muscatine (Iowa) Journal
October 16, 1909
Page 2

AUTO INSURANCE
GETS BODY BLOW

RISKS ON ACCIDENTS CAN NOT
BE ASSUMED

Attorney General Byers Hands Down
Opinion on Much Argued Question – His
Interpretation
Iowa automobile owners cannot protect themselves with an insurance policy, from paying damages for accidents resulting from reckless driving, in the opinion, of Attorney General Byers. The attorney general upholds the state insurance department in its ruling that insurance companies cannot take such risks in this
state.

Auditor Bleakly made his ruling about four months ago, basing it on an opinion "written by former Attorney General Mullan. The companies which had been writing "automobile accident insurance" protested, setting up the claim that such risks were permitted by a provision of law passed in 1907, authorizing insurance against personal injury or death by general accidents. In case this was not true they held that they could write automobile risks under the employers' liability insurance clause.

Attorney General Byers holds that both these claims are without foundation.  He also answers the argument presented by the insurance companies to the effect that the auditor’s ruling would work a hardship on automobile owners. "We are unable 'to see any very great importance in this suggestion for the reason that under, a liberal construction of the employers' liability clause — and the clause should have a liberal construction — the automobile owner may be indemnified against almost every possible liability except in the case of accidents occurring while the owner is operating his machine for pleasure," says Attorney General Byers in his opinion.

'In all such cases, as the law now stands, the owner of the machine must carry his own risk and protect himself against loss by the exercise of care and caution in operating his machine. To require this cannot be said to be a hardship. The safety of the public in its use of the streets and highways demands – upon the part of the driver of an automobile – the highest degree of care and caution, and it and it is only when injury results from the lack of such care and caution that liability follows."

Editor’s Note:  It wasn’t until July 4, 1913 that Iowa permitted the sale of automobile insurance in its state.  Think how much lower insurance rates would be if it was still illegal!  (It’s mandatory now, of course.)

It's All About Training, No? 
Again, our coverage team is at the ready to visit your location and help empower your claims professionals.  Suggested topics include the following, but we can merge, mold, alter or add as you might need.  The bolded topics are the ones most frequently requested:

      1. Tackling Tenders, Additional Insureds and Priority of Coverage
      2. Primary and Excess Insurance - Rights & Responsibilities
      3. SUM Claims Handling
      4. Preventing Bad Faith Claims - First Party Cases
      5. Preventing Bad Faith Claims - Liability Cases
      6. New Rules Regarding Notice, Developing Proof of Prejudice and a Strategic to Avoiding Direct Actions
      7. The Cooperation Clause - How to Handle
      8. NY Disclaimer Letter - Nuts & Bolts: How to Create and Write and Send a Disclaimer Letter, and How Not To. (The Reservation of Right Letter Myth)
      9. No- Fault Arbitrations and Appeals: Mock Arbitrations, Preserving the Record, Taking an Appeal 
      10. No Fault Regs - Knowledge is Power
      11. An Auto Liability Policy Primer
      12. A CGL Policy Primer
      13. A Homeowners Liability Policy Primer
      14. EUO's Under First Party Policies
      15. How to Resolve Coverage Disputes:  DJ Actions, Insurance Law Section 3420 Direct Actions (Choice, Strategy and Timing)
      16. Insured Selected Counsel: When is it Necessary and How to Avoid it? 
      17. Mediation and the Role of the Mediator
      18. ADR and How to Get to "Yes".
      19. The Internet as a Tool for the Claims Representative
      20. Construction Cases - The Interplay Between Indemnity Agreements and Insurance Policies

 

Just let us know so we can schedule a visit.

In This Week’s Coverage Pointers:

Kohane’s Coverage Corner
Dan D. Kohane

  • Where Claimant Sues Liability Carrier for Declaratory Relief, Court Grants Stay of Action to Permit Carrier to Commence Its Own Action for Declaratory Relief
  • Where There Is Proof that Coverage Was Provided by Contractor for Owner, Remedy for Owner is to Sue Carrier
  • Scheme by AIG to Avoid Revealing Funding of Settlement Which Would (a) Implicate Anti-Subrogation Rule and (b) Preclude It from Pursuing Third-Party Action for Contribution and Indemnity, Incenses Court
  • Insurer Moves Office from Time of Original Notice to Time of Suit Notice – Court Excuses Claimant’s Late Notice Since He Sent Notice of Suit to Earlier Address
  • Where Insurer Claims Misrepresentations in Policy Application, Insurer Still Required to Defend Insured; Court Sidesteps Misrepresentation Claim
  • Just What IS A Police Report?
  • Default Judgment Should Not Be Granted Purely on Pleadings, But Court Should Consider Substance
  • What Is a “Speed Contest,” Anyway?  Second Department Gets It Wrong
  • Another Reminder – Only 20 Days to Start Proceeding to Stay SUM Arbitration – State’s Briefest Statute of Limitations Rears Its Ugly Head Again

MARGO’S MUSINGS ON SERIOUS INJURY UNDER NEW YORK NO FAULT
Margo M. Lagueras

  • Contemporaneous And Recent Examinations Are Required . . .
  • Affirmation Concluding That Injury Is Permanent Must Be Based on Recent Examination

AUDREY’S ANGLES ON NO-FAULT
Audrey Seeley
Arbitration

  • Applicant Must Demonstrate Good Cause to Withdraw Without Prejudice Because of Pending BI Suit.

Litigation

  • More Definitive Decision on Plaintiff’s Prima Facie Case?

PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper

  • Regulatory Update – REGULATION 64 : UNFAIR CLAIMS SETTLEMENT ACT
  • Evidence Submitted in Support of Motion Is Also Sufficient to Satisfy Particularity Requirement for Fraud/Misrepresentation Claims
  • Plaintiff’s Malpractice Claim Failed Where He Could Not Establish an Attorney-Client Relationship with Defendant Law Firm

FIJAL’S FEDERAL FOCUS
Katherine A. Fijal

  • For Purposes of Timeliness of Suit on Surety Bond, Work Was On-Going Where Punch List Items Were Not Complete
  • Green House Claims – Are They Covered?

EARL’S PEARLS
Earl K. Cantwell
PROFESSIONAL LIABILITY POLICIES:
WHEN IS A CLAIM A CLAIM AND NOT ALMOST A CLAIM?

Keep those nice notes coming in – it warms the cockles of our little hearts to know how much you enjoy our little offerings.

Dan

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

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

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

NO-FAULT/UM/SUM TEAM
Audrey A. Seeley, Team Leader
[email protected]
Tasha Dandridge-Richburg
Margo M. Lagueras

APPELLATE TEAM
Jody E. Briandi, Team Leader
[email protected]
Scott M. Duquin

Index to Special Columns

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

KOHANE’S COVERAGE CORNER

Dan D. Kohane
[email protected]

10/9/09           Thomas v. Burrus
Appellate Division, Fourth Department
Where Claimant Sues Liability Carrier for Declaratory Relief, Court Grants Stay of Action to Permit Carrier to Commence Its Own Action for Declaratory Relief

Odd case.   Carrier should have moved to dismiss, instead moved for stay.

Tupper commenced this wrongful death action alleging that decedent was killed when he was struck by a vehicle negligently driven by Burrus.  Plaintiff initially commenced the action against Burrus, but then adding defendant Geico seeking declaratory relief that Geico should defend Burris.

For reasons that are unclear, Geico did not move to dismiss the lawsuit which was improperly commenced against it.  An injured party cannot commence a declaratory judgment action against a liability carrier until after it secures a judgment against the insured.  Instead, Geico asked for a stay of the action against it (rather than dismissal) so it could commence its own DJ action.  That, the court granted.

10/9/09           Hunt v. Ciminelli-Cowper Co.
Appellate Division, Fourth Department
Where There Is Proof That Coverage Was Provided by Contractor for Owner, Remedy for Owner Is to Sue Carrier
In a Labor Law case, plaintiff fell on ice while doing construction work at Jamestown Community College (JCC).  Hunt sued JCC and Ciminelli-Cowper (Ciminelli), the construction manager on the project.  Ciminelli and the JCC defendants each commenced a third-party action against various contractors on the project, asserting causes of action for contractual defense and indemnification and breach of contract based on their failure to procure insurance naming Ciminelli and the JCC as additional insured. .

On the insurance issue, one contractor, the court found that there was evidence insurance coverage was provided.  If the carriers denied coverage, JCC and Cowper’s remedy was to commence declaratory judgment actions against the carriers.

10/8/09           Osowski v. AMEC Construction Management, Inc.
Appellate Division, First Department
Scheme by
AIG to Avoid Revealing Funding of Settlement which Would Implicate Anti-Subrogation Rule and Preclude It from PursuingThird-Party Action for Contribution and Indemnity Incenses Court
This is a lengthy report but a very interesting decision.  AIG ends up getting its hand slapped and its counsel may face disciplinary charges.

During the construction of the New York Times building in mid-town Manhattan, Osowski, a construction worker, was seriously hurt when a four-ton beam fell upon him.
Before the construction started, the building owner, NYTB hired AMEC as the Construction Manager.  AMEC subcontracted the steel erection work to Osowski’s employer, DCM.
Both AMEC and DCM were enrolled in the Owner Controlled Insurance Program ("OCIP") that NYTB had obtained.  Under it, all coverages were obtained (CGL, excess, Workers Comp and Employers Liability) and all enrolled contractors were insured and waived claims against each other as to those covered by the OCIP program.
In May 2005, Osowski sued NYTB and AMEC in the main action.  Over two years later, AIG, the first layer excess carrier, denied coverage for bodily injury arising out of the loading or unloading of a vehicle.
In light of the denial, NYTB/AMEC sued DCM for common-law contribution and contractual indemnification and contribution in the third-party action.  Had AIG not denied coverage, the anti-subrogation rule would have precluded that claim (since they all would have been insured under the same policies).
On December 3, 2007, AMEC/NYTB commenced an insurance coverage declaratory judgment action against AIG.  DCM was permitted to intervene in the declaratory judgment action to challenge AIG's denial of coverage.  Less than a month later, on January 9, 2008, the trial court granted the Osowskis' motion for summary judgment on the issue of AMEC/NYTB's liability under sections 240(1) and 241(6) of the Labor Law.
On May 20, 2008, during the damages trial in the main action, a "Confidential Settlement and Release Agreement" was made between the Osowskis, NYTB and AMEC.  Pursuant to the agreement, AMEC and NYTB agreed to secure funding in the amount of $12 million payable to the Osowskis, as follows: (1) a $2 million payment from Travelers; and (2) a $10 million irrevocable, unconditional letter of credit.  In exchange for the $12 million settlement, the Osowskis released AMEC/NYTB from all claims relating to the events giving rise to the main action.
The following day, on May 21, 2008, counsel for the Osowskis announced, in open court, that the main action had been settled pursuant to a confidential settlement agreement with AMEC/NYTB.  Immediately thereafter, DCM informed the court that DCM had not been made privy to the details of the settlement.
What DCM didn’t know at that time was that AIG had help fund the $12 million settlement through a letter of credit and that the confidentiality agreement provided for that funding.  It also provided (so that the action against DCM could continue) that AIG’s disclaimer of coverage was in full force and effect (even though AIG was funding the settlement).  DCM pressed the court to uncloak the confidentiality agreement and the court – after reviewing its provisions – did just that.  DCM then successfully moved to dismiss the third party action, asserting that AIG’s funding of the settlement was the equivalent of providing coverage and thus the anti-subrogation rules barred the third party action.
The appellate court determined it was proper for the court below to disclose the confidential settlement agreement because the question of who funded the settlement of the main action was critical to whether AMEC/NYTB could continue to maintain the third-party action. To the extent NYTB/AMEC did not have any out of pocket losses, it could not maintain common-law or contractual indemnity claims and if AIG was funding the settlement, anti-subrogation principles would bar the third party action.
AIG’s funding of the settlement (through a letter of credit) was the same as AIG providing coverage (thus implicating the anti-subrogation rule).  The fact that the settlement agreement indicated that AIG's disclaimer was in full force and effect was meaningless where the DJ action was not going to continue and there was no chance of AIG getting its money back. The disclaimer became a fiction and, a “clear attempt to perpetrate a fraud on the court. “
The court was so incensed by AIG’s conduct in allegedly trying to hide the AIG payment from the court and parties, that it referred the conduct of the AIG’s outside counsel to the Disciplinary Committee to consider sanctions against the attorney.

10/8/09           American Transit Insurance Company v. Brown
Appellate Division, First Department
Insurer Moves Office from Time of Original Notice to Time of Suit Notice – Court Excuses Claimant’s Late Notice Since He Sent Notice of Suit to Earlier Address

On November 12, 2002, Brown was involved in an accident with American Transit (ATIC) insured, Batista.  In January 2003, Brown put ATIC on notice of a property damage claim and ATIC paid the claim..  In November of 2005, Brown sued Battista for personal injuries and Brown sent a copy of the summons and complaint to ATIC at the address set forth in the January 2003 letter from ATIC. ATIC had moved in November 2003. When nobody appeared on behalf of Battista, Brown took a default judgment against him in the amount of $81,830. Brown then brought a direct action against ATIC to enforce the judgment and ATIC commenced a declaratory judgment action denying coverage based on late notice by Batista and Brown.  
The court founds that Brown’s lack of prompt notice is excused because he was never notified by ATIC of its change of address and that was a reasonable excuse for a delay in notification.
Two dissenting judges noted (oh so correctly) that there is no obligation on the part of a liability carrier to advise of a change in address.  We love this language:
To put forth the lack of such notice as a valid excuse for the failure to notify the insurer of pending litigation ignores the reality that American Transit's address could have been verified on the Internet in approximately three-tenths of a second.
10/6/09           Burlington Insurance Company v. Guma Construction Corp.
Appellate Division, Second Department
Where Insurer Claims Misrepresentations in Policy Application, Insurer Still Required to Defend Insured; Court Sidesteps Misrepresentation Claim
Burlington issued a CGL policy to Guma with a “classification limitation” endorsement, limited the policy to apply only to those operations listed in the “classifications” section.  “Garbage, Ash or Refuse Collecting” was so listed.

A fire broke out in a building where Guma was working and a firefighter was injured.  He sued Guma, alleging that it negligently performed certain "construction, alteration, renovation, and/or demolition, work, labor and/or other services" and improperly removed pipe as part of the work it performed, and used one or more torches in connection with the work it performed.

Burlington refused to defend claiming that Guma had made misrepresentations in its application for insurance by describing its business as "garbage, ash or refuse collecting," when it was actually "supervising the removal of pipes.

The appellate court finds that the allegations are broad enough to require Burlington to defend.  Whether there is an obligation to indemnify will be determined, not in the underlying action (where Burlington is not a party) but in the declaratory judgment action (where Burlington can present proof).
Editor’s Note:  The court really does not deal, as it should, with the issue of the alleged policyholder misrepresentations.

10/6/09           In the Matter of Gurwich v. Motor Vehicle Accident Ind. Corporation
Appellate Division, Second Department
Just What IS a Police Report?
MVAIC opposed an application for leave to file a claim on the ground that the petitioner failed to report the accident to the policy within 24 hours of the accident as required under the MVAIC rules.  “Well,” says the court.  We have "consistently afforded a very liberal interpretation to the notice requirement, accepting police contacts that fall far short of the operator's obtaining a written report." While the petitioner didn’t file a formal police report, whatever other contact he had with the police during those 24 hours was deemed sufficient to satisfy the requirement.

10/2/09           Dole Food Company v. Lincoln General Insurance Company
Appellate Division, Fourth Department
Default Judgment Should Not be Granted Purely on Pleadings, but Court Should Consider Substance
Here’s one to remember.  The insured commenced a coverage action against Lincoln and Lincoln defaulted.  Plaintiff sought to take a judgment based on the pleadings, which it claimed were admitted by reason of the default.  The court rejected that application, holding that a “default judgment in a declaratory judgment action will not be granted on the default and pleadings alone.”  Instead, it is necessary for the plaintiff to establish a right to a declaration based on other filings with the court.  Here, Dole did not provide any documentation to the court establishing its entitlement to coverage.

9/29/09           MIC Property & Casualty Corp. v. Avila
Appellate Division, Second Department
What Is a “Speed Contest,” Anyway?  Second Department Gets It Wrong

You’ve seen the exclusion – we won’t provide coverage for “race or speed contests.”  Two guys, drag racing down a street, jockeying for position, cause a fatal accident.  Is that a “speed contest?”

On October 3, 2005, Merqui Avila was driving a car owned by Pedro Avila when the car struck another vehicle killing Singleton and two others.  Merqui and the driver of another vehicle, Carlos, were each charged with manslaughter in the second degree as a result of the accident.  During their plea allocution to the reduced charge of criminally negligent homicide, both admitted that at the time of the accident, they were engaged in a speed contest. In their prior statements to the police, however, they admitted only that after being stopped adjacent to each other at a traffic light, they each attempted to pass the other over the ensuing blocks until the accident occurred.
Singleton’s estate and others commenced an action against Merqui, Pedro and Carlos Molina based upon Merqui's alleged negligence.  MIC, Pedro’s carrier, disclaimed coverage based upon a policy provision that excluded liability for a vehicle that was used in or preparing for "any race, speed contest or performance contest."
The court finds that Merqui's plea of guilty to criminally negligent homicide does not, in itself, establish that he was engaged in a speed contest at the time of the accident.  Since nothing in the statutory language requires that, to be convicted of that crime, a person have been engaged in a speed contest, the conviction of criminally negligent homicide does not, in itself, establish that Merqui was involved in a speed contest.  
Merqui admitted, in his plea colloquy, that he was engaged in a speed contest at the time of the accident.  However, in a 3-2 decision, the Second Department found that the specific admission by the defendant that he was engaged in a “speed contest” does not establish that there is “no other reasonable interpretation" of the term “speed contest.”
The policy does not define the term "speed contest." ,Where the term is used in New York law, however, in Vehicle and Traffic Law § 1182(1), it does not encompass the conduct in which Merqui engaged here. ,Merely speeding down the street, even in tandem with another vehicle, does not constitute a "speed contest" within the meaning of that statute, says the court. The criminal statute requires that there be a race course established for there to be a “speed contest” rather than a couple of car trying to race each other down the street.
Two dissenting judges disagreed believing that the statement by each defendant specifically admitted that they were “engaged in a speed contest” and an exclusion that applied to “speed contests” should lead to a contrary conclusion.
Editor’s Note:  The majority was simply wrong here to rely upon the definition of “speed contest” in a criminal statute to define a term in an insurance policy.  The test is how reasonably people being issued this kind of policy should understand the term to be defined.
9/29/09           In the Matter of Liberty Mutual Insurance Company v. Zacharoudis
Appellate Division, Second Department
Another Reminder – Only 20 Days to Start Proceeding to Stay SUM Arbitration – State’s Briefest Statute of Limitations Rears Its Ugly Head Again

As a reminder, under CPLR 7503(c), if a SUM (uninsured/underinsured) carrier receives an arbitration demand and believes that the matter should not proceed, it must make an application, in court, to stay arbitration within 20 days after service of a notice of intention to arbitrate.  In the uninsured motorists arena, if the carrier believes, for example, that the other car was not uninsured, or there was not physical contact in a hit-and-run, etc., those issues cannot be resolved by the arbitrator.  They must be brought before a judge and that filing must take place within 20 days of service of the notice of intention to arbitrate.  A failure to make that timely application will generally preclude the party from objecting to the arbitration thereafter."  There are exceptions which we have discussed in this column before.
In this case, the proceeding was commenced more than 20 days after service upon the petitioner insurer by its insured of two separate notices of intention to arbitrate and was therefore time barred.  The SUM carrier waived its right to complain and object.

MARGO’S MUSINGS ON SERIOUS INJURY UNDER NEW YORK FAULT

Margo M. Lagueras
[email protected]

10/6/09           Nisanov v Kiriyenko
                        Sanevich v Lyubomir
Appellate Division, Second Department
Contemporaneous and Recent Examinations are Required . . .
to raise a triable issue of fact with regard to the permanent consequential limitation and/or significant limitation of use categories, as well as to causally relate the injuries to the subject accident.  In both cases the plaintiffs survived on appeal because they submitted reports of both contemporaneous and recent examinations, in addition to MRI reviews.  As such, the examining physicians’ conclusions that the injuries were permanent, consequential and causally related to the accidents in question, defeated summary judgment.

9/29/09           Ciancio v. Nolan
Appellate Division, Second Department
Affirmation Concluding that Injury as Permanent Must be Based on Recent Examination
Here the plaintiff’s treating chiropractor did not base his findings on a recent examination which resulted in his conclusion being insufficient to raise a triable issue of fact as to the permanency of the alleged injuries.  In addition, the plaintiff did not submit objective medical evidence of the extent or duration of the alleged physical limitations resulting from herniated and bulging discs and a tear in a tendon.  As repeatedly noted, without such evidence, those findings are not evidence of a serious injury.  Furthermore, the plaintiff failed both to explain the cessation in his treatment after 2006, and to submit any competent medical evidence to support his claim under the 90/180-day category.

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


10/13/09         Applicant v. Progressive Ins. Co.
Arbitrator Thomas J. McCorry (Erie County)
Applicant Must Demonstrate Good Cause to Withdraw Without Prejudice Because of Pending BI Suit.
This is an interesting decision as this issue arises from time to time in the no-fault world.  The issue is whether an applicant can withdraw without prejudice its arbitration demand because he or she is concerned about the collateral estoppel effect on a pending personal injury case.  As an aside, generally the concern over collateral estoppel arises if the arbitration involves a causation issue.

In this arbitration it is alleged that the Applicant’s counsel was recently substituted and was only recently advised of a pending personal injury lawsuit.  Based upon this, the Applicant appeared at the live hearing and requested the ability to withdraw the case without prejudice over concern of the collateral estoppel effect of this decision on the pending personal injury suit.

The assigned arbitrator granted the request and cited a decision from Master Arbitrator Godson which determined that such as request should be granted as a matter of course.  The reasoning is that granting such a request, without good cause shown, may create an appearance of biasness.

Here, the assigned arbitrator determined that the applicant’s counsel’s representation that it was recently substituted and apprised of the unresolved pending personal injury action was good cause to dismiss the arbitration without prejudice.

Litigation
10/2/09           Sunshine Imaging Assoc./WNY MRI a/a/o Carol Vancheri v. GEICO
Appellate Division, Fourth Department
More Definitive Decision on Plaintiff’s Prima Facie Case?
The only decision we had, prior to this one, on what constitutes plaintiff’s prima facie case was Hobby v. CNA.  This decision actually directly indicates that Plaintiff established its prima facie case by submitting evidence that the billing forms were received by the insurer and that the insurer’s payment of the benefit is overdue.  The Court cited LMK (appellate division decision) and AB Med Services v. Liberty Mut.

PEIPER ON PROPERTY (and POTPOURRI)

Steven E. Peiper
[email protected]

Regulatory Update – REGULATION 64 : UNFAIR CLAIMS SETTLEMENT ACT
Superintendent proposes changes to regulations governing releases/waivers when claims are settled.

Very recently, the Superintendent of Insurance introduced a draft amendment to Regulation 64 as promulgated at 11 NYCRR 216, et seq..  As most insurance professionals already know, Regulation 64 is better known as the Unfair Claims Settlement Act. Specifically at issue in the proposed amendment, the Superintendent seeks to expand the language of Section 216.6(g) which currently addresses payments of claims and releases. 

As currently drafted, Section 216.6(g) contains two distinct directives. 

  • The first directive prohibits an insurance company from issuing a check or draft payment in a first party claim which also contains waiver/release language indicating that the payee’s acceptance of the check will result in a final settlement and release of all future obligations arising from the covered event. 

 

  • The second directive goes on to prohibit a carrier from requiring a waiver/release which is broader than the “scope of the settlement” at issue.

The proposed amendment to Section 216.6(g) would only moderately tweak the first directive to prohibit a carrier from issuing a check or settlement draft that releases all claims arising from the loss or the claim that led to the settlement.  As currently drafted, the first directive only applies to releases applying to further obligations arising from the loss.

However, the changes to the second directive as currently found at Section 216.6(g) are much more expansive. 

  • First, the proposed amendment prohibits an insurer from requiring any release unless it contains certain provisions.  In short, the proposed draft requires that all releases contain:

 

  • a specific description of the settlement; and,
  • for property damage claims only – an explanation and calculation of the amount paid in settlement
  • A carrier cannot require the payee to execute a release which contains a confidentiality agreement unless such an agreement is “warranted by the circumstances.” 

 

  • A carrier must use separate releases for bodily injury and property damage.  Such release must clearly state in “bolded capital letters” that it is applicable only to a bodily injury claim or a property damage claim. 
  • Lastly, with respect to settlements involving third-party automobile claims, carriers will be required to issue a special Third-Party Motor Vehicle Release (or something substantially equivalent) which is being created by the Superintendent. 

 

  • The preferred form of the Third-Party Motor Vehicle Release will be incorporated into the regulation at 11 NYCRR § 216.12. 

Although cosmetic in some respects, the proposed amendment makes a few distinct changes to the current status.  Sure, a significant change would be the prohibition of a carrier seeking a confidentiality agreement unless there were unique circumstances.   In addition, if passed, carriers will now have to issue separate releases on the BI and PD components of a claim.  Finally, carriers will have to adopt and incorporate the so-called Third-Party Motor Vehicle Release for third-party auto claims.

Naturally, we will continue to monitor this as it proceeds through the regulatory process.

10/09/09         Old Williamsburg Candle Corp. v Seneca Insurance Co., Inc.,
Appellate Division, Second Department
Evidence Submitted in Support of Motion is Also Sufficient to Satisfy Particularity Requirement for Fraud/Misrepresentation Claims
Although this case involves a coverage dispute, the procedural rulings by the Second Department make this decision of note.  By way of background, Old Williamsburg purchased a candle factory and warehouse from Seneca’s named insured.  Shortly after the purchase, a fire destroyed the building and its contents.  As a result, Old Williamsburg presented a claim to Seneca for the loss which Seneca promptly denied.

In response to the ensuing lawsuit, Seneca asserted several affirmative defenses.  Among them, Seneca asserted that (1) Plaintiff had failed to state a cause of action; (2) fraud; (3) material misrepresentation; and, (4) concealment of material facts.

Relying on previous case law in the Second Department, the Trial Court dismissed Seneca’s affirmative defense that plaintiff had failed to state a cause of action.   However, between the time of the Trial Court’s ruling and the decision in this appeal, the Second Department reversed their ruling and held that the CPLR explicitly provides a defendant with the ability to assert the affirmative defense of failure to state a cause of action upon which relief can be granted.  Relying upon the rule that the law – as of the date of a decision - is controlling, the Second Department overturned the Trial Court’s dismissal and reinstated the affirmative defense.

Further, although not plead with particularity; the Second Department also ruled that the Trial Court erred in dismissing Seneca’s fraud/misrepresentation defenses.  The Second Department ruled that the evidence produced in motion practice was sufficient to establish a question of fact as to the viability of the proposed defenses.

10/02/09         Berry v. Utica National Group
Plaintiff’s Malpractice Claim Failed where He Could Not Establish an Attorney-Client Relationship with Defendant Law Firm
Trial Court’s dismissal of plaintiff’s legal malpractice claim was affirmed where the plaintiff was unable to establish the existence of an attorney-client relationship.  Plaintiff’s downfall was his failure to establish evidence of “an explicit undertaking [by the defendant law firm to perform a specific task.” 

FIJAL’S FEDERAL FOCUS

Katherine A. Fijal
[email protected]

10/1/09           Arch Insurance Company, Lumbermens Mutual Insurance Company  
                        v. Precision Stone, Inc.
Second Circuit Court of Appeals
For Purposes of Timeliness of Suit on Surety Bond, Work was On-Going where Punch List Items were Not Complete
Precision Stone Incorporated [“Precision”] provided materials for and performed work on a construction project in White Plains, New York pursuant to a subcontracting agreement with George A. Fuller Company and its construction manager HRH Construction [collectively referred to as “Fuller”].  According to Precision, Fuller paid only a portion of the amount due to Precision for the work.  Precision brought an action in an attempt to recover full payment for the work it performed from Arch Insurance Company and Lumbermens Mutual Casualty Company, two insurance companies that had issued labor and materials payment bonds in connection with the project.

On May 8, 20003, at Fuller’s request, Precision submitted a $536, 665 bid to perform stone work for the project’s fountains and plaza.  Fuller issued a “Letter of Intent” for Precision to perform the stone work for $515,000.  Precision executed the letter, but with various qualifications and conditions, including a condition that the agreed upon price excluded costs associated with overtime work. At the time the letter was issued, Precision had not been provided with a completing date, and it never bound itself to a “time-of-the-essence” provision.  On August 12, 2003, however, Precision agreed to complete its work by October 27, 2003, but only under specified conditions, including that Fuller timely and property prepare the work site and necessary substrates.

The project was beset with delays which the District Court found were caused by Fuller.  As a result of the delays Fuller was in jeopardy of completing the project on time and in early October, 2003, while Precision was performing work under the subcontract, Fuller engaged Berardi to perform a portion of that work. Berardi’s cost was higher that Precision’s but worked overtime to complete the work by the end of October.

Fuller later refused to pay Precision for a portion of the work that Precision had completed.  On December 17, 2004, Precision filed suit under the terms of the bond.  In their answer the Sureties asserted affirmative defenses that the suit was untimely under the terms of the bond. The Sureties alleged that Fuller ceased work on the contract more than one year prior to the filing of Precision’s complaint. 

Pursuant to the bond, those who had provided labor and materials on the project and who had not been paid  in full within ninety days after the completing of their work on the project were entitled to:

“sue [the Sureties] and [Fuller] on this bond for such sum as may be justly due, provided, however, that no such suit or action shall be commended by such claimant after the expiration of one (1) year following the date on which [Fuller]            ceased work on said contract . . .

Following a bench trial the District Court found that, under the terms of the bond, Precision had timely commenced its action and was entitled to damages.  The Court reduced Precision’s award, however, by the full amount of payments made by Fuller to Berardi Stone [“Berardi”] a contractor which was hired by Fuller to take over the work started by Precision when the work on the project was behind schedule.

The Sureties appealed from the District Court’s decision that the Precision suit was timely.  Precision cross-appealed from the District Court’s decision to offset Precision’s damages by the full amount of payments made to Berardi, including those payments exceeding the outstanding balance of Precision’s subcontract with Fuller.

The facts revealed that as of December 17, 2003, one year prior to the initiation of the complaint, “punch list” work had yet to be completed. The District Court determined Fuller had not completed work by December 17, 2003.  The court held that the punch list was part of the original contract and therefore, completion of the punch list would be completion of the contract.  The Second Circuit found no clear error in the District Court’s finding.

On the issue of damages Precision argued that the District Court improperly accounted for the additional Berardi Payment in calculating damages. The Second Circuit agreed with Precision.  Looking to the provisions of the payment bond, the Second Circuit noted that the payment bond provided for damages that are “justly due”.  When a contractor defaults or breaches an agreement with a subcontractor, the subcontractor ordinarily is entitled to “collect either in quantum meruit for what had been finished, or in contract for the value of what plaintiff had lost, i.e., the contract price, less payments made and less cost of completion.

Contrary to the District Court’s decision that Second Circuit held that in the absence of a default by Precision, the amount paid by Fuller to Berardi to complete the job is irrelevant, whether the theory of recovery is in contract or in quantum meruit.  The Second Circuit went on to state, however, that there may be circumstances where the additional Berardi payment may be taken into account in measuring Precision’s damages.  Had there been some wrong on Precision’s part, the Sureties might have been entitled to set off the additional Berardi Payment from the amounts due to Precision under the bond.

As a final point, the Second Circuit agreed with Precision that setoff to a contract is an affirmative defense is waived by failure to plead.

10/1/09           State of Connecticut v. American Electric Power Co., Inc.
Second Circuit, Court of Appeals
Green House Claims – Are They Covered?
This is a Second Circuit case which was originally decided on September 21, 2009 and corrected on October 2, 2009.  We want to give credit to Michael F. Aylward for bringing this case to our attention.  Mr. Aylward is a partner at the law firm of Morrison Mahoney, LLP, in Boston, Massachusetts.

This is a case which involved green house gas claims, claims which have not received a lot of attention from the courts.  State of Connecticut may well open the door to widespread climate change litigation, much as plaintiffs overcame early failures with respect to litigation involving asbestos and tobacco.  Even so, claimants that get over this initial hurdle will face significant further problems of proof, notably with respect to causation.  There is certainly no way of declaring with reasonable certainty what greenhouse effects are attributable to any individual emitter.  While it is possible that courts will permit plaintiffs to overcome this hurdle by adopting easier causation tests on the model of market share liability, as was the case with DES litigation in the 1980s, there are also reasons to question whether greenhouse gases are, in fact, a generic product akin to that considered by the California Supreme Court in Sindell v. Abbott Laboratories, 26 Cal.3d 558, 607 P.2d 924 (1980).

Nevertheless, at least one court has extended market share liability in a manner that might apply to greenhouse gases.  In holding that MTBE claimants were not required to link each incidence of environmental harm to a particular defendant’s releases of gasoline, Judge Schiendlin observed in In Re MTBE Products Liability Litigation, 379 F. Supp.2d 348, 377 (S.D.N.Y. 2005) that:
From time to time, the courts have fashioned new approaches in order to permit plaintiffs to pursue a recovery when the facts and circumstances of their actions raised unforeseen barriers to relief.  Those courts made a policy decision that in balancing the rights of all parties, it would be inappropriate to foreclose plaintiffs entirely from seeking relief merely because their actions did not fit the parameters of existing liability theories.
In the long term, it is possible that climate change claims will follow the trajectory of public nuisance claims involving guns or lead paint, cases that generated a great deal of controversy and legal expense for several years but petered out in the face of repeated appellate losses.  See, e.g.  State of Rhode Island v. Lead Industries Association, 921 A.2d 96 (R.I. 20087(dismissing State’s nuisance action against paint pigment manufacturers for the cost of remediating lead paint from public housing).  On the other hand, while the likelihood of such cases getting to a jury seems remote, the potential damages awardable are incalculable.
Insurer efforts to avoid coverage for climate change have been complicated by the difficulty in drafting a standardized exclusion that would encompass such claims.  Unlike Y2K or even claims involving exposure to asbestos or environmental liabilities, the scope of operations and processes allegedly contributing to climate change as well as the diverse nature of the injuries resulting from such claims make it extremely difficult to isolate such risks and preclude coverage for them.
Pending the introduction of some sort of “total” climate change exclusion, climate change claims are likely to be disputed by liability insurers on numerous bases, including the following:
●          Property Damage/Trigger of Coverage
What does “property damage” mean in the context of climate change?  It surely cannot be the emission of carbon dioxide into the atmosphere, a process that has occurred through natural biosynthesis since the dawn of time.  Nor is there an objective threshold or temperature that would enable courts to conclude that the atmosphere or environment had become damaged. If so, does “property damage” only occur when the consequences of climate change are felt, as through droughts or hurricanes that may or may not be causally related?
American Electric is potentially instructive in this regard.  In discussing whether the plaintiffs have suffered an “injury in fact” so as to have standing to sue, the court pointed out that although the plaintiffs were mainly concerned about the future consequences of global warming, they had alleged specific current injuries due to climate changes, such as coastal erosion in Massachusetts or the premature melting of glacial snowpack and associated flooding in California.
●          Fortuity
If the emission of greenhouse gases is claimed by policyholder to immediately result in property damage so as to require a “continuous trigger,” much as insureds have argued in the context of gas utility plans and hazardous waste sites, may not insurers respond that the intentional discharge of an inherently injurious by-product is not an “accident”?  Alternatively, given the publicity in recent years concerning the phenomenon of global warning, at what point would an insured’s failure to cease or limit such emissions preclude an argument that the resulting harm was not “expected or intended.”  Similarly, at what point would these resulting injuries become a “known loss”?
●          Pollution Exclusions
Liability policies have contained pollution exclusions since the early 1970s and, for the past twenty years, these exclusions have been “absolute” as regards emissions of pollutants from the insured’s own property and facilities.  Insurer arguments that such exclusions would apply to climate change claims find support in the U.S. Supreme Court’s seminal 2007 opinion in Massachusetts v. EPA that held that greenhouse gases are “pollutants” subject to regulation by the U.S. Environmental Protection Agency under the Clean Air Act.
●          Damages
Insureds may also seek coverage for the cost of installing new scrubber technologies and other measures designed to reduce or prevent greenhouse gas emissions.  For the most part, courts have refused to require insurers to pay for prophylactic measures to abate or prevent future losses.  Thus, in Cinergy Corp. v. AEGIS, 865 N.E.2d 571 (Ind. 2007), the Indiana Supreme Court held that AEGIS did not owe coverage for a lawsuit in which the federal government sought to compel Duke Energy and other utilities to comply with the federal Clean Air Act and implement new clean air technologies to prevent widespread harm to public health and the environment, the Supreme Court agreed with other jurisdictions that a distinction should be drawn between remedial and prophylactic remedies and that coverage was not required here where the federal lawsuit was directed at preventing future harm to the public not obtaining control, mitigation or compensation for past or existing environmentally hazardous emissions.  The court ruled that the policy’s requirement that injury be “caused by an accident” precluded coverage for cases such as this where the complaint sought to prevent an occurrence from happening.  Accord Newman Manufacturing, Inc. v. Transcontinental Ins. Co., 871 N.E.2d 396 (Ind. Ct. App. 2007).
●          CoverageTerritory
Current CGL forms require that property damage happen within the Coverage Territory, which is defined as:
a.         The United States of America (including its territories and possessions), Puerto Rico and Canada;
b.         International waters or airspace, but only if the injury or damage occurs in the course of travel or transportation between any places included in a. above; or
c.         All other parts of the world if the injury or damage arises out of:
(1)       Goods or products made or sold by you in the territory described in a. above;
(2)       The activities of a person whose home is in the territory described in a. above, but is away for a short time on your business; or
Plainly damage to the atmosphere is not property damage with this Coverage Territory.  On the other hand, claims that private or public entities may assert for damage to their own property, such as the Massachusetts coastal erosion claims, are not subject to this limitation.
As yet, there is only one reported coverage case in which these issues are being contended.  In 2008, Steadfast Insurance commenced an action for declaratory relief in state court in Arlington, Virginia arguing that it does not owe coverage for global warming claims brought against AES Corporation by the Native Village of Kivalina, Alaska. The DJ asks the state court to find that Steadfast does not owe coverage on the grounds that (1) global warming is not the result of any “accident” given the industry’s long-standing knowledge of risks associated with greenhouse gases; (2) in light of the long-standing nature of the problem, it is clearly a “loss in progress” subject to a Montrose endorsement in the policy; (3) the emission of greenhouse gases is “air pollution” subject to a total pollution exclusion in the Steadfast policy.
As above, it is far too early to tell whether American Electric will usher in a future wave of climate change litigation in the way that Borel v. Fibreboard opened the door to the modern era of mass tort litigation in 1975.  Nor is it clear how the panel’s opinion will fare following potential en banc or cert challenges.  It is clear, however, that in the near term this opinion will provide a road map to other challengers to pursue federal nuisance claims. 

EARL’S PEARLS

Earl K. Cantwell
[email protected]

PROFESSIONAL LIABILITY POLICIES: 
WHEN IS A CLAIM A CLAIMAND NOT ALMOST A CLAIM?

A Federal District Court in New York recently had occasion to consider issues raised concerning claims made under a legal malpractice-professional liability insurance policy.  St. Paul Fire & Marine Insurance Company v. Sledjeski & Tierney, PLLC, 2009 WL 2151425 (E.D. N.Y. July 17, 2009).  In Sledjeski & Tierney, the Court held that under the terms of the claims made policy, the determination of insurance coverage was made under the policy in effect when the insured provided notice of a potential claim, not another policy in effect when the actual claim (the lawsuit) was filed against the insured.  The problem for the insured, and which engendered the litigation, was that as a result coverage was subject to possible denial and problems caused by a “prior knowledge exclusion” in the relevant policy. 

A potential plaintiff retained Sledjeski & Tierney to represent her in a personal injury suit.  On the date of the statute of limitations, Sledjeski & Tierney filed a Summons and Complaint, but it was apparently defective and never served.  In October 2007, Sledjeski & Tierney informed its insurance company of the alleged error, and the law firm also disclosed the alleged error in a renewal application on October 31, 2007.    However, it was not until March 2008 that the client filed a legal malpractice suit arising from the firm’s failure to file the underlying case prior to expiration of the statute of limitations. 

Delving into the layers of insurance coverage, the firm was insured under one professional liability policy from December 20, 2006 to December 20, 2007 (the “2007 Policy”).  The insurer’s declaratory judgment action contended that there was no coverage under the 2007 Policy because before the 2006 Policy went into effect the law firm knew or could have reasonably foreseen that its error would result in a potential claim.  The law firm moved to dismiss the declaratory judgment claim under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim, but the Court denied the motion. 

Delving deeper into the policies, the problem was that the 2007 Policy contained an exclusion that there was no coverage for claims arising out of any error, omission, negligent act or personal injury occurring prior to the inception date of the policy if the insured, prior to the inception date, knew or could have reasonably foreseen that such error, omission, negligent act or personal injury would be expected to be the basis of a claim or suit.  In short, the insurance company wanted the 2007 Policy to apply because it might potentially exclude this claim, whereas the law firm wanted the later policy to apply which was in effect in 2008 when the law suit was filed because, presumably, it did not contain such an exclusion or contained different provisions. 

In deciding the motion, the Court first noted that the insurer sought a declaration of rights only with respect to the 2007 Policy.  This policy had been renewed for 2007-2008, but the insurer apparently did not seek any declaration of rights as to that renewed 2008 policy.  Therefore, the policy at issue in the declaratory judgment action was the 2007 Policy with the actual inception date of December 20, 2006. 

In reviewing the 2007 Policy, the exclusion would preclude coverage if, prior to December 20, 2006, the law firm knew or reasonably should have foreseen that the error could lead to a malpractice suit.  It was deemed immaterial that the law firm notified the insurer of the error prior to the expiration of the 2007 Policy. 

The Court also reviewed sections of the policy relating to notice and disclosure and held that the insured’s notice during the 2007 Policy period of a potential claim triggered coverage under the policy even if the claim was filed after the policy period.  Here, coverage under the 2007 Policy may have been triggered by notice in October 2007 of the alleged error in handling the case.  To some degree, therefore, the law firm was being penalized for its relatively early disclosure in October 2007 of the alleged error which might trigger coverage under the 2007 Policy, which coverage was now jeopardized by the “prior knowledge exclusion”.

The law firm argued that there was coverage under the 2007 Policy as a matter of law because the “potential claim” provision of the notice section was inconsistent with the nature of a claims made policy and thus created an ambiguity that had to be construed in favor of the insured.  The law firm argued that the effect of the exclusion was to, in effect, make the 2007 Policy more like an occurrence policy rather than a claims made policy if coverage could be excluded based on prior knowledge of the occurrence giving rise to the claim.  The Court found that there was no ambiguity since all the notice provision did was establish that some potential claims could trigger the applicability of a policy in effect before the policy period when a claim is actually filed. 

The Court essentially concluded that, by providing the insurer with notice of the alleged error in the Fall of 2007, the law firm potentially triggered coverage for the malpractice suit even if suit was not filed until after the 2007 Policy expired.  However, coverage under the 2007 Policy was jeopardized by the prior knowledge exclusion, which question was not decided on the motion to dismiss.  However, the tenor of the decision seems to indicate that the law firm knew or could have reasonably foreseen that its error in July 2005 could be the basis of a suit before the inception of the 2007 Policy (which actually commenced December 20, 2006). 

Despite the holding and outcome of this case, it is still incumbent upon professionals to timely and fully notify their professional liability carriers of a potential claim, or set of circumstances that could give rise to a potential claim, as soon as the insured knows “or could reasonably foresee” that the error might form the basis of a claim or suit. 

This case also emphasizes the importance to professionals of closely reading their professional liability policies with respect to their duties of notice, and requirements with respect to prior acts and knowledge of potential claims. 

This case also reveals the challenges and perils when policies cover subsequent periods, and may even be with different carriers and contain very different endorsements, covering language and exclusions, all of which may not necessarily be consistent.   This case also suggests the importance of reviewing historical liability policies to determine if coverage may have been triggered at an earlier date, i.e. before the claim period of actual suit. 

The 2007 Policy contained the prior knowledge exclusion but it seems apparent from the Court decision that this exclusion was not contained in the 2008 policy which the law firm sought to be made applicable.  Professionals and underwriters need to closely track insurance forms, policies and language to insure continuity of coverage, consistency of provisions and endorsements, and an awareness of the insured’s rights and obligations particularly if coverages change from year to year, from company to company, or from underwriting program to program.  Here, it made all the difference in the world to the law firm whether the 2007 Policy applied as opposed to the 2008 policy and it seems that the odds are stacked against the law firm if indeed the 2007 Policy is the one deemed applicable to the claim. 

ACROSS BORDERS
Please visit the Hot Cases Section of the Federation of Defense & Corporate Counsel website: www.thefederation.org

10/08/09         Medical Mut. Ins. Co. of Maine v. Indian Harbor Ins. Co,
First  Circuit Court of Appeals
D & O Insurance Policies Do Not Provide Coverage for Losses Stemming from Judicial And Administrative Complaints Filed Against a Company, Alleging Wrongful Conduct of Its Directors And Officers.
Plaintiff’s CEO suffered a stroke and was subsequently ousted from his position. Several months later, the CEO retained counsel who wrote a demand letter to the company, seeking compensation for disability discrimination. When that letter received no positive response, the former CEO filed an administrative complaint against the company with the Maine Human Rights Commission and the federal Equal Employment Opportunity Commission, naming the company as the lone respondent, but alleging discriminatory conduct on the parts of the company, its directors, and its officers. The agencies issued right-to-sue letters, and the former CEO filed a civil action in the United States District Court for the District of Maine against the company only. However, the prayers for relief asked for an injunction against the company, its agents, employees and successors from continuing to violate the former CEO’s rights. The company settled for $325,000 out of its own pockets in exchange for a release of all claims against the company, its officers, agents, employees, attorneys, and members of the Board of Directors. The company then sought reimbursement from Defendant, which issued a D&O policy to the company. The Defendant refused to pay, arguing that the claims were only against the company. Plaintiff then filed the instant action, and the District Court granted summary judgment. On appeal, the First Circuit affirmed, finding that the policy required a claim to be raised against the directors and officers, for the claim to be made against an insured person. Therefore, the First Circuit affirmed the decision of the District Court.
Submitted by: Mark Gesk and Ian Walchesky of Wayman, Irvin, & McAuley, LLC.

10/08/09         Oregon Mut. Ins. Co., v. Farm Bureau Mut. Ins. Coi. of Idaho
Idaho Supreme Court
The Supreme Court of Idaho Clarifies the Application of Collateral Estoppel Where Default Judgment Is Rendered Against An Insured, But Not Against His Alleged Insurers

Thompson and Kiser were involved in an automobile accident. At the time of the accident, Thompson was driving a Toyota Celica owned by his girlfriend, Tananda Bramlette. The vehicle was insured by Oregon Mutual, and the policy excluded coverage for any person using the vehicle without a reasonable belief that he or she is entitled to do so, or that the vehicle is being used within the scope of permission granted. Kiser was insured by Farm Bureau and Western Community. Thompson claimed that the accident with Kiser occurred while he was using Tananda’s vehicle within the scope of permission. After the accident, Farm Bureau and Western Community filed arbitration claims against Oregon Mutual, seeking indemnification and reimbursement for benefits paid to Kiser for damages related to the accident. Subsequently, Oregon Mutual filed a declaratory action, seeking a judgment that Thompson did not have permission to drive the vehicle and therefore, Oregon Mutual was not required to defend, indemnify, or otherwise provide coverage for Thompson. Farm Bureau and Western Community filed an answer to Oregon Mutual’s complaint, but Thompson failed to respond so default judgment was entered against him. Afterwards, Oregon Mutual moved for summary judgment against Farm Bureau and Western Community, arguing that the default judgment against Thompson precluded him from testifying that he had permission to drive the vehicle. The district court denied the motion, finding that collateral estoppel did not apply to the issue of Thompson’s coverage and that Thompson’s deposition testimony created a genuine issue of material fact regarding coverage. Thereafter, a bench trial was conducted to resolve the issue of whether Thompson had permission. The court held that Thompson did have permission to use the vehicle, and therefore, Oregon Mutual covered him while driving. On appeal, the issue was whether the default judgment against Thompson precluded Farm Bureau and Western Community from litigating the issue of whether Thompson had permission. The Supreme Court stated that five factors are required for collateral estoppel to bar re-litigation of an issue decided in an earlier proceeding, including that the party against whom the earlier decision was asserted had a full and fair opportunity to litigate the issue decided in the earlier case. Here, the Court found that that factor was not fulfilled. The Court found that Farm Bureau and Western Community had no grounds to object to the default judgment because their interests and Thompson’s interests regarding whether permission existed were in conflict, so they could not raise an objection on Thompson’s behalf. Additionally, they lacked standing to raise an I.R.C.P. 60(b) motion on behalf of Thompson’s position because they were not the party against whom a final judgment was entered. Since they were not the party against whom the earlier decision was asserted, they did not have a full and fair opportunity to litigate the issue of permission at the time that the default judgment was entered. Therefore, the judgment did not bar them from re-litigating the issue of permission. The Supreme Court affirmed the district court.
Submitted by: Phil Reeves and Hilary Moore of Gallivan, White & Boyd, P.A.

 

REPORTED DECISIONS

In the Matter of Liberty Mutual Insurance Company v. Zacharoudis


Randall S. Ferguson, Roslyn Heights, N.Y., for appellant.

DECISION & ORDER
In a proceeding pursuant to CPLR article 75 to permanently stay arbitration of a claim for uninsured motorist benefits, Effie Zacharoudis appeals, as limited by her brief, from so much of an order of the Supreme Court, Nassau County (Davis, J.), entered August 15, 2008, as denied her cross motion to dismiss the petition as untimely, determined that the proceeding was timely commenced, and directed a framed-issue hearing.
ORDERED that the order is reversed insofar as appealed from, on the law, with costs, the cross motion to dismiss the petition as untimely is granted, and the proceeding is dismissed as time-barred.
CPLR 7503(c) requires that an application to stay arbitration be made within 20 days after service of a notice of intention to arbitrate (see Matter of Fiveco, Inc. v Haber, 11 NY3d 140, 144; Matter of Land of Free v Unique Sanitation, 93 NY2d 942, 943; Matter of Steck [State Farm Ins. Co.], 89 NY2d 1082, 1084; Matter of Spychalski [Continental Ins. Cos.], 45 NY2d 847, 849). "Unless a party makes an application for a stay of arbitration within the statutory 20-day period, CPLR 7503(c) generally precludes the party from objecting to the arbitration thereafter" (Matter of Hermitage Ins. Co. v Escobar, 61 AD3d 869; see Matter of Fiveco, Inc. v Haber, 11 NY3d at 144; Matter of Land of Free v Unique Sanitation, 93 NY2d at 943; Matter of Steck [State Farm Ins. Co.], 89 NY2d at 1084; Matter of State Farm Ins. Co. v Williams, 50 AD3d 807, 809).
The instant proceeding was commenced more than 20 days after service upon the petitioner insurer by its insured of two separate notices of intention to arbitrate. Accordingly, contrary to the Supreme Court's determination, the cross motion should have been granted and the proceeding dismissed as time-barred (see Matter of Hermitage Ins. Co. v Escobar, 61 AD3d at 670; Matter of Travelers Indem. Co. v Castro, 40 AD3d 1005, 1006; Matter of Government Empls. Ins. Co. v Castillo-Gomez, 34 AD3d 477, 479).
MIC Property & Casualty Corp. v. Avila


Campbell & Miller, Smithtown, N.Y. (Edwin Miller of counsel), for
appellant.
Finder and Cuomo, LLP, New York, N.Y. (Sherri A. Jayson of
counsel), for respondent.

DECISION & ORDER
In an action for a judgment declaring, inter alia, that the plaintiff is not obligated to defend or indemnify Merqui G. Avila or Pedro E. Avila in an underlying personal injury action entitled Hill v Avila, pending in the Supreme Court, Nassau County, under Index No. 20620/05 and an underlying personal injury and wrongful death action entitled Beards v Avila, pending in the Supreme Court, Nassau County, under Index No. 10988/06, the defendant Karen Singleton Beards appeals from an order of the Supreme Court, Suffolk County (Costello, J.), dated May 6, 2008, which granted the plaintiff's motion for summary judgment declaring, in effect, that it is not so obligated.
ORDERED that the order is reversed, on the law, with costs, and the plaintiff's motion for summary judgment is denied.
On October 3, 2005, the defendant Merqui G. Avila (hereinafter Merqui) was driving a car owned by the defendant Pedro E. Avila (hereinafter Pedro) when that vehicle struck an automobile owned and operated by the defendant Herbert Singleton, killing one of the passengers in that vehicle, Vinette Louise Singleton, and injuring two others. Merqui and the driver of another vehicle, Carlos Molina, were charged with manslaughter in the second degree as a result of the accident. During their plea allocution to the reduced charge of criminally negligent homicide, both admitted that at the time of the accident, they were engaged in a speed contest. In their prior statements to the police, however, they admitted only that after being stopped adjacent to each other at a traffic light, they each attempted to pass the other over the ensuing blocks until the accident occurred.
The injured passengers and Karen Singleton Beards, the executrix of the estate of Vinette Louise Singleton, commenced an action against Merqui, Pedro, Molina, and Herbert Singleton to recover damages based upon Merqui's alleged negligence. The plaintiff, MIC Property & Casualty Corp. (hereinafter MIC), which insured Pedro's vehicle, disclaimed coverage based upon a policy provision that excluded liability for a vehicle that was used in or preparing for "any race, speed contest or performance contest." MIC then commenced this action for a judgment declaring that it has no duty to defend or indemnify Merqui or Pedro in the underlying actions. The Supreme Court granted MIC's motion for summary judgment declaring, in effect, that it is not so obligated. We reverse.
Merqui's plea of guilty to criminally negligent homicide does not, in itself, establish that he was engaged in a speed contest at the time of the accident. "A person is guilty of criminally negligent homicide when, with criminal negligence, he causes the death of another person" (Penal Law § 125.10). Since nothing in the statutory language requires that, to be convicted of that crime, a person have been engaged in a speed contest, the conviction of criminally negligent homicide does not, in itself, establish that Merqui was involved in a speed contest (see Allstate Ins. Co. v Zuk, 78 NY2d 41, 45).
Merqui's admission that he was engaged in a speed contest at the time of the accident also is not dispositive here. At issue here is the meaning of the term "speed contest" in the exclusion from coverage contained in the insurance policy issued by MIC. To " negate coverage by virtue of an exclusion, an insurer must establish that the exclusion is stated in clear and unmistakable language, is subject to no other reasonable interpretation, and applies in the particular case'" (Belt Painting Corp. v TIG Ins. Co., 100 NY2d 377, 383, quoting Continental Cas. Co. v Rapid-American Corp., 80 NY2d 640, 652; see Incorporated Vil. of Cedarhurst v Hanover Ins. Co., 89 NY2d 293, 298). Any ambiguity in the exclusion is to be construed against the insurer (see Allstate Ins. Co. v Noorhassan, 158 AD2d 638, 639). "The test for ambiguity is whether the language in the insurance contract is susceptible of two reasonable interpretations. The focus of the test is on the reasonable expectations of the average insured upon reading the policy" (NIACC, LLC v Greenwich Ins. Co., 51 AD3d 883, 884 [internal quotation marks and citations omitted]). "The insurance company bears the burden of establishing that the exclusions apply in a particular case and they are subject to no other reasonable interpretation" (MDW Enters. v CNA Ins. Co., 4 AD3d 338, 340; see Seaboard Sur. Co. v Gillette Co., 64 NY2d 304, 311; Gaetan v Firemen's Ins. Co. of Newark, 264 AD2d 806, 808). MIC failed to carry this burden here.
The policy does not define the term "speed contest." Where the term is used in New York law, however, in Vehicle and Traffic Law § 1182(1), it does not encompass the conduct in which Merqui engaged here. Merely speeding down the street, even in tandem with another vehicle, does not constitute a "speed contest" within the meaning of that statute (see People v Grund, 14 NY2d 32; see also Shea v Kelly, 121 AD2d 620, 621). "Violation of this statute means that, at least by implication, some race course must have been planned by the competitors along a street. It is not enough that an automobile operated by defendant and one by his codefendant left an intersection abreast when the traffic light changed to green and, thereafter, travelled abreast at about 55 miles an hour, each car jockeying for position" (People v Grund, 14 NY2d at 34).
The statements made by Merqui and Molina to the police on the day after the accident, which are admissible for the purpose of defeating a motion for summary judgment (see Ashif v Won Ok Lee, 57 AD3d 700; Westchester Med. Ctr. v Progressive Cas. Ins. Co., 51 AD3d 1014, 1017; cf. Niyazov v Bradford, 13 AD3d 501, 502), raised a triable issue of fact as to whether Merqui's conduct falls within the exclusion as so defined. Therefore, MIC's motion for summary judgment should have been denied (see Alvarez v Prospect Hosp., 68 NY2d 320, 324).
MIC's remaining contention is not properly before this Court.
SPOLZINO, J.P., FISHER and FLORIO, JJ., concur.

SANTUCCI, J., dissents, and votes to affirm the order appealed from and remit the matter to the Supreme Court, Suffolk County, for the entry of a judgment declaring that the plaintiff is not obligated to defend or indemnify Merqui G. Avila or Pedro E. Avila in an underlying personal injury action entitled Hill v Avila, pending in the Supreme Court, Nassau County, under Index No. 20620/05, and an underlying personal injury and wrongful death action entitled Beards v Avila, pending in the Supreme Court, Nassau County, under Index No. 10988/06, with the following memorandum, in which BALKIN, J., concurs. 
Contrary to the conclusion of my colleagues in the majority, I conclude that the insurer herein did establish a prima facie case for disclaiming coverage by virtue of a policy exclusion (see Incorporated Vil. of Cedarhurst v Hanover Ins. Co., 89 NY2d 293, 298). The appellant contends, inter alia, that the plaintiff, MIC Property & Casualty Corp. (hereinafter MIC), failed to meet its burden because the policy does not define the term "speed contest," and because the conduct of the drivers, the defendants Merqui G. Avila (hereinafter Merqui) and Carlos Molina (hereinafter together the drivers), did not rise to a level that can be considered a violation of Vehicle and Traffic Law § 1182(1)— the provision that prohibits unregulated "speed contests." At the time of the accident, Vehicle and Traffic Law § 1182(1) provided, in pertinent part:
"No races or contests for speed shall be held and no person shall engage in or aid or abet in any motor vehicle speed contest or exhibition of speed on a highway without the permission of the authorities of the state, city, town or village having jurisdiction and unless the same is fully and efficiently patrolled for the entire distance over which such race or contest for speed is to be held."

As noted by the majority, the Court of Appeals, in interpreting this statute, has held that "[v]iolation of this statute means that, at least by implication, some race course must have been planned by the competitors along a street" (People v Grund, 14 NY2d 32, 34), and that even though the defendant in that case and another driver may have been speeding and jockeying for position, the evidence was "not sufficient to convict [the defendant] beyond a reasonable doubt of drag racing' in violation of section 1182 of the Vehicle and Traffic Law" (id.). Thus, the Grund case is persuasive to the extent that it defines what constitutes a speed contest insofar as it relates to evidence sufficient to convict under Vehicle and Traffic Law § 1182.
However, in the case at bar, the issue is not the sufficiency of evidence with respect to the drivers' criminal convictions, but rather, whether MIC met its burden of establishing that the conduct at issue falls within the policy exclusion. In contrast to Vehicle and Traffic Law § 1182, the policy at issue does not require that a race be prearranged or organized, nor does it cite to the Vehicle and Traffic Law. The policy merely uses the same phrase, "speed contest." In this regard, it is to be noted that the phrase "speed contest" also has been interpreted to mean "a challenge coupled with a response in speed and relative position indicating acceptance of the challenge," which is a lower standard of proof than that required for a criminal conviction for drag racing under Vehicle and Traffic Law § 1182 (Shea v Kelly, 121 AD2d 620, 621, citing People v Grund, 14 NY2d 32). Moreover, based on the statements which the drivers made to the police at the time of their arrest, I believe that it is fair to conclude that their actions prior to the accident constituted such a "speed contest." Indeed, both drivers indicated that just before the accident occurred, and after stopping at a traffic light, Merqui pulled away at a high rate of speed and Molina raced to catch up with him. After stopping at a second traffic light, they continued "playing with each other," and pulled away at a high rate of speed as Merqui tried to pass Molina.
Furthermore, although no specifics as to the speed contest were elicited during the plea allocution, neither Merqui nor Molina was charged with a violation of the Vehicle and Traffic Law. Finally, and most significantly, the drivers clearly admitted that they had participated in a speed contest when they were asked that question during their plea allocution. Indeed, a review of the plea minutes indicates that not only did the court specifically elicit such admissions from them, but also, that there was no concern expressed at that time about the meaning of the questions being posed. The relevant portion of the plea transcript is as follows:
"THE COURT: Mr. Molina, let's go back to the 4th day of October, year 2005, County of Nassau, State of New York . . . It is true that you were engaged in a speed contest with Mr. [Merqui] Avila; is that correct?
"DEFENDANT MOLINA: Yes.
"THE COURT: And . . . the speed contest was . . . the criminal negligence on your part. ]Do you agree to that?
"DEFENDANT MOLINA: Yes.
. . .
"THE COURT: . . . Mr. [Merqui] Avila, let's go back to the 4th day of October, year 2005, County of Nassau, State of New York . . . Now, on that particular date, that particular location, were you involved in this speed contest with the co-defendant, defendant Molina; is that correct?
"DEFENDANT [MERQUI] AVILA: Yes.
. . .
"THE COURT: And your criminal negligence was the speed contest, is that correct?
"DEFENDANT [MERQUI] AVILA: Yes."
Accordingly, by submission of the insurance policy exclusion and a transcript of the drivers' plea allocutions in which they admitted participating in a "speed contest," MIC met its prima facie burden of establishing entitlement to judgment as a matter of law (see Utica Fire Ins. Co. of Oneida County, N.Y. v Shelton, 226 AD2d 705, 706). In opposition thereto, the appellant and the defendants Herbert Hill, Alice Gordon, and Herbert Singleton failed to raise a triable issue of fact. Therefore, in my opinion, the Supreme Court properly granted MIC's motion for summary judgment, and I would affirm the order appealed from and remit the matter to the Supreme Court, Suffolk County, for the entry of a judgment declaring the MIC is not obligated to defend or indemnify Merqui or Pedro in an underlying personal injury action entitled Hill v Avila, pending in the Supreme Court, Nassau County, under Index No. 20620/05, and an underlying personal injury and wrongful death action entitled Beards v Avila, pending in the Supreme Court, Nassau County, under Index No. 10988/06.
Dole Food Company v. Lincoln General Insurance Company


Appeal from an order of the Supreme Court, Erie County (Frederick J. Marshall, J.), entered July 17, 2008. The order, inter alia, granted plaintiffs' motion for a default judgment against defendants Lincoln General Insurance Company and Leonard's Express, Inc.

LITCHFIELD CAVO LLP, NEW YORK CITY (EDWARD FOGARTY, JR., OF COUNSEL), FOR DEFENDANTS-APPELLANTS.
COLUCCI & GALLAHER, P.C., BUFFALO (REGINA A. DELVECCHIO OF COUNSEL), FOR PLAINTIFFS-RESPONDENTS.

It is hereby ORDERED that the order so appealed from is unanimously reversed on the law without costs, the motion is denied, the cross motion is granted and plaintiffs are directed to accept service of the answer of defendants Lincoln General Insurance Company and Leonard's Express, Inc. dated May 14, 2008.
Memorandum: In this declaratory judgment action, Lincoln General Insurance Company and Leonard's Express, Inc. (collectively, defendants) appeal from an order granting plaintiffs' motion for a default judgment against them based on their failure to serve a timely answer and denying their cross motion seeking to compel plaintiffs to accept service of their late answer (see CPLR 3012 [d]). We agree with defendants that Supreme Court abused its discretion in granting the motion and in denying the cross motion. "A default judgment in a declaratory judgment action will not be granted on the default and pleadings alone for it is necessary that plaintiff[s] establish a right to a declaration" and, here, plaintiffs did not establish their entitlement to the declaration sought (Merchants Ins. Co. of N.H. v Long Is. PetCemetery, 206 AD2d 827 [internal quotation marks omitted]; cf. New York Mut. Underwriters v Baumgartner, 19 AD3d 1137, 1141).

American Transit Insurance Company v. Brown


Blank & Star, PLLC, Brooklyn (Scott Star of counsel), for
appellant-respondent.
Marjorie E. Bornes, New York, for respondent-appellant.
Order, Supreme Court, New York County (Marcy S. Friedman, J.), entered November 10, 2008, which, to the extent appealed from, denied defendant Arthur Brown's motion for summary judgment on his counterclaim and plaintiff's cross motion for summary judgment declaring that it is not obligated to satisfy a default judgment obtained by Brown against defendant Albertano Batista, modified, on the law, to the extent of granting Brown's motion and declaring that plaintiff is obligated to satisfy the said judgment in the amount of $81,830, together with interest from July 19, 2007, and otherwise affirmed, without costs.
On November 12, 2002, Brown was involved in a motor vehicle accident with Batista, ATIC's insured. ATIC acknowledged receipt of Brown's third-party claim by letter dated January 28, 2003. Brown settled his claim for property damage with ATIC and commenced a personal injury action against Batista on November 9, 2005. Brown forwarded copies of the summons and complaint to ATIC on or about January 26, 2006. These copies were mailed to ATIC at the address set forth in its January 2003 letter. Unbeknownst to Brown, however, ATIC had moved its offices in November 2003. Upon Batista's failure to appear in the action, Brown moved for a default judgment and proceeded to inquest on June 21, 2007. The underlying judgment in the amount of $81,830 was entered in favor of Brown against Batista on July 19, 2007. Pursuant to Insurance Law § 3420(a)(2), Brown served copies of the unsatisfied judgment with notices of entry upon ATIC and Batista on August 9, 2007. ATIC promptly issued a letter of disclaimer and commenced this declaratory judgment action on the ground that neither Batista nor Brown gave it timely notice of the underlying lawsuit as required by Batista's insurance policy. Supreme Court denied Brown's motion and ATIC's cross motion for summary judgment on the ground that additional discovery was needed. We find that Brown's motion should have been granted for reasons that follow.
ATIC asserts that Batista and Brown failed to immediately furnish it with copies of the underlying summons and complaint as required by the policy. ATIC does not cite any relevant policy provision in its brief or the affidavits it submitted below. Nevertheless, in its letter of disclaimer, ATIC quotes and relies upon paragraph 11 of the policy's insuring agreements, which provides, in relevant part, that "[i]f any suit is brought against the Insured to recover such damages the Insured shall immediately forward to the Company every summons or other process served upon him." However, paragraph 11 follows paragraph 9, which provides that "[t]he following provisions . . . shall apply between the Company and the Insured but shall not prejudice the right of any person other than the Insured to recover hereunder." Therefore, under the terms of ATIC's policy, the failure to comply with the notice requirement does not preclude Brown's third-party claim under Batista's policy with ATIC.
In a proper case, the failure to satisfy a notice requirement "may allow an insurer to disclaim its duty to provide coverage" (see American Tr. Ins. Co. v Sartor, 3 NY3d 71, 76 [2004]). In this regard, ATIC asserts that Brown breached the policy's notice requirement by forwarding the summons and complaint to its former address instead of its then current address. A failure to satisfy an insurance policy's notice requirement does not vitiate coverage where there is a valid excuse (cf. Matter of Allcity Ins. Co. [Jimenez], 78 NY2d 1054, 1055 [1991]). Brown has, in any event, demonstrated a valid excuse for forwarding the summons and complaint to ATIC's former address in that he was never notified of its change of address. Prior to the suit, ATIC's last correspondence to Brown set forth the former address. ATIC's allegation that it had "sent out a post card to claimants and attorneys who had filed any claims against us during that time" rings hollow as it does not claim that any specific notification was sent to Brown or his counsel. Equally unavailing is ATIC's assertion that its new address was printed on a check forwarded to Brown's counsel in settlement of an unrelated matter. An address on a check alone does not suffice as notice that it is the address to which notices should be sent (see Kennedy v Mossafa, 100 NY2d 1, 10 [2003]). As noted above, we merely find that Brown has demonstrated a reasonable excuse for his failure to satisfy the policy's notice requirement. We disagree with the dissent's contention that this finding shifts a burden to ATIC.
All concur except Andrias, J.P. and Catterson, J. who dissent in a memorandum by Catterson, J. as follows:

CATTERSON, J. (dissenting)
I must respectfully dissent because there is no legal obligation for a defendant's insurer to notify a potential plaintiff or plaintiff's counsel of the insurer's change of address. Moreover, to put forth the lack of such notice as a valid excuse for the failure to notify the insurer of pending litigation ignores the reality that American Transit's address could have been verified on the Internet in approximately three-tenths of a second.
The undisputed facts of this case are as follows: On November 12, 2002, Arthur Brown, the plaintiff in the underlying action, was involved in a car accident with a vehicle owned and operated by Albertano Batista. Batista was insured by American Transit Insurance Company (hereinafter referred to as "ATIC"). Brown's counsel notified ATIC of his client's claim against Batista, and ATIC acknowledged Brown's claim in a letter dated January 28, 2003, and assigned a claim number. The letterhead and annexed forms bore an address of 275 Seventh Avenue, New York, NY 10001. Subsequently, ATIC conducted a property damage appraisal and settled the property damage portion of the claim.
Almost three years later, on or about November 9, 2005, Brown commenced an action against Batista in order to recover damages for personal injuries sustained in the accident. On January 26, 2006, Brown's counsel sent a courtesy copy of the summons and complaint to ATIC instructing it to interpose an answer on behalf of its insured. The letter was sent to the Seventh Avenue address.
There was no reply or appearance by ATIC which, in fact, had moved two years earlier in November 2003 to offices on West 34th Street, Manhattan. On June 21, 2007, following an inquest, the court granted a default judgment in favor of Brown for $75,000. Judgment in the total amount of $81,830, including medical liens and interest, was entered against Batista on July 19, 2007. On August 9, 2007, Brown's counsel sent notice of entry of the judgment to ATIC at its current address on West 34th Street.
ATIC disclaimed coverage on the ground that it was not provided with timely notice of the lawsuit. ATIC then brought this declaratory judgment action alleging that neither Brown nor Batista complied with its policy requiring timely notice of commencement of an action against one of its insured. It stated that the first notification of the lawsuit was received after judgment was entered against Batista.
Supreme Court denied Brown's motion and ATIC's cross-motion for summary judgment on the ground that additional discovery was needed. In my opinion, the motion court erred in not granting summary judgment to ATIC.
On appeal, Brown argues that, because he sent the copy of the summons and complaint to ATIC, therefore ATIC must have received it because letters sent through the United States Postal Service are "generally" not destroyed. Brown continues to hypothesize that in cases where a recipient has moved, the post office will return the mail to the sender with the intended recipient's new address. Without citation to any authority whatsoever, Brown then concludes that because he did not receive any such returned mail, there is a "clear presumption" that the mailing was received by ATIC. Wisely, Brown has a fallback position: namely, if ATIC did not receive the letter, it is because Brown sent it to the wrong address because ATIC did not notify him of the change of addresses.
The majority inexplicably accepts this latter position as a valid excuse and so determines that coverage is not vitiated in this case. Thus, without citing to any legal authority, the majority places the burden on the defendant's insurer to notify a potential plaintiff as to the correct address to which to send a copy of a summons and complaint years after it has moved to a different location. Further, the majority rejects ATIC's statements that it sent a mass mailing announcing the change of address at the time of the move, and that it notified the State Insurance Department and the post office of the change of address, and changed its address on its Web site and all phone listings. Instead, the majority makes clear that ATIC should have sent specific notification of the new address to Brown or his counsel.
In my opinion, the majority has placed the burden on the wrong party. There is no legal obligation on ATIC to establish what sufficient efforts it made, if any, to notify a potential plaintiff of a change of address. Certainly, there is no legal authority whatsoever for the majority's demand that ATIC should have sent a specific notification to the counsel of a plaintiff whose property claim had been settled almost a year prior to ATIC's move to a new location.
In the absence of any legal authority for such a position, it appears the majority is willing to accept an attorney's lack of diligence in failing to spend three-tenths of a second to verify an address on the Internet as a valid excuse for the failure to satisfy an insurer's notice requirement. For the foregoing reasons, I believe that the motion court's order should be reversed and ATIC's motion for summary judgment should be granted.
Burlington Insurance Company v. Guma Construction Corp.

Ford Marrin Esposito Witmeyer & Gleser, LLP, New York,
N.Y. (James M. Adrian and Matthew C. Ferlazzo of counsel),
for appellant.
Goldberg & Rimberg, PLLC, New York, N.Y. (Israel
Goldberg and Brad Coven of counsel), for
respondent.

DECISION & ORDER
In an action for a judgment declaring that the plaintiff is not obligated to defend and indemnify the defendant, Guma Construction Corp., in an action entitled Sorrentino v 255 Water Street Associates, LLC, pending in the Supreme Court, Kings County, under Index No. 29581/05, the plaintiff appeals, as limited by its brief, from so much of an order of the Supreme Court, Kings County (Held, J.), dated March 13, 2008, as granted that branch of the defendant's motion which was for summary judgment declaring that the plaintiff is obligated to defend it in the underlying action, and referred the issue of indemnification to the trial court in the underlying action.
ORDERED that the order is modified, on the law, by deleting the provision thereof which referred the issue of indemnification to the trial court in the underlying action; as so modified, the order is affirmed insofar as appealed from, with costs to the defendant.
Burlington Insurance Company (hereinafter Burlington) issued a commercial general liability insurance policy to Guma Construction Corp. (hereinafter Guma), covering Guma for a period of one year beginning February 5, 2004. The policy contained a "classification limitation" endorsement, which provided that the policy would apply only to losses arising out of those operations listed in the "classifications" section of a Commercial General Liability Coverage Declarations form. Guma listed "Garbage, Ash or Refuse Collecting" in the "classification" section of the form.
On February 18, 2004, there was a fire at a building where Guma was performing work. As a result of the fire, firefighter John Sorrentino sustained personal injuries. On September 27, 2005, Sorrentino commenced an action (hereinafter the underlying action) against Guma, among others, alleging that Guma negligently performed certain "construction, alteration, renovation, and/or demolition, work, labor and/or other services" on the subject building. The complaint in the underlying action further alleged that Guma improperly removed pipe as part of the work it performed, and used one or more torches in connection with the work it performed. Guma forwarded a copy of the complaint in the underlying action to Burlington and, by letter dated February 16, 2006, Burlington acknowledged receipt of that complaint and informed Guma that it was going to conduct an investigation of the matter. In October 2006 Burlington issued a disclaimer of coverage. The disclaimer was based upon Guma's breach of the "classification limitation" endorsement clause in the contract. Burlington explained that Guma had made misrepresentations in its application for insurance by describing its business as "garbage, ash or refuse collecting," when it was actually "supervising the removal of pipes."
In December 2006 Burlington commenced this action against Guma for a judgment declaring that it was not obligated to defend Guma in the underlying action or indemnify Guma for any liability attributed to it. In November 2007 Guma moved for summary judgment declaring that Burlington is obligated to defend it in the underlying action and to indemnify it for any recovery by Sorrentino against it in the underlying action. In its motion, Guma contended that the disclaimer was untimely (see Insurance Law § 3420[d]). Burlington opposed the motion and, in reply, Guma argued that a reading of the allegations in the complaint suggested a reasonable possibility of coverage, and that Burlington consequently had a duty to defend it, which duty is broader than its obligation to indemnify. In an order dated March 13, 2008, the Supreme Court granted that branch of Guma's motion which for summary judgment declaring that Burlington has an obligation to defend Guma in the underlying action, and "referred" the indemnity issue to the trial court in the underlying action.
Initially, Burlington argues that the Supreme Court improperly considered an argument raised for the first time in reply papers. We disagree. We recognize that, ordinarily, courts do not consider issues first mentioned in reply in support of a motion for summary judgment (see Matter of Forest Riv., Inc. v Stewart, 34 AD3d 474; Calderone v Harrel, 237 AD2d 318). The reason behind this rule is to prevent the opposing party from being deprived of a fair opportunity to respond to the argument. Here, Burlington, in its brief, does not contend that it suffered any prejudice as a result of the new argument raised by Guma in its reply affirmation; nor does it contend that it would have offered additional or different evidence in opposing the argument. Thus, under the circumstances of this case, we find that the Supreme Court providently exercised its discretion in considering the argument raised in the reply affirmation submitted by Guma (see generally Feliciano v New York City Health & Hosps. Corp., 62 AD3d 537, 538; Home Ins. Co. v Leprino Foods Co., 7 AD3d 471, 472; Davison v Order Ecumenical, 281 AD2d 383; cf. Held v Kaufman, 91 NY2d 425, 430).
Burlington also contends that the Supreme Court's determination that it has a duty to defend Guma was premature because discovery in this action had not yet been completed. However, since the allegations in the complaint suggest a reasonable possibility of coverage, Guma is entitled to summary judgment declaring that Burlington has an obligation to defend it in the underlying action (see Automobile Ins. Co. of Hartford v Cook, 7 NY3d 131, 137). Any evidence that would be obtained through discovery would be irrelevant on this issue since "[e]ven where there exist extrinsic facts suggesting that the claim may ultimately prove meritless or outside the policy's coverage, the insurer cannot avoid its commitment to provide a defense" (Fitzpatrick v American Honda Co., 78 NY2d 61, 65-66).
Burlington is correct, on the other hand, that the Supreme Court erred in "referring" the indemnification issue to the trial court in the underlying action, to which Burlington is not a party. Moreover, "[i]t is generally recognized that, even where common facts exist, it is prejudicial to insurers to have the issue of insurance coverage tried before the jury that considers the underlying liability claims" (Christensen v Weeks, 15 AD3d 330, 331; see Kelly v Yannotti, 4 NY2d 603).
The parties' remaining contentions are without merit or not properly before this Court
Hunt v. Ciminelli-Cowper Co.


Appeal from an order of the Supreme Court, Erie County (Rose H. Sconiers, J.), entered May 1, 2008 in a personal injury action. The order, inter alia, granted the motions of third-party defendants for summary judgment dismissing the third-party complaint and all cross claims against them.

TREVETT CRISTO SALZER & ANDOLINA P.C., ROCHESTER (MARK M. CAMPANELLA OF COUNSEL), FOR THIRD-PARTY PLAINTIFF-APPELLANT.
BROWN & KELLY, LLP, BUFFALO (LISA T. SOFFERIN OF COUNSEL), FOR THIRD-PARTY DEFENDANT-RESPONDENT DAVID OGIONY DEVELOPMENT CO., INC.
CHELUS, HERDZIK, SPEYER & MONTE, P.C., BUFFALO (THOMAS J. SPEYER OF COUNSEL), FOR THIRD-PARTY DEFENDANT-RESPONDENT AHLSTROM-SCHAEFFER ELECTRIC CORPORATION.
BAXTER SMITH & SHAPIRO, P.C., WEST SENECA (WILLIAM BOLTREK OF COUNSEL), FOR THIRD-PARTY DEFENDANT-RESPONDENT PETTIT & PETTIT, INC.

It is hereby ORDERED that the order so appealed from is unanimously modified on the law by denying the motions of third-party defendants David Ogiony Development Co., Inc. and Pettit & Pettit, Inc. and reinstating the third-party complaint and cross claim against them and as modified the order is affirmed without costs. [*2]
Memorandum: Plaintiff commenced this Labor Law and common-law negligence action seeking damages for injuries he sustained when he slipped and fell on an icy and unlit path while performing construction work on property owned by Jamestown Community College, Jamestown Community College Region and Jamestown Community College Regional Board of Trustees (collectively, JCC defendants), defendants in appeal Nos. 1 and 2 and the third-party plaintiffs in appeal No. 2. Ciminelli-Cowper Co., Inc. (Ciminelli), a defendant in appeal Nos. 1 and 2 and the third-party plaintiff in appeal No. 1, served as the construction manager on the project. Ciminelli and the JCC defendants each commenced a third-party action against various contractors on the project, asserting causes of action for contractual defense and indemnification and breach of contract based on their failure to procure insurance naming Ciminelli and the JCC defendants as additional insureds on the project. The JCC defendants also asserted a cause of action for common-law indemnification. The contracts between the JCC defendants and third-party defendants Ingalls Site Development, Inc., formerly known as David Ogiony Development Co., Inc. (Ogiony), Pettit & Pettit, Inc. (Pettit), and Ahlstrom-Schaeffer Electric Corporation (Ahlstrom) provided in relevant part that "the Contractor shall indemnify and hold harmless the Owner[, i.e., the JCC defendants, and the] Construction Manager[, i.e., Ciminelli,] . . . from and against claims, damages, losses and expenses . . . arising out of or resulting from performance of the Work . . . but only to the extent caused in whole or in part by negligent acts or omissions of the Contractor, a Subcontractor, anyone directly or indirectly employed by them or anyone for whose acts they may be liable . . . ." The contracts also provided that those third-party defendants (hereafter, third-party defendants) shall obtain an endorsement to their general liability policies naming, inter alia, Ciminelli and the JCC defendants as additional insureds on a primary basis.
In appeal No. 1, Ciminelli appeals from an order granting, inter alia, the motions of third-party defendants for summary judgment dismissing Ciminelli's third-party complaint and all cross claims against them. The order in appeal No. 1 also denied the cross motion of Ciminelli for partial summary judgment seeking a determination that third-party defendants are obligated to procure insurance naming Ciminelli as an additional insured and to defend and indemnify Ciminelli in the main action. In appeal No. 2, the JCC defendants appeal from an order granting the motions of third-party defendants for summary judgment dismissing the JCC defendants' amended third-party complaint and all cross claims against them. The order in appeal No. 2 also denied the cross motion of the JCC defendants for partial summary judgment seeking a determination that third-party defendants are obligated to procure insurance naming the JCC defendants as additional insureds and that third-party defendants are obligated contractually and under the common law to defend and indemnify the JCC defendants in the main action.
We agree with Ciminelli in appeal No. 1 that Supreme Court erred in granting the motions of Ogiony and Pettit for summary judgment dismissing the third-party complaint and all cross claims against them. We also agree with the JCC defendants in appeal No. 2 that the court erred in granting the motion of Ogiony for summary judgment dismissing the amended third-party complaint and all cross claims against it, as well as those parts of the motion of Pettit for summary judgment dismissing the contractual defense and indemnification cause of action and the common-law indemnification cause of action and all cross claims against it. We therefore modify the orders in appeal Nos. 1 and 2 accordingly.
Ogiony, the snow removal contractor, established as a matter of law that it was not obligated to defend or indemnify Ciminelli and the JCC defendants in the main action by submitting evidence that there was no snow on the path where plaintiff felland that its contract with the JCC defendants did not require the application of sand, salt or other ice melting products (see generally Zuckerman v City of New York, 49 NY2d 557, 562). Ciminelli and the JCC defendants, however, raised a triable issue of fact whether Ogiony was negligent in its failure to [*3]remove snow from the area where the accident occurred and, if so, whether such negligence caused or contributed to the icy conditions of the path (see generally id.). Ciminelli and the JCC defendants submitted evidence that the contract between Ogiony and the JCC defendants required Ogiony to remove snow from the area where plaintiff's accident occurred, that Ogiony's subcontractor failed to remove snow from that area, and that the ice on the path was attributable, at least in part, to the melting and re-freezing of accumulated snow.
With respect to the breach of contract causes of action asserted against it by Ciminelli and the JCC defendants, Ogiony failed to submit any evidence demonstrating that, at the time of plaintiff's accident, it had procured the insurance for those defendants required by its contract with the JCC defendants. Thus, Ogiony failed to establish its entitlement to judgment as a matter of law dismissing those causes of action (see generally id.).
We further conclude that, by its own submissions, Pettit raised a triable issue of fact whether it was obligated to defend and indemnify Ciminelli and the JCC defendants in the main action based on its failure to install or its negligent installation of a walkway that caused or contributed to plaintiff's fall (see generally Zuckerman, 49 NY2d at 562). Pursuant to the contract between Pettit and the JCC defendants, Pettit was required to install temporary stone walkways at building entrances on the project site, including the area where plaintiff fell. Although Pettit's owner testified at his deposition that Pettit installed a stone walkway at that location prior to plaintiff's accident and that he believed that the walkways were constructed in accordance with the contract specifications, plaintiff testified at his deposition that there was no such walkway at the time of his accident and that his fall was caused in part by the presence of a hole or divot in the path.
With respect to the breach of contract cause of action asserted against it by Ciminelli, Pettit failed to submit any evidence demonstrating that it procured the required insurance and thus failed to establish its entitlement to judgment as a matter of law dismissing that cause of action (see generally id.). We conclude, however, that Pettit established its entitlement to judgment as a matter of law dismissing the breach of contract cause of action asserted against it by the JCC defendants. Pettit submitted the deposition testimony of its president, who testified that he procured the required insurance, as well as a certificate of general liability insurance naming the JCC defendants and Ciminelli as additional insureds on a primary basis. The JCC defendants failed to raise a triable issue of fact with respect thereto in opposition to the motion (see generally id.).
We conclude with respect to Ahlstrom that the court properly granted its motions for summary judgment dismissing the third-party complaint, the amended third-party complaint and all cross claims against it. Pursuant to its contract with the JCC defendants, Ahlstrom was obligated to install six security lights on the project site. Ahlstrom established as a matter of law that it was not required to defend or indemnify Ciminelli and the JCC defendants in the main action by submitting evidence that it installed the lights pursuant to Ciminelli's directions and that it was not negligent in its placement of the lights (see generally id.). In opposition to the motions, Ciminelli and the JCC defendants failed to raise a triable issue of fact whether the lights functioned properly or whether inadequate lighting in the area of plaintiff's fall was attributable to any act or omission on the part of Ahlstrom (see generally id.). Ahlstrom also established as a matter of law that it procured the requisite insurance for both the JCC defendants and Ciminelli pursuant to its contract with the JCC defendants. In support of its motions, Ahlstrom submitted a certificate of insurance for the time period covering plaintiff's accident that named the JCC defendants and Ciminelli as additional insureds on a primary basis. The JCC defendants and Ciminelli failed to raise a triable issue of fact with respect thereto in opposition to the motions (see generally id.). [*4]
We reject the contention of Ciminelli in appeal No. 1 and the contention of the JCC defendants in appeal No. 2 that the court erred in denying those parts of their respective cross motions for summary judgment on the third-party complaint and the amended third-party complaint with respect to Ogiony and Pettit. We do not address those parts of the cross motions with respect to Ahlstrom in view of our determination that the court properly granted Ahlstrom's motions, inasmuch as the third-party complaint, amended third-party complaint and cross claims have been dismissed against Ahlstrom. We also do not address that part of the cross motion of the JCC defendants with respect to their breach of contract cause of action against Pettit, for the same reason.
With respect to Ogiony and Pettit, Ciminelli and the JCC defendants failed to establish their entitlement to contractual indemnification as a matter of law because, as we previously concluded herein, there are triable issues of fact with respect to the negligence of Pettit and Ogiony (see Malecki v Wal-Mart Stores, 222 AD2d 1010, 1011). With respect to the common-law indemnification cause of action asserted against Ogiony and Pettit by the JCC defendants, they failed to establish as a matter of law that those third-party defendants were "guilty of some negligence that contributed to the causation of the accident" (Correia v Professional Data Mgt., 259 AD2d 60, 65; see DiPasquale v M.J. Ogiony Bldrs., Inc., 60 AD3d 1338, 1339-1340). With respect to the breach of contract causes of action alleging that those third-party defendants failed to procure insurance naming Ciminelli and the JCC defendants as additional insureds, Ciminelli and the JCC defendants failed to submit any evidence that those third-party defendants did not obtain that insurance (see Zuckerman, 49 NY2d 557, 562). Finally, to the extent that Ciminelli or the JCC defendants contend that they have been denied a defense pursuant to the insurance contracts obtained by third-party defendants, the proper remedy is to commence a declaratory judgment action against third-party defendants' insurers based upon their rights as additional insureds (see Garcia v Great Atl. & Pac. Tea Co., 231 AD2d 401).

Thomas v. Burrus


Appeal from an order of the Supreme Court, Oneida County (Anthony F. Shaheen, J.), entered November 13, 2008 in a wrongful death action. The order, inter alia, granted the motion of defendant Geico Insurance Company for a change of venue.

RALPH W. FUSCO, UTICA, FOR PLAINTIFF-APPELLANT.
MELVIN & MELVIN, PLLC, SYRACUSE (SUSAN E. OTTO OF COUNSEL), FOR DEFENDANT-RESPONDENT.

It is hereby ORDERED that the order so appealed from is unanimously affirmed without costs.
Memorandum: Plaintiff, as administratrix of the estate of Christopher Tupper (decedent), commenced this wrongful death action alleging that decedent was killed when he was struck by a vehicle negligently driven by defendant Brooke L. Burrus. Plaintiff initially commenced the action solely against Burrus, but thereafter filed an amended summons and amended complaint adding defendant Geico General Insurance Company, incorrectly sued as Geico Insurance Company (Geico), as a defendant. As against Geico, plaintiff sought a declaration that Geico was obligated to defend and indemnify Burrus in the action based on an automobile liability policy issued to her by Geico.
After learning of the amended summons and amended complaint but prior to personal service thereof, Geico served an answer and moved for a change of venue from Oneida County to Jefferson County. In addition, Geico, inter alia, sought a stay of the action pending a determination of plaintiff's cause of action seeking a declaration that Geico is obligated to defend and indemnify Burrus in the action or, alternatively, a stay to permit Geico to commence its own declaratory judgment action with respect to Geico's obligation to Burrus in this action. We conclude that Supreme Court properly granted Geico's motion for a change of venue as well as that part of the motion of Geico for a stay of the action to enable it to commence its own declaratory judgment action.
We note at the outset that we reject plaintiff's contention that Geico is "not in this case." Plaintiff filed an amended summons and amended complaint adding Geico as a defendant, and plaintiff was served with Geico's answer. Thus, we conclude that Geico properly appeared in this action (see CPLR 320 [b]).
We reject plaintiff's further contention that the court erred in granting Geico's motion for a change of venue. The record establishes that plaintiff selected an improper venue, which was based upon the location of the office of plaintiff's attorney, and we conclude that plaintiff thereby forfeited her right to designate the place of trial (see Searle v Suburban Propane Div. of Quantum Chem. Corp., 229 AD2d 988, 989). In any event, in view of the fact that plaintiff's amended summons identified Jefferson County as the residence of Burrus, plaintiff cannot be heard to complain that Jefferson County is an improper venue (see CPLR 503 [a]).
Finally, contrary to plaintiff's contention, it is well settled that an insurer may commence an action seeking a declaration concerning the validity of its disclaimer of the duty to defend or indemnify its insured (see Lang v Hanover Ins., Co., 3 NY3d 350, 356).
In the Matter of Gurvich v. Motor Vehicle Accident Indemnification Corporation


Cruz and Gangi and Associates (Connors & Connors, P.C., Staten
Island, N.Y. [Robert J. Pfuhler] of counsel), for appellant.
William Pager, Brooklyn, N.Y., for respondent.

DECISION & ORDER
In a proceeding pursuant to Insurance Law § 5218(c) for leave to commence an action against the Motor Vehicle Accident Indemnication Corporation, the appeal is from an order of the Supreme Court, Kings County (Knipel, J.), dated September 10, 2008, which granted the petition.
ORDERED that the order is affirmed, with costs.
The Motor Vehicle Accident Indemnification Corporation opposed the petition for leave to commence an action against it on the ground that the petitioner failed to report the subject accident to the police within 24 hours of the occurrence. However, the courts have "consistently afforded a very liberal interpretation to the notice requirement, accepting police contacts that fall far short of the operator's obtaining a written report" (Matter of Country Wide Ins. Co. [Russo], 201 AD2d 368, 370; see Canty v Motor Veh. Acc. Indem. Corp., 95 AD2d 509; Matter of Dixon v Motor Veh. Acc. Indem. Corp., 56 AD2d 650). Under the circumstances of this case, sufficient notice of the accident was timely given to the police.
Osowski v. AMEC Construction Management, Inc.

Third-Party plaintiffs appeal from a judgment of the Supreme Court, New York County (Jane Solomon, J.), entered July 21, 2008, inter alia, dismissing the third-party complaint, and from orders, same court and Justice, entered June 4, 2008 and June 23, 2008.

Shaub Ahmuty Citrin & Spratt, LLP, Lake Success
(Steven J. Ahmuty, Jr. of
counsel), for appellants.
Mauro Goldberg & Lilling LLP, Great Neck
(Kenneth Mauro, Matthew W.
Naparty and Anthony F.
DeStafano of counsel), for
respondent.

CATTERSON, J.
This action arises out of an accident that occurred during the construction of the New York Times Building in Midtown Manhattan. On May 13, 2005, the plaintiff Frank Osowski was seriously injured when a four-ton steel beam fell on him while he was unloading a truck at the construction project. As a result of the accident, Osowski's left leg and multiple toes on his right foot were amputated.
Prior to commencing construction on the project, on January 22, 2004, the New York Times Building, LLC (hereinafter referred to as "NYTB"), the owner of the building, entered into an agreement with AMEC Construction Management Inc. (hereinafter referred to as "AMEC") for construction management services for the project. Thereafter, on February 23, 2005, AMEC entered into a subcontract with DCM Erectors, Inc. (hereinafter referred to as "DCM"), Osowski's employer, for structural steel work at the project.
Both AMEC and DCM were enrolled in the Owner Controlled Insurance Program (hereinafter referred to as "OCIP") that NYTB had procured and implemented for the project [FN1] . The OCIP provided, inter alia, commercial general liability insurance, workers' compensation and employers liability insurance, and excess insurance to NYTB, AMEC and all enrolled contractors, including DCM. The OCIP contained a waiver-of-subrogation provision which provided that "[t]he Owner and Contractor hereby waive all rights against each other and any of their Subcontractors [...] as to claims and damages covered by insurance obtained by the Owner under its OCIP program [...]" (emphasis added).
On May 19, 2005, Osowski and his wife commenced an action against NYTB/AMEC (hereinafter referred to as the "main action"). Nearly 2½ years later, on October 22, 2007, American International Speciality Lines Insurance Corp. (hereinafter referred to as "AIG"), the first-layer excess insurer, issued a written denial of coverage to AMEC/NYTB in the main action. Its ground for denial was that, inter alia, its excess policy excluded coverage for bodily injury arising out of the loading or unloading of a vehicle.
On November 21, 2007, following AIG's disclaimer of coverage, AMEC/NYTB commenced an action against DCM, for common-law contractual indemnification and contribution (hereinafter referred to as the "third-party action"). Notably, absent AIG's disclaimer of coverage, the third-party action would have been prohibited by the "waiver of subrogation" provision in the OCIP, as well as by the antisubrogation rule.
On December 3, 2007, AMEC/NYTB commenced an insurance coverage declaratory judgment action against AIG. DCM was permitted to intervene in the declaratory judgment action to challenge AIG's denial of coverage. Less than a month later, on January 9, 2008, the trial court granted the Osowskis' motion for summary judgment on the issue of AMEC/NYTB's liability under sections 240(1) and 241(6) of the Labor Law.
On May 20, 2008, during the damages trial in the main action, a "Confidential Settlement and Release Agreement" was made between the Osowskis, NYTB and AMEC. Pursuant to the agreement, AMEC and NYTB agreed to secure funding in the amount of $12 million payable to the Osowskis, as follows: (1) a $2 million payment from Travelers; and (2) a $10 million irrevocable, unconditional letter of credit. In exchange for the $12 million settlement, the Osowskis released AMEC/NYTB from all claims relating to the events giving rise to the main action.
The following day, on May 21, 2008, counsel for the Osowskis announced, in open court, that the main action had been settled pursuant to a confidential settlement agreement with AMEC/NYTB. Immediately thereafter, DCM informed the court that DCM had not been made privy to the details of the settlement.
At that point, DCM was still a party to the two other actions involving the Osowski accident pending before the same court (i.e. the declaratory judgment action and the third-party action brought by AMEC/NYTB). The court, acknowledging the fact that DCM was preparing for a trial in the third-party action, inquired of AMEC/NYTB's counsel, Steve Palley, as to whose interests the confidentiality clause was designed to protect [FN2] . Palley responded, "I can fairly say that the confidentiality provision[s] are for the benefit of all parties involved to offset the arguments we will have closing argument in front of the jury."
The proceeding concluded with counsel for DCM stating on the record that she intended to make an application for full disclosure of the settlement terms and conditions. The matter adjourned for trial in the third-party action on June 3, 2008.
In the meantime, on May 30, 2008, DCM moved to compel disclosure of the settlement agreement and all related documents. DCM asserted that without disclosure, neither DCM nor the court could determine whether the waiver of subrogation provisions were applicable, and thus, whether dismissal of the third-party action was required. DCM noted that it was unaware whether settlement had been made on behalf of one or both defendants (i.e., AMEC/NYTB and DCM), and whether the plaintiff had filed releases in favor of one, or both of them. DCM further noted that in the third-party action AMEC/NYTB would be required to demonstrate that the amount paid in settlement was reasonable. Finally, DCM asserted that statements or representations in the settlement agreement could impact on credibility issues at the time of trial.
On June 2, 2008, AMEC/NYTB filed a cross motion for a protective order barring the disclosure sought by DCM. AMEC/NYTB asserted that DCM was not entitled to disclosure of the contents of the settlement agreement, except for the amount paid in settlement, which it represented was $12 million. AMEC/NYTB argued, inter alia, that since AIG had disclaimed coverage for claims in the main action, the waiver of subrogation provision did not bar AMEC/NYTB's third-party action against DCM seeking to recoup the settlement amounts in excess of the $2 million primary coverage.
Later that day, with both parties before it, the court reviewed the "Confidential Settlement and Release Agreement." Subsequently, the court directed AMEC/NYTB to turn over the agreement to counsel for DCM.
After reviewing the "Confidential Settlement and Release Agreement," DCM noted that the agreement stated only that AMEC/NYTB would "provide" the Osowskis with a $10 million letter of credit, but did not state that AMEC/NYTB would fund the letter of credit. DCM indicated to the court that the balance of the agreements must be disclosed because if it were determined that AIG was funding the settlement then the contractual waiver of subrogation provision would be triggered. The court found this argument persuasive.
On June 3rd, AMEC/NYTB was ordered to disclose the related settlement agreements. Thereupon, DCM learned the details of the related confidential "Settlement Agreement and Release" among AMEC, NYTB and AIG. DCM discovered that: (1) AIG agreed to provide AMEC/NYTB with an irrevocable letter of credit in the amount of $10 million designating the Osowskis as intended beneficiaries, (2) AMEC/NYTB agreed to dismiss the declaratory judgment action, with prejudice, and to release all claims and actions against AIG for any matters connected to the Osowski action (3) AMEC/NYTB agreed to assign to AIG any and all claims it had against any person or entity arising out of or in connection with the Osowski action, including but not limited to the claims in the third-party action [FN3] and (4) AMEC/NYTB agreed that settlement was without prejudice to AIG's disclaimer of coverage with respect to the third-party action, and that such disclaimer "remain[ed] in full force and effect."
Consequently, DCM made an oral motion to dismiss the third- party action. AMEC/NYTB's counsel objected to the oral motion, asserting that DCM's motion was one for summary judgment and thus, should be made on papers. The court then granted a continuance to June 5, 2008 for "an offer of proof in the trial."
After the parties reconvened on June 5, DCM made an offer to support its previously articulated motion to dismiss. DCM concluded that by virtue of the confidential settlement agreement and associated documents:
"there was, in fact, insurance that covered the loss; that there has been a promise and payment of those damages and, therefore, based upon the provisions in the contract that are now in evidence, the waiver of subrogation provision bars completely the pursuit of the third-party claim against DCM."
AMEC/NYTB countered that AIG had not rescinded its disclaimer, and nothing in the confidential settlement agreement and associated documents stated or implied otherwise. AMEC/NYTB concluded, "it's [DCM's] position that this set of agreements constitutes insurance. We disagree."
The trial court dismissed the third-party complaint on the ground that NYTB had not sustained any damages that would trigger a common-law right of indemnification against DCM. The court interpreted the settlement documents as the legal equivalent of insurance because "[AMEC/NYTB] will [never] be out-of-pocket a penny." Thereafter, the trial court severed the third-party action from the main action, ordered the entry of a judgment dismissing AMEC/NYTB's third-party complaint, and dismissed DCM's breach of contract counterclaim as moot.
On appeal, AMEC/NYTB argues that the trial court abused its discretion in ordering disclosure of the confidential settlement agreements. Furthermore, AMEC/NYTB contend that AIG's disclaimer was not mooted by the confidential settlement agreements. AMEC/NYTB assert that since AIG disclaimed coverage for "claims and damages" in the main action as not "covered" under the AIG policy, the waiver of subrogation did not bar AMEC/NYTB's third- party indemnity action against DCM seeking to recoup settlement amounts in excess of Travelers' $2 million primary policy. Additionally, AMEC/NYTB argue that the trial court erred in entertaining DCM's oral application.
For the reasons set forth below, we find that AMEC/NYTB's assertions are without merit, and affirm the judgment.
Pursuant to CPLR 3101, it was proper for the trial court to compel disclosure of the "Confidential Settlement and Release Agreement" between the Osowskis and AMEC/NYTB/AIG, the "Letter of Credit," and the "Settlement and Release Agreement" between AMEC/NYTB and AIG because these agreements were "material and necessary" to the issues raised in the third-party action.
According to CPLR 3101(a), "full disclosure of all matter material and necessary in the prosecution or defense of an  action" is required. In Allen v. Crowell-Collier Publ. Co. (21 N.Y.2d 403, 288 N.Y.S.2d 449, 235 N.E.2d 430 (1968)), the Court of Appeals interpreted the CPLR phrase "material and necessary" to mean nothing more or less than "relevant." Id. at 407, 288 N.Y.S.2d at 453. The Court stated that the phrase must be "interpreted liberally to require disclosure, upon request, of any facts bearing on the controversy which will assist preparation for trial by sharpening the issues and reducing delay and prolixity" Id. at 406, 288 N.Y.S.2d at 452. The Court concluded that the "test is one of usefulness and reason." Id. Thus, disclosure of the terms of a settlement agreement by a settling party to a nonsettling party may be appropriate, despite the presence of a confidentiality clause in the agreement, where the terms of the agreement are "material and necessary" to the nonsettling party's case. Masterwear Corp. v. Bernard, 298 A.D.2d 249, 250, 750 N.Y.S.2d 5, 6 (1st Dept. 2002); see Connors, Practice Commentaries, McKinney's Cons Laws of NY, Book 7B, CPLR 3101:18a ("[t]he central inquiry in resolving [...] disclosure requests [regarding settlement agreements] should focus on relevance").
There can be no question that in the instant case, the confidential settlement materials were properly ordered to be disclosed. The third-party action was based on a premise that AMEC/NYTB were "passively negligent" tortfeasors whose payment to the Osowskis in the underlying suit entitled them to seek indemnification from DCM, the subcontractor alleged to have control of the work giving rise to Osowski's injury. Thus, the question of who funded the settlement of the main action was critical to whether AMEC/NYTB could continue to maintain the third-party action. In other words, if AMEC/NYTB's alleged losses were not "out-of-pocket," no suit could be maintained for common-law or contractual indemnification, either by AMEC/NYTB or by AIG as its assignee.
AMEC/NYTB's reliance on Matter of New YorkCountyData Entry Worker Prod. Liab. Litig. (162 Misc 2d 263 (Sup. Ct. N.Y. County 1994), aff'd, 222 A.D.2d 381, 635 N.Y.S.2d 641 (1st Dept 1995)) is misplaced. That case involved a repetitive stress injury action against multiple defendants involving multiple claims of contribution. This Court found that the nonsettling defendants were not entitled to discover the terms of confidential settlement agreements entered into between the plaintiffs and the codefendants, because the terms of agreement were not material to the resolution of the issues involved in the case. Specifically, we concluded that other than the amount of settlement, a confidential settlement between the plaintiff and the codefendants had no relevance to a possible post verdict apportionment under General Obligations Law 15-108. 222 AD2d at 382, 635 N.Y.S.2d at 641. Here, however, the settlement of the main action directly bears on the underlying issue of fault and damages since the third-party action was one for indemnification and was necessarily predicated on the fact that AMEC/NYTB was "out-of-pocket" for a loss which should have been borne by DCM. [*7]
Furthermore, we find that the trial court did not abuse its discretion in entertaining DCM's oral motion to dismiss. There is no per se rule against oral motions, so long as a movant makes a proper evidentiary showing. See e.g. Rosado v. Proctor & Schwartz, 66 N.Y.2d 21, 494 N.Y.S.2d 851, 484 N.E.2d 1354 (1985) (affirming order which granted third-party defendant's oral application, on the eve of trial, to dismiss indemnification claim)). Indeed, the motion was made on an evidentiary record sufficient for a determination, and defendants/third-party plaintiffs had ample notice and opportunity to respond to it. Since the motion was prompted by revelation of the terms of the settlement that had been reached in the main action, defendants/third-party plaintiffs cannot claim to be surprised by it.
Moreover, we find that the trial court's ruling on the motion was correct. In funding the $10 million for the letter of credit, AIG effectively paid on the policy on which it had disclaimed. As a result, it foreclosed any claims AMEC/NYTB could have pursued against DCM in any third-party action because AMEC/NYTB were not out of pocket in connection with the settlement. Thus, AMEC/NYTB had no claims left to pursue or to assign to any other party, least of all to AIG since the effective payment on the policy triggered the waiver of subrogation clause.
The fact that the confidential agreement between AMEC/NYTB and AIG purported to keep AIG's disclaimer alive by stating that the disclaimer remained "in full force and effect" is irrelevant. The only possible way that AIG's disclaimer could have remained "in full force and effect" was if AIG and AMEC/NYTB had executed a reservation of rights agreement whereby AIG agreed to fund the $10 million in order to cap the damages but that, if a subsequent action determined that its disclaimer was indeed valid, then AMEC/NYTB would owe that amount to AIG. In that situation, AMEC/NYTB would be in a position to bring the third-party action against DCM, or even to assign its claim. Quizzed on this very point at oral argument, AIG conceded that no such explicit reservation of rights agreement was in place.
Indeed, the fiction of the disclaimer was belied by AIG's funding of the $10 million letter of credit on condition that AMEC/NYTB agreed not to pursue its declaratory judgment action against AIG. In other words, both AMEC/NYTB and AIG stipulated away the possibility of adjudicating the validity of the disclaimer. Thus, they created a situation where AMEC/NYTB could never find itself in a position of owing the $10 million to AIG, and thus would never be in a position to pursue its action against DCM or to assign its claim to AIG. Indeed, as DCM asserts, the fiction of the disclaimer was nothing more than an attempt to circumvent the waiver of subrogation clause and thus AMEC/NYTB's contractual obligation. As such, AIG's arguments against disclosure of the agreement between it and AMEC/NYTB cannot be viewed as anything but a clear attempt to perpetrate a fraud on the court.
Moreover, counsel for AIG appears to have acted in disregard of well-established discovery rules and demonstrated a lack of forthrightness and candor to the court by failing to come forward with the terms of the settlement agreement which directly concerned DCM's defense in the third-party action. We believe that counsel's continued prosecution of the third-party action against DCM after AMEC/NYTB entered into the settlement agreements raises substantial questions under the Code of Professional Responsibility.
Accordingly, the judgment of the Supreme Court, New York County (Jane Solomon, J.), entered July 21, 2008, inter alia, dismissing the third-party complaint, should be affirmed, with costs. The appeals from the orders of the same court and Justice, entered June 4, 2008 and June 23, 2008, respectively, should be dismissed, without costs, as subsumed in the appeal from the judgment. The Clerk is directed to refer the matter of the conduct of Steven Ahmuty Jr., Esq. to the Departmental Disciplinary Committee.
All concur.
Judgment, Supreme Court, New York County (Jane Solomon, J.), entered July 21, 2008, affirmed, with costs. Appeals from orders, same court and Justice, entered June 4, 2008 and June 23, 2008, dismissed, without costs, as subsumed in the appeal from the judgment. The Clerk is directed to refer the matter of the conduct of Steven Ahmuty Jr., Esq., to the Departmental Disciplinary Committee.
Opinion by Catterson, J. All concur.
Saxe, J.P., Catterson, McGuire, Moskowitz, Acosta, JJ.
Footnotes

Footnote 1: "OCIPs were developed to make the insurance programs used primarily for construction projects more equitable, uniform and efficient. OCIPs eliminate the costs of overlapping coverage and delays caused by coverage or other disputes between the parties involved in a project and, at the same time, protect all the contracting parties by bringing the risk of loss from the project within the insurance coverage of the OCIP." John Loveless, Construction Insurance: Do You Only Get What You Pay For? 78 APR N.Y. St. B.J. 10, 10 (2006).

Footnote 2: The attorney assigned by Travelers, the primary liability insurer, to defend AMEC/NYTB in the Osowski matter was Steven Cohen. Steven Palley was retained additionally to represent the interest of AMEC/NYTB. Three attorneys from the firm of Shaub Ahmuty Citrin & Spratt, LLP were also present: (1) Timothy Capowski, Esq. was the "voice" for AIG relative to settlement discussions between AIG, AMEC/NYTB (Mr. Palley) and the plaintiffs (Kenneth Sacks, Esq.); (2) Robert Ortiz, Esq. was monitoring the trial on behalf of AIG; and (3) once settlement was reached with the plaintiffs, Steven Ahmuty, Jr., Esq. appeared on behalf of AIG to prosecute its third-party action as assignee of AMEC/NYTB.

Footnote 3: It was expressly agreed that the rights conveyed to AIG by this latter provision represented an assignment, not subrogation.

Ciancio v. Nolan


Richard T. Lau & Associates, Jericho, N.Y. (Keith E. Ford of
counsel), for appellant.
Domenic M. Recchia, Jr., Brooklyn, N.Y. (Andrew G.
Sfouggatakis of counsel), for respondents.

DECISION & ORDER
In an action to recover damages for personal injuries, etc., the defendant appeals from an order of the Supreme Court, Kings County (Hurkin-Torres, J.), dated November 19, 2008, which denied his motion for summary judgment dismissing the complaint on the ground that the plaintiff Paolo Ciancio 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 defendant's motion for summary judgment dismissing the complaint is granted.
The defendant met his prima facie burden of showing that the plaintiff Paolo Ciancio (hereinafter the injured 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 limitations noted by the defendant's examining orthopedist concerning the injured plaintiff's left shoulder were insignificant (see Casco v Cocchiola, 62 AD3d 640).
In opposition, the plaintiffs failed to raise a triable issue of fact. The plaintiffs submitted, inter alia, the affirmation of the injured plaintiff's treating chiropractor, Dr. Enrico Ferdico. While Dr. Ferdico concluded that the injured plaintiff's injuries were permanent, he failed to base his findings on a recent examination of the injured plaintiff (see Diaz v Lopresti, 57 AD3d 832; Carrillo v DiPaola, 56 AD3d 712; Landicho v Rincon, 53 AD3d 568, 569; Cornelius v Cintas Corp., 50 AD3d 1085; Young Hwan Park v Orellana, 49 AD3d 721; Amato v Fast Repair Inc., 42 AD3d 477).
Additionally, while the plaintiffs submitted medical evidence that the injured plaintiff suffered from, inter alia, herniated and bulging discs, as well as a tear in a tendon, those findings are not evidence of a serious injury in the absence of objective evidence of the extent of the alleged physical limitations resulting from the injury and its duration (see Magid v Lincoln Serv. Corp., 60 AD3d 1008, 1009; Washington v Mendoza, 57 AD3d 972; Cornelius v Cintas Corp., 50 AD3d 1085, 1087; Shvartsman v Vildman, 47 AD3d 700).
The plaintiffs also failed to explain the essential cessation of the injured plaintiff's treatment after 2006 (see Pommells v Perez, 4 NY3d 566, 574; Casco v Cocchiola, 62 AD3d 640).
Lastly, the plaintiffs failed to submit any competent medical evidence that the injuries sustained by the injured plaintiff rendered him unable to perform substantially all of his daily activities for not less than 90 of the first 180 days subsequent to the subject accident (see Sainte-Aime v Ho, 274 AD2d 569).
SKELOS, J.P., FLORIO, BALKIN, BELEN and AUSTIN, JJ., concur.
Nisanov v. Kiriyenko


Marjorie E. Bornes, New York, N.Y., for appellant.
Asher & Associates, P.C., New York, N.Y. (Robert J. Poblete of
counsel), for respondent.

DECISION & ORDER
In an action, inter alia, to recover damages for personal injuries, the defendant appeals from an order of the Supreme Court, Kings County (Starkey, J.), dated March 18, 2009, 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.
In support of his motion, the defendant met 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). In opposition, the plaintiff raised a triable issue of fact through the affirmation of his treating physician, Dr. Mikhail Bernshteyn, as to whether he sustained a serious injury to the cervical and lumbar regions of his spine, under the significant limitation of use and/or permanent consequential limitation of use categories of Insurance Law § 5102(d) as a result of the subject accident (see Yun v Barber, 63 AD3d 1140; Pearson v Guapisaca, 61 AD3d 833; Williams v Clark, 54 AD3d 942; Casey v Mas Transp., Inc., 48 AD3d 610; Acosta v Rubin, 2 AD3d 657). Dr. Bernshteyn stated that he had conducted both contemporaneous and recent examinations of the plaintiff, which revealed significant limitations in both the plaintiff's cervical and lumbar regions, and that he had reviewed the plaintiff's MRI reports, which showed, inter alia, bulging discs at C5-6 and L5-S1. Dr. Bernshteyn concluded that the injuries to the cervical and lumbar regions of the plaintiff's spine, and range-of-motion limitations observed during examinations, were permanent and causally related to the subject accident. Dr. Bernshteyn further concluded that the plaintiff's injuries amounted to a permanent consequential limitation of use of the cervical and lumbar regions of his spine and/or a significant limitation of use of the function of those regions.
Contrary to the defendant's assertions on appeal, the plaintiff adequately explained, in his affidavit, the reason for the gap in his treatment history between February 2, 2004, and November 6, 2008 (see Black v Robinson, 305 AD2d 438, 439-440; see also Gaviria v Alvardo, 65 AD3d 567).
Accordingly, the Supreme Court properly denied the defendant's motion for summary judgment dismissing the complaint.
Sanevich v. Lyubomir


Baker, McEvoy, Morrissey & Moskovits, P.C., New York, N.Y.
(Stacy R. Seldin of counsel), for appellants.
Lozner & Mastropietro (Pollack, Pollack, Isaac & De Cicco,
New York, N.Y. [Brian J. Isaac and
Jillian Rosen], 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 March 31, 2009, as denied that branch of their motion which was for summary judgment dismissing the complaint insofar as asserted by the plaintiff Leonid Sanevich on the ground that he 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.
The defendants met their prima facie burden of showing that the plaintiff Leonid Sanevich (hereinafter 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; see also Giraldo v Mandanici, 24 AD3d 419; Meyers v Bobower Yeshiva Bnei Zion, 20 AD3d 456).
In opposition, Dr. Zina Turovsky, the plaintiff's treating physician, opined in an affirmation, based upon her contemporaneous and most recent examinations of the plaintiff and review of the magnetic resonance imaging report dated August 28, 2006, of the plaintiff's right shoulder and physical therapy records, that the plaintiff's right shoulder injury and observed range-of-motion limitations were significant and permanent, and causally related to the subject accident. Thus, the plaintiff raised a triable issue of fact as to whether he sustained a permanent consequential limitation of use and/or a significant limitation of use of his right shoulder as a result of the subject accident (see Azor v Torado, 59 AD3d 367, 368; Williams v Clark, 54 AD3d 942, 943; Casey v Mas Transp., Inc., 48 AD3d 610, 611; Green v Nara Car & Limo, Inc., 42 AD3d 430, 431; Francovig v Senekis Cab Corp., 41 AD3d 643, 644-645).
The defendants' remaining contentions either are without merit or, based on our determination, have been rendered academic.

Old Williamsburg Candle Corp. v Seneca Insurance Company, Inc.


Shay & Maguire LLP, East Meadow, N.Y. (Kenneth R. Maguire and
Saretsky Katz Dranoff & Glass, LLP, of counsel), for appellant.
Weg & Myers, P.C., New York, N.Y. (Joshua L. Mallin and Lisa
N. Wall of counsel), for respondent.

DECISION & ORDER
In an action, inter alia, to recover the proceeds of an insurance policy, the defendant appeals, as limited by its brief, from so much of an order of the Supreme Court, Kings County (Solomon, J.), dated November 5, 2007, as denied its motion for summary judgment dismissing the complaint without prejudice to renew upon completion of discovery, and granted those branches of the plaintiff's cross motion which were for summary judgment dismissing the defendant's first, third, fifth, eighth, ninth, tenth, fifteenth, and twentieth affirmative defenses.
ORDERED that the order is modified, on the law, by deleting the provision thereof granting those branches of the plaintiff's cross motion which were for summary judgment dismissing the first, third, fifth, eighth, ninth, tenth, fifteenth, and twentieth affirmative defenses and substituting therefor a provision denying those branches of the cross motion; as so modified, the order is affirmed insofar as appealed from, without costs or disbursements.
On December 26, 2002, a massive fire caused substantial damage to two buildings used to manufacture and store candles and the personal property inside the buildings. In a letter dated August 20, 2004, the defendant, Seneca Insurance Company, Inc. (hereinafter Seneca), disclaimed coverage for the losses on the ground, inter alia, that the New York corporation that previously owned the candle business and the buildings had sold them to the plaintiff, Old Williamsburg Candle Corp., a Delaware corporation, before the fire occurred and that the plaintiff was not a named insured on the subject insurance policy.
Contrary to Seneca's contention, the Supreme Court properly denied its motion for summary judgment without prejudice to renew the motion upon the completion of the outstanding court-ordered discovery (see McGlynn v Palace Co., 262 AD2d 116; WPP Group USA v Interpublic Group of Cos., 228 AD2d 296; Campbell v City of New York, 220 AD2d 476). In particular, the plaintiff was entitled to depose an employee in Seneca's underwriting department and the employee who investigated the subject insurance claims.
The Supreme Court also granted that branch of the plaintiff's cross motion which was for summary judgment dismissing the first affirmative defense, which alleged that the complaint failed to state a cause of action, based on the rule that such a defense should not be raised in an answer but should be raised by an appropriate motion pursuant to CPLR 3211(a)(7) (citing Plemmenou v Arvanitakis, 39 AD3d 612, 613). About one year later, on November 18, 2008, this Court issued an opinion stating, inter alia, that Plemmenou and similar cases did not articulate the correct legal standard that CPLR 3211(a)(7) expressly permits a defendant to raise in a pleading the defense that a complaint does not state a cause of action and, therefore, those cases should no longer be followed (see Butler v Catinella, 58 AD3d 145). All of the briefs in this case were filed in this Court before Butler was published.
Traditionally, cases on direct appeal should be decided in accordance with the law as it exists at the time the appeal is decided (see People v Favor, 82 NY2d 254, 260; Matter of Americorp Sec. v Sager, 239 AD2d 115, 116-117). Accordingly, that branch of the plaintiff's cross motion which was for summary judgment dismissing the first affirmative defense should have been denied.
The Supreme Court improperly dismissed the seven affirmative defenses that plead fraud, misrepresentation, and concealment of material facts, on the ground that Seneca "failed to plead these claims with the required specificity." In support of that conclusion, the court cited CPLR 3016(b), which provides, in relevant part, that "[w]here a cause of action or defense is based upon misrepresentation [and] fraud . . . the circumstances constituting the wrong shall be stated in detail."
However, Seneca moved, and the plaintiff cross-moved, for summary judgment pursuant to CPLR 3212. In conjunction with those motions, the parties submitted enough evidentiary material, including affidavits, deposition transcripts, and numerous documents, to support the allegations of misrepresentation and fraud. In assessing the adequacy of the pleadings, the Supreme Court should have considered that evidence (see Big Apple Car v City of New York, 204 AD2d 109).
In short, Seneca adduced evidence that raised triable issues of fact as to whether the New York corporation and/or the plaintiff concealed or misrepresented material facts in the application for, the procurement of, and the submission of claims under, the subject insurance policy. In light of these factual questions, the Supreme Court should have denied those branches of the plaintiff's cross motion which were for summary judgment dismissing those affirmative defenses alleging fraud, misrepresentation, and concealment of relevant facts (see Faulkner v City of New York, 47 AD3d 879; Lopez v 121 St. Nicholas Ave. H.D.F.C., 28 AD3d 429; Petracca v Petracca, 305 AD2d 566, 568).
FISHER, J.P., MILLER, ANGIOLILLO and HALL, JJ., concur.
BERRY v UTICA NATIONAL INSURANCE GROUP,

Appeal from an order and judgment (one paper) of the Supreme Court, Oneida County (Samuel D. Hester, J.), entered November 18, 2008 in a legal malpractice action. The order and judgment granted the motion of defendant McClusky Law Firm, LLC for summary judgment dismissing the complaint against it.

MICHELE E. DETRAGLIA, UTICA, FOR PLAINTIFF-APPELLANT.
HISCOCK & BARCLAY, LLP, SYRACUSE (MATTHEW J. SKIFF OF COUNSEL), FOR DEFENDANT-RESPONDENT.

It is hereby ORDERED that the order and judgment so appealed from is unanimously affirmed without costs.

Memorandum: Plaintiff commenced this action seeking, inter alia, damages arising from the alleged malpractice of McClusky Law Firm, LLC (defendant) in failing to commence a timely action against defendant Utica National Insurance Group (Utica National). Supreme Court properly granted the motion of defendant seeking summary judgment dismissing the complaint against it. "To recover damages for legal malpractice, a plaintiff must prove, inter alia, the existence of an attorney-client relationship" (Moran v Hurst, 32 AD3d 909, 910). Defendant met its burden of establishing as a matter of law that it had no attorney-client relationship with plaintiff, and plaintiff failed to raise a triable issue of fact (see Volpe v Canfield, 237 AD2d 282, 283, lv denied 90 NY2d 802). The unilateral belief of plaintiff that he was defendant's client does not by itself confer that status upon him (see Rechberger v Scolaro, Shulman, Cohen, Fetter & Burstein, P.C., 45 AD3d 1453; Moran, 32 AD3d at 911). Further, evidence that plaintiff contacted defendant concerning his dispute with Utica National does not establish the existence of an attorney-client relationship absent further evidence of an "explicit undertaking [by defendant] to perform a specific task" (Wei Cheng Chang v Pi, 288 AD2d 378, 380, lv denied 99 NY2d 501; see McGlynn v Gurda, 184 AD2d 980, appeal dismissed and lv denied 80 NY2d 988).

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