Coverage Pointers - Volume XII, No. 12

New York Times

December 10, 1910

Adopts Negro Segregation
Baltimore Council Passes Law Barring Blacks from White Districts 

The ordinance for the segregation of Negro residents of this city passed the second branch of the City Council tonight, having already been approved by the first branch.  Mayor Mahool will, it is said, sign it as soon as he is satisfied himself that it is in legal form.  It is not improbably that the ordinance will early find its way into the courts, as some doubt its constitutionality. 

 

The ordinance owes its existence to the fact that Negro families have lately moved into neighborhoods of the better class, inhabited by white persons.  Under the terms of the ordinance it will be unlawful for negroes to move into any block in which a majority of homes are tenanted by white persons or for white persons to move into any block in which a majority of homes are occupied by negroes.

McMechen, the first graduate of Morgan State College, went on to a long and successful legal career and served as Grand Exalted Rules of Elks of the World as well as the first African American Member of the Board of School Commissioners.  A high school in Baltimore is named in his honor about four miles from McMechen's home on McCulloh Street.  Click here for an in-depth history of the most drastic Jim Crow law of the time, a December 25, 1910 New York Times full page spread.

Audrey's Angle: 

There are a LOT of decisions this edition on a number of different issues.  As many of you may have heard or read in the national news certain parts of Western New York received over two feet of snow in 24 hours.  The band hit between my house and the office.  It made for interesting driving and I am thankful that I purchased an AWL vehicle this summer.  Keeping in line with the winter weather, there is a decision from Arbitrator Theiss on use and operation when the injury arises out of moving a snow blower.  When faced with such a claim it is always best to revisit the Gholson rule as Arbitrator Theiss thoroughly and carefully analyzes.

 Also, there is a good decision from Arbitrator McCorry with a gentle reminder regarding the explanation language in Box 33 for a denial.  It is rare to see the explanation he cited but it is a reminder that anyone should be able to pick up a denial and clearly ascertain the basis for same within 10 seconds.

 Hope everyone is staying warm!

 Audrey Seeley

[email protected]

 

 A Century Ago Today, December 10, 1910:

 Counted:  The Census Bureau announced that the population of the United States was 93,402,151, an increase of 21 per cent over the count ten years earlier.  New York was the most populous state, followed by Pennsylvania, Illinois, Ohio, Texas and Massachusetts.  California ranked 12th and Florida 34th.

• Evaluated: News accounts reported on a settlement of a wrongful death cases with the New York Central system involving the "killing of Spencer Trask, the banking philanthropist on December 11 last, when the private car in which he was riding was smashed to pieces in a collision."  The parties settled for $60,000 damages for Trask's death.  It was reported as the "largest settlement of accident damages ever arrived at out of court."
  
• Goosed: In Asheville, North Carolina, a case was in trial involving a claim by the SPCA against one Joe Greiger who was accused of causing a goose mental anguish when he nailed the goose to a board in the yard.  Greiger's defense was that goose had "no real feelings" while the SPCA agent claimed that the goose may not have suffered real pain but suffered "great mental anguish".

Headlines for This Week's Issue, Attached:

KOHANE'S COVERAGE CORNER
Dan D. Kohane
[email protected]

• In Late Reporting Case, Third Department Conjured Question of Fact in Delay by Insured and Injured Party  
• Both Named Insured and Additional Insured Failed to Give Timely Notice.  Failure of Additional Insured to Exercise Right to Approve Insurance (and Thereby Learn of Identity of Insurer) Renders Ineffective the Excuse That Additional Insured Was Ignorant of Carrier's Identity
• Ignorance May Be Bliss.  "Known Loss" Exclusion in Legal Malpractice Policy May Not Be Triggered if Law Firm Had No Knowledge That Federal Statute Required Suit to Be Brought Earlier Than State Statute
• Contractual Obligation by Contracting Parties to Indemnify Is Separate and Distinct from Any Insurance Obligations
• Application to Stay Uninsured Motorists Arbitration Must Be Made Within 20 Days of Demand for Arbitration, Even if Demand Comes in the Form of a Letter
• Finding That Vehicle Was Stolen, in Framed Issue Hearing, Will Not Be Disturbed

MARGO'S MUSINGS ON SERIOUS INJURY UNDER
NEW YORK NO FAULT
Margo M. Lagueras
[email protected]

• Review of Medical Records Is Not a Requirement for a Prima Facie Showing of Absence of Triable Issues of Fact
• RI Revealing Cervical Herniations Taken One Month After Accident Raises Issue of Fact
• Plaintiff's 90/180 Claim Is Reinstated Where Defendants' Experts Only Addressed Permanency of Injuries

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

 ARBITRATION

• One Year Rule Inapplicable When Injury Diagnosed and Reported 10 Months Post Accident
• Injury From Snow blower Not Use And Operation
• "Claim Speak" Does Not Equate To Clear Box 33 Explanation to EIP
• IME Report With Positive Objective Findings and Conclusory Opinion Insufficient to Deny Lost Wages BUT EIP Must TIMELY Submit Claim Even After Blanket Denial
• MMI Strikes Again In Chiropractic Denial
• Late Submission Rejected And Applicant Failed To Properly Justify Continued Treatment
• Collateral Estoppel Applied As Causal Relationship Fully Arbitrated In SUM Arbitration
• Insurer's Thorough Investigation Of Lost Wage Claim Persuasive.

LITIGATION

• Evidence of Payment and Denial Within 30 Days Fatal To Plaintiff's SJ Motion
• Claim Not Ripe For Determination And Insurer's Prior Blanket Denial Does Not Preclude Defense of Failure to Comply With Verification Demand
• Plaintiff's Failure to Oppose Motion Through Submission of Medical Rebuttal Fatal
• Plaintiff Deemed to Have Responded to Verification Request
• Procedural Defect In Failing to Obtain Proper Certificate of Conformity the First Time Results in Second Opportunity As Insurer's Substantive Argument Sound
• Registered Nurse Review Insufficient Because No Discussion on Background to Support Competency for Opinion. 

PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper
[email protected]

Of Property

• Plaintiff's GBL § 349 Claim Dismissed Where Insurer's Denial of Life Insurance Benefits was a Private Contractual Dispute, Not a Broad Scheme Aimed at the General Public
• New Jersey Incontestability Statute Applies Where the Policy, Insured, and Beneficiaries All Resided In New Jersey at the Time of Contracting

Of Potpourri

• RED ALERT, RED ALERT : Court of Appeals Rules that Pre-Judgment Interest Will Not Be Waived by Submitting a Damages Dispute to Binding Arbitration Unless All Parties Agree To Waive It as Part of the Parameters of Arbitration 

FIJAL'S FEDERAL FOCUS
Katherine A. Fijal
[email protected]

• Whether Louisiana Prescriptive Statute Applies Retroactively?

JEN'S GEMS
Jennifer A. Ehman

[email protected]

• Where Petitioner Fails to Submit Copy of Policy, Court Declines to Vacate Mandatory Arbitration Award
• No Coverage for Fifteen Years of Water Damage
• Belief That Accident Was a Workers' Compensation Matter Did Not Constitute a Reasonable Excuse for the Insured's Failure to Give Timely Notice
• Court Denies Request to Permanently Stay Arbitration Where Accident Occurred After the Insured Transferred Ownership of the Vehicle
• Court Finds a Question of Fact as to the Applicability of the Dishonesty and Disappearance Exclusions
• Court Holds That a 61-Day Delay in Providing Notice of Water Damage Was Unreasonable and the Insureds' Excuse That They Relied Upon Their Contractor to Provide Such Notice Did Not Remedy the Delay

EARL'S PEARLS
Earl K. Cantwell
[email protected]

NEW FEDERAL RULE ON EXPERTS - DECEMBER 1, 2010

 Now, repeat after me: "Every day that passes is one day closer to Spring."

 We'll see you just before Christmas. 

 Dan

Dan D. Kohane
Hurwitz & Fine, P.C.
1300 Liberty Building
Buffalo, NY 14202    
Phone: 716.849.8942
Fax:      716.855.0874
E-Mail:  [email protected]
H&F Website:  www.hurwitzfine.com

As a public service, Hurwitz & Fine, P.C. is pleased to present its biweekly newsletter, providing summaries of and access to the latest insurance law decisions from the New York State appellate courts.  The primary purpose of this newsletter is to provide timely educational information and commentary for our clients and subscribers.

If you know of others who may wish to subscribe to this free publication, or if you wish to discontinue your subscription, please advise Dan D. Kohane at [email protected] or call 716-849-8900.

You will find back issues of Coverage Pointers on the firm website listed above.
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
Jennifer A. Ehman
Diane F. Bosse

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
Jennifer A. Ehman

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

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

KOHANE’S COVERAGE CORNER
Dan D. Kohane
[email protected]

12/9/10         Nationwide Mutual Fire Ins. Co. v. Maitland
Appellate Division, Third Department
In Late Reporting Case, Third Department Conjured Question of Fact in Delay by Insured and Injured Party 
Up in the Adirondacks, there is a lovely Town of Speculator. In a tavern in the town, Lisa Turner it her head on the floor and was rendered, temporarily, unconscious back on January 24, 2007.  She claims she was hurt when Maitland, an old high school friend who she had encountered at the bar, tried to put Lisa on his shoulders and lost his balance.  An ambulance was summoned and Turner was diagnosed with a head injury and released from the hospital that evening. In April 2007, Turner was diagnosed with two herniated disks and underwent surgery. Turner sued Maitland in February 2008 and then, for the first time, Maitlland gave notice to Nationwide, his homeowners’ carrier. Nationwide promptly disclaimed on late reporting of the incident on the part of both Maitland and Lisa (who had a statutory right to give notice) Nationwide commenced a declaratory judgment action to affirm its disclaimer and both the carrier and the insured moved for summary judgment.
Maitland claimed that he did not believe that Turner had sustained any type of significant injury on the date of the incident, explaining that she was walking after the fall, did not appear to be injured and refused to get into an ambulance until he convinced her to do so as a precautionary measure.  He later heard “scuttlebutt” around town that he might be sued.  There were even letters to Turner from the insurer from the bar and letters from Lisa’s counsel in 2007 indicating that the plaintiff was suffering from serious injuries (although he claim that those letters were misaddressed and not delivered to him).
The appellate court found questions of fact as to whether the delay by in the insured in giving notice was reasonable or not. 
With regard to notice by the Lisa, there was a time when Lisa’s lawyer could not find Maitland in order to ascertain the identity of his carrier.  That time was justifiably forgiven.  However, after finding Maitland, the letters to him only asked him to notify his carrier and did not ask Maitland to identify the carrier to plaintiff’s counsel.  Yet, the court finds that there is a question of fact as to the reasonableness of the plaintiff’s actions in giving notice.
Editor’s Note:  Poorly reasoned decision.  Knowing that the plaintiff lost consciousness and was taken to the hospital should have been enough to put the insured on alert that this could be a serious injury.  That coupled with the rumor of an impending lawsuit leads to the unmistakable conclusion that notice should have been given.  Moreover, from the decision it appears that the plaintiff’s counsel, once Maitland was located, never asked Maitland to identify his carrier so that notice could be given.

11/30/10       New York University v. American Building Maintenance
Appellate Division, First Department
Both Named Insured and Additional Insured Failed to Give Timely Notice.  Failure of Additional Insured to Exercise Right to Approve Insurance (and Thereby Learn of Identity of Insurer) Renders Ineffective the Excuse That Additional Insured Was Ignorant of Carrier’s Identity
Under this policy, Continental has no obligation to defend NYU in the underlying action.  The policy gave the insurer the “right, but not the duty, to defend or participate in the defense of any suit' against the insured."
As to the obligation to indemnify, NYU and defendant maintenance contractor (ABM) entered into a contract that provides for ABM's procurement of insurance naming NYU as an additional insured, also provides that notice from ABM to the insurer would be deemed notice by NYU, and also provides that ABM "shall not commence any work . . . until it has obtained all of the insurance required by this paragraph and such insurance has been approved by [NYU]'s Director of Insurance."
ABM obtained a policy from Continental that provided for a self insured retention (SIR) of $1 million per occurrence, and required that "You [i.e., the insured] must see to it that we [i.e., Continental] are notified as soon as practicable of an occurrence,' . . . act, [or] error or omission . . . which may result in a claim for which the damages can reasonably be expected to exceed fifty percent . . . of the [SIR]."
Continental did not receive timely notice of the underlying accident and, for that reason, has no obligation to indemnify. The underlying accident occurred on March 6, 2003, and although NYU knew about the accident, at the latest, by February 14, 2006, the date of its answer in the underlying action, the only notice that NYU gave Continental was to sue it, which NYU did not do until August 14, 2008. ABM did not give Continental notice of the accident either. While NYU was told by ABM that ACE was the insurer and did not find out about Continental until 2008, had NYU had exercised its right under its contract with ABM to approve ABM's insurance, it would have known about Continental.   

11/30/10 Liberty Insurance Underwriters Inc. v. Corpina Piergrossi, etc.
Appellate Division, First Department
Ignorance May Be Bliss.  “Known Loss” Exclusion in Legal Malpractice Policy May Not Be Triggered if Law Firm Had No Knowledge That Federal Statute Required Suit to Be Brought Earlier Than State Statute
Liberty Insurance Underwriters (“LIU”) had issued a series of legal malpractice policies to the Corpina law firm.  LIU argued that it should not be required to defend and indemnify the law firm because prior to the effective date of the first policy, back in July 2004, the attorneys had reason to foresee that a former client would sue them.  The policy excluded “Known Claims or Circumstances,” e.g. "any claim arising out of a wrongful act occurring prior to the policy period if . . . you had a reasonable basis to believe that you had breached a professional duty, committed a wrongful act, violated a Disciplinary Rule, engaged in professional misconduct, or to foresee that a claim would be made against you."
The underlying legal malpractice action arose out of the attorneys' representation of the former client in connection with a medical malpractice claim for personal injuries allegedly caused by vaccinations in 1991 when he was an infant.  Under the federal statute dealing with these vaccines, there was a three year deadline to bring suits.  The attorneys resigned from representation after the three year statute of limitations had expired. When the attorneys received a letter of representation in December 2006, notice was given to the malpractice carrier/.
The attorneys knew that the three year period had expired but did not know that the passage of the three years under the federal statute would preclude a malpractice case.  Under state law, there is generally a tolling period for infancy.
What a competent, or reasonable, attorney would have known, however, is far from dispositive of the question of what the attorneys in fact knew. 
Since there is a question of fact as to when the attorney first learned of the applicability of the federal statute, there will have to be a factual hearing at trial on this issue. 
Finally, the attorneys argued that the insurer should be estopped from disclaiming coverage because they have been prejudiced by the insurer's delay in disclaiming. This argument, the court found, was meritless because the insurer has never disclaimed coverage and has been defending the underlying malpractice action from the outset under an undisputedly timely reservation of rights.
Editor’s Note:  Regular readers of this newsletter will wonder about the soundness of the “reservation of rights” discussion at the end of the opinion.  Here, the insurer never disclaimed but defended the carrier under a reservation of rights.  It is rare to see a New York case endorse the use of a reservation of rights in New York.  We should point out that the statute which requires prompt disclaimers applies only to bodily injury and wrongful death cases and not malpractice or property damage cases so there was no statutory obligation to disclaim.  The courts have given quiet approval to ROR letters in cases where there is no statutory obligation to disclaim promptly.  Most telling is that the court had to go back to a 1957 Court of Appeals case, over a half-century, to find a citation of a Court of Appeals case that sanctioned the use of the reservation of rights: O'Dowd v American Sur. Co. of N.Y., 3 NY2d 347.

11/30/10       Inner City Redevelop. Corp. v. Thyssenkrupp Elevator Corp.
Appellate Division, First Department
Contractual Obligation by Contracting Parties to Indemnify Is Separate and Distinct from Any Insurance Obligations
Not really an insurance matter, this was a claim under a contract of indemnity.  Inner City sued Thyssenkrupp seeking both defense and indemnity under a contractual indemnity provision.  Since the defendant Thyssenkrupp is not an insurer, its duty to defend its contractual indemnitee is no broader than its duty to indemnify.  That is, the indemnity agreement only requires the defendant to indemnify Inner City for losses caused in whole or in party by the defendant’s negligence.

There was a separate obligation on the part of the defendant to procure insurance that would cover the indemnity obligation.  A policy was purchased but it had a $1.25 million deductible. Accordingly, defendant is obligated to defend and indemnify for any covered liability within the deductible.
That Inner City failed to give the insurer notice is of no moment to the obligation that is imposed by the contract on the defendant to defend and indemnify.
Editor’s Note: Obligations that arise from trade contracts between the parties to the underlying transaction must be examined separately and independently from any parallel insurance contracts obligations.  This case is an example of that separation.

11/23/10       Matter of State Farm Mutual Auto. Ins. Co. v. Urban
Appellate Division, Second Department
Application to Stay Uninsured Motorists Arbitration Must Be Made Within 20 Days of Demand for Arbitration, Even if Demand Comes in the Form of a Letter
On December 1, 2008, Urban, while driving his own car, insured by State Farm, was involved in an accident.  Urban’s policy included an endorsement for uninsured motorist benefits which provided for arbitration to resolve claims submitted to State Farm pursuant to this endorsement.
On December 21 of the same year, he informed State Farm, by certified mail that he intended to arbitrate a claim for those benefits, since the other car in the accident fled the scene.  Uninsured motorists benefits are available for accidents involving hit-and-run vehicles, so long as there is physical contact.
In his letter, he warned State Farm that the carrier had 20 days to move to stay arbitration or it would be “precluded from objecting that a valid agreement was not made or complied with and from asserting in court the bar of a limitation of time."  State Farm received the letter.  It was not until April 8, 2009, that State Farm denied Urban’s claim.
On June 10, 2009, by certified mail, return receipt requested, Urban sent State Farm a "Request for Arbitration" with the American Arbitration Association (AAA). This request was received by State Farm on June 12, 2009. On June 22, 2009, State Farm petitioned for an order pursuant to staying the arbitration.  Urban cross-moved to dismiss the petition as untimely.
Under CPLR 7503(c) an application to stay arbitration must be made within 20 days after service of a notice of intention to arbitrate. To be considered a valid notice of the intention to arbitrate, the notice must identify the agreement under which arbitration is sought and the name and address of the person serving the notice in addition to containing the statutory 20-day warning that failure to commence a proceeding to stay arbitration will preclude an objection to arbitration.
As the first notice, sent in 2009, contained all of the elements of an appropriate notice, State Farm’s application to stay arbitration was untimely.   Likewise, State Farm lost the right to conduct discovery in the arbitration procedure by not seeking a timely stay.
Editor’s Note:  About every 90 days or so we have a chance to remind you, as we do now, that an insurer cannot challenge arbitrability of a UM or SUM claim unless it moves to stay arbitration, in a judicial application, within 20 days of the demand for arbitration.  Usually that demand is made on an AAA form, such as the one used in 2009 in this case.  However, the demand need not be on that form, and as long as it contains the elements of a demand, the carrier must make that judicial application or lose substantial rights.  Here, State Farm forfeited the ability to challenge whether there was physical contact between the insured’s car and the alleged “hit-and-run” and whether the offending vehicle, in fact, was insured. See, for example, the following case:

11/23/10       Matter of State Farm Fire & Casualty Ins. Co. v. Hayes
Appellate Division, Second Department
Finding That Vehicle Was Stolen, in Framed Issue Hearing, Will Not Be Disturbed
In a framed issue hearing, the hearing officer found that the vehicle in question was stolen, overcoming the presumption of permission.  That hearing was conducted after a timely application.  The Second Department left the finding undisturbed, relying on the hearing’s officer determination of the credibility of the witnesses. Accordingly, the petition to stay arbitration was denied and the petition dismissed and the matter will proceed to arbitration.

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

12/07/10       Rosa-Diaz v. Maria Auto Corp.
Appellate Division, First Department
Review of Medical Records Is Not a Requirement for a Prima Facie Showing of Absence of Triable Issues of Fact
Plaintiff was a pedestrian allegedly injured when she was struck by a metal object apparently propelled into her by a motor vehicle.  She argued that the trial court’s grant of defendants’ motion was error because defendants’ doctors failed to review her medical records.  The appellate court disagreed and unanimously affirmed the trial court’s decision holding that such a review is not required in order to make a prima facie showing of the absence of triable issues of fact.  Defendants’ proffered the affirmed reports and specific tests performed by their examining neurologist and orthopedist to refute her claims under the permanent consequential and/or significant limitation of use categories.

Plaintiff failed to raise a triable issue in opposition for several reasons.  First, her chiropractor completely ignored what effect two prior accidents, and one subsequent one, may have had on her alleged symptoms.  The court reiterated that when contributing factors, such as pre-existing conditions, interrupt the chain of causation between accident and claimed injury, summary dismissal may be appropriate even where there is objective medical proof of injury.  The court additionally dismissed plaintiff’s 90/180-day claim because it was based only on unsupported subjective complaints of pain without any objective proof.  As a result, defendants’ reference to plaintiff’s deposition testimony and her proofs was sufficient.

11/30/10       Torain v. Bah
Appellate Division, First Department
MRI Revealing Cervical Herniations Taken One Month After Accident Raises Issue of Fact
On appeal, plaintiff’s claims under the permanent consequential and/or significant limitation of use categories are reinstated but the dismissal of her 90/180 day claim is affirmed.  Even though defendant’s experts concluded plaintiff had full range-of-motion in her back, neck and shoulders, and the radiologist opined that her complaints of pain were due to degenerative changes, plaintiff’s orthopedic surgeon, who reviewed cervical and lumbar MRIs taken one month after the accident, concluded that the herniations were causally related to the accident based on the manner in which the nuclear pulposis was projected outward.  Plaintiff’s experts also conducted tests which revealed limitations in range of motion and concluded the restrictions were causally related to the accident.  All this was sufficient to raise an issue and survive summary judgment.

11/23/10       Bejaran v. Perez
Appellate Division, First Department
Plaintiff’s 90/180 Claim Is Reinstated Where Defendants’ Experts Only Addressed Permanency of Injuries
Defendants’ experts examined plaintiff two years after the accident and only addressed the permanency of his injuries, therefore failing to show that he did not sustain a serious injury under the 90/180 category.  Thus, on appeal, the dismissal of plaintiff’s claims under the permanent consequential and/or significant limitation of use categories is affirmed, but the claim under the 90/180-day category is reinstated.

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

ARBITRATION
12/6/10         Applicant v. Respondent
Arbitrator Thomas J. McCorry, Erie County
One Year Rule Inapplicable When Injury Diagnosed and Reported 10 Months Post Accident
On February 14, 2006, the eligible injured person was involved in a motor vehicle accident while a passenger in a NYC cab.  She received emergency room treatment then 10 months later sought treatment from her primary care physician in Buffalo.  A December 20, 2006, prescription from her primary care physician indicates that she has a temporary disability due to a back injury and inability to stand for lengthy time periods.

The insurer denied payment for the prescription based upon the one year rule.  This basis failed as the back injury and resulting prescription were provided to the insurer within one year from the date of accident.

12/3/10         Applicant v. Respondent
Arbitrator Mary Anne Theiss, Onondaga County
Injury From Snow blower Not Use And Operation
The eligible injured person was moving a snow blower using his father’s truck when he ruptured his right bicep tendon.  The assigned arbitrator applied the Gholson rule and determined that the injury did not arise out of the use and operation of a motor vehicle. 

12/2/10         Applicant v. Respondent
Arbitrator Thomas J. McCorry, Erie County
“Claim Speak” Does Not Equate To Clear Box 33 Explanation to EIP
The insurer denied massage therapy based upon concurrent care.  The assigned arbitrator initially determined that Box 33 of the denial was not adequate in that it contained too much “claim speak” which an eligible injured person would not understand.  Box 33 stated: “massage therapy wi/scope of prov concurrently treating patient.  Per NYS F/S payment to most relevant specialty not both.  This treatment was concurrent care as the eligible injured person was treating with Dorothy S. Rupley, D.C. from 3/28/06-5/09/06.”  The assigned arbitrator aptly concluded that while an industry person may understand this explanation the ordinary lay person may not.

The assigned arbitrator also determined that the concurrent care defense was not established.  This is because the treatment revealed it was in the same general time frame and not treatment provided on the same day.

11/29/10       Applicant v. Respondent
Arbitrator Veronica K. O’Connor, Erie County
IME Report with Positive Objective Findings and Conclusory Opinion Insufficient to Deny Lost Wages BUT EIP Must TIMELY Submit Claim Even After Blanket Denial
The eligible injured person (“EIP”) was involved in an April 5, 2007, accident resulting in alleged neck and low back injuries.  The EIP sought lost wages from April 5, 2007 through February 6, 2008.  She worked as a receptionist at Eye Care.
The insurer did not deny the lost wage claim and never paid same from April 5, 2007 through August 2, 2007.  Therefore, the assigned arbitrator awarded payment.

The lost wages from August 3, 2007 through February 6, 2008, were denied based upon a July 3, 2007, examination conducted by Dr. Patrick Hughes.  The assigned arbitrator determined that the examination was not persuasive as Dr. Hughes found multiple positive objective findings and yet concluded that the EIP could work without restrictions.

However, the assigned arbitrator only awarded wages during this timeframe up to July 1, 2007.  In reliance upon a General Counsel opinion dated September 2, 2004, the assigned arbitrator held that the EIP even after the denial of lost wages had an obligation to submit claims for benefits.  The EIP failed to do so and could not now timely submit a claim for lost wages under the 90 day rule.

11/29/10       Applicant v. Respondent
Arbitrator Veronica K. O’Connor, Erie County
MMI Strikes Again in Chiropractic Denial
The eligible injured person (“EIP”) was denied chiropractic care based upon an examination conducted by Gary Kostek, D.C.  Mr. Kostek’s report concluded that the EIP year plus treatment at three times per week was an adequate trial of care and further care is not indicated.  Further, Mr. Kostek acknowledged that the EIP had ongoing symptoms but that chiropractic care would be of little clinical benefit.

The assigned arbitrator determined that Mr. Kostek’s opinion was the equivalent of maximum medical improvement, which under Hobby, is not a recognized defense for denying chiropractic care.  Thus, the treating chiropractor was awarded for over two years of treatment to the EIP.

11/29/10       Applicant v. Respondent
Arbitrator Thomas J. McCorry, Erie County
Late Submission Rejected and Applicant Failed to Properly Justify Continued Treatment
The eligible injured person (“EIP”) underwent three months of acupuncture and chiropractic treatment after a July 30, 2006, accident.  The insurer denied further chiropractic care based upon an examination performed by Mr. Ferrante.  Mr. Ferrante’s examination revealed essentially negative objective findings.  Mr. Ferrante opined that the EIP had a resolved cervical, thoracic, and lumbar spine sprain/strain.

The assigned arbitrator noted that he received a post hearing evidence submission of the treating chiropractor’s SOAP notes from the Applicant which had not been requested to be submitted during the hearing.  Further, the Applicant provided no explanation as to why the documents were submitted late.  Due to this, the assigned arbitrator would not consider the late evidence.

The assigned arbitrator did not find any reports from the treating chiropractor that would support further treatment or rebut Mr. Ferrante’s opinion.  Therefore, the insurer’s denial was upheld.

11/29/10       Applicant v. Respondent
Arbitrator Thomas J. McCorry, Erie County
Collateral Estoppel Applied as Causal Relationship Fully Arbitrated in SUM Arbitration
The eligible injured person (“EIP”), a 72 year old part time school bus driver, was involved in a March 9, 2007, accident.  The EIP sought limited medical expenses and lost wages in excess of $20,000.00.  It is noted that the EIP did not appear or give testimony at the hearing. 

The insurer argued that collateral estoppel bars the EIP from recovering as in February 2009, “virtually the identical matter” was arbitrated before Arbitrator Diebold.  Arbitrator Diebold determined that the EIP was not credible and that his alleged injuries were not causally related to the accident.  Rather, the EIP’s complaints were reflective of pre-existing injuries due to prior accidents.  The assigned arbitrator agreed after reviewing Arbitrator Diebold’s award and the evidence submitted in the SUM arbitration.

11/29/10       Applicant v. Respondent
Arbitrator Mary Anne Theiss, Onondaga County
Insurer’s Thorough Investigation of Lost Wage Claim Persuasive
The eligible injured person (“EIP”) sought $72,000.00 in lost wages as a result of a May 14, 2006, accident.  Of importance is that the EIP was involved in a November 24, 2004, excavator accident after he fell into a cesspool.  As a result, the EIP commenced a personal injury action and claimed he was unable to perform his regular duties and suffered lost wages. 

The insurer produced a deposition transcript from the personal injury action arising out of this May 14, 2006, accident wherein the EIP admitted that after the November 2004, accident he was forced to liquidate his business and had no jobs lined up.  Further, the EIP did not enter into any contracts during 2006 or 2007.

The insurer also obtained an authorization for the EIP’s tax filings with the IRS from 2004 through 2009.  The IRS responded to the inquiry that the EIP had not filed taxes for his business for 2004, 2005, 2007, 2008, or 2009.  Apparently his 2006 taxes were filed in 2008.  The EIP also had not filed any personal taxes for 2004, 2005, and 2007.  The assigned arbitrator indicated that this evidence supports the insurer’s denial of the lost wage claim.

LITIGATION

11/30/10       Westchester Medical Ctr. a/a/o Sharon Bayly v. Nationwide Mut. Ins. Co.
Appellate Division, Second Department
Evidence of Payment and Denial Within 30 Days Fatal to Plaintiff’s SJ Motion
The plaintiff’s summary judgment motion was properly denied as it failed to establish its prima facie case entitlement to judgment as the evidence demonstrated that the insurer made partial payment and partial denial of the claim within 30 days after receipt.  Further, the insurer’s minor factual discrepancy in the denial did not invalidate it.

11/26/10       Triangle R. Inc. a/a/o Danilo Cabarcas v. Praetorian Ins. Co.
Appellate Term, Second Department
Claim Not Ripe for Determination and Insurer’s Prior Blanket Denial Does Not Preclude Defense of Failure to Comply with Verification Demand
The insurer’s summary judgment motion should have been granted as it demonstrated that verification, in the form of a request for medical records, was still outstanding.  Thus, the 30 day timeframe to pay or deny had not lapsed and plaintiff’s claim was not ripe for determination.  The court specifically rejected plaintiff’s contention, as it conceded same on appeal, that the insurer’s issuance of a blanket general denial prior to the verification request did not preclude it from asserting the defense of noncompliance with a verification demand.

11/26/10       Pomona Med. Diag., PC a/a/o Pedro Vargas v. Praetorian Ins. Co.
Appellate Term, Second Department
Plaintiff’s Failure to Oppose Motion Through Submission of Medical Rebuttal Fatal
The insurer’s cross-motion for summary judgment should have been granted as the record before the court demonstrated that plaintiff failed to oppose same through actually submitting a rebuttal letter to the insurer’s expert opinion.

11/26/10       St. Vincent’s Hosp. & Med. Ctr. a/a/o Luigi Gandini v. American Transit Ins. Co.
Appellate Term, Second Department
Plaintiff Deemed to Have Responded to Verification Request
The insurer’s contention that the plaintiff failed to provide the requested verification thereby rendering the action premature lacked merit.  The insurer requested a copy of the NF-5 form signed by Plaintiff’s assignor.  The NF-5 was already on file with the insurer and where the assignor was to execute it was stated that the assignor’s signature was “on file” with Plaintiff.  The court held that the Plaintiff had complied with the verification request and the attorney affirmation asserting the insurer had never received a signed assignment of benefits form lacked any probative value.

11/19/10       Ave T MPC Corp. a/a/o Maxim Kamlet v. Amica Mut. Ins. Co.
Appellate Term, Second Department
Procedural Defect in Failing to Obtain Proper Certificate of Conformity the First Time Results in Second Opportunity as Insurer’s Substantive Argument Sound
The insurer’s summary judgment motion was improperly granted as it established that the bills in dispute in Plaintiff’s Complaint were never provided to the insurer until after the suit was commenced.  Further, the insurer demonstrated that the proof of mailing Plaintiff produced was for an address where the insurer had never been located.  The Plaintiff further argued that the insurer used an out of state affidavit which failed to have an attached certificate of conformity.  On reply, the insurer provided same which the lower court held cured any initial defect. 

On appeal, the court held that while the insurer permissibly sought to cure the defect regarding the certificate of conformity, the document was not executed by an authorized  person pursuant to Real Property Law §299-a.  However, the certificate can be given nunc pro tunc effect once properly obtained it was remitted for further proceeding with the lower court.

11/19/10       Rockaway Med. and Diag., PC a/a/o Rudolph Persaud v. Country-Wide Ins. Co.
Appellate Term, Second Department
Registered Nurse Review Insufficient Because No Discussion on Background to Support Competency for Opinion
Plaintiff’s summary motion should have been granted as the insurer’s reliance upon a registered nurse’s peer review report to deny an MRI was insufficient.  The court held that the registered nurse was a lay informant for medical diagnosis and treatment and cannot render a medical opinion without providing some background on his or her medical training, observation, or experience that is sufficient to establish competence.

The following are four decisions from the Appellate Term, Second Department, reversing the lower court and granting the insurer’s summary judgment motion as the plaintiff failed to rebut the presumption of lack of medical necessity by presenting medical evidence to address the IME or Peer Reviewer’s findings and conclusions:

11/26/10       Elmont Open MRI & Diag. Radiology, PC a/a/o Joanne Linsalato v. Clarendon Nat. Ins. Co.
Appellate Term, Second Department

11/26/10       Dynamic Med. Imaging, PC a/a/o Lijia Espinal v. New York Cent. Mut. Fire Ins. Co.
Appellate Term, Second Department

11/19/10       Radiology Today, PC a/a/o Nadiya Shcheglova v. Mercury Ins. Co.
Appellate Term, Second Department

11/19/10       Richmond Pain Mgt., PC a/a/o Juan Rodriguez v. Clarendon Nat. Ins. Co.
Appellate Term, Second Department

PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper
[email protected]
Of Property

12/09/10       Shou Fong Tam v Metropolitan Life Ins. Co.
Appellate Division, First Department
Plaintiff’s GBL § 349 Claim Dismissed Where Insurer’s Denial of Life Insurance Benefits was a Private Contractual Dispute, Not a Broad Scheme Aimed at the General Public
Despite the First Department’s lengthy discussion of the facts, it appears that Ms. Tam obtained an ownership interest in life insurance policies issued to a Mr. Ngai.  When Mr. Ngai’s policies lapsed for payment of non-premium, neither Ngai (who likely knew nothing about the policies), nor Ms. Tam, undertook any efforts to reinstate the coverage.

However, upon Mr. Ngai’s death, Ms. Tam allegedly used her influence as a Met Life employee to convince Met Life to permit her to pay all past due premiums and thereby bring the coverage up to date.  Immediately after paying all past due premiums, Ms. Tam placed a claim for death benefits due to Mr. Ngai’s death. 

Met Life, as one can imagine, denied the claims.  Ms. Tam commenced the instant suit as a result, therein alleging a violation of GBL § 349.  Met Life, smartly, moved to dismiss the Section 349 allegation on the basis that there was no evidence in the Record to establish that the denial involved conduct that was part of a scheme aimed at the general public as a whole.  The Appellate Division agreed by holding that a private contract dispute, such as the instant dispute, cannot give rise to a GBL claim under Section 349.

Peiper’s Point:  This underscores the need to move in the early stages to dismiss what most times are weak extra-contractual claims.  By letting allegations like this simmer, a carrier opens itself to a litany of expansive discovery demands ala the First Department’s decision in Diamond State v Utica First.  Kudos to counsel for Met Life for getting the right result for the right reason!

12/07/10       Johnson v Metropolitan Life Ins. Co.
Appellate Division, First Department
New Jersey Incontestability Statute Applies Where the Policy, Insured, and Beneficiaries All Resided In New Jersey at the Time of Contracting
Decedent executed applications for, and ultimately obtained, two life insurance policies from Met Life.  The first policy identified Ms. Johnson as the beneficiary, while the second policy identified Mr. Nicklas as the beneficiary.  At the time of the contracting, the decedent indicated that he would be making all the premium payments on both policies.  Likewise, at the time of the contracting, decedent also indicated that he had no history of serious medical problems. 

Years later, in November 0f 2004, Met Life learned that premium payments were not being made by decedent, but rather by beneficiaries Johnson and Nicklas, respectively.  As this was a violation of the underwriting guidelines maintained by Met Life, both policies were terminated in correspondence sent to the insured on November 29, 2004.  The decedent died in August of 2005, and beneficiaries Johnson and Nicklas sought coverage under the two Met Life policies. 

In response, Met Life denied the claims on the basis that decedent had materially misrepresented who would be paying premiums on the policy.  In addition, Met Life added that decedent had also misrepresented his health condition at the time of the contracting.  At that time, plaintiff failed to disclose his history of end-stage liver disease, hepatitis C and diabetes. 

After commencing the instant suit, plaintiffs moved for summary judgment.  Met Life opposed on the basis affidavits provided by the VP of Corporate Ethics and Compliance, Chief Underwriter and Senior Technical Claims Advisor which indicated that the decedent’s misrepresentation that he was the “payer of premiums” was a material misstatement.  Upon hearing this issue, the trial court ruled that question of fact as the materiality of the source of payment misstatement. 

In opposing plaintiffs’ summary judgment motion, Met Life also sought leave to amend its Answer to assert a counter-claim for fraud.  Plaintiffs then opposed Met Life’s request for relief on the basis that the discovery was more than two years after the execution of the policy.  Plaintiff correctly noted that both New Jersey and New York have mandatory two year incontestability statutes. 

However, the Appellate Division noted that New Jersey’s high court had previously ruled that allegations of fraud are not subject to the two-year incontestability requirement.  New York courts, on the other hand, will not emasculate the terms of the statute by allowing an insurer to challenge coverage after the two year time period expires where the defense is based in, or upon, fraud. 

In applying the New Jersey standard, the First Department concluded that because the policy was issued in New Jersey, to a New Jersey resident, from a New Jersey office, with New Jersey beneficiaries, and premium payments were submitted to a New Jersey office, understandably, New Jersey law should apply.

Of Potpourri

11/30/10       Grobman v Chernoff
Court of Appeals
RED ALERT, RED ALERT : Court of Appeals Rules that Pre-Judgment Interest Will Not Be Waived by Submitting a Damages Dispute to Binding Arbitration Unless All Parties Agree To Waive It as Part of the Parameters of Arbitration

The Facts:

 Plaintiff was injured in an automobile accident in August of 1996.  In June of 2000, a jury verdict found defendants 100% liable for the injuries that plaintiff, Grobman, sustained.  In addition, the jury also found that Ms. Grobman’s injuries satisfied one of the several categories outlined under Insurance Law § 5102(d) (see Margo’s Musings if you desire additional information on the Serious Injury Threshold), and awarded $10,000 in damages.  After a series of appeals, the Appellate Division eventually concluded that the jury’s decision on liability would stand, as would its decision on the Serious Injury Threshold.  The Appellate Division ruled, however, that the matter needed to re-tried to establish damages.

At that point, the case was sent to binding arbitration with a high/low agreement of $10,000/$150,000.  Importantly, the arbitration agreement held that “any and all pending litigation arising from this action shall be discontinued with prejudice upon the determination of this matter.”  In addition, the arbitration agreement provided that the dispute was limited to “AT ISSUE: Damages.”   Apparently, the arbitration agreement made no reference to the calculation of, or waiver of, accrued pre-judgment interest.

In any event, at the conclusion of the arbitration, the panel awarded plaintiff “a net amount award of $125,000.”  The decision was silent as to the issue of interest.  Nonetheless, upon learning of the decision, defendant’s carrier presented a settlement check to plaintiff in the amount of $125,000.  Although plaintiff’s counsel accepted the check, he did not cash it.  Rather, he made a follow demand for interest on $125,000 that he maintained had been running since liability and threshold had been determined in 2000.  It was now 2008, and plaintiff was entitled to approximately 72% of the award in additional interest payment. 

The Challenge:

Understandably, defendant’s carrier objected to the demand for interest.  The alleged that the arbitration agreement which set a binding high/low of $10,000/$150,000 did not contemplate the payment of interest. 

For their part, the plaintiff’s counsel agreed that the arbitration agreement did not address the interest issue.  However, plaintiff’s counsel maintained that because there was nothing waiving accrued interest, it remained a viable claim.  Indeed, no one challenged the fact that, absent the arbitration agreement, plaintiff was entitled to pre-judgment interest accrued from the date of the jury verdict establishing defendant’s liability.  Where it was a viable claim, and where the plaintiff had never indicated its desire to waive interest, plaintiff argued that it was entitled to recover.

When distilled to its most elementary form, the dispute was really whether interest on an arbitration award accrued from the date of the arbitration decision (as maintained by defendant), or whether the interest began to accrue on the date liability was found (as maintained by plaintiff, and as is the general rule for matters decided by trial/motion).  The Trial Court ruled interest began to accrue from the date of the arbitration award.  In so holding, the underlying judge recognized the issues at hand by noting that “interest on a judgment ultimately entered in a motor vehicle case begins to run from the date of…the jury’s verdict.”  However, the judge went on to explain that was diverting from the general rule because the parties had submitted the entire dispute (i.e., including the issue related to interest) into arbitration. 

The Appeal: 

On appeal, the Appellate Division held that prejudgment interest was not the same as “damages.”  Accordingly, because the arbitration agreement only spoke to “damages,” it did not extend to prejudgment interest.  Absent any other indication that the plaintiff had waived its right to collect interest on the damages award, the Appellate Division ruled that interest had been accruing, at the statutory rate, since the 2000 jury verdict.

The instant decision from the Court of Appeals affirms the decision and reasoning of the Appellate Division.  Essentially, the Court of Appeals ruled that an award of prejudgment interest, although related to and contingent upon an award, is not same thing as a damages award.  As such, where the arbitration agreement did not explicitly extinguish the plaintiff’s rights to collect interest on the award, the Court of Appeals held that a claim for prejudgment interest remained valid.

The Crystal Ball: 

Obviously, this decision creates some major issues in the very near future.  As we read the decision, an arbitration agreement will not destroy pre-judgment interest rights unless the intent to waive all accrued interest is clearly designated in the arbitration agreement.  By including this line in the agreement, defendants can inoculate themselves from any potential exposure. 

Practitioners would be wise to consider the various areas where this issue might turn up in the future.  Certainly, in cases were liability is established through summary judgment motion and/or trial, pre-judgment interest must be addressed in the arbitration agreement.  Moreover, in cases where interest accrues from the date of the event (e.g., breach of contract or property damage), pre-judgment interest must likewise be considered and addressed prior to entering an arbitration agreement. 

On the bright side, by intimating that a party can chose to forgo pre-judgment interest as part of the parameters of a arbitration, the Court of Appeals is also establishing that arbitrations are, in essence, a settlement agreement.  Thus, it appears disposing of a case by arbitration is, at its core, a creative way of reaching a negotiated settlement, thereby providing counsel the protections afforded under GOL § 3-335.

As a reminder, In New York, while there is pre-judgment interest allowable in breach of contract, wrongful death and property damage cases, it is not recoverable in bodily injury cases until liability is established.  Here, there was a determination of tort liability prior to the assessment of damages, so interest was accrued from the determination of liability, even though it was prior to final judgment.

FIJAL’S FEDERAL FOCUS
Katherine A. Fijal
[email protected]

11/30/10  Eric Holt v. State Farm Fire Casualty Co.
United States Court of Appeals for the Fifth Circuit
Whether Louisiana Prescriptive Statute Applies Retroactively?
Plaintiff, Eric Holt’s, home in New Orleans suffered extensive fire damage in January, 2007 and he sought to recover payment under his homeowner’s policy with State Farm Fire Casualty Co. [“State Farm”].  Between the time Holt’s cause of action arose in January 2007 and his lawsuit in February 2008, the state legislature amended the applicable prescriptive statutes in the Louisiana Insurance Code.  Previously the insured had only 12 months from loss to file a suit; the amendment extended the prescriptive period to 24 months.

State Farm brought a motion for summary judgment arguing that Holt’s suit was time barred and that he could not benefit from the extended reporting period.  The district court denied the motion, concluding that the amended prescription period applied retroactively to Holt’s claim. The Court of Appeals for the Fifth Circuit affirmed the district court’s decision. 

In rendering its decision the Court reviewed Article 6 of the Louisiana Civil Code which sets out the governing rule of statutory construction applicable to this case.  The Article states that “In the absence of contrary legislative expression, substantive laws apply prospectively only.  Procedural and interpretative laws apply both prospectively and retroactively, unless there is legislative expression to the contrary”. 

The Court pointed out that based on Louisiana decisional law, application of Article 6 requires a two-fold inquiry:  (1) the court must ascertain whether in the enactment the legislature expressed its intent regarding retroactive or prospective application, if the legislature did so the judicial inquiry ends; and (2) if the legislature did not do so, the court must then classify the enactment as substantive, procedural or interpretive.  See, Cole v. Celotex Corp., 599 So.2d 1058 (La. 1992).

In applying this test to revised statute, Act 43, the Court determined that in applying the first prong of the Article 6 inquiry it could not find a clear and unmistakable expression of legislative intent. 

As to the second prong of the inquiry the court began its analysis by stating that in Louisiana, statutes of limitations are generally treated as procedural laws. See, Chance v. Am. Honda Motor Co., 635 So.2d 177 (La. 1994).  However, the Louisiana Supreme Court has specified two exceptions to this rule of retroactivity for prescriptive statutes: the statute is not retroactive where such applications would (1) strip a party of a vested right, or (2) revive an already prescribed caused of action.

State Farm argued that Act 42 is substantive and therefore applies on a proscriptive basis only.  State Farm’s argument was based solely on a Louisiana Supreme Court case that was decided on an expedited basis to address the legislature’s extension of the prescriptive period for insurance claims arising from hurricanes, Katrina and Rita.   See, State v. All Prop. and Cas. Ins. Carriers Authorized and Licensed to Do Bus. In the State of La., 937 So.2d 313 (La. 2006).  In the wake of those two hurricanes, the Louisiana legislature enacted Acts 2006, Nos. 739 and 802 (“2006 Acts”), to extend the prescriptive period within which insured parties could file certain claims under their insurance policies for Katrina and Rita related losses.  The issue presented was whether the 2006 Acts were constitutional.  The court in All Prop first noted  that prescriptive statutes are generally procedural in nature, which would allow retroactive application of these Acts to causes of action that arose prior to their effective dates.  However, because the legislation at issue has the effect of extending a prescriptive period, the court concluded that the 2006 Acts were substantive in nature.   The court then undertook the requisite constitutional analysis, and concluded that the retroactive application of the 2006 Acts did not violate the federal or Louisiana constitutions.

State Farm argued that because the Louisiana Supreme Court in All Prop concluded that the 2006 Acts were substantive laws, the Fifth Circuit must conclude the same with respect to Act 43.  The Fifth Circuit disagreed. The Court held that the clear weight of the case law from the Louisiana Supreme Court supports the conclusion that Act 43, as it applies to Holt’s cause of action was procedural law.  Further, the Court held that neither of the two exceptions to the general rule of retroactivity applies here:  the retrospective application of Act 43 will not strip any party of a vested right, not will it revive an already prescribed cause of action.  At the time of Act 43’s effective date in August 2007, State Farm’s right to plead prescription had not yet vested; that right would not vest under the prior 12 month period until January 2008.  Likewise, Holt’s cause of action for recovery under this fire insurance had not yet prescribed and therefore, the retroactive application of Act 43 will not revive any claim here.  The Court found that under these circumstances, the conclusion that Act 43 retroactively applies to Holt’s claim in inescapable.

JEN’S GEMS
Jennifer A. Ehman
[email protected]

12/6/10         State Farm Auto. Ins. Co. v. Harco Natl. Ins. Co.
Supreme Court, Queens County
Where Petitioner Fails to Submit Copy of Policy, Court Declines to Vacate Mandatory Arbitration Award
Petitioner moved to vacate an award rendered following mandatory arbitration based on the arbitrator’s disregard of applicable law.  William Salas, petitioner’s insured, drove a loaner vehicle while his own vehicle was being repaired at a car dealership.  The loaner vehicle was insured by respondent.  While driving the loaner vehicle, Mr. Salas struck a pedestrian.  Petitioner paid no-fault benefits to the pedestrian and then submitted the claim to arbitration seeking reimbursement from respondent.  Before taking control of the loaner vehicle, Mr. Salas signed a loaner/rental agreement, which provided that Mr. Salas’ personal auto insurance policy was primary.

The court held that in the case of mandatory arbitration, which was the case here, due process imposes closer judicial scrutiny on the arbitrator’s decision.  Accordingly, an arbitration award in a mandatory arbitration proceeding will be upheld if it is supported by the evidence and is not arbitrary and capricious.  The court then went on to hold that as this is a priority of payment claim, and petitioner never produced its policy, the arbitrator properly relied upon the respondent’s policy to determine that petitioner was primarily responsible to make no-fault payments to the pedestrian.  Further, the court was not persuaded by petitioner’s argument that a loaner vehicle was akin to a rental vehicle and thus, respondent was primary for no-fault coverage. 

12/1/10         Bella-Vita LLC v. Tower Ins. Co. of N.Y.
Supreme Court, New York County
No Coverage for Fifteen Years of Water Damage
Plaintiff owns a five-story building at 211 Madison Ave., New York.  In early May 2008, plaintiff began seeking tenants for the property’s basement.  An interested tenant visited the property, but had difficulty entering the basement door.  As a result of this complaint, the property’s manager visited the building and discovered that the floor in the doorway area was sagging.  Because of the sagging, the manager had a portion of the cement floor pieced open.  Upon opening the cement floor, he discovered a rotting floor system made of wood with a steam pipe underneath.  Plaintiff promptly notified its broker, requesting that defendant, its insurance carrier, inspect the property. 

Defendant sent a licensed professional engineer to the property.  His inspection revealed that the concrete hovered over a small, unventilated crawl space and steam pipe.  As a result of the extreme moisture, the wood rotted and deteriorated.  He opined that the condition existed for about 15 years.  Because of this finding, defendant denied coverage.  Plaintiff then brought this action. 

In granting defendant’s motion for summary judgment, the court reviewed the applicable policy exclusions.  Under the terms of the policy, damages derived from “rust, corrosion, fungus, decay, [or] deterioration, hidden or latent defect in property that causes it to damage or destroy itself” were excluded.  The court determined that, based on this provision, the policy clearly excluded coverage for the deteriorating wood joists, beams and sub floor in the basement.  Further, the policy also excluded damage caused by “[c]ontinuous or repeated seepage or leakage of water that occurred over a period of 14 days or more.”  As evidence established that the water seeped onto the wood flooring for more than 14 days, the damage was not covered.  Moreover, the policy excluded recovery for conditions that were created prior to the policy’s inception.  Lastly, the court noted that plaintiff failed to submit evidence sufficient to raise a triable issue of fact. 

11/24/10       Tower Ins. Co. of New York v. JAAP Construction, Inc.
Supreme Court, New York County
Belief That Accident Was a Workers’ Compensation Matter Did Not Constitute a Reasonable Excuse for the Insured’s Failure to Give Timely Notice
Tower brought this action seeking a declaration that it had no duty to defend or indemnify its insured, JAAP Construction, Inc. for a separate personal injury action brought by an employee injured as a result of a work related accident.  The basis of this action was that JAAP did not notify Tower of the accident until nine months after it occurred even though it is alleged that the President of JAAP was aware of the accident on the date that it occurred and, in fact, drove the injured party to the hospital. 

JAAP argued in reply that within a few days of the accident one of its’ President’s asked its insurance broker for advice and guidance regarding the accident, and she was advised by the broker that the accident was a workers’ compensation matter.   

The court held “where an insurance policy requires that notice of an occurrence be given promptly, notice must be given within a reasonable time in view of all of the circumstances.”  It concluded that as the notice was provided more than nine months after the incident, it was late as a matter of law.  The court then went on to hold that JAAP’s reliance on the broker’s advice did not excuse its untimely notice to Tower.  A broker is deemed an agent of the insured and notice to a broker does not satisfy the insured’s duty to notify its insurance carrier.  Further, the court held that JAAP’s contention that it believed the accident was a workers’ compensation matter between the employee and his employer did not constitute a reasonable excuse for failure to give timely notice.   

11/23/10       Matter of New S. Ins. Co. v. Schaffer
Supreme Court, Wayne County
Court Denies Request to Permanently Stay Arbitration Where Accident Occurred After the Insured Transferred Ownership of the Vehicle
The court denied Petitioner’s request for a permanent stay of arbitration.  An injured party sought to compel arbitration of an uninsured motorist claim.  At the time of the accident, the injured party was the operator of a 1996 Ford Taurus owned by Caroline Lopez, and allegedly insured by Mercury Casualty Company.  Mercury disclaimed coverage, maintaining that its “former” insured Lopez had sold the vehicle prior to the accident, but permitted the buyer to keep her plates on the vehicle so that he could register it in a different state.  This information was provided at two separate examinations of Lopez.  Lopez never notified Mercury or her insurance agent prior to the accident that she sold the vehicle.

The court found that New South Insurance Company (New South was the insurance carrier for Schaffer’s son, with whom Schaffer resided at the time of the accident) made a prima facie showing that Mercury was the insurer of the Lopez vehicle on the date of the accident based on its submission of a police report, which identified Lopez as the owner, and Mercury as the insurer.  However, an insurer’s coverage of an insured automobile terminates upon the transfer of title by its insured to another unless the insurer is notified and consents to continued coverage.  Despite the lack of documentary evidence as to the sale, the court found that Mercury produced sufficient evidence to rebut New South’s prima facie showing based on the uncontroverted testimony of Lopez.  Thus, the court denied New South’s motion to permanently stay arbitration and found that Mercury was not obligated to defend or indemnify Lopez in any civil action arising from the accident.  

11/22/10       GSD Prod. Servs., Inc. v. Vigilant Ins. Co.
Supreme Court, Nassau County
Court Finds a Question of Fact as to the Applicability of the Dishonesty and Disappearance Exclusions
Plaintiff is in the business of selling and renting theatrical lights and audio equipment.  It appears from the decision that the company was experiencing a bit of upheaval.  The company recently defaulted on a loan it procured from an asset-based lender.  As a result thereof, the lender commenced an action seeking an order that Joseph Trippi, a non-party herein, be placed in charge of managing the company’s business affairs, including the accounts receivable and rents.  This resulted in all management power being taken away from the company’s President and sole shareholder, Glen Davis.   

After being placed in charge, Mr. Trippi changed the locks on all building doors thereafter only giving four employees a set of keys.  In this same time, Mr. Davis became extremely uncooperative and was eventually terminated. 

Thereafter, a theft occurred at plaintiff’s warehouse and approximately 160 pieces of audio and sound equipment were stolen.  In connection with this, plaintiff filed a notice of loss with a policy issued by defendant.  Defendant denied the claim citing the policy’s exclusions for Dishonesty and Disappearance as its investigation revealed no sign of forced entry and no access to the property by unauthorized personnel.  Notably, however, the matter was investigated by the police who identified three suspects, all employees of plaintiff, but the investigation was ultimately closed due to a lack of leads. 

In considering defendant’s motion for summary judgment, the court held that while both exclusions were clear and unambiguous, a review of the record revealed the existence of questions of fact which precluded summary judgment.  Specifically, there was an absence of evidence which conclusively established that it was plaintiff’s employee or someone acting in concert therewith that committed the theft.     

11/16/10       Mercado v. American Sec. Ins. Co.
Supreme Court, New York County
Court Holds That a 61-Day Delay in Providing Notice of Water Damage Was Unreasonable and the Insureds’ Excuse That They Relied Upon Their Contractor to Provide Such Notice Did Not Remedy the Delay
Sandy and Rhina Mercado brought this action seeking to recover insurance proceeds from a residential insurance policy issued by American Security Ins. Co. (“American”).  The Mercados made two claims under their policy in 2004, during the course of renovations made on their property.  The first claim was made in January 2004 when the Mercados experienced water damage caused by frozen pipes.  American reimbursed the Mercados for $53,000 in repairs, but the Mercados were not reimbursed for electrical and plumbing costs related to the incident as they allegedly failed to provide American with a detailed summary of the cost of the repairs needed.  The second claim was made in May 2004 resulting from a March 10, 2004 water-related incident.  American denied the claims asserting that the Mercados were aware of the damage immediately after it occurred, but waited 61-days to provide notice.  In reply, the Mercados’ argued that they did not inform American of the damage until May as they had left that chore to their contractor. 

On American’s motion for summary judgment as to both claims, the court stated that an insurer’s obligation to cover its insured’s loss is not triggered unless the insured gives timely notice of loss in accordance with the terms of the insurance contract.  The court then held that the Mercados failed to establish that the 61-day delay in notifying American of the March incident was reasonable.  Further, the court held that the Mercados’ excuse that they relied on their contractor was not reasonable as the evidence established that they lost contact with the contractor after the incident and eventually hired a different one.  Moreover, the court noted this excuse was unreasonable in light of the Mercados’ failure to ask the contractor whether the notice was ever provided. 

As for the unpaid electrical and plumbing costs concerning the January incident, the court held the Mercados’ established sufficient evidence to avoid summary judgment in that they provided American with “detailed estimates” for the work.  Specifically, the Mercados submitted two estimates.  The first estimate listed the areas of plumbing work to be done with a final price.  Similarly, the second estimate listed the electrical work to be done with a total price.  The court rejected American’s argument that the estimates were fraudulent and failed to identify the contractor involved. 

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

New Federal Rules on Experts – December 1 2010

Major changes to Rule 26 of the Federal Rules of Civil Procedure took effect December 1, 2010, which include significant changes in longstanding procedures concerning expert witness discovery, reports, and communications. 

Of paramount importance, Rule 26 will NO longer require full discovery of all draft or preliminary expert reports, and all communications between an expert and trial counsel, which has generally been the case since the early 1990’s.  Rather, such items will now come under the “protection” of the work product doctrine.  The new rule will prohibit discovery of draft/preliminary expert reports, and limit discovery of attorney and expert communications. 

The rule expressly extends the work product doctrine to drafts of any expert report or disclosure, regardless of the form in which the draft is recorded.  Arguably, this would not only apply to formal draft or preliminary reports, but also to letters, memoranda and emails from the expert to trial counsel. 

The rule will also apply work product protection to communications between an expert and the counsel who retains them.  There are, however, three important sections or areas where disclosure IS still required:

          1.       Communications pertaining to the expert’s compensation;

          2.       The facts or data the attorney provided, and that the expert considered in forming his/her opinions; and

          3.       Assumptions that counsel may have provided, and the expert relied upon in lieu of actual facts or data. 

In addition, the rule alters the procedure for witnesses who may provide “expert testimony” but who were not specifically retained for purposes of trial expert testimony such as treating physicians and government accident investigators.  If such an expert is not required to submit a written report, the lawyer who will use the testimony must submit a disclosure summarizing the facts and opinions on which the expert is expected to testify. 

These changes were brought about because of “complaints” that FRCP 26 was being interpreted to allow discovery of all communications between counsel and expert witnesses and of all draft or preliminary expert reports.  This was perceived as leading to “artificial and wasteful discovery-avoidance practices” such as hiring two sets of experts – one for consultation and one to actually  testify.  Overall, the aim of the measure is to reduce the cost and contentiousness of litigation (which is perhaps a false hope at best and an oxymoron at worst).

Incidentally, it also appears that the new rule extends the new work product protections not just to the “expert” himself/herself, but also to the expert’s employees, staff and assistants. 

Whether or not the new rule will reduce cost and “contentiousness” in litigation is an open question.  It certainly forecloses areas of fruitful investigation and cross-examination of experts who, on many occasions, have been skewered by preliminary and draft reports and ill-conceived communications and discussions memorialized between the expert and counsel. 

ACROSS BORDERS
Courtesy of the FDCC Website
www.thefederation.org

12/03/10       Stafford v. Scottsdale Insurance Company
Third Circuit Court of Appeals
The Third Circuit Upheld the Enforcement of an Animal Exclusion in an Insurance Policy in a Case Involving Serious Injury Resulting from an Attack by a Dog Named “Tank”
The Third Circuit, applying New Jersey law, addressed an animal exclusion in a homeowners insurance policy issued by defendant Scottsdale Insurance Company. The district court had granted summary judgment to Scottsdale. The Third Circuit affirmed concluding that the animal exclusion applied. The plaintiff had been attacked by Tank, a pit-bull mix. The trial court had found Tank’s owner negligent for failing to contain Tank within a fence despite a prior attack, failing to properly train Tank, and for failing to provide Tank with adequate exercise. Based upon these findings, the Superior Court concluded that Tank’s owner was liable to the plaintiff for negligent supervision of his dog. In the declaratory action, applying New Jersey law, the Third Circuit found the animal exclusion to be clear and unambiguous. The Court found that a reasonable person would conclude that the policy did not provide personal liability coverage for bodily injury sustained in the course of an animal attack, such as those that Tank inflicted on the plaintiff. The Plaintiff had argued that coverage was provided due to the negligent supervision of Tank relying upon a concurrent causation doctrine. The court found that the negligent supervision of Tank simply could not be considered a cause of the Plaintiff’s injuries separate and apart from Tank’s attack. The court found it was not dealing with an independent discreet act of negligence unrelated to the attack. In fact, absent Tank’s injury causing attack, the conduct could not have been deemed negligent at all. The court also concluded that Scottsdale did not act in bad faith when it failed to defend the claims.
Submitted by: Stacy Broman, Meagher & Geer, PLLP  

12/3/10         Sellers v. Zurich American Insurance Company
Seventh Circuit Court of Apeals
No Coverage Existed Under an Accidental Death and Dismemberment Policy Where the Death Could Not be Traced to an Accident that Occurred One Year Prior to Claimant’s Death
Mr. Sellers tore a tendon in his knee while performing training exercises at work. He underwent surgery to repair the torn tendon on September 29, 2005. He was told that a metal wire which was inserted to assist in the healing process would likely need to be removed. On November 16, 2006, Mr. Sellers had surgery to remove the broken wire. Nine days later, on November 25, 2006, Mr. Sellers died from an acute pulmonary embolism due to immobilization following the wire removal. Sellers’ wife submitted a claim for benefits under the accidental death and dismemberment policy which covered death within 365 days of an accident. The question was whether Mr. Sellers’ death could be traced to the September 15, 2005 knee injury. Zurich rejected Mrs. Sellers’ claim that the wire breakage constituted an accidental bodily injury reasoning that medical device failures are not accidents under the policy. Because the employer’s plan was governed by ERISA, federal law principles of contractual interpretation applied. The court concluded that Zurich’s decision that the wire break was not an accident was not reasonable. Zurich’s application of the definition for the point of view of a doctor rather than a person of average intelligence and experience was arbitrary. By failing to interpret the plan as would a person of average intelligence and experience, the court found Zurich acted arbitrarily and capriciously. However, the court affirmed agreeing with Zurich which had argued that the wire breakage was a complication of the original knee surgery. Thus, the policy’s 365 day limit barred coverage. If Mr. Sellers’ death could be traced to any accidental injury it was due to the September 2005 injury. However, because that injury predated his death by more than 365 days, Mrs. Sellers was not entitled to recover benefits under the policy.
Submitted by: Stacy Broman, Meagher & Geer, PLLP

12/1/10         Dinallo v. Duav Ins. Co
Second Circuit Court of Appeals
Service of Suit Clause in Reinsurance Agreement Waived Defendant’s Right of Removal
The district court had remanded the case based upon its interpretation of a service of suit provision in the reinsurance agreements between Dunav and Midland Insurance Company, for which Dinallo serves as Liquidator, as waiving defendant’s right of removal. On appeal, Dunav argued that the service of suit provision was ambiguous and should be interpreted to require only its submission to personal jurisdiction, but not as waiver of its rights to removal. The court concluded that the service of suit provision unambiguously waived Dunav’s right of removal. The court noted that when a policy’s service-of-suit clause applies, its probable effect is to waive the insurer’s removal rights. Having found the service-of-suit provision to waive Dunav’s right of removal, the court declined to reach Dinallo’s alternative grounds for affirmance.
Submitted by: Stacy Broman, Meagher & Geer, PLLP

REPORTED DECISIONS
 State Farm Mutual Automobile Insurance Company v. Urban
Randall S. Ferguson, Roslyn Heights, N.Y., for appellant.
Richard T. Lau, Jericho, N.Y. (Joseph G. Gallo of counsel), for
petitioner-respondent.

DECISION & ORDER
In a proceeding pursuant to CPLR article 75 to stay arbitration of a claim for uninsured motorist benefits, Thomas Urban appeals from so much of an order of the Supreme Court, Nassau County (Galasso, J.), entered August 6, 2009, as denied his cross motion to dismiss the petition as untimely, determined that the proceeding was timely commenced, directed a framed-issue hearing, and directed him to furnish the petitioner with discovery in the event that the matter proceeded to arbitration.
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.
On December 1, 2008, the appellant, Thomas Urban, while driving his own motor vehicle, was involved in an accident. At the time of the accident, Urban's vehicle was insured by the petitioner, State Farm Mutual Automobile Insurance Company (hereinafter State Farm). Urban's insurance policy included an endorsement for supplementary uninsured/underinsured motorist benefits which provided for arbitration to resolve claims submitted to State Farm pursuant to this endorsement.
By letter dated December 22, 2008, sent by certified mail, return receipt requested, Urban informed State Farm that he intended to arbitrate a claim under his State Farm policy for, inter alia, supplementary uninsured/underinsured motorist benefits with respect to the December 1, 2008, accident, since the accident involved a motorist who left the scene of the accident. In the letter, Urban provided information concerning his State Farm policy number, his name and address, and a warning that, unless within 20 days of receipt thereof State Farm applied to stay arbitration, it would "be precluded from objecting that a valid agreement was not made or complied with and from asserting in court the bar of a limitation of time." The signed return receipt for the letter demonstrated that State Farm received Urban's letter on December 26, 2008. State Farm responded to Urban's counsel by letter dated April 8, 2009, in which it denied Urban's claim for supplementary uninsured/underinsured motorist benefits.
On June 10, 2009, by certified mail, return receipt requested, Urban sent State Farm a "Request for Arbitration" with the American Arbitration Association (hereinafter the AAA). This request was received by State Farm on June 12, 2009. On June 22, 2009, State Farm petitioned for an order pursuant to CPLR 7503(c) staying the arbitration. Urban cross-moved to dismiss the petition as untimely. The Supreme Court denied Urban's cross motion and granted State Farm's petition to the extent that it set the matter down for a framed-issue hearing and directed Urban to provide discovery to State Farm in the event that the matter proceeded to arbitration.
"CPLR 7503(c) requires that an application to stay arbitration be made within 20 days after service of a notice of intention to arbitrate" (Matter of Liberty Mut. Ins. Co. v Zacharoudis, 65 AD3d 1353, 1353-1354; see Matter of Fiveco, Inc. v Haber, 11 NY3d 140, 144; Matter of Land of the Free v Unique Sanitation, 93 NY2d 942, 943; Matter of Steck [State Farm Ins. Co.], 89 NY2d 1082, 1084). To be considered a valid notice of the intention to arbitrate, the notice must identify the agreement under which arbitration is sought and the name and address of the person serving the notice in addition to containing the statutory 20-day warning that failure to commence a proceeding to stay arbitration will preclude an objection to arbitration (see CPLR 7503[c]; Matter of Blamowski [Munson Transp.], 91 NY2d 190, 195; State Farm Mut. Auto. Ins. Co. v Szwec, 36 AD2d 863).
The failure to move for a stay of arbitration within the statutory period will generally preclude objections to the arbitration after the expiration of that 20-day period (see Matter of Fiveco, Inc. v Haber, 11 NY3d at 144; Matter of Land of the Free v Unique Sanitation, 93 NY2d at 943; Matter of Steck [State Farm Ins. Co.], 89 NY2d at 1084; Matter of Liberty Mut. Ins. Co. v Zacharoudis, 65 AD3d at 1354; Matter of Hermitage Ins. Co. v Escobar, 61 AD3d 869; Matter of State Farm Ins. Co. v Williams, 50 AD3d 807, 809).
Here, once Urban served his notice of intention to arbitrate upon State Farm on December 26, 2008, the 20-day period for State Farm to move for a stay of the arbitration started to run and the subsequent service of the "Request for Arbitration" filed with the AAA did not reset the 20-day period (see Matter of Government Empls. Ins. Co. v Castillo-Gomez, 34 AD3d 477). Consequently, the Supreme Court should have granted Urban's cross motion, regardless of State Farm's contention that there was insurance coverage for the adverse motor vehicle (see Matter of State Farm Ins. Co. v Williams, 50 AD3d at 809) or the Supreme Court's determination that an issue existed with respect to whether there was contact between Urban's vehicle and the motor vehicle which left the scene (see Matter of AIU Ins. Co. v Orellana, 18 AD3d 652; Matter of Merchants Mut. Ins. Co. v Anemone, 271 AD2d 690). Thus, the proceeding should have been dismissed as time-barred (see Matter of Liberty Mut. Ins. Co. v Zacharoudis, 65 AD3d at 1354; Matter of Hermitage Ins. Co. v Escobar, 61 AD3d at 869).
We have not considered State Farm's contention that Urban's notice of his intention to arbitrate was served in a manner intended to conceal its nature or to precipitate default, as it is improperly raised for the first time on appeal (see Matter of Castillo v Town of Oyster Bay, 70 AD3d 939; Matter of Panetta v Carroll, 62 AD3d 1010).
Moreover, it was improper for the Supreme Court to have directed discovery in the event that the matter proceeded to arbitration since a failure to move to stay arbitration within the applicable 20-day time period is a bar to judicial intrusion into the arbitration proceedings (see Aetna Life & Cas. Co. v Stekardis, 34 NY2d 182, 186). In addition, State Farm repudiated its liability for Urban's claim in its letter, dated April 8, 2009, disclaiming coverage, and could not thereafter insist upon adherence to the terms of its policy (see Matter of State Farm Ins. Co. v Domotor, 266 AD2d 219; see also Auerbach v Otsego Mut. Fire Ins. Co., 36 AD3d 840).

In the Matter of State Farm Fire & Casualty Co. v. Hayes
Gellman & Mandell, Lynbrook, N.Y. (Irving Mandell of counsel),
for appellant.
Gail S. Lauzon (Montfort, Healy, McGuire & Salley, Garden
City, N.Y. [Donald S. Neumann, Jr.],
of counsel), for respondents-
respondents.

DECISION & ORDER
In a proceeding pursuant to CPLR article 75 to stay arbitration of an uninsured motorist claim, the appeal, as limited by the appellant's brief, is from so much of a judgment of the Supreme Court, Kings County (Kurtz, Ct. Atty. Ref.), dated November 18, 2009, as, after a hearing, determined that the subject vehicle was stolen and being operated without permission at the time of the accident and, in effect, denied the petition and dismissed the proceeding.
ORDERED that the judgment is affirmed insofar as appealed from, with costs.
"The strong presumption of permissive use afforded by Vehicle and Traffic Law § 388, can only be rebutted by substantial evidence sufficient to show that the driver of the vehicle was not operating the vehicle with the owner's consent" (Matter of State Farm Mut. Auto. Ins. Co. v Ellington, 27 AD3d 567, 568; see Murdza v Zimmerman, 99 NY2d 375, 378; Matter of New York Cent. Mut. Fire Ins. Co. v Dukes, 14 AD3d 704). "The determination of the fact-finding court should not be disturbed on appeal unless its conclusions could not be reached on any fair interpretation of the evidence, especially where, as here, the determination turns largely upon the credibility" of witnesses (Matter of New York Cent. Mut. Fire Ins. Co. v Accardo, 298 AD2d 459, 459; see Sargeant v Village Bindery, 296 AD2d 395, 396; Matter of CGU Ins. Co. v Velez, 287 AD2d 624).
Here, the Supreme Court's resolution of the issues of the vehicle owner's credibility, and the weight to be given the evidence, is supported by the record and will not be disturbed on appeal (see Amex Assur. Co. v Kulka, 67 AD3d 614, 615; McDonald v Rose, 37 AD3d 781, 783; Matter of Allstate Indem. Co. v Nelson, 285 AD2d 545). Accordingly, the Supreme Court properly, in effect, denied the petition and dismissed the proceeding, finding that the presumption of permissive use was overcome (see Matter of New York Cent. Mut. Fire Ins. Co. v Accardo, 298 AD2d at 459; Matter of Allstate Indem. Co. v Nelson, 285 AD2d at 545; Headley v Tessler, 267 AD2d 428, 428-429).

Inner City Redevelopment Corp. v. Thyssenkrupp Elevator Corporation

Geringer & Dolan LLP, New York (John T. McNamara of
counsel), for appellant.
Barry, McTiernan & Moore, New York (David H. Schultz of
counsel) for respondent.
Order, Supreme Court, New York County (Milton A. Tingling, J.), entered March 9, 2010, which, upon reargument, adhered to the original determination granting plaintiff's motion for summary judgment declaring that defendant Thyssenkrupp has a duty to defend plaintiff in the underlying personal injury action and in addition declared that said defendant is obligated to indemnify plaintiff for up to $1.25 million dollars, unanimously affirmed, with costs.
As defendant Thyssenkrupp is not an insurer, its duty to defend its contractual indemnitee is no broader than its duty to indemnify (Bellefleur v Newark Beth Israel Med. Ctr., 66 AD3d 807, 809 [2009]). The contract limits the indemnity to losses caused in whole or in part by defendant's negligence. Because there has been no showing that defendant was negligent, any order requiring defendant to defend or indemnify is premature (see Francescon v Gucci Am., Inc., 71 AD3d 528 [2010]).
However, the contract contains a promise by defendant not only to indemnify, but also to procure insurance that fully covers the scope of the indemnity. The policy that defendant obtained, in the correct face amount, has a $1.25 million deductible. Thus, defendant is obligated to defend and indemnify for any covered liability within the deductible, i.e., up to $1.25 million (see Hoverson v Herbert Constr. Co., 283 AD2d 237, 238 [2001]).
Nor does plaintiff's failure to comply with the notice provisions of the insurance policy provide a defense. Defendant's contractual obligation is separate and distinct from the insurer's obligations under the policy (Singh v New York City Tr. Auth., 17 AD3d 262, 263-264 [2005]). In any event, the amount of the claim is within the deductible.

Liberty Insurance Underwriters Inc. v. Corpina Piergrossi, etc.
Pollack Pollack Isaac & DeCicco, New York (Brian J. Isaac of
counsel), for appellants.
Ropers, Majeski, Kohn & Bentley, New York (Andrew L.
Margulis of counsel), for respondent.
Order, Supreme Court, New York County (Charles E. Ramos, J.), entered June 23, 2009, which, upon the parties' respective motions for summary judgment, granted plaintiff insurer's (the insurer) motion for summary judgment and declared that is not obligated to defend or indemnify defendants attorneys (the attorneys) in an underlying action for legal malpractice, unanimously modified, on the law, to deny the insurer's motion, and otherwise affirmed, with costs.
The insurer argues that it is not obligated to defend or indemnify the attorneys because, prior to the effective date of the first legal malpractice policy issued by the insurer to the attorneys in July 2004, the attorneys had a reasonable basis to foresee that a former client would make a claim against them, and that coverage is therefore excluded under the policy's "Known Claims or Circumstances" clause. In relevant part, the clause excludes coverage for "any claim arising out of a wrongful act occurring prior to the policy period if . . . you had a reasonable basis to believe that you had breached a professional duty, committed a wrongful act, violated a Disciplinary Rule, engaged in professional misconduct, or to foresee that a claim would be made against you."
The underlying legal malpractice action arose out of the attorneys' representation of the former client in connection with a medical malpractice claim for personal injuries allegedly caused by vaccinations administered to the former client in 1991 when he was an infant. More specifically, the malpractice complaint alleges that the attorneys failed to meet a three-year deadline for filing a claim under the federal National Vaccine Injury Compensation Program, 42 USC §§ 300aa-10 et seq. (the NVICP or the Program), and that their failure both foreclosed compensation under the NVICP and barred any civil actions for damages, including a medical malpractice action. The underlying representation apparently began in August 1993; it ended when the attorneys, without bringing an action, resigned from the representation in June 1994 after the three-year NVICP deadline had expired. In December 2006, the former client's attorney advised the attorneys by letter that he had been retained to prosecute a legal malpractice claim based on their failure to file a NVICP claim. The attorneys promptly notified the insurer of this letter, and the insurer has been representing the attorneys in the underlying legal malpractice action under a reservation of rights.
In arguing that the attorneys had a reasonable basis for foreseeing a claim by the former client, the insurer relies on a letter to the former client's father written in October 1993 by an associate employed by the attorneys. The associate confirmed a prior conversation in which he advised that an "important deadline" was approaching in January 1994. That is, after stating that the former client "may be entitled to compensation under the terms of the Vaccine Injury Compensation Program," the associate stated that "[i]n order to make a claim under this program, the petition must be filed within 36 months from the time symptoms first appeared." The associate requested complete copies of all applicable medical records "[i]n order to prepare a proper petition." In arguing the absence of any such reasonable basis, the attorneys stress what is not said in the associate's letter and rely on a June 1994 letter, written by one of the attorneys to the former client's father. That letter, which makes no mention of the NVICP, "confirm[ed]" a prior discussion in which the father had been advised that the attorneys "cannot represent your son in this potential medical malpractice action." The letter did not explain why the firm could not represent the former client, but went on to state that, assuming the information provided by the father was correct, the "statute of limitations will expire on January 22, 2001, based upon the statute of limitations of medical malpractice actions on behalf of infants." This shows, the attorneys argue, that they did not know that the failure to file a claim under NVICP would preclude a state court medical malpractice action. Because they did not know otherwise until after the inception of coverage — when they received the December 2006 claim letter — they maintain that the known-claims exclusion does not apply.
The parties agree that the burden is on the insurer to show the applicability of the known-claims exclusion and that a two-pronged test governs the applicability of the exclusion. Under that test, the court "must first . . . consider the subjective knowledge of the insured and then the objective understanding of a reasonable attorney with that knowledge" (Executive Risk Indem. Inc. v Pepper Hamilton LLP, 13 NY3d 313, 322 [2010] [construing Pennsylvania law] [internal quotation marks omitted; ellipsis in original]). More particularly, the first prong requires the insurer to show the insured's knowledge of the relevant facts prior to the policy's effective date, and the second requires the insurer to show that a reasonable attorney "might expect such facts to be the basis of a claim" (id.; see also Colliers Lanard & Axilbund v Lloyds of London, 458 F3d 231, 237 [3d Cir 2006], construing New Jersey law).
The attorneys do not dispute the insurer's contention that the knowledge of the associate must be imputed to them. Nor do they dispute that the letter establishes that the associate knew both of NVICP and of a requirement that a petition be filed within three years of the first appearance of symptoms "[i]n order to make a claim under this program." Their contention is that the letter does not establish that they also knew that the failure to file a timely administrative claim under the Program had the additional legal consequence of foreclosing any civil action for damages. As a matter of logic, this contention is plainly correct. The associate, of course, may have known this fact about the law, but the letter does not establish that he did know. Nor did anything else submitted in support of the insurer's motion establish that the associate (or any attorney at the firm) knew this legal fact. It may be that a competent attorney who became aware that making a claim under the Program required a petition to be filed within a deadline would make sure he knew all the legal consequences of not meeting that deadline. What a competent, or reasonable, attorney would have known, however, is far from dispositive of the question of what the attorneys in fact knew. 
The inference that the attorneys did know that the failure to file a petition in accordance with the NVICP would preclude a civil action for damages may be a reasonable one. The evidentiary support for that inference includes the fact that the statement in the June 1994 letter that the attorneys could not undertake the representation is unexplained. Moreover, the attorneys' assertion in their letter to the insurer after learning of the malpractice claim that they "were only investigating a medical malpractice claim," rather than an administrative claim, is at odds with the associate's request for copies of all medical records "[i]n order to file a proper petition [under the Program]." Regardless of whether the inference is reasonable, it is not inescapable and it cannot be the basis for granting summary judgment to the insurer (Branham v Loews Orpheum Cinemas, Inc., 8 NY3d 931, 932 [2007] [all favorable inferences must be drawn in favor of party opposing summary judgment]).
The insurer unpersuasively argues the irrelevance of the attorneys' reasonable expectation of a claim as a result of not filing a petition under the Program. Contrary to its contention, the attorneys' insistence on the relevance of their actual ignorance of the legal consequences of not filing does not "entirely remove" the objective component of the test. Rather, the most that can be said is that in some cases the subjective prong of the test will be dispositive; the insured's lack of knowledge will make it unnecessary to consider the objective prong.
The insurer also objects that the attorneys "are in essence seeking to be rewarded for their ignorance . . . in connection with the medical malpractice action for which they were retained." The "reward" of coverage, however, is the necessary and intended consequence of a test with a subjective component. The insurer is in essence objecting to the practical reality that enables it to sell any malpractice coverage, including retroactive coverage on a claims made basis. To obtain protection from the consequences of their ignorance is a key reason why attorneys purchase and insurers are able to sell malpractice insurance. A purely objective test would provide insurers with far greater protection against the risks of both "adverse selection" (see generally Simpson v Phoenix Mut. Life Ins. Co., 24 NY2d 262, 268-269 [1969]) and outright fraud. But if attorneys had to run that gauntlet to obtain coverage, they would have little or no reason to buy malpractice insurance. After all, the promised retroactive coverage would be illusory if it could be denied solely because a reasonable attorney would have known at the time of the act or omission that a malpractice claim could be made (cf. Colliers Lanard, 458 F3d at 242 ["retroactive coverage for professional errors would be illusory if such coverage could be denied on the ground that a reasonable professional would have known that the error had been committed prior to obtaining the policy"]).
Nor does the attorneys' position require insurers to provide coverage whenever the insured raises a claim of ignorance. The claim of ignorance might not be credible and the insurer, perhaps aided by discovery into the insured's handling of other cases, may be able to refute it. Moreover, ignorance at the time of the malpractice is not sufficient to entitle the insured to coverage. Rather, subject to the application of the objective prong, the insured will not be entitled to coverage if its ignorance is dispelled before the beginning of the policy period. Thus, as the attorneys concede, the exclusion would apply if they had learned at any time prior to the beginning of the policy period that the failure to file a petition under the Program would foreclose a civil action for damages. In addition, although an attorney might not know that a particular act or omission would result in the dismissal of the client's claim, the attorney might know (or be unable to deny knowing) that some adverse consequence would or was likely to result. In such a case, regardless of whether a malpractice claim was reasonably foreseeable, a reasonable attorney with that more limited knowledge might believe nonetheless that the attorney "had breached a professional duty, committed a wrongful act, violated a Disciplinary Rule, [or] engaged in professional misconduct." Indeed, as discussed below, the insurer makes a similar argument. For this additional reason, we disagree with the insurer's argument that the attorneys' position on the subjective prong "eviscerates" the objective prong.
Despite making that very argument, the insurer contends that "any reasonable lawyer with knowledge of the facts admittedly known to [the attorneys] would believe that the failure to timely file a claim [in accordance with the NVICP] would have some consequences and could lead to a malpractice claim against the lawyer." This fallback position also is unpersuasive. The reasonable lawyer who believed that not filing a petition under the Program would affect only what he believed his client did not want, an administrative remedy, certainly would not expect to be a defendant in a malpractice action alleging that no civil action could be prosecuted because that petition had not been filed. Mere knowledge of "some consequences" is inconsequential. The attorneys' knowledge of the banality that actions have consequences does not provide "a reasonable basis to believe that [they] had breached a professional duty, committed a wrongful act, violated a Disciplinary Rule, [or] engaged in professional misconduct."
Just as we cannot draw against the attorneys the inference that they did know the actual consequences of not filing a petition under the Program, we cannot draw against the insurer the inference that they did not know. For that reason alone, we reject the attorneys' argument that their cross motion for summary judgment should have been granted. To avoid confusion, we address briefly the attorneys' contention that "a mistaken belief that a professional did not commit malpractice is sufficient to avoid the [known-claims-or-circumstances] exclusion." Suffice it to say that if a reasonable attorney with the subjective knowledge of the insured would expect a claim against the insured on the basis of the facts known to the insured, coverage would be excluded regardless of any belief that no professional standards were violated.
Finally, the attorneys argue that the insurer should be estopped from disclaiming coverage because they have been prejudiced by the insurer's delay in disclaiming. This argument is meritless as the insurer has never disclaimed coverage and has been defending the underlying malpractice action from the outset under an undisputedly timely reservation of rights (see O'Dowd v American Sur. Co. of N.Y., 3 NY2d 347, 355 [1957]).

New York University v. American Building Maintenance 
Carluccio Keener & Morrow, New York (Marian S. Hertz of
counsel), for appellant.
The Chartwell Law Offices, LLP, New York (Jack Gross of
counsel), for respondent.
Order, Supreme Court, New York County (Walter B. Tolub, J.), entered October 21, 2009, which, in a declaratory judgment action involving defendant insurer's (Continental) obligation to defend and indemnify plaintiff (NYU) in an underlying action for personal injuries sustained on NYU's premises, insofar as appealed from, denied Continental's motion for summary judgment declaring that it is not so obligated, unanimously reversed, on the law, with costs, the motion granted, and it is declared that Continental is not so obligated. Appeal from order, same court (Eileen A. Rakower, J.), entered January 15, 2010, which denied Continental's motion to renew, unanimously dismissed, without costs, as academic in view of the foregoing.
Continental has no obligation to defend NYU in the underlying action under a policy that provides, "We [i.e., Continental] shall have the right, but not the duty, to: 1. Defend or participate in the defense of any suit' against the insured" (see In Re Sept. 11th Liab. Ins. Coverage Cases, 458 F Supp 2d 104, 123-124, 128 [SD NY 2006]; see also AJ Contr. Co., Inc. v Forest Datacom Servs., 309 AD2d 616, 618 [2003]).
Concerning the obligation to indemnify, it appears that NYU and defendant maintenance contractor (ABM) entered into a contract that provides for ABM's procurement of insurance naming NYU as an additional insured, also provides that notice from ABM to the insurer would be deemed notice by NYU, and also provides that ABM "shall not commence any work . . . until it has obtained all of the insurance required by this paragraph and such insurance has been approved by [NYU]'s Director of Insurance." ABM obtained a policy from Continental that, as amended, provides for a self insured retention (SIR) of $1 million per occurrence, and also provides that "You [i.e., the insured] must see to it that we [i.e., Continental] are notified as soon as practicable of an occurrence,' . . . act, [or] error or omission . . . which may result in a claim: 1. For which the damages can reasonably be expected to exceed fifty percent . . . of the [SIR]."
While we agree with NYU that summary judgment in Continental's favor on the issue of coverage is precluded by an issue of fact as to whether the damages in the underlying action will exceed the $1 million SIR (see Long Is. Light. Co. v Allianz Underwriters Ins. Co., 35 AD3d 253, 254 [2006], appeal dismissed 9 NY3d 1003 [2007]), we find that Continental did not receive timely notice of the underlying accident and, for that reason, has no obligation to indemnify. The underlying accident occurred on March 6, 2003, and although NYU knew about the accident, at the latest, by February 14, 2006, the date of its answer in the underlying action, the only notice that NYU gave Continental was to sue it, which NYU did not do until August 14, 2008. Nor did ABM give Continental notice of the accident. To be sure, ABM initially told NYU that its insurer was ACE USA, and NYU did not find out until May 27, 2008 that ABM was insured by Continental. However, if NYU had exercised its right under its contract with ABM to approve ABM's insurance, NYU would have known back in 2000 that ABM's insurer was Continental. As it is clear that NYU could have prevented the mishap, we find that it did not give notice as soon as practicable (cf. Briggs Ave. LLC v Insurance Corp. of Hannover, 11 NY3d 377, 381 [2008]).

Torain v. Bah
Brandon J. Walters, New York, for appellant.
Baker, McEvoy, Morrissey & Moskovits, P.C., New York
(Stacy R. Seldin of counsel), for respondent.
Order, Supreme Court, Bronx County (Nelson S. Roman, J.), entered June 11, 2009, which granted defendant's motion for summary judgment dismissing the complaint on the grounds that plaintiff did not sustain a serious injury as defined by Insurance Law § 5102(d), unanimously modified, on the law, to the extent of denying the motion in part and reinstating plaintiff's claims that she sustained a significant limitation of use of a body function or system and/or a permanent consequential limitation of use of a body organ or member, and otherwise affirmed, without costs.
Defendant established a prima facie entitlement to summary judgment by submitting the affirmed reports of an orthopedic surgeon and a neurologist, who, after conducting independent examinations of plaintiff and detailing the objective tests performed, concluded that plaintiff had full range of motion in her neck, back and shoulder (see Zhijian Yang v Alston, 73 AD3d 562 [2010]). Defendant also submitted the affirmed report of a radiologist, who, upon reviewing plaintiff's MRI films, opined that plaintiff's complaints of pain were attributable to degenerative changes in her lumbar and cervical spine.
In opposition, plaintiff raised triable issues as to whether she sustained a serious injury under the categories of significant limitation of use of a body function or system and/or the permanent consequential limitation of use of a body organ or member (Insurance Law § 5102[d]). Plaintiff's orthopedic surgeon, who examined plaintiff and reviewed the MRI films of her cervical and lumbar spine taken approximately one month after the accident, opined that the cervical herniations were caused by the trauma of the accident, inasmuch as the nuclear pulposis was projected outward in a focalized way. The conflicting expert opinions as to the cause of plaintiff's cervical herniations raises an issue of fact for trial (see e.g. Jacobs v Rolon, 76 AD3d 905 [2010]). Triable issues are also raised by evidence, including the MRI of plaintiff's lumbar spine showing two disc bulges, that plaintiff was asymptomatic prior to the accident, that the results of the objective tests performed by plaintiff's experts indicated universal limitations in range of motion, and that such experts opined that the cause of plaintiff's lumbar injuries were related to the accident (see id.; Mercado-Arif v Garcia, 74 AD3d 446 [2010]).
Dismissal of plaintiff's claim of serious injury under the 90/180-day category was appropriate inasmuch as the record establishes that plaintiff continued to work following the accident, albeit in a diminished capacity, and there was no medical determination that she was unable to engage in substantially all her material and customary daily activities for 90 out of the first 180 days after the accident (see e.g. Blake v Portexit Corp., 69 AD3d 426 [2010]).

Bejaran v. Perez
Fotopoulos, Rosenblatt & Green, New York (Dimitrios C.
Fotopoulos of counsel), for appellant.
Abrams, Gorelick, Friedman & Jacobson, P.C., New York
(Dennis J. Monaco of counsel), for respondents.
Order, Supreme Court, Bronx County (Norma Ruiz, J.), entered September 16, 2009, which granted defendants' motion for summary judgment dismissing the complaint for lack of a serious injury, unanimously modified, on the law, the motion denied and the complaint reinstated only to the extent that the serious injury claim is based on inability to perform usual and customary activities for at least 90 of the 180 days following the accident, and otherwise affirmed, without costs. Appeal from order, same court and Justice, entered December 22, 2009, which denied plaintiff's motion to renew and reargue, unanimously dismissed, without costs, as academic with regard to renewal, and as taken from a nonappealable order with regard to reargument.
The reports of defendants' experts, based on examinations performed more than two years after the accident and addressed only to the permanency of plaintiff's injuries, failed to make a prima facie showing that plaintiff had not sustained a 90/180 injury (see Alexandre v Dweck, 44 AD3d 597 [2007]; Loesburg v Jovanovic, 264 AD2d 301 [1999]). Nor did defendants submit any other evidence to show that plaintiff did not sustain such an injury. However, the court properly granted summary judgment with respect to alleged permanent injury and significant limitations, since plaintiff's experts failed to respond sufficiently to defendant's evidence on those claims.

Rosa-Diaz v. Maria Auto Corp.
Greenstein & Milbauer, LLP, New York (Andrew W. Bokar of
counsel), for appellant.
Baker, McEvoy, Morrissey & Moskovitz, P.C., New York
(Stacy R. Seldin of counsel), for respondent.
Order, Supreme Court, Bronx County (Maryann Brigantti-Hughes, J.), entered on or about July 22, 2009, which, in this action seeking damages for personal injuries purportedly suffered by a pedestrian as the result of being struck by a metal object thrust up by a motor vehicle, granted defendants' motion for summary judgment dismissing the complaint on the ground of lack of serious injury pursuant to Insurance Law § 5102(d), unanimously affirmed, without costs.
Defendants satisfied their initial burden of establishing, prima facie, the absence of any triable questions of fact so as to entitle them to judgment as a matter of law (see Smalls v AJI Indus., Inc., 10 NY3d 733, 734 [2008]) by submitting the affirmed reports of a neurologist and orthopedic surgeon, supported by specific tests that had been performed upon plaintiff, that the subject incident did not cause her to suffer a serious injury within the contemplation of Insurance Law § 5102(d) in the form of a permanent consequential limitation of a body organ or a significant limitation of use of a body function or system (see Zhijian Yang v Alston, 73 AD3d 562, 563 [2010]; Santiago v Bhuiyan, 71 AD3d 485 [2010]). Moreover, notwithstanding that the orthopedic surgeon did discern a minor deficit in a single aspect of plaintiff's lumbar motion, this slight limitation was insignificant for purposes of Insurance Law § 5102(d) (see Cruz v Lugo, 67 AD3d 495, 496 [2009]; Eichinger v Jone Cab Corp., 55 AD3d 364 [2008]). Although plaintiff also argues that the failure of defendants' doctors to review her medical records mandated the denial of summary judgment, a prima facie showing of the absence of triable questions of fact does not require such a review as a condition for a grant of summary judgment (see Clemmer v Drah Cab Corp., 74 AD3d 660, 660-661 [2010]; DeJesus v Paulino, 61 AD3d 605, 607 [2009]).
In opposition, plaintiff failed to raise a triable issue of fact. It is significant that plaintiff has admitted that she was involved in three other accidents in addition to the one at issue, two of which happened before the subject event, the third having occurred in September 2006, but plaintiff's chiropractor totally ignored any effect of those accidents on the purported symptoms attributable to the one herein. Yet, "even where there is objective medical proof of an injury, summary dismissal of a serious injury claim may be appropriate when additional contributory factors, such as preexisting conditions, interrupt the chain of causation between the accident and the claimed injury" (Farrington v Go On Time Car Serv., __ AD3d __, 2010 NY Slip Op 6538, ***1-2 [2010]; see also Pommells v Perez, 4 NY3d 566, 572 [2005]).
As for the 90/180-day category of serious injury, it is axiomatic that an individual's unsupported subjective claim of continuing pain and the inability to work for more than 90 days is not dispositive of the existence of a 90/180 category injury. In order to raise a question of fact there must be some objective proof, not here presented, substantiating the existence of such an injury (see Nieves v Castillo, 74 AD3d 535 [2010]; Weinberg v Okapi Taxi, Inc., 73 AD3d 439 [2010]). Consequently, "the reference to plaintiffs' proof and deposition testimony sufficiently refuted the 90/180 day allegation of serious injury" (DeJesus v Paulino at 607).

Nationwide Mutual Fire Ins. Co. v. Maitland
Calendar Date: October 13, 2010
Before: Peters, J.P., Spain, Lahtinen, Kavanagh and Garry, JJ.

Law Office of Epstein & Rayhill, Latham (Jeffrey T.
Culkin of counsel), for appellant.
Abdella Law Offices, Gloversville (J. David Burke of
counsel), for Alex L. Maitland and another, respondents.
Law Office of Michael Braccini, Schenectady (Michael
Braccini of counsel), for Lisa Turner and another, respondents.
MEMORANDUM AND ORDER



Peters, J.P.
Appeal from that part of an order of the Supreme Court (Aulisi, J.), entered January 25, 2010 in Hamilton County, which denied plaintiff's motion for summary judgment seeking a declaration that it had no duty to defend or indemnify defendants Alex L. Maitland and Tamara Maitland in an underlying personal injury action.
On January 24, 2007, while at a bar in the Town of Speculator, Hamilton County, defendant Lisa Turner hit her head on the floor and was temporarily rendered unconscious. According to Turner, she was injured when defendant Alex L. Maitland, an old high school friend who she had encountered at the bar, lost his balance after attempting to pick her up onto his shoulders. Following the incident, an ambulance was summoned and Turner was diagnosed with a head injury and released from the hospital that evening. Several months later, in April 2007, Turner was diagnosed with two herniated disks and subsequently underwent surgery. Turner and her husband, derivatively, thereafter commenced a personal injury action against Maitland, among others. After Maitland was served, he notified plaintiff, his insurer, of the action on February 4, 2008. Plaintiff disclaimed coverage on the ground that neither Maitland nor Turner gave prompt notice of the incident. Plaintiff then commenced the instant action seeking a judgment declaring that it had no duty to defend or indemnify Maitland and his wife in connection with the underlying personal injury action. Following joinder of issue, plaintiff moved and the Maitlands cross-moved for summary judgment. Supreme Court denied both motions, prompting this appeal by plaintiff.
Where, as here, "a policy of liability insurance requires that notice of an occurrence be given 'as soon as practicable,' such notice must be accorded the carrier within a reasonable period of time" (Great Canal Realty Corp. v Seneca Ins. Co., Inc., 5 NY3d 742, 743 [2005] [citation omitted]; see Sorbara Constr. Corp. v AIU Ins. Co., 11 NY3d 805, 806 [2008]). There may be circumstances that excuse a delay in notifying the insurer, such as the insured's good faith reasonable belief in nonliability (see Great Canal Realty Corp. v Seneca Ins. Co., Inc., 5 NY3d at 743; U.S. Underwriters Ins. Co. v Carson, 49 AD3d 1061, 1063 [2008]; Spa Steel Prods. Co. v Royal Ins., 282 AD2d 864, 865 [2001]). "The reasonableness of the insured's belief, as well as a failure to conduct further inquiry, generally remains a question of fact for the jury" (Morehouse v Lagas, 274 AD2d 791, 794 [2000] [citations omitted]; see Preferred Mut. Ins. Co. v New York Fire-Shield, Inc., 63 AD3d 1249, 1251 [2009]). Guided by these principles, we find that questions of fact exist as to whether there was a reasonable excuse for Maitland's delay in providing notice.
Here, Maitland stated that he did not believe that Turner had sustained any type of significant injury on the date of the incident, explaining that she was walking after the fall, did not appear to be injured and refused to get into an ambulance until he convinced her to do so as a precautionary measure. Although Maitland indicated that he heard rumors in the summer of 2007 that he might be sued by Turner, he believed it to be simply "scuttlebutt about town," as the information did not come from Turner herself — or anyone with direct knowledge — and he did not learn of Turner's diagnosis of bulging disks until much later. Furthermore, while plaintiff submitted two letters that were sent to Maitland in August and September 2007 from the insurer of the bar inquiring as to the incident that caused Turner's injuries, as well as correspondence sent from Turner's counsel in May and October 2007 advising Maitland that Turner was being represented for serious injuries sustained as a result of the January 2007 incident, Maitland stated that he does not recall ever receiving these letters. Maitland averred that his address is "P.O. Box 789, Lake Pleasant" and that the correspondence, which was addressed to either "Route 8, Lake Pleasant" or "Route 8, Speculator," would likely not have reached his home without the inclusion of his post office box number since "Route 8 is a large expanse of state highway in Lake Pleasant and beyond." Maitland did mention in a recorded statement to the insurer that he received a letter from "an attorney" in September or October 2007, but there is no evidence as to the contents of that letter or who sent it, and Maitland subsequently averred that he did not recall receiving a letter from Turner's attorney. In light of these credibility issues and the conflicting inferences that may be drawn from the facts, and mindful of the preference for permitting a jury to decide the question of reasonableness, we find that Supreme Court properly denied plaintiff's summary judgment motion (see North Country Ins. Co. v Jandreau, 50 AD3d 1429, 1431 [2008]; Klersy Bldg. Corp. v Harleysville Worcester Ins. Co., 36 AD3d 1117, 1119 [2007]; Morehouse v Lagas, 274 AD2d at 794; G.L.G. Contr. Corp. v Aetna Cas. & Sur. Co., 215 AD2d 821, 822 [1995]).
Similarly unpersuasive is plaintiff's assertion that Turner's notice to it was untimely as a matter of law. Insurance Law § 3420 (a) (3) affords an injured party an independent right to give notice so as to preserve his or her right to proceed directly against an insurer, notwithstanding the timeliness of the notice given by an insured (see American Tr. Ins. Co. v Sartor, 3 NY3d 71, 76 [2004]; General Acc. Ins. Group v Cirucci, 46 NY2d 862, 863-864 [1979]; U.S. Underwriters Ins. Co. v Carson, 49 AD3d at 1064; Lauritano v American Fid. Fire Ins. Co., 3 AD2d 564, 568 [1957], affd 4 NY2d 1028 [1958]). "Significantly, the notice required of an injured party to an insurer is measured less rigidly than the notice required of an insured . . . 'since what is reasonably possible for the insured may not be reasonably practical for the injured person'" (GA Ins. Co. of N.Y. v Simmes, 270 AD2d 664, 666 [2000], quoting Jenkins v Burgos, 99 AD2d 217, 221 [1984]; accord U.S. Underwriters Ins. Co. v Carson, 49 AD3d at 1064). "In each case, the test is one of reasonableness, measured by the diligence exercised by the injured party in light of the prospects afforded to him [or her] under the circumstances" (Jenkins v Burgos, 99 AD2d at 221 [citation omitted]; see GA Ins. Co. of N.Y. v Simmes, 270 AD2d at 666).
Here, within a few weeks of being diagnosed with herniated disks and advised of the need for surgery, Turner retained an attorney. Her attorney promptly engaged the services of a private investigator, but the investigator was unable to locate or speak with Maitland [FN1] . After ascertaining that Turner had a viable claim, Turner's attorney immediately requested in a May 1, 2007 letter, and again in an October 2007 letter, that Maitland provide notice to his insurer and to contact him if he was not insured. Under these circumstances, the reasonableness of Turner's actions in attempting to provide notice to plaintiff presents a question of fact for the jury to resolve (see U.S. Underwriters Ins. Co. v Carson, 49 AD3d at 1064; Allstate Ins. Co. v Marcone, 29 AD3d 715, 717 [2006], lv dismissed 7 NY3d 841 [2006]; GA Ins. Co. of N.Y. v Simmes, 270 AD2d at 666-667).
Spain, Lahtinen, Kavanagh and Garry, JJ., concur.
ORDERED that the order is affirmed, with one bill of costs.
Footnotes
Footnote 1: Notably, Maitland averred that he was rarely home in 2007 because his job required him to engage in extensive travel.

Johnson v Metropolitan Life Insurance Co.

Smith Campbell, LLP, New York (Thomas M. Campbell of
counsel), for appellants.
d'Arcambal, Levine & Ousley, LLP, New York (Aimee P.
Levine of counsel), for respondent.
Order, Supreme Court, New York County (Michael D. Stallman, J.), entered May 29, 2010, which denied plaintiffs' motion for summary judgment and granted defendant's cross motion to amend its answer to assert a defense and counterclaim for insurance fraud under the New Jersey Insurance Fraud Prevention Act (IFPA), unanimously affirmed, with costs.
Plaintiffs are the beneficiaries of two life insurance policies that defendant issued. The insured, now deceased, executed applications for the policies partly in New Jersey and partly in New York. The insured stated on the applications that he resided in Kearny, New Jersey and worked there as well. The policies that defendant issued in reliance on the applications contain a "NJ" notation on some pages.
On the applications, the insured answered "no" to every question concerning whether he had a particular disease or disorder. He also represented in the applications that he would be paying the premiums. Allegedly relying on the representations in the applications, defendant issued the two policies. Plaintiff Johnson was the named beneficiary on one policy, and plaintiff Nicklas was the named beneficiary on the other.
In 2004, defendant learned that the insured had not made a single premium payment on his own, but rather, a third person had been making all the payments. On November 29, 2004, defendant advised the insured in writing that it considered the policies null and void because the insured had not paid any premiums himself, and requested identification of the person to whom it could return the premiums. It does not appear that defendant ever received a response. The insured died on August 7, 2005 from cardiopulmonary arrest.
After the insured's death, defendant disclaimed coverage on several grounds. First, defendant claimed that the policies were void because the insured decedent had misrepresented on the applications that he would pay the premiums when, in fact, a third party paid them. Second, defendant contended that contrary to the representations decedent made in the applications, he had a known history of serious and chronic medical problems, including "end-stage liver disease secondary to hepatitis C," hypertension and diabetes. Defendant also intimated that the policies were void because it appeared that the insured had not actually participated in the application process himself.
Plaintiffs commenced this action in 2006 to recover the proceeds of the policies. In 2009, they moved for summary judgment on their complaint and to dismiss defendant's counterclaims. Defendant cross-moved for leave to amend its answer to include a defense and counterclaim under the IFPA (NJ Stat Ann § 17:33A-7).
The motion court properly denied summary judgment. Defendant submitted affidavits from long-term employees, including its Vice President of Corporate Ethics and Compliance, Chief Underwriter and Senior Technical Claims Advisor, as well as internal underwriting and compliance documents. These submissions raise questions of fact regarding the materiality of the decedent's misrepresentations that he would be the payor, sufficient to defeat summary judgment at this juncture (see Leamy v Berkshire Ins. Co., 39 NY2d 271, 274 [1976]).
With respect to its cross motion to amend to assert a defense and counterclaim for insurance fraud under the IFPA, defendant maintains that New Jersey law applies and permits this claim. Plaintiffs contend that the law is the same in New York and New Jersey, and the operation of either state's "incontestability" statute bars defendant from pleading fraud as a defense or counterclaim more than two years after issuance of the policies.
Both New York and New Jersey have statutes that mandate that all life insurance policies contain a clause making the policy incontestable by the life insurer after the policy is in force for two years (Insurance Law § 3203[a][3]; NJSA § 17B:25-4). However, the New Jersey Supreme Court has stated in dictum that "[e]ven after the expiration of the contestability period, an insurer may deny a claim if the insured committed fraud in the policy application" (Ledley v William Penn Life Ins. Co., 138 NJ 627, 635, 651 A2d 92, 95 [1995]). In addition, New Jersey enacted the IFPA "to confront aggressively the problem of insurance fraud . . . by . . . requiring the restitution of fraudulently obtained insurance benefits" (NJSA § 17:33A-2).
By contrast, New York's incontestability statute bars challenges even when the insured has failed to disclose facts on an insurance application (see New England Mut. Life Ins. Co. v Caruso, 73 NY2d 74 [1989]; see also Ilyaich v Bankers Life Ins. Co of N.Y., 47 AD3d 614, 615 [2008] [alleged misrepresentation concerning insured's assets and the purpose for the insurance]). New York's approach represents a policy choice to place the onus on the insurance company to investigate, within the two-year period, the veracity of the claims that a potential insured might make in an application for life insurance (see New England Mutual, 73 NY2d at 82; see also Settlement Funding LLC v AXA Equitable Life Ins. Co., 2010 US Dist LEXIS 104451, *10-11, 2010 WL 3825735, *3 [SD NY] ["the incontestability clause serves the important function of encouraging buyers to purchase insurance with confidence that after the contestable period has passed they are assured of receiving benefits for which they pay premiums"]).
There indeed appears to be a conflict between the laws of the two states. However, no court in New York has directly held that an insurance company is restricted to the two-year period where the insured has lied about his or her health in an application for insurance. Obviously, correct health information is pertinent to an insurance company's decisions whether to take on the risk and what premium to charge. Nevertheless, we need not decide what New York law calls for because New Jersey law applies to this dispute. The decedent represented on the applications that he was a resident of New Jersey. On defendant's change-of-ownership form, dated July 10, 2003, he also listed his address in New Jersey as the mailing address for his niece, beneficiary and owner of one of the policies. The insured signed in New Jersey at least part of the applications that induced defendant to issue the policies. Defendant sent bills for premiums to a Kearny, New Jersey address. No one suggested changing that billing address. As New Jersey was the place of contracting and defendant was led to believe that the location of the insured risk (i.e. the insured) was in New Jersey, no one should be surprised that New Jersey law applies to this dispute(see Certain Underwriters at Lloyd's, London v Foster Wheeler Corp., 36 AD3d 17 [2006], affd 9 NY3d 928 [2007]).
Accordingly, the court properly permitted defendant to amend its answer to include a fraud defense and counterclaim asserting that the insured decedent knowingly provided false and misleading information on the applications regarding the decedent's medical history, even though defendant raised this defense outside the two-year contestability period (see Paul Revere Life Ins. Co. v Haas, 137 NJ 190, 201-202, 644 A2d 1098, 1104 [1994]; see also Ledley, 138 NJ at 635, 651 A2d at 95). This is consistent with the IFPA, that was enacted to prevent false or misleading statements in insurance applications (see Ashkenazi v Lincoln Natl. Life Ins. Co., 2009 US Dist LEXIS 40234, *18-20, 2009 WL 1346394, *6 [ED NY]; Liberty Mut. Ins. Co. v Land, 186 NJ 163, 171-172, 892 Ad 1240, 1245 [2006]).
THIS CONSTITUTES THE DECISION AND ORDER
OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.

Grobman v Chernoff

Dominic P. Zafonte, for appellants.
Alexander J. Wulwick, for respondent.




READ, J.:
In August 1996, plaintiff Lindsay Grobman was injured in a car accident; at the time, she was traveling as a passenger in car driven by defendant Adam J. Chernoff and owned by defendant Rhonda Globman (a/k/a Rhoda Grobman). A bifurcated trial was held in plaintiff's ensuing lawsuit. In June 2000, a jury found defendants 100% at fault in the happening of the accident. The next month, a jury found that plaintiff had suffered a serious injury; namely, ”permanent consequential limitation of use of a body organ or member" (see Insurance Law § 5102 [d]), and awarded her damages for future medical expenses, but not for future pain and suffering. Supreme Court entered judgment for plaintiff in the amount of $10,000 in August 2001. This sum included $1,100 for past pain and suffering and $8,900 for future medical expenses.
Plaintiff appealed. The Appellate Division concluded that the jury's "failure to award any damages for future pain and suffering [could not] be reconciled with the finding of permanent injury," and remitted the matter to Supreme Court for a new trial on the issue of damages (Ajoudanpour v Grobman, 2 AD3d 373 [2d Dept 2003]).
On remand, Supreme Court granted defendants' motion to compel arbitration on all issues, including the threshold issue as to whether plaintiff suffered serious injury. Plaintiff appealed again, and the Appellate Division reversed. The court concluded that the jury's determination that plaintiff had sustained serious injury within the meaning of New York's no-fault statute, which neither party challenged in the first appeal, was a final and binding determination that could not be relitigated in arbitration (Grobman v Chernoff, 35 AD3d 658, 659 [2d Dept 2006]).
The case then returned to arbitration solely on the issue of damages. The parties agreed to high/low parameters of $150,000 and $10,000; that "any and all pending litigation arising from this action shall be discontinued with prejudice upon the determination of this matter"; and that damages were at issue. After a hearing, the arbitrator awarded plaintiff a "net amount award" of $125,000. The arbitrator's decision did not mention interest.
Plaintiff subsequently moved and defendants cross moved to confirm the arbitration award and enter judgment. While these motions were pending, defendants' insurance carrier tendered a check for $125,000 as "full and final settlement." Plaintiff retained this check, but did not cash it.
In a decision in August 2008 disposing of the motions, Supreme Court noted that the "principal issue" contested by the parties was "whether plaintiff [was] entitled to interest on the arbitration award computed from the date of the jury verdict in her favor on the issue of liability," or, alternatively, "from the date of the arbitration award." The judge added that "[t]he decision of the arbitrator does not allude to the subject and neither side contends that the question was presented to the arbitrator."
Supreme Court confirmed the award in the amount of $125,000, "with interest . . . at the judgment rate from the date of the award with credit to be given to defendants for the payment tendered, computed from the date of receipt of the check." The judge acknowledged that "[i]n general," where a plaintiff has obtained a favorable jury verdict on liability, "interest on a judgment ultimately entered in a motor vehicle accident case begins to run from the date of . . . the jury's verdict"; however, he added, the usual rule did not govern this case "because the parties agreed to submit the entire dispute to arbitration."
Plaintiff appealed to the Appellate Division for a third time. As relevant here, the court held that plaintiff was entitled to interest on the damages award from the date the jury found defendants liable, citing our decision in Love v State of New York (78 NY2d 540 [1991]) (63 AD3d 786 [2d Dept 2009]). We granted defendants' motion for leave to appeal (13 NY3d 714), and now affirm.
Defendants argue that the parties' arbitration agreement includes a "broad arbitration clause," which empowered the arbitrator to decide the entire controversy, including the amount of any prejudgment interest. While the parties in this case were free to submit the issue of prejudgment interest to the arbitrator, we do not read their arbitration agreement as having done this. As relevant, the agreement says merely "AT ISSUE: Damages" and, as we pointed out in Love, damages and prejudgment interest are not the same thing. Damages compensate plaintiffs in money for their losses, while prejudgment interest "is simply the cost of having the use of another person's money for a specified period" (Love, 78 NY2d at 544 [citing Siegel, NY Prac § 411, at 623 [2d ed]). Further, as plaintiff observes, there was "no necessity to negotiate whether plaintiff was entitled to interest" as a part of the arbitration agreement because "she already possessed that right as a matter of law as of the date of her liability verdict." Finally, there are no circumstances in this case indicating that plaintiff gave up that right when she agreed to arbitrate damages (cf. Rice v Valentine, 75 AD3d 631 [2d Dept 2010]).
Accordingly, the order of the Appellate Division should be affirmed, with costs.
* * * * * * * * * * * * * * * * *
Order affirmed, with costs. Opinion by Judge Read. Chief Judge Lippman and Judges Ciparick, Graffeo, Smith, Pigott and Jones concur.
Decided November 30, 2010
Decided on December 9, 2010
Gonzalez, P.J., Saxe, Nardelli, Richter, RomÁn, JJ.

Tam v Metropolitan Life Insurance Company

K & L Gates LLP, New York (Michael R. Gordon of counsel),
for appellant-respondent.
Jaroslawicz & Jaros LLC, New York (David Jaroslawicz of
counsel), for respondent-appellant.
Order, Supreme Court, New York County (Walter B. Tolub, J.), entered November 16, 2009, which denied defendant's motion for summary judgment to dismiss the complaint and grant its counterclaim, and denied plaintiff's cross motion for summary judgment, unanimously modified, on the law, to dismiss plaintiff's General Business Law § 349 claim, and otherwise affirmed, without costs.
This appeal concerns plaintiff Shou Fong Tam's right to recover death benefits under three life insurance policies issued in 1988, 1991, and 1992 by defendant Metropolitan Life Insurance Company (MetLife). The policies insured the life of non-party James Ngai. Tam worked for MetLife as a sales representative and account executive from the late 1980s until 2008. She apparently sold the policies to Ngai, who would later become her fiancÉ. Subsequent to their purchase, Ngai transferred ownership of all three policies to Tam.
Tam made premium payments for over a decade, until December 2003, when the policies lapsed for nonpayment. Coverage continued temporarily through a nonforfeiture clause, which allowed the owner a grace period in which to pay past due premiums and reinstate coverage. When Tam was notified her policies had lapsed, she elected to have the premiums paid by accrued dividends. However, as the policies had lapsed, their reinstatement required forms to be signed by Mr. Ngai, as insured. Tam never submitted these forms. She alleges that she was promised notification by regular mail in the event that her dividends were insufficient to keep premium payments current. MetLife counters that no such promise was made, and that it was standard practice to send email notification, which is what it did. By letter dated July 2004, MetLife notified Tam that her premiums were past due and that the policies' "non-forfeiture" periods had expired.
In December 2004, Tam requested that the reinstatement forms be waived. MetLife refused, and Tam asked her manager, a higher level MetLife employee, to intercede on her behalf. Through e-mails and phone calls, he attempted to get MetLife to waive the reinstatement form requirement. Mr. Ngai died in March of 2005. In May 2005, Tam spoke with MetLife agents and stated that the policies lapsed due to MetLife's negligence. MetLife then waived the reinstatement requirements. Company employees aver that they only allowed reinstatement without Ngai's signature based upon Tam's misrepresentation that she was the agent, not the beneficiary of the policies. Once reinstated, Tam paid the balance on the premiums and the policies became active. Tam then submitted a claim for death benefits, which was rejected.
She then brought this action alleging breach of contract and violation of General Business Law § 349. In its answer, defendant counterclaimed for rescission of the three policies. Both plaintiff and defendant moved for summary judgment, which the court denied. Both parties appealed. We modify to dismiss plaintiff's General Business Law § 349 claim, and otherwise affirm.
The IAS court properly denied plaintiff's and defendant's motions for summary judgment on the cause of action for breach of contract. There are material issues of fact as to whether plaintiff was properly notified of the imminent lapse of the insurance policies she owned, thus precluding summary judgment to either party (see Gilbert Frank Corp. v Federal Ins. Co., 70 NY2d 966 [1988]; Zuckerman v City of New York, 49 NY2d 557 [1980]). There are also issues of fact concerning whether plaintiff misrepresented her status as the owner of the policies when attempting to have them reinstated without proper documentation.
However, we grant defendant's motion to dismiss the claim for violation of General Business Law § 349. The elements of a claim under that section include consumer-oriented conduct that is materially deceptive and causes injury to the plaintiff (see Oswego Laborers Local 214 Pension Fund v Marine Midland Bank, 85 NY2d 20, 25 [1995]; New York Univ. v Continental Ins. Co., 87 NY2d 308, 320 [1995]). Here, plaintiff contends that MetLife violated General Business Law § 349 by withholding crucial information regarding the status of policyholders' premium payments, in furtherance of a broad scheme to unlawfully avoid paying benefits. While it is settled that disputes involving insurance transactions can fall within the ambit of General Business Law § 349 (Riordan v Nationwide Mut Fire Ins. Co., 977 F2d 47, 52 [1992]), private contractual disputes upon matters not affecting the consuming public are not actionable under this section (see Continental, 87 NY at 321; Security Mutual Life Insurance Company of N.Y. v DiPasquale, 283 AD2d 182 [2001], lv dismissed 97 NY2d 653 [2001]).
Plaintiff alleges misconduct in the handling of her policy and MetLife's failure to pay death benefits. However, her dispute with her insurer and their course of dealings is unique. There is nothing in the record to indicate that there are any other policyholders similarly situated. Accordingly, we dismiss plaintiff's General Business Law § 349 claim. These facts do not present the type of consumer-oriented misconduct the statute was enacted to prevent.