Coverage Pointers - Volume XII, No. 21
Dear Coverage Pointers Subscribers:
Welcome to the official beginning of summer. It is Friday the 15th and that means the beach house is open for the next six months. The ice boom is being removed from the mouth of the Niagara River. Even in Buffalo, the snow shovels are finally being placed in the back of the sheds. The vodka is on ice. Come around for a cocktail on the white, soft and sandy shores of Lake Erie, but bring your passport, because you'll have to cross into the Province of Ontario. Oh, and go pay your taxes as well, if you've not done that yet. The beach is more fun.
Nashville was Special
A special welcome to the 20+ new subscribers who joined our wonderful Coverage Pointers family, as a result of our presentations at the PLRB Claims Conference in Nashville. So you know, every second Friday, you'll find an action-packed issue of Coverage Pointers in your e-mail box. Every issue is prefaced by a cover letter that outlines the highlights of the issue attached. We produce these in MS Word format so you can easily cut and paste our summaries into your claims files. Enjoy.
Sniffing Around Bad Faith -- Twice
It is rare that a bad faith case reaches an appellate court in New York and still rarer if a bad faith verdict or judgment is sustained. It's been several years since any bad faith judgment has been affirmed by a New York court. In this week's issue, there are two decisions that reference bad faith. In my column, there is a downstate decision where a judgment of bad faith was vacated in a liability context and sent back for a full trial on the issues. In Steve's property contribution, you will find a Fourth Department discussion of bad faith in a first party case. However, there is still no affirmed judgment.
Cassie's Capital Connections
Our Albany counsel, Cassie Kazukenus, is hard at work. In keeping with our desire to keep you better advised on state government activities relating to insurance, Cassie will be stopping into the Assembly and Senate legislative committee meetings to watch for relevant bills under consideration. She reports on two of those in her column this week.
One Hundred Fifty Years Ago
Most recognize that this is the 150th anniversary of the beginning of the War Between the States (or, as my friends in Dixie call it, The War of Northern Aggression). The New York Times was in its 10th year of existence in 1861, and its front page 150 years ago today covered only Civil War news, including the fall of Fort Sumpter. The headlines read:
New York Times
April 15, 1861
FORT SUMPTER FALLEN
PARTICULARS OF THE BOMBARDMENT
The Fort on Fire and the Garrison Exhausted
NO ATTEMPT AT REINFORCEMENT
The Cessation of Firing and the Capitulation
NO LIVES LOST ON EITHER SIDE
Major Anderson and his Men Coming to New York
How the News Was Received in Washington
Call for Seventy-Five Thousand Militia
An Extra Session of Congress
War Feeling Throughout the Northern and Western States
Fort Pickens Reinforced
Major Anderson has surrendered, after hard fighting, commencing at 4½ o'clock yesterday morning and continuing until five minutes to 1 today. The American Flag has given place to the Palmetto of South Carolina.
We have a number of decisions pertaining to the sufficiency of a peer review to deny durable medical equipment that warrant review. The Upstate arbitrators are scrutinizing the peer review reports and specifically are looking at the journals the reviewer is relying upon. In quite a few of these decisions, it seems that the reviewer is relying upon a journal which addresses prevention of workplace accidents to the low back. The assigned arbitrator determined that this journal is not relevant as the case involves treatment for a low back injury post-accident not prevention. Thus, the persuasiveness of the review is substantially diminished. Another issue that arose in these decisions is the failure of the reviewer to address the significance, or lack thereof, of positive objective findings and tests and link why the equipment would not be necessary.
There are some other decisions that warrant a brief review regarding application of the Medicare/Medicaid fee schedule to an ambulance or air ambulance service. There have been a number of awards in the past months, all with the same rationale, from multiple Upstate arbitrators determining that the ambulance or air ambulance service's bills were at the prevailing local rate and that the insurer could not apply the Medicare/Medicaid fee schedule.
Since Spring is finally here please let us know if you have any training needs. Some topics that we have received telephone calls on recently are:
- Understanding loss transfer when a commercial vehicle is involved;
- Tips for analyzing whether an accident arises out of the use and operation or loading and unloading of a vehicle;
- Determining whether you have a sufficient IME or peer review; and
- Preparing for arbitration and conduct during an arbitration.
One Hundred Years Ago
April 15, 1911
TODAY IS ANNIVERSARY
OF LINCOLN'S DEATH
Washington, April 15.-Further than the flying of the American flag from the window of the house In which Abraham Lincoln died, there was little outward indication here that to-day was the forty-sixth anniversary of the Martyred President's death. The house now contains the Oldroyd collection of Lincoln relics, notable among them the death mask of Lincoln. Several states commemorated the anniversary of the assassination of the martyred President, among them New York, where the flags on the public buildings were flown at half-mast. It is a singular coincidence that Good Friday this year fell upon April 14th, since it was the night of Good Friday in 1865 that Lincoln was shot. He lingered until the next day
One Hundred Years Ago - We Do Love Baseball Trivia (1)
Hall of Fame pitcher Grover Cleveland Alexander had his major league debut on April 15, 1911. Alexander had a 29-11 record for the Syracuse Stars in the Class B New York State in 1910 and was thereafter sold to the Philadelphia Phillies for $750. From 1912 to 1920, Alexander led the league in ERA five times (1915, 1916, 1917, 1919, and 1920), wins five times (1914-17, 1920), innings six times (1912, 1914-17, 1920), strikeouts six times (1912, 1914-1917, 1920), complete games five times (1914-1917, 1920), and shutouts five times (1915, 1916 [a single-season record 16], 1917, 1919).He won pitching's Triple Crown 1915, 1916, and 1920.
Steven Peiper Piping:
At long last...decisions, decisions, decisions! We've got an interesting collapse case that was taken up by the Third Department in this week's offering. In addition, we also review a decision discussing a Coverage Pointers favorite...the two year suit limitation clause. We also offer a delightful decision from the Fourth Department reviewing the sixty-day rule for Proofs of Loss.
On a more solemn note, we also invite you take a look at the Bakos decision from the Fourth Department. It is more proof that the continued erosion of New York's long standing rules on bad faith is well underway. More than three years ago, in the aftermath of the infamous Bi-Economy decision, the Coverage Pointers' staff (well, okay, Dan and myself) wrote of a coming wave of bad faith litigation.
While the wave that was expected hasn't quite materialized, make no mistake there continues to nibbling at the edges of the bad faith protections this State has long afforded to the insurance industry. We see more and more evidence that plaintiffs are defeating early on motions to dismiss. While not yet breaking through with an affirmative finding of bad faith, the mere allegation of an extra-contractual claim creates a host of issues in file handling and discovery exchange. Almost invariably, the support for plaintiff's defeating a motion to dismiss is found within the dicta of Bi-Economy.
All is not lost, however. In fact, carriers and defense counsel alike have been able to hold their ground with respect to affirmative findings of bad faith. As noted from time to time here, no New York appellate court has affirmed a finding of bad faith in several years. Of course, the best way to inoculate oneself from an extra-contractual claim is diligent file handling and constant communication with the insured. Doing so provides defense counsel with the tools necessary to maintain standing precedent.
That's it for this week. See you again in two weeks.
One Hundred Years Ago - We Do Love Baseball Trivia (2)
It is said to be one of the most interesting feats in sports, throwing four strikeouts in one inning. It can only happen when the catcher drops a third strike and the batter then has an opportunity to run to first. If the batter/runner gets there before the ball, he gets the base but the pitcher gets credit for the strike-out anyway.
One hundred years ago today, Hall of Famer Walter "The Big Train" Johnson became the first National League pitcher to achieve that mark, while pitching for the Washington Senators. By the way, because I know you were curious, the first American League pitcher to do so was Ed Crane, of the New York Giants on October 4, 1888. In some record books, Crane is listed as playing for the New York Gothams. Formed in 1883, the Gothams were renamed the Giants in 1885 by their founder/manager, "Truthful Jim" Mutrie. After a very satisfying victory, he called the players his "giants" and the nickname stuck. Of course, the Giants remained in New York until the end of the 1957 season, when they moved out to the west coast.
In this Week's Headlines
KOHANE'S COVERAGE CORNER
Dan D. Kohane
- Contractual Liability Exclusion Excepts Leases
- In Uninsured Motorists Application, Framed Issue Hearing Appropriate to Determine Insured Status of Offending Vehicle Where Proof Presented of Possibility of Insurance; Timeliness of Application to Stay Measured by Filing, Not Service, of Special Proceeding
- Summary Judgment Finding Bad Faith Against Carrier Set Aside and Matter Remitted for Trial
- Obligations Found Under Unsigned Purchase Order and Insurance Policy to Defend Property Owner in Construction Suit; Evidence Existed of Intent to Be Bound by Terms
- Subsequent Request for Unavailable Coverage Renews Broker's Obligation to Find It or Advise of Unavailability
MARGO'S MUSINGS ON SERIOUS INJURY UNDER NEW YORK NO FAULT
Margo M. Lagueras
- Psychologist's Failure to Review Pre-Accident Medical or Psychological Records Renders Opinion Regarding Causal Relationship Speculative: Pro Se Litigant's Burden Is Not Lighter
- If One Injury Meets Threshold, Jury Will Also Hear Those That Do Not
- Again, Complaint Is Dismissed Where No Contemporaneous Evidence Is Proffered
- Unaffirmed or Uncertified Submissions Fail to Raise a Triable Issue of Fact
- Once Again, Complaint Is Dismissed Where No Contemporaneous Evidence Is Proffered
- Claims Under Significant Limitation of Use and 90/180-Day Categories Are Reinstated Thanks to Defendant's Evidence Submissions
AUDREY'S ANGLES ON NO-FAULT
Audrey A. Seeley
- Peer Review Opinion Not Persuasive Due to Treating Physician's Rebuttal Focusing on Issues with Cited Journals
- Peer Review Opinion Not Persuasive Due to Failure to Address Care in Current Case and Reliance Upon Article Pertaining to Workplace Accident Prevention
- Peer Review Opinion Persuasive on Durable Medical Equipment When Compared with Lack of Evidence from Treating Chiropractor
- Medicare Fee Schedule Not Applicable to Ambulance Service Bill
- Questionable Counsel Tactics Lead to Confusion and Failure to Permit Second Opportunity to Show for IME
- IME No-Show Denial Upheld as Assignor's Story Contradicted Applicant's Own Treatment Records
- Medicare Ambulance Fee Schedule Not Applied to Air Ambulance Service
- Motion Failed to Demonstrate Financial Relationship on Referral Case
PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper
- Endorsement Covering Damages Arising from Enforcement of an Ordinance of Law Did Not Require That the Enforcement Be Occasioned Due to a Covered Cause of Loss
- Carrier's Subrogation Rights Do Not Accrue Until Payment of a Claim
- Fourth Department Holds That Two Year Suit Limitation Clause Does Not Apply to Rebuilding/Replacement Cost Disputes; Bi-Economy Lurking in the Background
- Sixty-Day Deadline for Submission of Proofs of Loss Is Triggered by First Receipt of the Request for Proofs of Loss
- GOL 5-321 Does Not Prohibit a Party to a Lease from Being Indemnified for Its Own Negligence
CASSIE'S CAPITAL CONNECTION
Cassandra A. Kazukenus
- News from the New York State Assembly Insurance Committee
FIJAL'S FEDERAL FOCUS
Katherine A. Fijal
- Settlement and Application of the Air Transportation Safety and System Stabilization Act of 2001 ["ATSSSA"]
- Whether Accident "Arose Out of" the Operations of Defendants' Insured
Question of Fact on Late Notice Where Plaintiff's President Spoke No English and Relied on a Business Acquaintance to Read the Suit Papers and "Take Care of It"
- Waiver of Subrogation Provision in Lease Agreement Leads to Dismissal of Complaint
- Court Refuses to Permit Deduction for Depreciation in Fire Loss Case
- Owner and Construction Manager Not Entitled to Additional Insured Status; Notice to Insurance Carrier Under One Policy Is Not Notice Under a Separate Policy Issued to a Different Insured
- Predominant Cause of Destruction of Insured's Retaining Wall Was Excessive Water, Not Malfunctioning Storm Drain
Jennifer A. Ehman
- Question of Fact on Late Notice Where Plaintiff's President Spoke No English and Relied on a Business Acquaintance to Read the Suit Papers and "Take Care of It"
- Massive Water Intrusion Did Not Arise Out of Insured's Work for Owner and Construction Manager
- Waiver of Subrogation Provision in Lease Agreement Leads to Dismissal of Complaint
- Court Refuses to Permit Deduction for Depreciation in Fire Loss Case
- Owner and Construction Manager Not Entitled to Additional Insured Status; Notice to Insurance Carrier Under One Policy Is Not Notice Under a Separate Policy Issued to a Different Insured
- Predominant Cause of Destruction of Insured's Retaining Wall Was Excessive Water, Not Malfunctioning Storm Drain
Earl K. Cantwell
INDICATORS OF MEDICAL PROVIDER FRAUD
That's all for now. Have a lovely weekend and don't forget to write. We do love hearing from you.
And we hear from a lot of you, especially with commentary about decisions in which you were involved.
Hurwitz & Fine, P.C.
1300 Liberty Building
Buffalo, NY 14202
E-Mail: [email protected]
H&F Website: www.hurwitzfine.com
Hurwitz & Fine, P.C. is a full-service law firm
providing legal services throughout the State of New York
Dan D. Kohane
INSURANCE COVERAGE TEAM
Dan D. Kohane, Team Leader
Michael F. Perley
Katherine A. Fijal
Audrey A. Seeley
Steven E. Peiper
Margo M. Lagueras
Jennifer A. Ehman
Diane F. Bosse
FIRE, FIRST-PARTY AND SUBROGATION TEAM
Andrea Schillaci, Team Leader
Jody E. Briandi
Steven E. Peiper
Audrey A. Seeley, Team Leader
Margo M. Lagueras
Jennifer A. Ehman
Jody E. Briandi, Team Leader
Scott M. Duquin
Diane F. Bosse
Index to Special Columns
Kohane’s Coverage Corner
Margo’s Musings on “Serious Injury”
Audrey’s Angles on No Fault
Peiper on Property and Potpourri
Cassie’s Capital Connection
Fijal’s Federal Focus
KOHANE’S COVERAGE CORNER
Dan D. Kohane
04/14/11 VBH Luxury, Inc. v. 940 Madison Associates LLC
Appellate Division, First Department
Contractual Liability Exclusion Excepts Leases
The policy's contractual liability exclusion does not apply to "insured contracts," which include leases, and that, since the liability here arises from a lease, it is not subject to the contractual liability exclusion. As there is no cross-liability exclusion, the third-party claims by the named insured against the additional insured may proceed.
Editor’s Note: I know I’m missing something here, but what about anti-subrogation concerns? Inquiring minds want to know.
04/05/11 In the Matter of GEICO v. Morris
Appellate Division, Second Department
In Uninsured Motorists Application, Framed Issue Hearing Appropriate to Determine Insured Status of Offending Vehicle Where Proof Presented of Possibility of Insurance; Timeliness of Application to Stay Measured by Filing, Not Service, of Special Proceeding
GEICO moved to stay an uninsured motorist arbitration and filed the petition within 20 days of the demand for arbitration (although it was served after the 20 day statutory time period). Under state statute, if a UM carrier believes that there is no right to arbitration over benefits, it must file its special proceeding with the state no later than 20 days following the demand for arbitration. Here, since the filing of the petition took place within the 20 day period, it was timely, even thugh served thereafter.
GEICO demonstrated that it was entitled to a framed-issue hearing on whether or not the offending vehicle was insured on the date of the accident. If it were insured, then the arbitration would be permanently stayed. Morris’ attorney had acknowledged that the vehicle had been insured until “a few hours” before the accident and the police report indicated that the car was insured as well.
Editor’s Note: At least once every quarter an appellate decision reminds us that an uninsured motorist arbitrator does not have the power to determine whether or not an arbitration should proceed because of the potential insured status of the other vehicle. A UM carrier that believes that it should not have to pay those benefits because, in fact, the vehicle was not uninsured must make an application to stay arbitration, in State Supreme Court, and that petition must be filed within twenty (20) days of a demand for arbitration. It is the shortest statute of limitations around.
Note the next case:
04/05/11 In the Matter of Liberty Mutual Ins. Co. v. Vella
Appellate Division, Second Department
Where There Is Uncontroverted Evidence of Physical Contact Between Insured’s Motor Vehicle and a “Hit-and-Run” Car, Uninsured Motorists Benefits Are Available
Liberty Mutual commenced a special proceeding to stay uninsured motorist arbitration on the ground that there was no physical contact between its insured’s car and the alleged hit-and-run driver. Under New York law, there must be physical contact between the vehicles to qualify for UM coverage. Since Liberty contended there was no physical contact and therefore took the position that UM coverage was unavailable, it filed the petition to stay.
The facts were as follows. Vella, the insured’s daughter, was driving her car on a highway in Queens. She collided with the rear of a truck which was stopped in her lane of travel. According to her testimony at the framed issue hearing, the collision took place because an unidentified vehicle struck the rear of hers, causing it to lurch forward and then fled the scene. The lower court, in the framed-issue hearing as to physical contact, agreed with Liberty that there had not been physical contact and permanently stayed arbitration.
The appellate court, reviewing the “uncontroverted evidence” below found that there was physical contact with an unidentified driver and thus reversed the order below, lifting the stay and allowing the UM arbitration to proceed.
04/05/11 Federal Insurance Co. v. North American Specialty Ins. Co
Appellate Division, First Department
Summary Judgment Finding Bad Faith Against Carrier Set Aside and Matter Remitted for Trial
Allied World Assurance insured a policy of CGL coverage to Galaxy with a limit of $1,000,000. Federal provided Galaxy with excess coverage up to $10,000,000. In addition, pursuant to its contractual indemnity obligation, Galaxy purchased from CUIC, for the property owners' benefit, a separate owners and contractors protective liability policy (OCP) with a limit of $1,000,000.
The underlying Labor Law action was settled for $3,000,000. CUIC paid $1,000,000 by CUIC pursuant to the OCP policy and $2,000,000 by Federal pursuant to the excess policy, without prejudice to Federal's right to recover from CUIC. Federal alleged that it paid an extra $1,000,000 as a result of CUIC's bad faith in failing to defend Galaxy against the owners' indemnification claims on the basis of the antisubrogation rule. In a prior appeal the court found that Federal sufficiently stated a cause of action for bad faith because it favored one insured against another in order to avoid policy proceeds from being implicated..
The court reviewed the duties of good faith that exist under New York law:
- Once it assumes defense of the suit, the insurer has a duty to act in "good faith" when deciding whether to settle and may be held liable for breach of that duty;
- This duty also applies where an excess insurer is exposed to liability;
- A primary insurer must give consideration to the excess carrier's interests as it does to its own;
- An insurer does not breach its duty of good faith when it makes a mistake in judgment or behaves negligently;
- To establish bad faith, an excess insurer must show that the primary insurer's conduct constituted a "gross disregard" of the excess insurer's interests and that the insurer's conduct involved a "deliberate or reckless failure to place on equal footing the interests of its insured with its own interests when considering a settlement offer;"
- There is no formula to determine whether an insurer acted in good faith. The court must assess, among other factors, the "plaintiff's likelihood of success on the issue of liability, the potential damages award, the financial burden on each party if the insurer refuses to settle, whether the claim was properly investigated, the information available to the insurer when the demand for settlement was made, and . . . any other relevant proof tending to establish or negate the insurer's good faith in refusing to settle."
The court found that there remains a material issue of fact as to whether CUIC was merely negligent or whether CUIC and/or its counsel were aware that the antisubrogation rule applied and deliberately failed to assert the defense in order to allow the owners to escape liability, thereby removing the OCP policy from the layer of coverage that had to be exhausted before triggering Federal's excess coverage. The court remits the matter to trial to determine whether the underlying file establishes a deliberate plan by CUIC or merely reflect discussions of the consequences of a valid indemnity claim by the owner against Galaxy.
A dissenting judge would have sustained the bad faith judgment.
Editor’s Note: Had the summary judgment been affirmed, this would have been the first reported bad faith judgment against an insurance carrier sustained by an appellate court in New York in several years.
04/07/11 ACC Construction Corp. v. Tower Insurance Co. of New York
Appellate Division, First Department
Independent Contractors Exclusion Removed Coverage for Additional Insured
The Court found that it was undisputed that the Tower CGL policy provided additional insured coverage to ACC. However, the policy had a independent contractors exclusion, which excludes from coverage " personal injury' arising out of operations performed for any insured by independent contractors."
In this case, decedent was an employee of an independent contractor of ACC Construction and that his death arose out of his employer's operations, and therefore, the exclusion applies as a matter of law.
Tower also sought indemnity for costs incurred in connection with its defense of this declaratory judgment action from the decedent's wife, based on an indemnification provision contained in its settlement agreement with her in the underlying action. The Court found that the agreement did not so provide.
04/01/11 Timmons v. Barrett Paving Materials, Inc.
Appellate Division, Fourth Department
Obligations Found Under Unsigned Purchase Order and Insurance Policy to Defend Property Owner in Construction Suit; Evidence Existed of Intent to Be Bound by Terms.
Two lawsuits were commenced arising out of construction accident. Timmons sued property owner Barrett after Timmons was struck by a metal catwalk while working on a construction project. Timmons worked for Schneider and when Schneider refused to defend Barrett, Barrett commenced a third-party action against Schneider based on an indemnity/hold harmless agreement.
In second action, Barrett sued Colony Insurance Company claiming it enjoyed additional insured status under a policy procured by Schneider for its benefit. Town of Aurora, 202 AD2d 984).
With respect to the defense and indemnity issues, the unsigned purchase order containing a defend and indemnify clause issued by Barrett to Schneider prior to the accident constituted a "written contract" within the meaning of Workers' Compensation Law § 11 . The fact that the purchase order was not signed by a representative of Schneider is of no moment inasmuch as there is sufficient evidence in the record to establish as a matter of law that Schneider assented to the terms of the purchase order and intended to be bound by it. It performed the work in the purchase order and it procured the insurance required by its terms, demonstrating an intention to be bound..
With respect to the action against Colony, the court noted that additional insured endorsement provides that a third party may be added as an additional insured "when [Schneider] and the [third party] . . . have agreed in writing in a contract or agreement that such person or organization be added as an additional insured' on [Schneider's] policy." Here, the purchase order, which required Schneider to add Barrett as an additional insured on its commercial general liability policy, constitutes an agreement in writing for purposes of the additional insured endorsement.
Editor’s Note: There is an interesting discussion in the decision, not reviewed here, about the inapplicability of the Labor Law provisions to this accident.
04/01/11 Page One Auto Sales, Inc. v. Brown & Brown of New York, Inc.
Appellate Division, Fourth Department
Subsequent Request for Unavailable Coverage Renews Broker’s Obligation to Find It or Advise of Unavailability
Page is an auto dealership and sued an insurance broker claiming that the broker breached its duty to procure an insurance policy containing "false pretense coverage," which is intended to cover losses in the event that plaintiff purchased automobiles with defective titles.
Where there is a specific request for coverage, an agent has the duty to obtain it or tell the customer it cannot.
The dissent argued that the insured had the opportunity to review the policy prior to the loss and should have known the policy did not have the requested coverage. However, the majority found that the broker was asked, after the policy was reviewed, to again obtain the coverage. This new request triggered another obligation to try to secure it or advise that it was unavailable.
04/14/11 D’Antonio v. Rothchild
Appellate Division, First Department
Plaintiff Fails to Rebut Defendant’s Prima Facie Showing
On appeal, the trial court’s grant of summary judgment to defendant is affirmed where defendant’s examining experts reported no range-of-motion restrictions or other residual injury, and plaintiff failed to adequately rebut that evidence.
04/14/11 Bernardez v. Babou
Appellate Division, First Department
Expert’s Opinion That Complaints Are Subjective Must Be Supported
Plaintiff claimed permanent consequential and significant limitations of use of the lumbar spine. Defendants’ motion was denied and on appeal that ruling was affirmed because defendants’ orthopedic expert noted range-of-motion restrictions and objective signs of injury. In addition, although the expert opined that plaintiff’s complaints were subjective, there was no evidence that her limitations were self-imposed.
04/07/11 Clark v. Basco
Appellate Division, Third Department
Psychologist’s Failure to Review Pre-Accident Medical or Psychological Records Renders Opinion Regarding Causal Relationship Speculative: Pro Se Litigant’s Burden Is Not Lighter
Plaintiff’s vehicle was struck from behind and she commenced an action, pro se, claiming injuries under the permanent consequential and/or significant limitation of use, and the 90/180-day categories of serious injury. In her bill of particulars, she claimed hip and lumbar disorder, post-concussive disorder, loss of vision, posttraumatic stress disorder, traumatic brain injury, and major depressive disorder.
In support of her summary judgment motion, defendant submitted evidence showing that plaintiff drove herself to the hospital with complaints of neck, back and buttocks pain, that x-rays revealed only mild degenerative changes, that she followed up a week later with her primary care physician who diagnosed whiplash, and sent her for physical therapy, and that when she returned a month later, her physician determined the pain had resolved, authorizing her to return to work.
Over the next two years, plaintiff presented to her physician repeatedly with many problems and her physician’s reports noted that plaintiff suffered from schizoaffective disorder, which has been diagnosed before the accident. A neurologist found no signed or permanent injury and MRIs of the brain and lumbar spine were normal. Defendant also proffered the results of an IME by an orthopedic surgeon that attributed her symptomology to preexisting degenerative disc disease, exaggerated by her mental conditions, but found no causal relationship to the accident.
In addition, a clinical neuropsychologist, who performed a peer review of the records of plaintiff’s psychologist, found that the conclusions regarding diagnosis and causal relationship were unsupported as the psychologist had not conducted any neuropsychological testing, nor had she reviewed any of plaintiff’s pre-accident medical or psychological records, but rather relied on plaintiff’s subjective complaints. As such, her conclusions lacked foundation and were speculative.
In opposition, plaintiff relied only on her medical records and reports from her medical providers and her own affidavit. Only the records of a physical therapist contained any qualitative or quantitative assessments, and none of the diagnostic testing revealed any abnormalities. In addition, none of the records of her psychological treatment contained objective findings. As a result, she failed to raise a triable issue of fact with respect to the permanent consequential or significant limitation of use categories.
With regard to her claim under the 90/180-day category, there was no objective medical proof presented to support that claim.
04/05/11 O’Sullivan v. Velez
Appellate Division, First Department
If One Injury Meets Threshold, Jury Will Also Hear Those That Do Not
Defendants’ motion and cross motion were denied on appeal with respect to the permanent consequential and significant limitation of use categories as related to plaintiff’s right wrist as plaintiff submitted the affirmation of her treating physician which set forth objective tests and opinions conflicting with those of defendants’ experts. Because her claim for injury to the wrist was sufficient to go to a jury, she was also entitled to have a jury hear her neck claim even though those injuries did not meet the threshold. However, with regard to her claim under the 90/180-day category, her own deposition testimony defeated that claim.
04/05/11 Capriglione v. Rivera
Appellate Division, Second Department
Again, Complaint Is Dismissed Where No Contemporaneous Evidence Is Proffered
Dismissal of the complaint is affirmed where plaintiff did not submit any admissible medical records or affidavits/affirmations with findings contemporaneous with the accident.
04/05/11 D’Orsa v. Bryan
Appellate Division, Second Department
Unaffirmed or Uncertified Submissions Fail to Raise a Triable Issue of Fact
The reports of plaintiff’s treating neurologist and orthopedist, hospital records, and imaging and EMG/NCS reports all failed to raise an issue of fact because they were all either unaffirmed or uncertified. In addition, the neurologist’s report did not contain any findings that were contemporaneous with the accident, all of which results in the trial court’s dismissal of the complaint being affirmed.
04/05/11 Refuse v. Magloire
Appellate Division, Second Department
IME Must Relate Findings to 90/180-Day Claims in Order to Defeat Those Claims
Both plaintiffs alleged injuries to the cervical and lumbar spine areas and both made claims under the 90/180-day category. In opposition to plaintiffs’ motion for summary judgment, defendant failed to raise an issue of fact because the IME of his expert orthopedic surgeon did not specifically relate the findings to plaintiffs’ 90/180-day claims which were set forth in the bill of particulars, emphasizing once more the importance of paying attention to every detail in a bill of particulars.
04/05/11 Lippman v. Flaherty
Appellate Division, Second Department
Once Again, Complaint Is Dismissed Where No Contemporaneous Evidence Is Proffered
The affirmed report of plaintiff’s treating physician contained objective evidence of significant limitations on recent examination but no competent evidence was proffered that was contemporaneous with the accident. As such, the trial court is reversed, defendant’s motion granted and the complaint dismissed.
04/01/11 Houston v. Geerlings
Appellate Division, Fourth Department
Claims Under Significant Limitation of Use and 90/180-Day Categories Are Reinstated Thanks to Defendant’s Evidence Submissions
Plaintiff was involved in a three-car chain reaction collision when defendant’s vehicle jumped a curb while exiting a parking lot. The trial court had granted defendant’s motion dismissing the complaint, but on appeal the decision was modified to reinstate the claims under the significant limitation of use and the 90/180-day categories.
The appellate court first reiterated the rule that a sworn medical opinion, even if relying on unsworn reports, is competent evidence. The court additionally noted that even though plaintiff did not plead exacerbation or aggravation of a pre-existing injury, she could rely on that theory in opposing the motion because the defendant raised it in her motion papers.
Plaintiff pled serious injury under the categories of significant disfigurement as well as the permanent consequential, significant limitation and 90/180-day categories, however, all the categories with respect to the cervical and lumbar spine, as well as the significant disfigurement were either dismissed or deemed abandoned, leaving only plaintiff’s allegations respecting her right shoulder.
Defendant submitted evidence that any injury to plaintiff’s right should had resolved within 21 months of the accident, warranting dismissal under the permanent consequential category. However, although defendant submitted reports regarding the range-of-motion of the shoulder, those reports did not compare the findings with the norm and therefore there was no evidence that the limitations were merely ‘minor, mild or slight as to be considered insignificant.’ Defendant also submitted evidence that plaintiff underwent torn rotator cuff surgery and that the accident might have exacerbated pre-existing injuries. Therefore, the significant limitation of use category was reinstated.
As for the claim under the 90/180-day category, defendant submitted evidence that the accident, at the very least, exacerbated the right should injury, that plaintiff was confined to bed for over two months, and that she was unable to do simple chores, groom herself or play with her children for three to four months following the accident. Thus defendant presented sufficient evidence to support plaintiff’s 90/180-day claim and, having failed to sustain her initial burden, there was no need to consider plaintiff’s submissions in opposition.
04/12/11 Elite Medical Supply v. Praetorian Ins. Co.
Arbitrator Kent Benziger, Erie County
Peer Review Opinion Not Persuasive Due to Review of Cited Journals
On December 23, 2009, Applicant’s assignor was involved in a motor vehicle accident and came under chiropractic care in May 2010. The assignor had moderate right-sided pain with parenthesia into the thigh and foot as well as positive orthopedic tests in the lumbar area. The medical records also documented limited range of motion and spasm. On July 12, 2010, Dr. Marino prescribed an LSO brace to address the assignor’s low back complaints and specifically stated that the brace would help the assignor stabilize her spine through immobilization. The brace would take pressure off of the injured discs and reduce further inflammation and tearing.
The insurer denied the durable medical equipment based upon the peer review of Dr. Ganz. He opined that there was no rationale for performing chiropractic manipulation then attempting to immobilize the spine outside of treatment. Further, Dr. Ganz relied upon a journal article which indicated that lumbar support have prevented back injuries there was no evidence that it supports the brace’s use in treating acute low back injuries. Dr. Ganz further recited to the Worker’s Compensation treatment guidelines for low back injuries which found lumbar supports were not recommended for prevention of lower back pain but are useful in treating spondylolysis, instability and post-operative treatment.
The assigned arbitrator did not find Dr. Ganz’s opinion persuasive as the report cited to journals on how to prevent workplace low back injuries which was not relevant to the treatment of a low back injury attributed to a motor vehicle accident.
04/12/11 Elite Medical Supply v. GEICO Ins. Co.
Arbitrator Kent Benziger, Erie County
Peer Review Opinion Not Persuasive Due to Treating Physician’s Rebuttal Focusing on Issues with Cited Journals
On July 15, 2010, the Applicant’s assignor was involved in a motor vehicle accident and treated for neck, mid back pain, headaches, and fully body stiffness. Dr. Taylor, the assignor’s treating physician, recorded multiple positive objective findings and only after prescribing durable medical equipment ordered an MRI of the cervical, thoracic, and lumbar spine which revealed three disc herniations. Dr. Taylor prescribed a lumbar traction belt, cervical traction belt, and TENS unit to decrease pain and increase range of motion as well as decrease pressure on the assignor’s discs.
The insurer denied the durable medical equipment based upon a peer review conducted by Dr. Garofalo. Dr. Garofalo cited to journals recommending against the use of the equipment. Further, Dr. Garofalo opined that the cervical traction unit for home use was redundant.
Dr. Taylor submitted a rebuttal to the peer review and stated he actually spoke with the author of one of the journals Dr. Garofalo relied upon in his peer review. The journal author disagreed with Dr. Garofalo’s opinion on the lack of need for home based equipment. Further, Dr. Taylor pointed out that one of the journals relied upon applied to workplace accident prevention and not treatment of an injury post motor vehicle accident.
The assigned arbitrator, while indicating that Dr. Taylor’s rebuttal was sarcastic, self-righteous and unprofessional in tone, was persuaded by the Applicant’s evidence. The fact that Dr. Taylor had reviewed the peer reviewer’s cited sources and could present evidence that the sources were taken out of context or simply inapplicable to the case was persuasive. Also, the assigned arbitrator indicated that in this case there were positive MRI findings which the peer reviewer did not address as to why such equipment would not be needed.
04/11/11 Elite Medical Supply v. GEICO Ins. Co.
Arbitrator Thomas J. McCorry, Erie County
Peer Review Opinion Not Persuasive Due to Failure to Address Care in Current Case and Reliance Upon Article Pertaining to Workplace Accident Prevention
On June 7, 2010, the Applicant’s assignor was involved in an accident and came under chiropractic care with Michael Cardamone, D.C. who prescribed a cervical traction unit and LSO brace. The medical necessity for the durable medical equipment was due to the assignor’s condition and complaints.
The insurer denied the equipment based upon the peer review of Dr. Joseph Elfenbein who concluded from an orthopedic surgeon’s viewpoint there was no justification for the equipment. Dr. Elfenbein opined that cervical traction has not been proven to be superior to physical therapy which the assignor was receiving. The opinion was silent on its use or value in chiropractic care. Further the LSO brace is not more effective than training in preventing workplace accidents to the low back. The assigned arbitrator mentioned that this case is not a prevention case. Ultimately, the assigned arbitrator failed to uphold the insurer’s denial.
04/11/11 Elite Medical Supply v. GEICO Ins. Co.
Arbitrator Thomas J. McCorry, Erie County
Peer Review Opinion Persuasive on Durable Medical Equipment When Compared with Lack of Evidence from Treating Chiropractor
In yet another durable medical equipment case, the Applicant’s assignor was prescribed a cervical traction unit and LSO brace on August 23, 2010, by Mary Cananise, D.C. The reason for the prescription was listed as “chiropractic.” However, John Ward, D.C. submitted a post hearing rebuttal letter on his patient’s behalf opining that such equipment was instrumental in relieving the assignor’s symptoms.
The insurer denied the durable medical equipment based upon the peer review of Robert Sohn, D.C. Mr. Sohn provided what the specific standards were in the chiropractic field as to when an LSO brace is recommended. One of those standards is to immobilize the patient while providing comfort and is usually designed for a person who just had spinal surgery or has a suspected fracture. Also, the cervical traction unit was not necessary since there was no indication that the treating chiropractor was actually using cervical traction as part of the in-office treatment program. Thus, the assigned arbitrator determined Mr. Sohn’s opinion was more persuasive and upheld the insurer’s denial.
04/06/11 North Area Volunteer Ambulance Corps v. Allstate Ins. Co.
Arbitrator Kent L. Benziger, Erie County
Medicare Fee Schedule Not Applicable to Ambulance Service Bill
The Applicant challenged the insurer’s decrease of its ambulance service bill as it was not in compliance with local prevailing charges as the Medicare/Medicaid fee schedule should apply. The assigned arbitrator rejected such a contention as he, and other arbitrators, have with a number of similar cases on this issue.
The assigned arbitrator did not provide guidance on whether any evidence is required to be submitted by the provider to establish what the local prevailing charges are and that this billing was consistent with same. However, the assigned arbitrator noted that the Applicant did submit evidence to him of the local prevailing rates and that its bill was consistent. Further, the insurer’s argument on application of the Medicare/Medicaid fee schedule was rejected as Medicare is designed to reimburse providers at less than their actual costs contrary to intent of Workers’ Compensation fee schedule.
We note that this is only one of about five reported cases before Arbitrator Benziger in the past two weeks on the exact same issue.
04/05/11 Applicant v. GEICO Ins. Co.
Arbitrator Kent L. Benziger, Erie County
Questionable Counsel Tactics Lead to Confusion and Failure to Permit Second Opportunity to Show for IME
The Applicant sought lost wages as a result of an August 30, 2009, accident which were denied by the insurer based upon breach of a policy condition to appear for scheduled IMEs. This claim seems to have a long and tortured history for both parties.
The Applicant retained counsel to represent her after the accident. On October 23, 2009, the insurer through a Support Claims Service, a third-party scheduling company, sent a verification request to Applicant in the form of an IME notice for an examination with a chiropractor and orthopedist to be conducted on November 5, 2009. The notice was sent to the Applicant and her counsel.
On October 30, 2009, counsel advised the Support Claims Service that he was objecting to the examination on a number of grounds – the examining physician and chiropractor were not from Buffalo and wanted their CVs, the insurer failed to make transportation arrangements for the Applicant, and she was unavailable on that date due to a prior commitment.
On November 2, 2009, the insurer, through Support Claims Service, sent Applicant and counsel a notice scheduling the chiropractic exam on November 18, 2009 and the orthopedic exam on December 2, 2009. It is unclear whether this was an agreement to reschedule the exams.
On November 6, 2009, counsel advised Support Claims Service that he assumed the adjournment was granted and that the Applicant could not attend on the November 18th due to a prior commitment but could attend on December 2nd if the insurer provided her with transportation.
On November 16, 2009, counsel contacted the insurer’s representative and advised that Support Claims Service called him to only reschedule the examinations once. Counsel questioned the insurer’s good faith in scheduling untimely exams with out-of-county experts.
On November 19, 2009, Support Claims Service advised the insurer that Applicant failed to appear for examinations on November 5 and 18, 2009.
On November 24, 2009, the insurer denied the entire claim based upon failed to appear for the first scheduled chiropractic IME and the second scheduled chiropractic IME.
The Applicant appeared pro se and testified that counsel advised her not to attend the IMEs. Also, Applicant testified that she never had any prior commitments as claimed and she could have attended the scheduled examinations as well as arranged for her own transportation.
The assigned arbitrator determined that the insurer’s scheduling letters were proper. With regard to counsel’s continued objections to the notices, the assigned arbitrator stated, “at the very least, counsel’s objections were disingenuous combining over zealous advocacy, misstatements of law and – to this arbitrator – misstatements of facts.” The assigned arbitrator indicated that in his determination it was evident that counsel had no intention of allowing his client to attend an IME.
The assigned arbitrator carefully assessed the Applicant’s, whose counsel filed arbitration on her behalf then ceased representing her in this proceeding, excuse of reliance of advice of counsel. The assigned arbitrator rejected the excuse as reasonable citing public policy reasons that would permit attorneys to instruct clients not to attend IMEs only to have benefits reinstated during arbitration.
Despite this, the assigned arbitrator pointed out that in part due to counsel’s questionable tactics, the insurer’s denial was not proper. The reason why is that the insurer has to permit the Applicant two opportunities to appear for an IME. In this case, the November 5, 2009, IME was rescheduled to November 18 and December 2. The Applicant only missed the November 18th IME and was not afforded another opportunity to appear. Therefore, the denial was not upheld.
04/01/11 Medical Care of WNY v. New York Cent. Mut. Fire Ins. Co.
Arbitrator Veronica K. O’Connor, Erie County
IME No-Show Denial Upheld as Assignor’s Story Contradicted Applicant’s Own Treatment Records
The insurer denied No-Fault benefits to the Applicant’s assignor based upon violation of a policy condition to attend scheduled IMEs. The insurer demonstrated that it scheduled IMEs for August 7 and 28, 2009, which the Applicant’s assignor failed to appear for. On September 8, 2009, the insurer issued the denial of all benefits.
The Applicant’s assignor testified that he had no knowledge of the first IME until after he missed the appointment. Also, he missed the second IME due to traveling to Ohio to visit an ill great aunt who died requiring him to remain in Ohio for approximately two months. Finally, he claimed that he participated in a conference call with the insurer after the funeral to arrange to appear for an IME.
The insurer responded to this purported excuse by submitting phone logs which confirmed the Applicant’s assignor did participate in a conference call in October 2009 after missing the second IME. However, it was noted the assignor stated he was in Tennessee due to a family member’s baby’s death where he stayed from August 18 until October 12, 2009.
Further, the assignor advised the insurer that he returned to Buffalo on October 12, 2009 and during his absence did not seek any treatment. The Applicant’s billing though contradicted the assignor’s statement because the Applicant treated the assignor on September 8, 20, and October 9, 2009.
The assigned arbitrator determined that the insurer’s denial was appropriate and that the assignor violated a condition to insurance coverage under the policy. Since the Applicant accepted an assignment it stood in the shoes of the assignor and possessed no greater rights than the assignor.
04/01/11 Mercy Flight Cent. Inc. v. Allstate Prop. and Cas. Ins. Co.
Arbitrator Mary Anne Theiss, Onondaga County
Medicare Ambulance Fee Schedule Not Applied to Air Ambulance Service
An insurer challenged the billing of Mercy Flight claiming that the billing was not in accordance with local prevailing charges and that the Medicare/Medicaid fee schedule for an ambulance should apply. The assigned arbitrator awarded in Mercy Flight’s favor and held that the Medicare fee schedule was not applicable here and the charges were reasonable and appropriate.
04/05/11 Stephen Matrangalo, DC a/a/o Kevin Fogah v. Allstate Ins. Co.
Appellate Term, First Department
Motion Failed to Demonstrate Financial Relationship on Referral Case
Plaintiff sought reimbursement for services rendered to the assignor arising out of a January 2009, accident which were denied based upon application of Public Health Law §238-a prohibiting recovery if the referring practitioner had a “financial relationship” with the plaintiff. PHL §238(3) defines a “financial relationship” as “an ownership interest, investment interest or compensation arrangement.” PHL §238-a(5)(a) defines a “compensation arrangement” as “any arrangement involving any remuneration between a practitioner, or immediate family member, and a health care provider.” It does not include payments for rental or lease of office space so long as it meets certain requirements.
The insurer did not meet its burden on summary judgment establishing a “financial relationship” since there was no allegation of an ownership or investment interest. Further, some evidence of an unspecified lease of office space was also insufficient to establish a “financial relationship.”
04/14/11 City of Elmira v. Selective Ins. Co.
Appellate Division, Third Department
Endorsement Covering Damages Arising from Enforcement of an Ordinance of Law Did Not Require That the Enforcement Be Occasioned Due to a Covered Cause of Loss
The City of Elmira owned and used the historic Armory Building until March of 2006 when the building’s southern wall collapsed in a windstorm. Upon a review of the premises, engineers concluded that the wall had become weakened due to hidden decay of the mortar. The engineer report also found other areas of the building that were similarly weakened. As such, the building was declared a public hazard and was ultimately demolished.
Immediately thereafter, the City submitted a claim to Selective for demolition costs, as well as costs incurred in the purchase of an alternative location within the City. In response, Selective paid for the damages to the southern wall. However, Selective declined the City’s claim for demolition costs and the costs associated with obtaining the new location.
The City maintained that pursuant to an “Ordinance or Law” endorsement, Selective was required to pay for losses which were caused by the enforcement of ordinance or law. Where, as here, the building was demolished due to an Order of the Code Enforcement Officer, the City argued that the coverage had been triggered.
In opposing the City’s position, Selective argued that because the demolition was not caused by a “covered cause of loss” (ie., the windstorm), but rather an independent review of the building’s structural integrity the endorsement had not been triggered.
The Third Department held in favor of the City therein stating that the endorsement in question did not require that the covered cause of loss trigger the enforcement of an ordinance of law. Rather, the endorsement only required that a covered cause of loss occur, and that the building was in violation of an ordinance or law. In so holding, the Third Department noted that if Selective wished to limit the endorsement’s application to the enforcement of an ordinance or law that was caused by a covered cause of loss, it “could have easily done so” within the terms of the endorsement.
In a secondary issue, the Third Department held that Selective was not required to reimburse the City for the purchase of a subsequent property. Under the plain terms of the endorsement, the City was only entitled to recovery for costs of “repairing, rebuilding or constructing” a replacement structure. Because the City purchased a pre-existing structure, the building did not fall within the scope of the endorsement.
04/05/11 Gould Invs., LP v Travelers Cas. & Sur. Co of Am.
Appellate Division, Second Department
Carrier’s Subrogation Rights Do Not Accrue Until Payment of a Claim
Defendant, Travelers, moved to dismiss Gould’s claim on the basis that Gould settled certain actions which potentially destroyed Travelers’ subrogation rights. As with most policies, the Commercial Crime Policy at issue in this case contained a condition requiring the insured preserve the carriers’ subrogation rights.
However, subrogation rights do not ripen until Travelers actually incurs loss due to payment of a claim. In the instant case, because Travelers had not paid a loss no subrogation rights had accrued.
04/01/11 Bakos v New York Cent. Mut. Fire Ins. Co.
Appellate Division, Fourth Department
Fourth Department Holds That Two Year Suit Limitation Clause Does Not Apply to Rebuilding/Replacement Cost Disputes; Bi-Economy Lurking in the Background
Plaintiff’s house was destroyed by fire, and the resulting dispute gave rise to the instant claim. New York Central opposed plaintiff’s claim on the basis that (a) it was not required to remit payment per the plain terms of the Loss Settlement provision of the policy and (b) that plaintiff’s claims were barred by the two year suit limitation condition set forth in the policy. As such, New York Central moved to dismiss plaintiff’s Complaint as unripe, and also barred by the suit limitation clause.
With regard to the Loss Settlement provision of the policy, the Fourth Department noted that the policy indicated that New York Central was not required to remit replacement cost payment until “actual repair or replacement is complete.” In the instant case, New York Central produced evidence which established that the repair/replacement was not yet completed. As such, New York Central argued that there was no viable claim because plaintiff had not actually satisfied all of the conditions for payment under the Loss Settlement provision. In response, the Fourth Department appears to have held that because plaintiff could have completed the repair or replacement at some point in the future New York Central was required to tender actual replacement costs at that time.
In addition, New York Central also appears to have moved to dismiss plaintiff’s Complaint on the basis that the suit was commenced more than two years after the date of loss. However, in denying this portion of New York Central’s motion, the Fourth Department noted that the policy does not place any time limitation upon reconstruction of the insured premises. Thus, where the insured is not obligated to complete repairs within a two year time frame, the Court appears to reason that the suit limitation clause is inapplicable.
Finally, the Fourth Department also refused to dismiss plaintiff’s claims of bad faith which appear to have been premised upon New York Central’s refusal to waive the two year suit limitation defense referenced above. In so holding, the Court found that the plaintiff “alleged facts that could give rise to a cause of action for breach of contract based upon a breach of the covenant of good faith and fair dealing.” In reaching this conclusion, the Fourth Department obliquely referenced the Court of Appeals’ famous decision in New York University v. Continental Ins. Co. (aka the Rocanova test).
In a well-reasoned dissent, Judge Peradotto noted that the plain language of the policy did not compel any action by New York Central until after repairs or replacement was complete. As the instant matter did not involve completed repairs and/or replacement, the matter was not ripe for a decision. Moreover, Judge Peradotto also held that plaintiff’s claims for bad faith did not “constitute a gross disregard of the insured’s interests.”
Peiper’s Point – Bi-Economy rears its ugly head again. I’d bet a drink on the Kohane Rivera that plaintiff argued language from Bi-Economy to get a question of fact. Of course, as a first-party bad faith claim, the carrier’s action must be actionable as an independent tort, be egregious, and directed toward both the insured and the general public as a whole. You’d think this standard would have been applied given the fact the majority opinion referenced the New York University decision in the opinion.
Judge Peradotto rightly recognized the weakness of plaintiff’s claim and voted to dismiss it. We respectfully note that the dissent appears to have applied the third-party “Pavia” standard, rather than the “Rocanova/NYU” standard for first party claims as it has done in the past, but we’ll take what we can get.
04/01/11 Stopani v Alleghany Co-op Ins. Co.
Appellate Division, Fourth Department
Sixty-Day Deadline for Submission of Proofs of Loss Is Triggered by First Receipt of the Request for Proofs of Loss
Plaintiff Stopani received a demand for proof of loss on March 6, 2009. On March 9, 2009, plaintiff received a second copy of the demand for proof of loss via certified mail. Unfortunately for plaintiff, the proofs of loss were not submitted to Alleghany until May 8, 2009. This, of course, was sixty days after receipt of the second request. The proofs of loss were not submitted until sixty-three days after the receipt of the first letter.
Of course, under the Insurance Law, proofs of loss must be submitted to the carrier within sixty-days of receipt of the request for proof of loss. As the time requirement is triggered upon receipt of the first request for proof of loss, plaintiff’s submission was untimely as a matter of law. Accordingly, plaintiff’s claim was dismissed. In so holding, the Court held that de minimis delays as argued by plaintiff, did not excuse plaintiff’s failure to comply with its requirements.
04/05/11 DiBuono v Abbey, LLC
Appellate Division, Second Department
GOL 5-321 Does Not Prohibit a Party to a Lease from Being Indemnified for Its Own Negligence
Plaintiff commenced this action against Abbey, LLC after its land was contaminated by gasoline storage tanks on land owned by Abbey. Abbey, in turn, commenced a third-party action against its tenant Palisades Resources, Inc. In the third-party action, Abbey alleged that Palisades breached the lease agreement by failing to procure insurance under which Abbey was named as an additional insured. In addition, Abbey also sought an award of contractual indemnification against Palisades.
The Second Department held that the lease agreement required Palisades to name Abbey as an additional insured, and the evidence submitted to the Court revealed that no such policy was obtained by Palisades.
In addition, the Second Department also held that Abbey was entitled to an award of contractual indemnification pursuant to the agreement in the lease. In so holding, the Court noted that GOL 5-321 does not preclude a party from being indemnified for its own negligence. Rather, GOL 5-321 only prohibits a party from absolving itself from liability to the injured party.
Finally, with regard to Palisades’ duty to defend and indemnify, the Court noted that Abbey must only defend, and indemnify (if necessary) those damages sustained during the term of the lease agreement. As such, the Court noted that Palisades is not obligated to pay for, nor defend, damages that occurred before or after Abbey’s occupancy of the premises.
News from the New York State Assembly
While there is not a lot of activity in either the Senate or Assembly Insurance Committees, there were a couple of bills pending before the Assembly Insurance Committee this week worth noting. Both bills were reported out of the Committee this week.
A2204-A Introduced by Member of Assembly Zebrowski
This bill would amend Insurance Law §2601 by adding two new paragraphs to this provision otherwise known as Unfair Claims Settlement Practices. The first new paragraph would make the requirement that a claims adjuster or insurer deny a certain number or percentage of claims during a given time period an unfair claims practice. The other new paragraph is similar in that it would make it an unfair practice to require an individual or insurer to cancel a certain number or percentage of policies during any given period of time.
A4601 Introduced by Member of Assembly Englebright
This is an interesting bill. If an insured makes a good faith first party claim for property insured under a property insurance policy and then the insured finds the lost property, this bill would require the insurer to remove the claim record as long as the insured repays the insurer the money previously paid out to the insured under the policy.
From a practical perspective, my question is: What does removed from the claim record mean? Does it mean remove from claim history so there is no rating impact? Does it mean that the actual physical or electronic claim file is destroyed? My thoughts are that the legislature does not want this to impact any rating as the insured did not keep the payment under the policy.
04/08/11 In Re: September 11 Property Damage Litigation
United States Court of Appeals for the Second Circuit – New York
Settlement and Application of the Air Transportation Safety and System Stabilization Act of 2001 [“ATSSSA”]
This case concerns the multitude of property damage claims that arose from the terrorist attacks of September 11, 2001. Among the several groups of plaintiffs that filed suit against the Aviation Defendants, the Settling Plaintiffs alleged subrogated and uninsured property damage and business interruption claims. The World Trade Center Property Plaintiffs [“WTCP”] similarly asserted claims alleging that but for the negligence of the Aviation Defendants, the terrorists would not have boarded Flights 11 and 175, and the WTCP Plaintiffs’ property would not have been destroyed.
The WTCP Plaintiffs and Aviation Defendants entered into mediation whereby both sides accepted the mediator’s settlement figure of $1.2 billion to settle all claims. The agreement was expressly conditioned upon the district court: 1) approving both the settlement and allocation of payments between the contributing Aviation Defendants as consistent with ATSSSA; 2) concluding that all amounts paid pursuant to the settlement agreement are to be credited against the contributing Aviation Defendants’ respective ATSSSA liability limits; and 3) finding that Huntleigh USA Corp. exhausted its liability limits under ATSSSA.
The district court approved the settlement and ordered all amounts paid pursuant to the settlement agreement to be credited against the liability ceilings of the contributing Aviation Defendants; and, that payment by Huntleigh’s insurers exhausted the limits of Huntleigh’s liability coverage.
The issues presented to the Second Circuit were: (1) Whether the district court properly applied state law to approve the settlement agreement- (a) Whether ATSSSA’s liability limits create a “Limited Fund”- (b) Whether ATSSSA’s purpose and statutory scheme preempt New York’s “First-Come, First Served” Settlement Rule; (2) Whether the district court failed to make a proper evaluation of the settlement; (3) Whether the proposed settlement payments count toward the Aviation Defendants’ liability limits.
First, the Second Circuit found that the WTCP Plaintiffs’ argument that the New York “first-come, first-served” settlement rule was contrary to [and preempted by] the ATSSSA, lacked merit. The court determined that ATSSSA specifies that liability “for all claims, whether for compensatory or punitive damages or for contribution or indemnity,” against the Aviation Defendants “shall not be in an amount greater than the limits of liability insurance coverage maintained by” the Aviation Defendants. ATSSSA, §408(a)(1). The court stated that it has repeatedly made clear that this provision – far from creating a fund for the payment of claims – instead “caps tort liability stemming from the attacks at ‘the limits of liability insurance coverage maintained,” in this case by the Aviation Defendants. The Court found nothing in the ATSSSA’s text to suggest that Congress intended to create a “limited fund” from which plaintiffs bringing a federal cause of action under ATSSSA against the Aviation Defendants are entitled to an equitable share. The Court stated that had Congress intended to create a “limited fund” for those plaintiffs pursuing an ATSSSA cause of action against the Aviation Defendants, and to constrain the manner in which settlements could be made, it would have done so in far more explicit terms.
The Court also disagreed with the WTCP Plaintiffs contention that the Second Circuit in Canada Life Assurance Co. v. Converium Ruckversichergun (Deutschland) AG, 334 F.3d 52 (2nd Cir. 2003) concluded that Congress intended to ensure that ATSSSA’s liability limit preserved the ability of any claimant to recover a damages award, requiring the preemption of New York’s “first-come, first served” settlement rule, pointing out that the discussion in Canada Life relied upon by the WTCP Plaintiffs referred solely to the purposes of the ATSSSA’s exclusive venue provision. The Court concluded that the district court properly applied New York state law settlement rules to the settlement agreement.
Second, the WTCP Plaintiffs argued that the district court failed to make a proper evaluation of the settlement and its relative fairness. The Court noted; however, that under New York law, an insurer “has no duty to pay out claims ratably and/or to consolidate them, so long as it does not act in bad faith”, and that the WTCP Plaintiffs had presented no evidence of the bad faith necessary to question the settlement in this case. Accordingly, the Second Circuit agreed with the district court that the settling parties entered into their settlement agreement in good faith, finding further that the district court did not abuse its discretion in approving the settlement agreement.
Finally, the third issue the WTCP Plaintiffs argued was that the district court erred in crediting the settlement payments against the contributing Aviation Defendants’ respective liability limits. They argued that ATSSSA;s limitation only applies to payments for “liability,” and that the settlement payments here should not count because they were not determined on the basis of the Aviation Defendants’ liability. In responding to this argument, the Second Circuit stated that when interpreting a statute it was required to give terms their ordinary, common meaning and read them in their appropriate context. ATSSSA states in relevant part, “liability for all claims . . . shall not be in an amount greater than the limits of liability insurance coverage maintained by [an Aviation Defendant].” ATSSSA §408(a)(1). “Liability” is defined as either: 1) “[t]he quality or state of being legally obligated or accountable”; or 2) “[a] financial or pecuniary obligation.” Black’s Law Dictionary 997 (9th Ed. 2000). The Court held that this reading of “liability” in §408(a)(1) accords with the common understanding of “liability insurance,” which commonly provides for an insured’s claim to arise “once the insured’s legal obligation to a third party has been asserted. The court further noted that this readying also coheres with other provisions of the ATSSSA, which uses similar language to limit the “liability” of certain defendants. See, ATSSSA, §408(a)(4), (5). Based on this analysis the Court determined that the district court did not abuse its discretion or commit an error of law in crediting the settlement payments against the contributing Aviation Defendants’ limit of liability.
04/07/11 Federal Ins. Co. a/s/o AAAMA v. American Home Assur. Co.
United States Court of Appeals for the Second Circuit – New York
Whether Accident “Arose Out of” the Operations of Defendants’ insured
This action involves analysis of the affiliation between the American Automobile Association, Inc. [“AAA”] and one of its seventy independently operated and managed automobile clubs, specifically the regional automobile club AAA Mid-Atlantic, Inc. [“AAAMA”]. This is a declaratory judgment action brought by Federal Insurance Company [“Federal”] as subrogee of AAAMA against American Home Assurance Company [“AHA”] as the insurer for AAA.
The underlying personal injury action occurred on September 6, 2001 in New Jersey when a tow truck operated by Gerard Taber collided with a stalled vehicle operated by Richard Cannon. The collision caused the stalled vehicle to explode, causing severe and permanent injuries to Cannon. At the time of the accident, Taber was responding to a roadside assistance call to change a flat tire in Parlin, New Jersey. The call originated from the 1-800-AAA-HELP line. A mobile data terminal [“MDT”] was installed in the flatbed truck that was being operated by Taber and Taber had testified that the MDT went off while en route to provide roadside assistance and caused him to be distracted when it beeped, prompting him to check with it to obtain information about the roadside assistance call. Taber testified that because of the distraction he failed to see the stalled car on the side of the road.
Taber’s employer and owner of the truck was E & D Auto Repair [“E & D”] and was an AAAMA Preferred Service Provider [“Provider”]. As an AAAMA Provider, E & D was contractually obligated to provide roadside assistance to AAA Members within the region of AAAMA’s coverage, and E & D was authorized to display the AAA insignia and emblem.
After a trial, AAAMA and Cannon agreed to settle all claims against AAAMA for $27.25 million, with Federal contributing $26.5 million and AAAMA’s excess insurer, Fireman’s Fund, contributing $750,000. AHA and National Union Insurance Company [“NUIC”], AAA’s excess insurer, did not make any settlement offers on AAAMA’s behalf.
Federal first brought this action in New York Supreme Court, New York County, seeking a declaratory judgment and ancillary relief relating to the obligations of the parties to defend and indemnify AAAMA in the Cannon action. Defendants removed the action to the district court.
In the district court Federal moved for summary judgment arguing that AAAMA is insured under policies issued to AAA by AHA and NUIC, and Federal is therefore entitled to reimbursement for $25 million of the $26.5 million it paid to settle the underlying bodily injury action. Defendants also moved for summary judgment arguing that they do not insure AAAMA with respect to any liability arising from the Cannon action, and alternatively, if they do insure AAAMA, that they are obligated to pay, according to the principles of equitable contribution, only half of the $25 million that Federal seeks.
The district court analyzed the language of the AHA Endorsement that provided for liability arising out of AAA’s operations, finding that the language was “generally accepted” and “unambiguous.” The district court determined that the AAA National’s operations “include a level of emergency roadside oversight and coordination that is, at the very least, ‘connected to’ the Cannon accident and AAAMA’s liability. The court found that “the accident arises out of the call to an AAA number, which is serviced by AAA. The accident was ‘originating from, incident to, or having a connection with’ the AAA number, an AAA operation.”
The district court also found that the entire settlement amount was subject to equitable contribution and that it should not be limited by an apportionment of AAAMA’s direct and vicarious liability; that AHA must reimburse Federal $1 million under the AHA policy [both primary policies]; after contribution by the primary insurers totaling $2.5 million (and the Fireman’s Fund excess policy in the amount of $750,000), the court found the amount due to be $24 million and ordered NUIC to reimburse Federal $12 million; and, that Federal was entitled to prejudgment interest from the date of settlement at the statutory rate (AHA policy was issued in Florida).
Federal appealed only that part of the district court’s judgment that held that the “other insurance” provisions required equal sharing, arguing that the court erred by disregarding the Federal Policy’s language that “it will not make any payments until the other insurance has been exhausted by payment of claims.” On cross-appeal the defendants argue that under the plain language of the Endorsement contained in the AHA Policy, AAAMA’s liability did not “arise out of” AAA;s operations and neither the AHA policy nor the NUIC should be required to contribute to Federal’s settlement obligations.
In analyzing the issues, the Second Circuit first reviewed the AHA Endorsement which named Members Clubs, such as AAAMA, as additional insured under the AHA Policy “but only with respect to liability arising out of [AAA’s] operations or premises owned by [AAA]. The Court then analyzed New York Law which interprets the term “arising out of” as being ordinarily understood to mean “originating from, incident to, or having connection with”. The court stated that although the term “operations” is not defined in the AHA policy, it should be given its ordinary meaning, which, in this case, is “doing or performing” of work.
The Court agreed with the district court that the language “arising out of . . . operations” was not ambiguous but held that the district court misapplied the unambiguous language of the endorsement. In analyzing New York law, the Court held that AAA was not engaged in operations at the time of the accident. Citing, Worth Construction Co. v. Admiral Ins. Co., 888 N.E.2d 1043 (2008); Bovis Lend Lease LMB, Inc. v. Garito Contracting, Inc., 885 N.Y.S.2d 59 (App. Div. 2009); greater N.Y. Mutual Ins. Co. v. Mutual Marine Office, Inc., 760 N.Y.S.2d 234 (App. Div. 2003). The court determined that at the time of the accident, AAA National’s activities included maintaining the federation of clubs and accrediting member clubs; promoting use of MDTs; issuing towing, service and lockout manual s to the member clubs; disseminating quality standards, including a thirty-minute response time goal; and maintaining the toll-free telephone number that directed service calls to the member club operating in the area of the call’s origin. The Court found that these activities were much different from the operations of AAAMA, which provided actual roadside service. At the time of the accident AAAMA owned and operated over 100 trucks and also contracted with towing contractors, including E & D. AAAMA also financed the truck Taber was driving, required E & D to use the MDT, trained E & D to use the MDT, and equipped the truck with the MDT. The Court found that the minimum causal relationship between the injury and risk for which coverage was provided was lacking. Citing, Maroney v. New York Cent. Mut. Fire Ins. Co., 5 N.Y.3d 457 (2005).
The Second Circuit concluded that AAAMA’s liability to the injured plaintiff did not arise out of AAA National’s operations; and, because it concluded the AAA National contract did not insure AAAMA as an additional insured, it did not consider the remaining arguments.
04/07/11 Xingjan Constr. Inc. v. Atlantic Cas. Ins. Co.
Supreme Court, Queens County
Question of Fact on Late Notice Where Plaintiff’s President Spoke No English and Relied on a Business Acquaintance to Read the Suit Papers and “Take Care of It”
In this case, although notice of occurrence and suit was given seven months after receipt, the court found that plaintiff raised a triable issue of fact to defeat summary judgment. Plaintiff submitted evidence, specifically the testimony of its President, that he only spoke Mandarin Chinese and, when he received the suit papers, could not read or understand them. Accordingly, he relied on a business acquaintance to read the documents and “take care of it.”
In denying defendant’s motion for summary judgment, the court determined that plaintiff raised a triable issue of fact as to whether the President’s inability to read or understand English and his reliance on an acquaintance to notify the carrier were sufficient mitigating circumstances to excuse plaintiff’s late notice. Moreover, the court found that there was also a question of fact as to whether plaintiff had a good faith belief in non-liability. This determination was based on evidence that plaintiff’s President believed that there would be no claims against it since plaintiff performed no work at the subject worksite.
04/07/11 QBE Ins. Corp. v. Adjo Contracting Corp.
Supreme Court, Nassau County
Massive Water Intrusion Did Not Arise Out of Insured’s Work for Owner and Construction Manager
This is a very lengthy decision involving dozens of insurance carriers. Accordingly, we are going to make this summary manageable by providing the details relating to one carrier, Farm Family Casualty Insurance Company (who we also happened to represent).
Farm Family’s insured, Sipala Landscape Services, Inc., entered into a contract with Tocci Building Corporation of New Jersey to perform landscaping services, including installation of an irrigation system and planting, at an apartment complex. The complex was owned by Archstone and Tocci was retained as the construction manager. Beginning in 2007, tenants of the complex began commencing lawsuits against Archstone and other entities involved in the building’s construction. The suits alleged that the complex was experiencing severe water intrusion. Specifically, in one complaint, it was alleged that during heavy rainstorms water was pouring through apartment widows.
On these motions for summary judgment, in determining whether Tocci and Archstone qualified as additional insureds on the Farm Family policy, the court considered whether the damage arose out of Sipala’s work for Tocci and Archstone. In analyzing this issue, the court held that there were no allegations in the consolidated tenant complaints indicating that they suffered damages because water from the irrigation systems sprayed on the buildings.
While it was alleged that water from the irrigation system was expected to spray on the buildings, and may have entered through gaps in the mortar joints of the manufactured stone veneer on the exteriors of buildings, Archstone and Travelers, Tocci’s insurer, made no effort to explain the causal nexus which related Sipala’s operations to Archstone’s and Tocci’s liability in the underlying actions. Any water spraying on the buildings from the irrigation systems, would not be a “but for” cause of water intrusion issues, since water would be expected to spray or fall on the building from rain and other sources. Rather, Sipala’s situational and incidental contribution to the source of water that may have entered the buildings in the complex was analogous to the “situs of the accident” nexus that was rejected as sufficient causal nexus in Worth.
04/06/11 New Hampshire Ins. Co. v. Hi-Life Bar & Grill
Supreme Court, New York County
Waiver of Subrogation Provision in Lease Agreement Leads to Dismissal of Complaint
In this subrogation case, plaintiff brought an action to recover amounts paid as a result of a fire at its insured’s premises. The landlord, plaintiff’s insured, rented the property to a restaurant. While the cause of the fire is in dispute, defendant moved for summary judgment dismissing the complaint on the grounds that the subrogation claim is barred under the terms of the lease.
The lease provided, in relevant part, “to the extent that such insurance is in force and collectible and is permitted by law, Owner and Tenant each hereby releases and waives all right of recovery against the other or anyone claiming through or under each of them by way of subrogation or otherwise…” Plaintiff argued that this clause was contradicted by a latter provision which provided that the restaurant would indemnify the landlord from all claims arising out of the restaurant’s use of the premises.
The court disagreed with plaintiff holding that the allegedly contradictory clause referred to indemnification in the landlord’s favor from claims made by third parties. According to the court, since a subrogation claim is made in the name of the insured party, it cannot obtain indemnification from its own claim. In turn, the court granted defendant’s motion noting that a waiver of subrogation provision within a lease precludes the insurer’s subrogated negligence claim to recover money it paid to or on behalf of its insured.
04/05/11 Goorland v. New York Prop. Ins. Underwriting Assoc.
Supreme Court, New York County
Court Refuses to Permit Deduction for Depreciation in Fire Loss Case
Plaintiffs’ home was partially destroyed by fire. Under the terms of the policy issued to plaintiffs by defendant, “[c]overed property losses are settled at actual cash value at the time of the loss but not more than the amount required to repair or replace the damaged property.” “Actual cash value” was not a defined term in the policy.
In this motion, plaintiffs sought resolution of one question: whether payment of the claimed loss should have included depreciation on the cost of replacement of the destroyed property? The court found that defendant’s reliance on a consideration of replacement costs less depreciation was unfounded under the policy language. The policy did not state whether depreciation was or was not excluded; however, the policy did limit coverage to an amount “not more than the amount required to repair or replace the damaged property,” which, according to the court, necessarily excluded deduction for depreciation. Thus, the court held that defendant failed to show a legal basis for making a deduction for depreciation.
3/31/11 Bovis Lend Lease LMB, Inc. v. St. Paul Fire & Mar. Ins. Co.
Supreme Court, New York County
Owner and Construction Manager Not Entitled to Additional Insured Status; Notice to Insurance Carrier Under One Policy Is Not Notice Under a Separate Policy Issued to a Different Insured
J.C. Penny store retained Bovis Lend Lease LMB (“Bovis”) to act as construction manager on a project at its store in the Queens Center Mall. Bovis then subcontracted excavation, foundation and pile driving work to Ruttura & Sons Construction Co. (“Ruttura”). Ruttura then subcontracted the pile driving work to Underpinning and Foundation Contractors (“Underpinning”).
In June 2003, JCP was notified that the vibrations resulting from the excavation work caused damage to the building. JCP forwarded the material to Bovis who, in turn, forwarded it to Ruttura. Upon receipt by Ruttura, it faxed the documentation to Underpinning. Underpinning then placed its carrier St. Paul Fire & Mar. Ins. Co. (“St. Paul”) on notice. In investigating the claim, St. Paul asked Bovis for any vibration studies that were conducted at the mall in connection with the pile driving operations.
Eventually, in 2005, a lawsuit was commenced by the property owner. The suit named JCP and Bovis. Upon receipt of the Summons and Complaint, Bovis wrote to Ruttura demanding that it defend and indemnify both Bovis and JCP in the lawsuit. At this point, Ruttura’s insurer was provided first notice of claim. Interestingly, Ruttura’s insurer was also St. Paul. In reply to the demand for defense and indemnify, St. Paul disclaimed coverage to Bovis and JCP under the Ruttura policy due to, among other things, their failure to comply with the notice provisions. Bovis and JCP then brought this action.
In analyzing this case, the court began by reviewing the subcontract between Bovis and Ruttura. The agreement provided that Ruttura obtain a Commercial General Liability policy naming JCP and Bovis and any other entity required in the Owner/Contractor Agreement as Additional Insureds. The court then turned to the policy St. Paul issued to Ruttura. Pursuant to a policy endorsement, St. Paul agreed to provide insurance coverage to an “additional protected person,” which was defined as “any Person or Organization who required that you [Ruttura] add them as an additional protected person in written or oral contract with you.” Based on the contract and St. Paul’s insurance policy, the court agreed with plaintiffs that they qualified as additional insureds on the St. Paul policy issued to Ruttura.
However, the court held that as additional insureds they were bound by the notice provisions. Plaintiffs argued, on this issue, that St. Paul had notice of the property damage in 2003 when it investigated the vibration complaints. According to the court, citing Sorbara Constr. Corp. v. AIU Ins. Co., 11 NY3d 805 (2008), this argument did not advance plaintiffs’ claims as notice given in connection with the Underpinning policy was not sufficient to provide notice under the Ruttura policy. Thus, St. Paul was not obligated to defend and indemnify plaintiffs as there two year delay in providing notice was late as a matter of law.
In addition, the court examined the Underpinning policy to determine whether JCP and Bovis qualified as additional insureds under that policy and, in turn, triggering St. Paul’s obligation to defend and indemnify. According to the court, the subcontract between Ruttura and Underpinning did not support plaintiffs’ assertion that they were additional insureds under the St. Paul policy issued to Underpinning. Specifically, even though the subcontract stated that the “[s]ubcontractor [Underpinning] shall maintain at least the limits of liability in a company satisfactory to the Contractor as set forth in Exhibit _,” no exhibit addressed the insurance coverage. Thus, the subcontract only set forth the scope of work for the project. Based on the language of the subcontract, it was clear to the court that Underpinning was not required to procure insurance for Bovis/JCP. In light of these findings, the court denied JCP’s and Bovis’ motion for summary judgment and granted St. Paul’s motion.
03/13/11 Wilner v. Allstate Ins. Co.
Supreme Court, Nassau County
Predominant Cause of Destruction of Insured’s Retaining Wall Was Excessive Water, Not Malfunctioning Storm Drain
Plaintiff’s property, along with adjoining property, was burdened by a storm sewer drainage easement in favor of the Village of Roslyn. During a heavy rainstorm, water overflowed from a clogged sewer drain manhole located on contiguous property uphill from plaintiff. The concentration of water caused the soil in the rear of plaintiff’s property to slide downhill, and resulted in the destruction of plaintiff’s retaining wall.
When plaintiff asserted a claim under a homeowners’ policy issued by defendant, it disclaimed coverage on the basis that its policy did not cover earth movement. In reply, plaintiff retained an engineering firm who opined that the damage to the retaining wall was caused by the flow of water across the property during the storm. The engineering firm further concluded that the additional water flowing from the clogged storm drain on the adjacent lot added sufficient later form to cause the collapsed. Upon submitting this report to defendant, it issued a second disclaimer based on numerous water related exclusions (i.e., flooding, weather conditions, freezing, thawing pressure or weight of water). Defendant also cited a policy provision that excluded coverage for losses when “a) there are two or more causes of loss to the covered property; and b) the predominate cause(s) of the loss is (are) excluded under Losses We Do Not Cover…”
In considering this motion for summary judgment on plaintiff’s breach of contract claim, the court explained that the determination herein ultimately turned on what was the predominate cause of loss (i.e. excessive water v. broken drain). According to the court, “a reasonable person, employing ordinarily parlance and understanding would not say that the retaining wall [sic] fell by a malfunctioning storm drain.” The operative force, which directly affected the damage, was excessive water – flowing water, surface water, water pressure or water missed with soil. The court refused to perform a “but for” analysis in determining the predominate cause.
INDICATORS OF MEDICAL PROVIDER FRAUD
- The insured/claimant has extensive knowledge of medical terms and procedures, billing codes and medical insurance claims.
- Medical treatments and therapy are unrelated to primary diagnoses.
- Medical bills show multiple consecutive dates of treatment.
- Referring doctor and provider of services have same address.
- Referring doctor and provider of services have the same tax I.D.
- Referring doctor and medical provider are part of the same professional practice.
- Number of prescriptions, or quantity per prescription, is unusually large.
- Location of pharmacy or physician is geographically distant from person’s work/home.
- Pharmacy dispensed generic drugs, but brand name drugs are billed.
- Temporomandibular Joint Disorder (TMJ) claim is a late diagnosis, or not supported by medical records or evidence.
- Medical bills for services not rendered or different from those performed (“Upcoding”).
- Multiple identical claims are submitted for the same patient.
- Multiple medical bills are submitted on different dates, but show same dates of service or overlapping dates of service.
- Dates of service in doctor’s notes/reports do not match dates of service on bills.
- Medical visits are not itemized by date and type of service.
- The rental fee for Durable Medical Equipment (DME) exceeds the actual cost of the equipment.
- Claimant submits bills for more TENS units or other equipment than actually received from the DME company.
- “Gang billing” – billing for services or equipment for “friends and family” of the patient/claimant.
- Can the rehab or therapy facility document the credentials of its medical professionals and service providers?
- The medical bills are addressed or submitted to claimant’s attorney.
03/31/10 Taylor v. Allstate
Court of Appeals for the First District of Texas
The Court Followed Prior Precedent in Holding No Negligence Claim Against an Insurer Based upon the Quality of the Defense
The Court discusses several issues related to the alleged negligent activities of an auto carrier and counsel retained to defend the insured by the carrier in a catastrophic auto accident. Taylor was Allstate’s insured and the defendant in the civil suit filed by the injured passenger in the other auto. He claims to have had valid defenses to the case. At mediation, Taylor settled the case for an amount that exceeded policy limits and Allstate tendered its limits. Taylor then filed suit against counsel and Allstate alleging negligence and other causes of action. Allstate moved for summary judgment on the grounds that a Stowers claim (negligent failure to settle within limits when liability has become reasonably clear) is the only cause of action an insured has against his liability carrier.
Taylor then amended his claim to allege breach of contract, tortious interference with his relationship with counsel, vicarious liability for counsel’s actions and violations if the Insurance Code and DTPA. Allstate re-urged its position that Stowers’ claims are the only ones available to an insured in this situation. The trial court granted summary judgment for Allstate and Taylor appealed. The Court held that there was no liability on the part of the carrier based on theories of vicarious responsibility for counsel it hired to represent the insured. The Court found that the common law vests special duties on counsel in regard to representing the insured, the counsel’s only client in this situation, and that this vesting of control precludes an insurer from exercising that control “to the degree necessary to justify the imposition of vicarious liability”. Taylor also alleged that the insurer was negligent in failing to exercise ordinary care by conducting an improper investigation and providing an inadequate defense.
The Court followed prior precedent in holding that Texas recognizes no negligence claim against an insurer based upon the quality of the defense.
Submitted by: Robert A. Shults Lugenbuhl, Wheaton, Peck, Rankin & Hubbard
Appeal from an order of the Supreme Court, Monroe County (Harold L. Galloway, J.), entered April 21, 2010 in a personal injury action. The order granted the motion of defendant for summary judgment.
CELLINO & BARNES, P.C., BUFFALO (ELLEN B. STURM OF COUNSEL), FOR PLAINTIFF-APPELLANT.
RUPP, BAASE, PFALZGRAF, CUNNINGHAM & COPPOLA LLC, ROCHESTER (ALISON M.K. LEE OF COUNSEL), FOR DEFENDANT-RESPONDENT.
It is hereby ORDERED that the order so appealed from is unanimously modified on the law by denying the motion in part and reinstating the complaint, as amplified by the bill of particulars, with respect to the significant limitation of use and 90/180-day categories of serious injury within the meaning of Insurance Law § 5102 (d) insofar as they relate to plaintiff's right shoulder injury and as modified the order is affirmed without costs.
Memorandum: Plaintiff commenced this action seeking damages for injuries she allegedly sustained in a three-car chain reaction motor vehicle accident that occurred after the vehicle driven by defendant jumped a curb while exiting a parking lot. Defendant moved for summary judgment dismissing the complaint on the ground that plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102 (d), and Supreme Court granted the motion.
At the outset, we reject plaintiff's contention that defendant improperly submitted unsworn medical reports that were not obtained from plaintiff's counsel in support of defendant's motion (see Meely v 4 G's Truck Renting Co., Inc., 16 AD3d 26, 27). In any event, "[a]lthough [those] reports were unsworn, the . . . medical opinion[ ] relying on those . . . reports [is] sworn and thus competent evidence' " (Harris v Carella, 42 AD3d 915, 916, quoting Brown v Dunlap, 4 NY3d 566, 577 n 5). We further conclude that, even though plaintiff did not plead the aggravation or exacerbation of a preexisting injury, defendant herself raised that issue in her motion papers and thus plaintiff could properly rely on that theory in opposition to the motion (see generally Mazurek v Home Depot U.S.A., 303 AD2d 960, 961; Martin v Volvo Cars of N. Am., 241 AD2d 941, 943).
Plaintiff does not challenge that part of the order granting defendant's motion with respect to the significant disfigurement category of serious injury, and we therefore deem any challenge with respect thereto abandoned (see Ciesinski v Town of Aurora, 202 AD2d 984). We conclude that defendant met her initial burden of establishing that plaintiff did not sustain a serious injury under any category relating to her neck or lumbar spine, and plaintiff did not raise a triable issue of fact (see generally Zuckerman v City of New York, 49 NY2d 557, 562). Indeed, the evidence submitted by plaintiff in opposition to the motion concerned the alleged injury to her right shoulder only.
We further conclude that defendant met her initial burden of establishing that plaintiff did not sustain a serious injury relating to her right shoulder under the permanent consequential limitation of use category. Defendant submitted evidence that any alleged injuries to plaintiff's right shoulder had resolved within 21 months following the subject motor vehicle accident (see Dilone v Tak Leu Cheng, 56 AD3d 397; Curtis v Brent, 51 AD3d 464; Snow v Harrington, 40 AD3d 1237, 1238; see generally Gaddy v Eyler, 79 NY2d 955, 957-958). In opposition to the motion, plaintiff failed to raise a triable issue of fact whether any limitation of use of her right shoulder was permanent (see generally Zuckerman, 49 NY2d at 562).
We agree with plaintiff, however, that the court erred in granting those parts of the motion with respect to the significant limitation of use and 90/180-day categories of serious injury insofar as they relate to plaintiff's right shoulder injury, and we therefore modify the order accordingly. With respect to the significant limitation of use category, we conclude that defendant failed to meet her initial burden of establishing that plaintiff did not sustain a serious injury under that category. Although defendant submitted reports from physicians discussing the range of motion of plaintiff's right shoulder, those reports fail to compare plaintiff's range of motion to what would be considered normal. Thus, those reports are "insufficient to establish that [any] decreased range of motion in the plaintiff's right [shoulder] was so mild, minor or slight as to be considered insignificant within the meaning of [Insurance Law § 5102 (d)]" (Diorio v Butler, 69 AD3d 787, 787-788; see McCarthy v Gagne, 61 AD3d 942; cf. Roll v Gavitt, 77 AD3d 1412). Indeed, defendant submitted evidence that, following the motor vehicle accident, plaintiff underwent surgery for a rotator cuff tear to her right shoulder and that, although plaintiff had preexisting injuries to her right shoulder, the accident may have exacerbated those preexisting injuries.
Finally, with respect to the 90/180-day category, we conclude that defendant failed to meet her initial burden of establishing that plaintiff was able to perform substantially all of the material acts that constituted her usual and customary daily activities during no less than 90 days of the 180 days following the accident (see Insurance Law § 5102 [d]). "To qualify as a serious injury under the 90/180[-day] category, there must be objective evidence of a medically determined injury or impairment of a non-permanent nature . . .[,] as well as evidence that plaintiff's activities were curtailed to a great extent" (Zeigler v Ramadhan, 5 AD3d 1080, 1081 [internal quotation marks omitted]). Defendant's own submissions included objective medical evidence that plaintiff may have sustained an injury to her right shoulder that, at the very least, exacerbated a preexisting injury. Defendant also submitted evidence that plaintiff was confined to her bed for 2½ months following the accident and was unable to perform daily grooming activities, to do simple chores or to play with her children for three to four months following the accident.
Inasmuch as defendant failed to meet her initial burden of establishing that plaintiff did not sustain a serious injury relating to her right shoulder that was causally related to the accident under those two categories of serious injury, the burden never shifted to plaintiff to raise a triable issue of fact (see generally Alvarez v Prospect Hosp., 68 NY2d 320, 324).
Appeal from an order of the Supreme Court, Monroe County (Ann Marie Taddeo, J.), entered April 6, 2010. The order denied the motion of plaintiff for summary judgment and granted the cross motion of defendant for summary judgment.
BOYLAN, BROWN, CODE, VIGDOR & WILSON, LLP, ROCHESTER (DAVID K. HOU OF COUNSEL), FOR PLAINTIFF-APPELLANT.
HURWITZ & FINE, P.C., BUFFALO (KATHERINE A. FIJAL OF COUNSEL), FOR DEFENDANT-RESPONDENT.
It is hereby ORDERED that the order so appealed from is modified on the law by denying defendant's cross motion and reinstating the complaint and as modified the order is affirmed without costs.
Memorandum: Plaintiff, an automobile dealership, commenced this action seeking damages for the alleged breach by defendant, plaintiff's insurance broker, of its duty to procure an insurance policy containing "false pretense coverage," which is intended to cover losses in the event that plaintiff purchased automobiles with defective titles. We agree with plaintiff that Supreme Court erred in granting defendant's cross motion for summary judgment dismissing the complaint, and we therefore modify the order accordingly. " In New York, the duty owed by an insurance agent to an insurance customer is ordinarily defined by the nature of the request a customer makes to the agent' " (Chase's Cigar Store v Stam Agency, 281 AD2d 911, 912; see Wied v New York Cent. Mut. Fire Ins. Co., 208 AD2d 1132, 1133). "Where . . . there is a specific request for insurance, the agent has a duty to obtain the requested coverage or to inform the client of his or her inability to do so" (Herdendorf v Geico Ins. Co., 77 AD3d 1461, 1463; see Murphy v Kuhn, 90 NY2d 266, 270; Twin Tiers Eye Care Assoc. v First Unum Life Ins. Co., 270 AD2d 918, lv denied 95 NY2d 758). "In such a case, it must be demonstrated that the coverage could have been procured prior to the occurrence of the insured event" (Herdendorf, 77 AD3d at 1463; see American Motorists Ins. Co. v Salvatore, 102 AD2d 342, 346).
Viewing the evidence in the light most favorable to the nonmoving party, as we must (see Russo v YMCA of Greater Buffalo, 12 AD3d 1089, lv dismissed 5 NY3d 746), we conclude that there are triable issues of fact whether defendant breached its duty to procure the insurance coverage requested by plaintiff (see generally Zuckerman v City of New York, 49 NY2d 557, 562). Further, although the insured's receipt of the insurance policy at issue may in some cases provide a complete defense to the insured's action against an agent or broker for failing to procure certain coverage (see e.g. Hoffend & Sons, Inc. v Rose & Kiernan, Inc., 19 AD3d 1056, 1057-1058, affd on other grounds 7 NY3d 152; Laconte v Bashwinger Ins. Agency, 305 AD2d 845, 846), it does not provide such a defense in this case. Where, as here, there is evidence establishing that the insured made requests for the missing coverage subsequent to receipt of the policy, the broker has a renewed "duty to obtain the requested coverage or to inform the client of [its] inability to do so" (Herdendorf, 77 AD3d at 1463).
We further conclude, however, that the court properly denied plaintiff's motion for, inter alia, summary judgment on the complaint inasmuch as the record demonstrates that triable issues of fact exist with respect to both defendant's liability and the amount of damages recoverable by plaintiff (see generally Zuckerman, 49 NY2d at 562).
All concur except Peradotto, J., who dissents and votes to affirm in the following Memorandum: I respectfully dissent because, in my view, Supreme Court properly granted defendant's cross motion for summary judgment dismissing the complaint. Plaintiff, an automobile dealership, commenced this action seeking damages for the alleged breach by defendant, plaintiff's insurance broker, of its duty to procure an insurance policy containing "false pretense coverage," which is intended to cover losses in the event that plaintiff purchased automobiles with defective titles. Plaintiff subsequently moved for summary judgment on the complaint, and defendant cross-moved for summary judgment dismissing the complaint.
"It is now well settled that insurance agents have a common-law duty to obtain requested coverage for their clients within a reasonable time or [to] inform the client of the inability to do so' " (Arthur Glick Truck Sales v Spadaccia-Ryan-Haas, Inc., 290 AD2d 780, 781, quoting Murphy v Kuhn, 90 NY2d 266, 270). It is equally well settled, however, that "an insured is conclusively presumed to know the contents of an insurance policy concededly received, even though the insured did not read or review it" (Laconte v Bashwinger Ins. Agency, 305 AD2d 845, 846; see Chase's Cigar Store v Stam Agency, 281 AD2d 911, 912; Nicholas J. Masterpol, Inc. v Travelers Ins. Cos., 273 AD2d 817). Here, plaintiff submitted evidence in support of its motion establishing that it requested false pretense coverage for the 1999-2000 policy period and that its insurance broker advised plaintiff that he would procure such coverage. Plaintiff's submissions demonstrate that, in November or December 1999, the broker informed plaintiff's office manager that coverage "had been procured" and that "the endorsements were coming." The office manager thereafter continued to contact the broker periodically to inquire about the endorsements, and she was repeatedly advised that the endorsements were on the way. The office manager acknowledged, however, that defendant had not provided documentary proof that it had obtained false pretense coverage by the time she left plaintiff's employ in April 2000, and plaintiff's general manager conceded that plaintiff never received the requested endorsements.
Notably, all of the losses at issue appear to have been sustained during the 2000-2001 policy period. Although the record indicates that plaintiff may not have received the new policy for that period before the losses occurred, the prior policy specifically excluded false pretense coverage, and the only policy change plaintiff discussed with defendant when the policy came up for renewal in June 2000 was a possible increase in limits for the coverage it already possessed. At his deposition, plaintiff's general manager suggested that plaintiff may not have made a specific request for false pretense coverage at the time of renewal because plaintiff "assumed" it had such coverage. In my view, however, any such assumption was unreasonable as a matter of law in light of the plain language of the policy in plaintiff's possession at that time, i.e., the 1999-2000 policy, and the fact that plaintiff had never received documentation confirming the false pretense coverage, despite numerous requests for it over a period of at least 10 months (see Laconte, 305 AD2d at 846; see also Chase's Cigar Store, 281 AD2d at 912-913; Nicholas J. Masterpol, Inc., 273 AD2d at 818). Moreover, it is undisputed that plaintiff never paid for such coverage. I therefore conclude that, notwithstanding the broker's assurances in November or December 1999 that plaintiff had false pretense coverage, plaintiff knew or should have known that it did not have such coverage at the time plaintiff's office manager left in April 2000, if not sooner. Thus, in the absence of any evidence sufficient to overcome plaintiff's presumptive knowledge of the contents of the policy, it is my view that the court properly granted defendant's cross motion for summary judgment dismissing the complaint. I would therefore affirm the order.
Appeals and cross appeal from a judgment of the Supreme Court, Oswego County (Norman W. Seiter, Jr., J.), entered April 24, 2009. The judgment, among other things, granted defendant/third-party plaintiff Barrett Paving Materials, Inc.'s motion for summary judgment in action No. 1 and denied defendant Colony Insurance Company's motion for summary judgment in action No. 2.
COTE & VAN DYKE, LLP, SYRACUSE (JOANNE VAN DYKE OF COUNSEL), FOR PLAINTIFFS-APPELLANTS-RESPONDENTS.
COSTELLO, COONEY & FEARON, PLLC, SYRACUSE (SABRINA A. VICTOR OF COUNSEL), FOR DEFENDANT-APPELLANT.
COLUCCI & GALLAHER, P.C., BUFFALO (PAUL G. JOYCE OF COUNSEL), FOR DEFENDANT-RESPONDENT-RESPONDENT, THIRD-PARTY PLAINTIFF-RESPONDENT-RESPONDENT AND PLAINTIFF-RESPONDENT.
COHEN & LOMBARDO, P.C., BUFFALO (STUART B. SHAPIRO OF COUNSEL), FOR THIRD-PARTY DEFENDANT-RESPONDENT-APPELLANT.
It is hereby ORDERED that the judgment so appealed from is unanimously affirmed without costs.
Memorandum: Plaintiffs Joseph Timmons and Jennifer Timmons (Timmmons plaintiffs) commenced action No. 1 alleging, inter alia, Labor Law violations based on injuries sustained by Joseph Timmons (Timmons) when he was struck by a metal catwalk while working on property owned by Barrett Paving Materials, Inc. (Barrett), the defendant in action No. 1. Barrett in turn commenced a third-party action against Timmons' employer, Schneider Brothers Corporation (Schneider), seeking a declaration that Schneider was obligated to defend and indemnify it in action No. 1 and that it was an additional insured under a commercial general liability policy issued to Schneider by Colony Insurance Company (Colony). Thereafter, Barrett commenced action No. 2 against Colony, the defendant in that action, seeking, inter alia, a declaration that it is an additional insured under the policy issued to Schneider.
In action No. 1, Barrett moved, inter alia, for summary judgment dismissing the Labor Law § 240 (1), § 241 (6) and § 200 claims against it, as well as the separate Labor Law § 241 (6) cause of action against it, and for judgment in the third-party action declaring that Schneider must defend and indemnify it in the Timmons action. Supreme Court granted those parts of the motion with respect to the Labor Law and, although the Timmons plaintiffs also asserted a cause of action for common-law negligence, the court, apparently sua sponte, dismissed the complaint in its entirety. We note that the Timmons plaintiffs do not contend on appeal that Barrett did not seek that relief with respect to the common-law negligence cause of action, nor do they contend that Barrett was not entitled to it. The Timmons plaintiffs thus are deemed to have abandoned any contention with respect to the alleged viability of the common-law negligence cause of action (see Ciesinski v Town of Aurora, 202 AD2d 984).
Contrary to the Timmons plaintiffs' contention, the court properly granted that part of the motion with respect to Labor Law § 240 (1). It is well settled that Labor Law § 240 (1) "was designed to prevent those types of accidents in which the scaffold, hoist, stay, ladder or other protective device proved inadequate to shield the injured worker from harm directly flowing from the application of the force of gravity to an object or person" (Runner v New York Stock Exch., Inc., 13 NY3d 599, 604, quoting Ross v Curtis-Palmer Hydro-Elec. Co., 81 NY2d 494, 501). "[F]or section 240 (1) to apply, a plaintiff must show more than simply that an object fell causing injury to a worker. A plaintiff must show that the object fell, while being hoisted or secured, because of the absence or inadequacy of a safety device of the kind enumerated in the statute" (Narducci v Manhasset Bay Assoc., 96 NY2d 259, 268).
Here, the record establishes that, prior to the accident, Timmons and a coworker had tack-welded the catwalk to a building, following which the workers noticed that the outside portion of the catwalk was slightly higher than the inside portion. Timmons' coworker attempted to level the catwalk by pushing down on it with a manlift while Timmons, who was standing on a lower catwalk, prepared to weld a support gussett underneath the tack-welded catwalk. As a result of the pressure exerted on the catwalk by the manlift, the tack-weld on the portion of the catwalk closest to Timmons broke and that end of the catwalk fell, striking Timmons in the head and pinning him between the upper catwalk and the handrail of the lower catwalk. "Since the [catwalk] was not an object being hoisted or secured, Labor Law § 240 (1) does not apply" (id. at 269; see Bennett v SDS Holdings, 309 AD2d 1212, 1213). We thus conclude that Timmons was "exposed to the usual and ordinary dangers of a construction site, and not the extraordinary elevation risks envisioned by Labor Law § 240 (1)" (Rodriguez v Margaret Tietz Ctr. for Nursing Care, 84 NY2d 841, 843).
With respect to Labor Law § 241 (6), the court properly concluded that the Industrial Code regulations relied upon by the Timmons plaintiffs are either insufficiently specific to support such a claim or cause of action or are inapplicable to the facts of this case. 12 NYCRR 23-1.5 "sets forth only a general safety standard and is thus incapable of supporting a Labor Law § 241 (6) claim" or cause of action (McCormick v 257 W. Genesee, LLC, 78 AD3d 1581, 1583 [internal quotation marks omitted]; see Wilson v Niagara Univ., 43 AD3d 1292, 1293). In addition, 12 NYCRR 23-1.7 (a) does not apply here because there is no evidence that the area in which Timmons was working was "normally exposed to falling material or objects" within the meaning of that section (12 NYCRR 23-1.7 [a] ; see Perillo v Lehigh Constr. Group, Inc., 17 AD3d 1136, 1138). Lastly, 12 NYCRR 23-2.3 also has no application to this case because it regulates "the final placing of structural steel members" (12 NYCRR 23-2.3 [a] ), which was not the task in which Timmons was engaged at the time of his accident (see Smith v Le Frois Dev., LLC, 28 AD3d 1133, 1134). In any event, even if the upper catwalk was a "structural steel member," 12 NYCRR 23-2.3 (a) (1) "does not require that hoisting ropes be used for the placing of structural steel members. Rather, the regulation applies only when hoisting ropes are actually used for the placing of structural steel members. Thus, because no hoisting ropes were used by [Timmons], the regulation is inapplicable" (Hasty v Solvay Mill Ltd. Partnership, 306 AD2d 892, 894).
With respect to Labor Law § 200, that statute "codifies the common-law duty of an owner or employer to provide employees with a safe place to work" (Jock v Fien, 80 NY2d 965, 967; see Ross, 81 NY2d at 505; Lombardi v Stout, 80 NY2d 290, 294). "An implicit precondition to this duty is that the party charged with that responsibility have the authority to control the activity bringing about the injury" (Comes v New York State Elec. & Gas Corp., 82 NY2d 876, 877 [internal quotation marks omitted]). "Where the alleged defect or dangerous condition arises from the contractor's methods and the owner exercises no supervisory control over the operation, no liability attaches to the owner under . . . Labor Law § 200" (id.; see Lombardi, 80 NY2d at 295).
Here, Barrett established that it did not supervise or control the manner or method of the work performed by Timmons, and the Timmons plaintiffs failed to raise a triable issue of fact in opposition (see Lovall v Graves Bros., Inc., 63 AD3d 1528, 1530; Uzar v Louis P. Ciminelli Constr. Co., Inc., 53 AD3d 1078, 1079; cf. Capasso v Kleen All of Am., Inc., 43 AD3d 1346, 1347-1348). Although there is evidence in the record that Barrett's plant superintendent oversaw the timing and sequence of the work, that his responsibilities included job safety, and that he could directly address an employee of Schneider if he observed an unsafe practice, it is well established that "monitoring and oversight of the timing and quality of the work is insufficient to raise a triable issue of fact with respect to supervision or control for the purposes of . . . Labor Law § 200" (McCormick, 78 AD3d at 1581). Similarly, "a general duty to ensure compliance with safety regulations or the authority to stop work for safety reasons is insufficient to raise a triable issue of fact" under Labor Law § 200 (id. at 1582).
The court also properly granted that part of Barrett's motion for summary judgment declaring that Schneider had a duty to defend Barrett in the Timmons action. We need not address that part of the motion with respect to indemnification in view of our decision that the complaint in action No. 1 was properly dismissed. Contrary to the contention of Schneider, a purchase order containing a defend and indemnify clause issued by Barrett to Schneider prior to the accident constituted a "written contract" within the meaning of Workers' Compensation Law § 11 (see generally Mentesana v Bernard Janowitz Constr. Corp., 36 AD3d 769, 771; Kay-Bee Toys Corp. v Winston Sports Corp., 214 AD2d 457, 458, lv denied 86 NY2d 705). The fact that the purchase order was not signed by a representative of Schneider is of no moment inasmuch as there is sufficient evidence in the record to establish as a matter of law that Schneider assented to the terms of the purchase order and intended to be bound thereby (see Flores v Lower E. Side Serv. Ctr., Inc., 4 NY3d 363, 369, rearg denied 5 NY3d 746). Specifically, the prior course of conduct between the parties, Schneider's performance of the work set forth in the purchase order, and its procurement of insurance on Barrett's behalf in accordance with the purchase order establishes that Schneider "was aware of and had assented to the terms of . . . the purchase order" (Kay-Bee Toys Corp., 214 AD2d at 459; cf. Auchampaugh v Syracuse Univ., 67 AD3d 1164, 1165). There is no merit to the further contention of Schneider that the agreement is barred by the statute of frauds (see General Obligations Law § 5-701 [a] ).
With respect to action No. 2, we conclude that the court properly denied Colony's motion seeking a declaration that there is no coverage and, implicitly, no duty to provide a defense, under its insurance policy and granted Barrett's cross motion seeking a declaration that it is an additional insured under that policy. The policy's additional insured endorsement provides that a third party may be added as an additional insured "when [Schneider] and the [third party] . . . have agreed in writing in a contract or agreement that such person or organization be added as an additional insured' on [Schneider's] policy." Here, the purchase order, which required Schneider to add Barrett as an additional insured on its commercial
general liability policy, constitutes an agreement in writing for purposes of the additional insured endorsement.
O'Sullivan v. Velez
Asta & Associates, P.C., New York (Eliot S. Bickoff of
counsel), for appellant.
Brand Glick & Brand, Garden City (Peter M. Khrinenko of
counsel), for Armando Velez and Elrac, Inc., respondents.
Baker, McEvoy, Morressey & Moskovitz, P.C., New York
(Stacy R. Seldin of counsel), for Mahmoud R. Hassan,
Order, Supreme Court, New York County (Paul Wooten, J.), entered January 7, 2010, which, to the extent appealed from, as limited by the briefs, in an action for personal injuries arising from a motor vehicle accident, granted defendant Mahmoud R. Hassan's motion and defendants Armando Velez and Elrac, Inc.s' cross motion for summary judgment dismissing the complaint, unanimously modified, on the law, to deny the motion and cross motion with respect to the "permanent consequential limitation" and "significant limitation" categories and otherwise affirmed, without costs.
With respect to the "permanent consequential limitation" and "significant limitation" serious injury categories (Insurance Law § 5102[d]), as related to plaintiff's right wrist injury, defendants' papers failed to eliminate issues of fact as to whether plaintiff suffered a "serious injury" to the wrist and as to the cause of the injury and thus failed to meet their prima facie burden of demonstrating entitlement to judgment as a matter of law (see Alvarez v Prospect Hosp, 68 NY2d 320, 324 ).
In any event, regarding the wrist, plaintiff's opposition raised triable issues of fact. Specifically, plaintiff's treating physician submitted an affirmation setting forth findings based on objective tests and opinions conflicting with those of defendants' experts (see Grill v Keith, 286 AD2d 247, 248 ). Because we find that plaintiff is entitled to present her claim involving her wrist to a jury, she is also entitled to seek damages for injuries to her neck, even if those injuries themselves did not meet the threshold (see Rubin v SMS Taxi Corp., 71 AD3d 548, 549 ).
With respect to the 90/180 day category, defendants made a prima facie showing of entitlement to summary judgment, as their respective moving papers included plaintiff's deposition testimony in which she testified that she was not confined to her home for any period nor did she miss work on account of the injuries allegedly sustained in the accident (see Byong Yol Yi v Canela, 70 AD3d 584, 584-85 ). Plaintiff failed to create an issue of fact with respect to the 90/180 day category.
Calendar Date: February 9, 2011
Before: Peters, J.P., Spain, Rose, Stein and Egan Jr., JJ.
Robert M. Cohen, Ballston Lake, for appellant.
Thuillez, Ford, Gold, Butler & Young, L.L.P., Albany
(Kelly M. Monroe of counsel), for respondent.
MEMORANDUM AND ORDER
Appeal from an order of the Supreme Court (McDonough, J.), entered March 26, 2009 in Albany County, which, among other things, granted defendant's motion for summary judgment dismissing the complaint.
In October 2004, while plaintiff was attempting to merge onto a bridge in the City of Albany, her vehicle was struck from behind by a vehicle being driven by defendant. Thereafter, plaintiff commenced this action, pro se, alleging that she suffered a serious injury within the meaning of Insurance Law § 5202 (d), relying upon the statutory categories of permanent consequential limitation, significant limitation, and inability to perform substantially all of her customary activities for at least 90 out of the 180 days immediately following the accident. In her bill of particulars, plaintiff claimed that she suffered from, among other things, hip and lumbar injuries, a traumatic brain injury, major depressive order, posttraumatic stress disorder, post-concussive disorder and loss of vision. Following discovery, defendant successfully moved for summary judgment dismissing the complaint. Plaintiff now appeals, and we affirm.
As the proponent of the summary judgment motion, defendant had the threshold burden of establishing by competent medical evidence that plaintiff did not sustain a serious injury caused by the accident (see Howard v Espinosa, 70 AD3d 1091, 1091-1092 ; Lee v Laird, 66 AD3d 1302, 1303 ). The evidence submitted by defendant established that, following the accident, plaintiff drove herself to a hospital emergency room with complaints of pain in her neck, back and buttocks. X rays performed on her thoracic and cervical spine revealed some mild degenerative changes, but no fractures. Plaintiff was diagnosed with a neck and thoracic strain, advised to follow up with her physician and discharged. Approximately one week later, plaintiff visited her primary care physician, Adele Strominger, who diagnosed her with whiplash and a low back muscle strain/sprain caused by the accident and referred her to physical therapy. When plaintiff returned to Strominger the following month complaining of weakness in her legs, Strominger noted that plaintiff's previous pain had essentially resolved itself and authorized plaintiff to return to work.
Between December 2004 and October 2006, plaintiff presented to Strominger with a multitude of problems. Strominger repeated her previous diagnosis and noted that, while plaintiff had complained of "multiple somatic symptoms" since the accident, subsequent X rays failed to identify any significant abnormalities. Strominger's reports also indicated that plaintiff suffered from schizoaffective disorder, which had been diagnosed before the accident. David Hart, a neurologist who evaluated plaintiff based on her complaints of shooting pain down her legs and up along her back, found that plaintiff had "a muscular ligamentous strain injury" from the accident with no focal neurological findings and no signs of permanent injury. A later MRI taken of plaintiff's brain and lumbar spine in response to her visual complaints, constant head pain and chronic low back pain was normal with no pathology and an MRI taken of her lumbar spine was essentially negative.
Defendant also proffered a report from orthopedic surgeon Thomas Eagan, who conducted an independent medical examination of plaintiff in October 2008. Eagan found that, while plaintiff likely sustained some soft tissue injuries from the accident, no structural changes existed that would cause chronic pain. He opined that the symptoms she complained of were attributable to her preexisting degenerative disc disease and exaggerated by her underlying mental health issues, particularly her schizoaffective disorder, and that her "bizarre symptomatology . . . was consistent with her chronic psychological condition." Eagan ultimately concluded that there was no causal relationship between plaintiff's current complaints and the reported injury.
Defendant further submitted the expert affidavit and report of Julie Lynch, a clinical neuropsychologist. Based upon her review of the records of Jeanne Kostas, a psychologist who diagnosed plaintiff with posttraumatic stress disorder, cognitive disorder and depressive disorder, Lynch found that Kostas had not conducted any neuropsychological testing needed to support such conclusions and had also failed to review plaintiff's preaccident medical or psychological records before making her diagnoses and causally relating them to the accident. As such, Lynch opined that Kostas' diagnoses were not based upon any objective testing or findings, but rather plaintiff's subjective report of her symptoms, and that Kostas' conclusion concerning causality lacked an adequate foundation (compare Brandt-Miller v McArdle, 21 AD3d 1152, 1154 ).
This evidence was sufficient to shift the burden to plaintiff to present "'competent medical evidence based upon objective medical findings and tests to support [her] claim of serious injury and to connect the condition to the accident'" (Wolff v Schweitzer, 56 AD3d 859, 861 , quoting Blanchard v Wilcox, 283 AD2d 821, 822 ; accord Vargas v Tomorrow Travel & Tour, Inc., 74 AD3d 1626, 1627 ; see Nowak v Breen, 55 AD3d 1186, 1187 ). To establish a claim under the permanent consequential limitation or significant limitation of use categories, "'the medical evidence submitted by plaintiff must contain objective, quantitative evidence with respect to diminished range of motion or a qualitative assessment comparing plaintiff's present limitations to the normal function, purpose and use of the affected body organ, member, function or system'" (Dean v Brown, 67 AD3d 1097, 1098 , quoting John v Engel, 2 AD3d 1027, 1029 ; see Hildenbrand v Chin, 52 AD3d 1164, 1165 ).
In opposition, plaintiff did not submit an affidavit from any medical expert, instead relying on her medical records, reports from her treatment providers and her own affidavit.[FN1] Notably, none of the records — other than those from plaintiff's treatment with Deborah Ciprioni, a physical therapist — contains qualitative or quantitative assessments of any physical limitation, nor do the diagnostic test results show evidence of abnormality. Ciprioni's report from October 2004 indicates that plaintiff suffers from muscle spasms in the cervical and lumbrosacral regions, and sets forth quantitative limitations in plaintiff's range of motion. However, Ciprioni neither identifies any objective or diagnostic tests utilized to support her findings nor causally relates the spasms to the accident (see Parks v Miclette, 41 AD3d 1107, 1110 ; Tuna v Babendererde, 32 AD3d 574, 577 ; Burford v Fabrizio, 8 AD3d 784, 785 ). Likewise, the medical report of Robert Fox, an optometrist who diagnosed plaintiff with convergence insufficiency and visual field defect, fails to causally relate these findings to the accident.
With respect to plaintiff's alleged psychological injuries, including posttraumatic stress disorder and major depressive disorder, her psychological treatment records contain no objective findings supporting those diagnoses and fail to set forth any adequate assessment of how the alleged injuries were causally related to the accident (see Palmeri v Zurn, 55 AD3d 1017, 1019 ; Bissonette v Compo, 307 AD2d 673, 674 ; Kristel v Mitchell, 270 AD2d 598, 599 ; compare Krivit v Pitula, 79 AD3d 1432, 1434-1435 ). Moreover, given Kostas' admitted failure to review plaintiff's preaccident records and defendant's proof that plaintiff's depression was a preexisting condition, Kostas' opinion that plaintiff's psychological condition is causally related to the accident is speculative (see Franchini v Palmieri, 307 AD2d 1056, 1058 , affd 1 NY3d 536 ). Accordingly, plaintiff's proof fell short of demonstrating that she sustained any injury — physical or psychological — constituting a permanent or significant limitation as a result of the accident.
Finally, with respect to plaintiff's claim under the 90/180-day category of serious injury, the medical proof failed to set forth objective evidence linking the alleged curtailment of her activities following the accident to an injury sustained in the accident (see Howard v Espinosa, 70 AD3d at 1094; Palmer v Moulton, 16 AD3d 933, 935 ; Creech v Walker, 11 AD3d 856, 856 ; Blanchard v Wilcox, 283 AD2d at 824). As plaintiff failed to establish the existence of a genuine issue of fact as to whether she sustained a serious injury as a result of this accident, the complaint was properly dismissed.
Footnote 1: Despite plaintiff's suggestion to the contrary, a pro se litigant "'acquires no greater right than any other litigant'" and, therefore, her decision to proceed pro se had no effect on her burden to present legally competent evidence to oppose defendant's summary judgment motion (Duffen v State of New York, 245 AD2d 653, 653-654 , lv denied 91 NY2d 810 , quoting Roundtree v Singh, 143 AD2d 995, 996 ).
ACC Construction Corporation v. Tower Insurance Company of New York
Rafter & Associates PLLC, New York (Howard K. Fishman of
counsel), for appellants-respondents.
Law Office of Max W. Gershweir, New York, (Joshua L.
Seltzer of counsel), for respondent-appellants.
O'Leary & Spero, Staten Island (Maria D. Spero of counsel),
Order and judgment (one paper), Supreme Court, New York County (Edward H. Lehner, J.), entered August 25, 2009, which denied plaintiffs' motion for summary judgment, granted defendant Tower Insurance Company's cross motion for summary judgment declaring that it has no duty to indemnify plaintiffs in connection with the underlying wrongful death action, and so declared, and granted third-party defendant's motion to dismiss the third-party complaint, unanimously affirmed, without costs.
It is undisputed that the commercial general liability insurance policy issued by Tower provided additional insured coverage to plaintiff ACC Construction Corp., as limited by the terms of the policy. The policy contains an independent contractors exclusion, which excludes from coverage " personal injury' arising out of operations performed for any insured by independent contractors." As the record demonstrates that the decedent was an employee of an independent contractor of ACC Construction and that his death arose out of his employer's operations, the exclusion applies as a matter of law (see Carriage Dev. v U.S. Underwriters Ins. [*2]Co., 4 AD3d 305 ).
In the third-party action, Tower seeks, inter alia, a defense and indemnity for costs incurred in connection with its defense of this declaratory judgment action from the decedent's wife, based on an indemnification provision contained in its settlement agreement with her in the underlying action. To interpret the provision in the manner urged by Tower would "produce a result that is absurd" and "contrary to the reasonable expectations of the parties," and we decline to do so (see Matter of Lipper Holdings v Trident Holdings, 1 AD3d 170, 171 ).
Crowell & Moring LLP, New York (Clifton S. Elgarten of
counsel), for appellants.
Quick and Bakalor, P.C., New York (Timothy J. Keane of
counsel), for respondent.
Order, Supreme Court, New York County (Charles E. Ramos, J.), entered December 15, 2008, which, to the extent appealed from as limited by the briefs, granted plaintiff's cross motion for summary judgment on its cause of action for bad faith, unanimously reversed, on the law, without costs, and the cross motion denied.
Defendant-appellant Allied World Assurance Company (U.S.) Inc., formerly known as Commercial Underwriters Insurance Company (CUIC), insured Galaxy Contracting Corp. (Galaxy) under a commercial general liability (CGL) policy with a limit of $1,000,000. Plaintiff-respondent Federal Insurance Company (Federal) provided Galaxy with excess coverage up to $10,000,000. In addition, pursuant to its contractual indemnity obligation, Galaxy purchased from CUIC, for the property owners' benefit, a separate owners and contractors protective liability policy (OCP) with a limit of $1,000,000.
The underlying Labor Law action was settled for $3,000,000. This was paid $1,000,000 by CUIC pursuant to the CGL policy and $2,000,000 by Federal pursuant to the excess policy, without prejudice to Federal's right to recover from CUIC. This action followed and, as is relevant to this appeal, in the second cause of action, Federal alleged that it paid an extra $1,000,000 as a result of CUIC's bad faith in failing to defend Galaxy against the owners' indemnification claims on the basis of the antisubrogation rule. In a prior appeal (47 AD3d 52, 64 ), we found that Federal sufficiently stated a cause of action for bad faith.
Under New York law, since an insurer has exclusive control over a claim against its insured once it assumes defense of the suit, it has a duty to act in "good faith" when deciding whether to settle and may be held liable for breach of that duty (see Pavia v State Farm Mut. Auto. Ins. Co., 82 NY2d 445, 452 (1993]). This duty also applies where an excess insurer is exposed to liability (see Hartford Acc. & Indemn. Co. v Michigan Mut. Ins. Co., 61 NY2d 569 ; Elm Ins. Co. v GEICO Direct, 23 AD3d 219 ), and requires a primary insurer to [*2]give as much consideration to the excess carrier's interests as it does to its own (Pavia, 82 NY2d at 453; St. Paul Fire & Mar. Ins. Co. v United States Fid. & Guar. Co., 43 NY2d 977, 978-979, ).
An insurer does not breach its duty of good faith when it makes a mistake in judgment or behaves negligently. To establish bad faith, an excess insurer must show that the primary insurer's conduct constituted a "gross disregard" of the excess insurer's interests and that the insurer's conduct involved a "deliberate or reckless failure to place on equal footing the interests of its insured with its own interests when considering a settlement offer" (Pavia, 82 NY2d at 453).
There is no formula to determine whether an insurer acted in good faith. The court must assess, among other factors, the "plaintiff's likelihood of success on the issue of liability, the potential damages award, the financial burden on each party if the insurer refuses to settle, whether the claim was properly investigated, the information available to the insurer when the demand for settlement was made, and . . . any other relevant proof tending to establish or negate the insurer's good faith in refusing to settle" (see Pinto v Allstate Ins. Co., 221 F3d 394, 399 [2d Cir 2000], citing Pavia, 82 NY2d at 454-55).
Given these stringent standards, there remains a material issue of fact as to whether CUIC was merely negligent or whether CUIC and/or its counsel were aware that the antisubrogation rule applied and deliberately failed to assert the defense in order to allow the owners to escape liability, thereby removing the OCP policy from the layer of coverage that had to be exhausted before triggering Federal's excess coverage. Although the memos and correspondence submitted by plaintiff could conceivably support a bad faith verdict after trial, it is for the finder of fact to determine whether the documents establish a deliberate plan by CUIC or merely reflect discussions of the consequences of a valid indemnity claim by the owner against Galaxy.
All concur except McGuire, J. who dissents in a memorandum as follows:
McGUIRE J. (dissenting)
I disagree with the majority's conclusion that plaintiff Federal Insurance Company (Federal) is not entitled to summary judgment as a matter of law on its second cause of action for bad faith. Accordingly, I would affirm Supreme Court's decision granting Federal's cross motion for summary judgment on that cause of action.
This declaratory judgment action arises from a personal injury action commenced by an employee of a subcontractor who was injured at a construction site. The employee sued the general contractor, Galaxy General Contracting Corporation (Galaxy), and the owners and sponsors of a construction housing project (Owners). Galaxy had obtained two separate primary insurance policies from defendant Commercial Underwriters Insurance Company (CUIC): a commercial general liability (CGL) policy for itself and an owners and contractors protective liability (OCP) policy for the Owners. Each policy provided coverage up to the amount of $1,000,000. Galaxy also obtained a $10,000,000 excess insurance policy for itself from Federal.
At the inception of the action in 1999, CUIC retained one law firm to represent both Galaxy and the Owners. In June 2002, however, CUIC assigned separate defense counsel for Galaxy and the Owners. As CUIC states, it concluded that a potential indemnification claim by the Owners created a conflict of interest between its two insureds. Thereafter, the Owners amended their answer to assert cross claims against Galaxy for contractual and common-law indemnification, and moved for summary judgment on the cross claims. Galaxy opposed the motion but did not raise the antisubrogation rule, i.e., it did not argue that the owners were not entitled to indemnification because they were insured by the same insurer and an insurer "has no right of subrogation against its own insured for a claim arising from the very risk for which the insured was covered" (North Star Reins. Corp. v Continental Ins. Co., 82 NY2d 281, 294 ). In March 2003, Supreme Court conditionally granted the indemnification claims because no evidence had been presented that the Owners either were present at the work site or had any responsibility to control or supervise the work being performed. In a motion to renew or reargue, Galaxy belatedly raised the antisubrogation rule; the motion was denied on the ground that Galaxy had not provided a satisfactory explanation for failing to raise the antisubrogation rule on the original motion. Thereafter, the case was settled for $3,000,000; $1,000,000 was paid by CUIC pursuant to its CGL policy and $2,000,000 was paid by Federal under the excess policy.
On or about November 4, 2005, Federal commenced this declaratory judgment action, individually and as a subrogee of Galaxy, against CUIC. Federal asserted five causes of action, including violation of the antisubrogation rule, bad faith in defending Galaxy against the Owners' indemnification claims, and legal malpractice. CUIC made a pre-answer motion to dismiss and Supreme Court granted the motion with respect to the causes of action for legal malpractice. This Court affirmed the dismissal of those causes of action and also dismissed the causes of action for violation of the antisubrogation rule (47 AD3d 52, 59-63 ). With respect to the cause of action for bad faith, we held that "Federal's claim that CUIC manifested a conscious disregard' for Federal's rights by allowing one of its insureds, the owners, to escape liability in violation of the antisubrogation rule, thereby removing one of its policies (OCP) from the layer of coverage that had to be exhausted before triggering Federal's excess coverage, sufficiently states a cause of action for bad faith" (id. at 63-64 [internal citation omitted]).
In support of its motion for summary judgment, Federal submitted, inter alia, a hand-written memorandum by a CUIC claims manager that diagrams the parties, states that the Owners were not actively negligent in connection with the underlying personal injury action and lays out CUIC'S reason for seeking indemnification: doing so "will save 1 of CUIC's limits." A subsequent note to the Owners' counsel, authored by the same claims manager, states:
"Our goal is to get Galaxy the G.C. through its primary coverage . . . and Galaxy's excess carrier to resolve this claim thereby keep[ing] our $1 million for [the Owners] protected. Galaxy's primary and their [sic] excess is enough to settle this, the trick is to get Galaxy's excess carrier to agree they're [illegible]."
Additionally, in a letter to CUIC regarding a possible settlement, the Owners' counsel advises:
"In summary, there is no settlement that makes sense for [the Owners] unless our contribution is substantially less than the $1 million policy limits and there is no further litigation. If, for example, Federal requested that [the Owners] pay $500,000 toward settlement and agreed not to challenge the indemnification finding, CUIC would be able to end the litigation without risking the full exposure of both its policies in this case."
Federal maintains that these documents establish that pursuant to a plan it developed, CUIC acted to shift the financial responsibility for the personal injury claim to place a greater burden on Federal by triggering the excess coverage instead of CUIC's OCP policy. CUIC maintains that the plan was to protect the Owners, that the documents demonstrate a lack of knowledge of the antisubrogation rule and that this lack of legal knowledge reflects mere negligence (which they blame on counsel retained to represent the Owners) rather than a violation in bad faith of their fiduciary duty to Federal as the excess carrier. CUIC also maintains that after the file was split, i.e., after it retained separate counsel and assigned separate claims handlers to the claims against Galaxy and the Owners, "[t]heir duty ran only to the Owners, and not to Federal, which only insured Galaxy."
Under New York law, "the primary carrier owes to the excess insurer the same fiduciary obligation which the primary insurer owes to its insured, namely, a duty to proceed in good faith and in the exercise of honest discretion" (Hartford Acc. & Indem. Co. v Michigan Mut. Ins. Co., 93 AD2d 337, 341 , affd 61 NY2d 569 ). A primary insurer is considered to act in good faith when it gives the same consideration to the excess insurer's interests that it gives to its own interests (see Pavia v State Farm Mut. Auto Ins. Co., 82 NY2d 445, 453 ; New England Ins. Co. v Healthcare Underwriters Mut. Ins. Co., 295 F3d 232 [2d Cir 2002]). In the context of a bad-faith claim founded on a failure to settle, "the plaintiff must establish that the insurer's conduct constituted a gross disregard' of the insured's interests —- that is, a deliberate or reckless failure to place on equal footing the interests of its insured with its own interests when considering a settlement offer" (Pavia, 82 NY2d at 453 [internal citation omitted]).
Here, summary judgment is warranted because CUIC knowingly and deliberately placed its interests ahead of those of the excess carrier to avoid exposure beyond the $1 million limit of the CGL policy it issued to Galaxy. Specifically, the record establishes that CUIC devised and executed a plan to avoid exposure of the Owners' primary policy, i.e., to save one of CUIC's two limits of $1 million, with the knowledge and intent that a successful indemnification claim against its other insured would shift the financial burden to Federal (id.; see also Hartford Acc., 93 AD2d at 341-342).
Nor can CUIC avoid liability on the ground that neither it nor the attorneys it retained to represent the Owners knew that a doctrine called the antisubrogation rule barred the indemnification claim. This defense is predicated not on what CUIC did or did not do, but on what it did or did not know about the law. Even assuming neither CUIC nor the attorneys for the Owners knew of the rule, that lack of knowledge is not a defense for it does not alter the crucial fact that CUIC knowingly and deliberately placed its interest ahead of those of the excess carrier to which it owed the same fiduciary obligation it owed to its insureds. Obviously, to recognize such a defense —- CUIC cites no authority recognizing it -— would run afoul of the precept that ignorance of the law is not an excuse. Moreover, it would have the unseemly effect of permitting an insurer ignorant of the rule, a rule premised in part on the need to avoid the conflicts of interest inherent in situations in which an insurer provides coverage to two insureds for the same risk (Pennsylvania Gen. Ins. Co. v Austin Powder Co., 68 NY2d 465, 472 ), to be in a superior position than an insurer knowledgeable about the rule. The former can avoid a loss for which it provided coverage (here, a $1 million loss) while the latter must pay it. In short, CUIC's liability should turn on the self-serving nature of the conduct it knowingly committed, not on whether it knew that a rule of law prohibited that conduct.
CUIC asserts that it acted in good faith because it was in the Owners' best interest not to [*5]trigger coverage under the Owners' OCP policy. More specifically, it maintains that "pressing and protecting the Owner's [sic] right of indemnification . . . served, inter alia, to minimize the erosion of the Owners' primary policy, to protect the policy to be available to pay a judgment above any amounts available from Galaxy, and to safeguard the Owners' loss history." The same claims handler who testified to these ostensible reasons for conserving the OCP policy wrote the contemporaneous notes quoted above setting out a very different reason for seeking indemnification: doing so "will save 1 of CUIC's limits" (emphasis added). And in the handwritten note quoted above, the claims handler expressly stated that "Galaxy's primary and their [sic] excess is enough to settle this." Moreover, when the indemnification motion was made, no other claims had been made against the Owners that might trigger coverage under the OCP policy. In any event, even assuming that its plan to seek indemnification was motivated in part by a beneficent regard for the interests of the Owners, that does not negate the evidence establishing that CUIC knowingly and deliberately placed its interests above those of Federal. Finally, as Federal notes, after it did become aware of the antisubrogation rule and learned that it had benefitted from the rule's violation, CUIC was asked to contribute to the settlement but refused, essentially insisting on the advantage it had obtained from the successful realization of its plan.
Whether the plan was devised before or after the defense was split between law firms and claims handlers is irrelevant. CUIC's duty to Federal did not evaporate simply because separate counsel for each insured was obtained. Not surprisingly, CUIC cites nothing in support of its argument that its duty ran only to the owners, and not to Federal, after the split. An "insurer does not satisfy its duty to defend merely by designating independent counsel to defend the litigation" (Feliberty v Damon, 72 NY2d 112, 117 ). Likewise, its fiduciary duty to act in good faith toward both its insured and the excess carrier were not discharged upon the assignment of separate counsel. Finally, the mere fact that CUIC obtained separate counsel is hardly conclusive proof that it was acting selflessly. After all, the firm that initially represented both insureds could not bring a cross claim against one of its clients on behalf of the other.
Accordingly, I would affirm the Supreme Court's decision granting Federal's cross motion for summary judgment on its cause of action for bad faith. As there is no dispute that the appropriate measure of damages is $1 million, I assume, without deciding, that it is the amount to which Federal is entitled.
O'Connor, McGuinness, Conte, Doyle & Oleson, White Plains,
N.Y. (Montgomery L. Effinger of counsel), for appellant.
Sobo & Sobo, LLP, Middletown, N.Y. (Suzan D. Paras of
counsel), for respondent-respondent.
DECISION & ORDER
In a proceeding pursuant to CPLR article 75 to stay arbitration of an uninsured motorist claim, the petitioner appeals, as limited by its brief, from so much of an order and judgment (one paper) of the Supreme Court, Orange County (Bartlett, J.), dated June 14, 2010, as denied that branch of the petition which was to stay arbitration and dismissed the proceeding.
ORDERED that the order and judgment is reversed insofar as appealed from, on the law, with costs, that branch of the petition which was to stay arbitration is reinstated, and the matter is remitted to the Supreme Court, Orange County, for joinder of the proposed additional respondents as necessary parties and, thereafter, a determination of that branch of the petition which was to stay arbitration.
As the petitioner correctly points out, the timeliness of a proceeding for a stay of arbitration is measured with respect to the earlier filing of the petition, not with respect to its later service (see CPLR 304, 7502[a]; e.g. Matter of State Farm Mut. Auto. Ins. Co. [Rickard], 250 AD2d 896, 897). The Supreme Court erred in dismissing the proceeding based on the untimeliness of the proceeding. We note that the respondent-respondent, Ahmad Morris, does not contest the issue of timeliness on appeal, and he did not raise the issue of timeliness in his submissions in Supreme Court.
We also agree with the petitioner that it made a sufficient showing that the offending vehicle might have been insured at the time of the accident to warrant a framed-issue hearing (see Matter of AutoOne Ins. Co. v Hutchinson, 71 AD3d 1011; Matter of Continental Ins. Co. v Biondo, 50 AD3d 1034). Morris's own attorney, in her affirmation in opposition to the petition, acknowledged that the offending vehicle had been insured up until a few hours before the accident (cf. Matter of Peerless Ins. Co. v Milloul, 140 AD2d 346). Further, in his submissions in the Supreme Court, Morris did not advance any argument opposing the admissibility of the police report upon which the petitioner relied (see CPLR 4518) to show that the offending vehicle might have been insured at the time of the accident (see Matter of AutoOne Ins. Co. v Hutchinson, 71 AD3d 1011).
Contrary to the petitioner's contention on appeal, it did not demonstrate the need for an order directing disclosure in the aid of arbitration (see CPLR 3102[c]). There is no proof that Morris has refused to comply with any legitimate discovery demand made upon him by the petitioner. Moreover, Morris's attorney, in her affirmation in opposition, stated that Morris would "comply with all requisite pre-arbitration demands for discovery to the extent relevant and necessary."
For these reasons, the order and judgment must be reversed insofar as appealed from, that branch of the petition which was to stay arbitration must be reinstated, and the matter must be remitted to the Supreme Court, Orange County, for joinder of the proposed additional respondents as necessary parties and, thereafter, a determination of that branch of the petition which was to stay arbitration.
In the Matter of Liberty Mutual Insurance Company v. Vella
Alan M. Sanders, Carle Place, N.Y., for appellants.
Martyn, Toher & Martyn, Mineola, N.Y. (Timothy J.
Campanella of counsel), for respondent.
DECISION & ORDER
In an proceeding pursuant to CPLR article 75 to permanently stay arbitration of a claim for uninsured motorist benefits, Justyna Vella and Hanna Kulpanowska appeal from a judgment of the Supreme Court, Queens County (Rios, J.), dated December 10, 2009, which, after a hearing, granted the petition.
ORDERED that the judgment is reversed, on the law, with costs, the petition is denied, and the proceeding is dismissed.
The petitioner, Liberty Mutual Insurance Company (hereinafter Liberty Mutual), commenced this proceeding to permanently stay arbitration of a claim for uninsured motorist benefits on the ground that there was no physical contact between the vehicle of its insured, Hanna Kulpanowska (hereinafter the insured), and an alleged hit-and-run vehicle. On December 26, 2006, Justyna Vella, the insured's daughter, was driving the insured's vehicle on the westbound Grand Central Parkway in Queens. She allegedly was injured when she collided with the rear of a truck which was stopped in her lane of travel. According to Vella's testimony at a hearing, her vehicle collided with the truck because an unidentified vehicle, which fled the scene, struck the rear of her vehicle, causing it to lurch forward. After a framed-issue hearing as to physical contact, the Supreme Court granted Liberty Mutual's petition and permanently stayed arbitration.
Physical contact is a condition precedent to an arbitration based upon a hit-and-run accident involving an unidentified vehicle (see Insurance Law § 5217; Matter of New York Cent. Mut. Fire Ins. Co. v Vento, 63 AD3d 841, 843; Matter of Travelers Indem. Co. v Panther, 61 AD3d 984, 985; Matter of Eveready Ins. Co. v Scott, 1 AD3d 436, 437). "The insured has the burden of establishing that the loss sustained was caused by an uninsured vehicle, namely, that physical contact occurred, that the identity of the owner and operator of the offending vehicle could not be ascertained, and that the insured's efforts to ascertain such identity were reasonable" (Matter of Nova Cas. Co. v Musco, 48 AD3d 572, 573; see Matter of Newark Ins. Co. v Caruso, 14 AD3d 613, 614).
Where, as here, a case was tried before a judge without a jury, this Court's power to review the evidence is as broad as that of the trial court, "taking into account in a close case the fact that the trial judge had the advantage of seeing the witnesses'" (Northern Westchester Professional Park Assoc. v Town of Bedford, 60 NY2d 492, 499 quoting York Mtge. Corp. v Clotar Constr. Corp., 254 NY 128, 133-134).
Contrary to the Supreme Court's conclusion, the uncontroverted evidence adduced at a hearing, which consisted of Vella's testimony, two post-accident photographs of her vehicle, and a Department of Motor Vehicles report signed by Vella stating, inter alia, that her vehicle was struck from the rear, established that the subject accident was caused by physical contact with a hit- and-run vehicle. Thus, the Supreme Court's determination that there was no physical contact was not supported by the record (see Matter of Newark Ins. Co. v Caruso, 14 AD3d at 614; cf. Matter of Nova Cas. Co. v Musco, 48 AD3d at 573).
Accordingly, the Supreme Court should have denied the petition to permanently stay arbitration and dismissed the proceeding.
Max D. Leifer, P.C., New York, N.Y. (Ira H. Zuckerman of counsel), for appellant.
Richard T. Lau & Associates, Jericho, N.Y. (Marcella Gerbasi
Crewe of counsel), for respondent.
DECISION & ORDER
In an action to recover damages for personal injuries, the plaintiff appeals (1), as limited by her notice of appeal and brief, from so much of an order of the Supreme Court, Queens County (Golia, J.), dated April 9, 2010, as granted the defendant's cross motion for summary judgment dismissing the complaint on the ground that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d), and (2) a judgment of the same court entered June 4, 2010, which, upon the order, is in favor of the defendant and against her dismissing the complaint.
ORDERED that the appeal from the order is dismissed; and it is further,
ORDERED that the judgment is affirmed; and it is further,
ORDERED that one bill of costs is awarded to the defendant.
The appeal from the intermediate order must be dismissed because the right of direct appeal therefrom terminated with the entry of judgment in the action (see Matter of Aho, 39 NY2d 241, 248). The issues raised on the appeal from the order are brought up for review and have been considered on the appeal from the judgment (see CPLR 5501[a]).
Contrary to the plaintiff's contentions, the Supreme Court correctly determined that the defendant met his prima facie burden of showing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident (see Toure v Avis Rent A Car Sys., 98 NY2d 345; Gaddy v Eyler, 79 NY2d 955, 956-957). In opposition, the plaintiff failed to raise a triable issue of fact. The plaintiff failed to submit any affirmations or affidavits of her treating physicians, or medical records in admissible form, of any medical findings contemporaneous with the subject accident (see Toure v Avis Rent A Car Sys., 98 NY2d at 350-351; Rush v Kwan Chiu, 79 AD3d 1004, 1005; Posa v Guerrero, 77 AD3d 898, 899).
Since the plaintiff failed to raise a triable issue of fact in opposition, the Supreme Court properly granted the defendant's cross motion for summary judgment dismissing the complaint.
D'Orsa v. Bryan
Thomas P. Cleere, Ft. Salonga, N.Y., for appellant.
Martyn, Toher & Martyn, Mineola, N.Y. (Christine J. Hill of
counsel), for respondent.
DECISION & ORDER
In an action to recover damages for personal injuries, the plaintiff appeals from an order of the Supreme Court, Queens County (Agate, J.), dated May 24, 2010, which granted the defendant's motion for summary judgment dismissing the complaint on the ground that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d).
ORDERED that the order is affirmed, with costs.
The Supreme Court correctly determined that the defendant met her prima facie burden of showing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident (see Toure v Avis Rent A Car Sys., 98 NY2d 345; Gaddy v Eyler, 79 NY2d 955, 956-957). In opposition, the plaintiff failed to raise a triable issue of fact.
The reports of the plaintiff's treating neurologist, Dr. Lewis A. Levy, and the report of the plaintiff's treating orthopedic surgeon, Dr. Robert Y. Garroway, as well as the plaintiff's hospital records, magnetic resonance imaging reports, and EMG/NCS reports, all were unaffirmed or uncertified, and thus, failed to raise a triable issue of fact (see Grasso v Angerami, 79 NY2d 813, 814; Rush v Kwan Chiu, 79 AD3d 1004, 1004; Bernier v Torres, 79 AD3d 776, 776; Zawaski v Salzano, 77 AD3d 823, 824; Vasquez v John Doe #1, 73 AD3d 1033, 1033; Lozusko v Miller, 72 AD3d 908, 908).
The affirmation of Dr. Levy also failed to raise a triable issue of fact because it did not contain any medical findings contemporaneous with the subject accident (see Toure v Avis Rent A Car Sys., 98 NY2d at 350-351; Rush v Kwan Chiu, 79 AD3d at 1005; Posa v Guerrero, 77 AD3d 898, 899).
Accordingly, the Supreme Court properly granted the defendant's motion for summary judgment dismissing the complaint.
David J. Sobel, P.C., Smithtown, N.Y., for appellant.
Ferro, Kuba, Mangano, Skylar, P.C., Hauppauge, N.Y. (Claudia
Behmoiram and Kenneth E. Mangano
of counsel), for respondent.
DECISION & ORDER
In an action to recover damages for personal injuries, the defendant appeals from an order of the Supreme Court, Suffolk County (Pitts, J.), dated May 24, 2010, which denied his motion for summary judgment dismissing the complaint on the ground that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d).
ORDERED that the order is reversed, on the law, with costs, and the defendant's motion for summary judgment dismissing the complaint is granted.
The defendant met his prima facie burden of showing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident (see Toure v Avis Rent A Car Sys., 98 NY2d 345; Gaddy v Eyler, 79 NY2d 955, 956-957). In opposition, the plaintiff failed to raise a triable issue of fact.
Although the affirmed report of Dr. Joseph Perez, one of the plaintiff's treating physicians, contained recent objective evidence of significant limitations in the range of motion of the thoracic and lumbar regions of the plaintiff's spine, as well as of the plaintiff's left knee, the plaintiff did not proffer any competent medical evidence that revealed the existence of any significant limitations in those areas that were contemporaneous with the subject accident (see Toure v Avis Rent A Car Sys., 98 NY2d at 350-351; Rush v Kwan Chiu, 79 AD3d 1004, 1005; Posa v Guerrero, 77 AD3d 898, 899). Accordingly, the Supreme Court should have granted the defendant's motion for summary judgment dismissing the complaint.
James G. Bilello, Westbury, N.Y. (Patricia McDonagh of counsel),
Billig Law, P.C., New York, N.Y. (Darin Billig of counsel), for
DECISION & ORDER
In an action to recover damages for personal injuries and property damage, the defendant appeals from an order of the Supreme Court, Kings County (Silber, J.), dated July 15, 2010, which granted the plaintiffs' motion for summary judgment on the issue of serious injury.
ORDERED that the order is affirmed, with costs.
The plaintiffs demonstrated their entitlement to judgment as a matter of law by establishing, prima facie, that they each sustained a serious injury within the 90/180-day category of serious injury under Insurance Law § 5102(d) (see Rasporskaya v New York City Tr. Auth., 73 AD3d 727; cf. Gavin v Sati, 29 AD3d 734, 735; Pierre v Nanton, 279 AD2d 621, 622; Krakofsky v Fox-Rizzi, 273 AD2d 277, 278; Schifren v Scheiner, 269 AD2d 381). In opposition, the defendant failed to raise a triable issue of fact as to whether the plaintiffs, who both alleged that they sustained injuries to, inter alia, the cervical and lumbar regions of their spines, each had a medically-determined injury that prevented them from performing substantially all of the material acts constituting their usual and customary daily activities during not less than 90 days during the first 180 days immediately following the subject accident (see Insurance Law § 5102[d]). In his reports detailing his medical findings from his recent examinations of the plaintiffs, the defendant's expert orthopedic surgeon, Alan J. Zimmerman, failed to relate those findings to the plaintiffs' 90/180 serious injury claims, which were clearly set forth in the bill of particulars. Thus, the reports were not sufficient to raise a triable issue of fact in opposition to the plaintiffs' prima facie showing (cf. Lewis v John, 81 AD3d 904, 905; Mugno v Juran, 81 AD3d 908; Reynolds v Wai Sang Leung, 78 AD3d 919, 920). Accordingly, the Supreme Court properly granted the plaintiffs' motion for summary judgment on the issue of serious injury.
Baker & Hostetler LLP, New York (Dennis O. Cohen of
counsel), for appellant.
Wilson Elser Moskowitz Edelman & Dicker LLP, New York
(Judy C. Selmeci of counsel), for respondent.
Judgment (denominated an order), Supreme Court, New York County (Debra A. James, J.), entered August 24, 2010, declaring that third-party plaintiff's claims are excluded from coverage under the policy issued by third-party defendant Excelsior Insurance Company, unanimously reversed, on the law, without costs, the declaration vacated, and it is declared that third-party plaintiff's claims are not excluded from coverage under the policy.
The parties agree that by its terms the policy's contractual liability exclusion does not apply to "insured contracts," which include leases, and that, since the liability here arises from a lease, it is not subject to the contractual liability exclusion. Nor, contrary to Excelsior's contention, are third-party plaintiff's claims subject to exclusion from coverage as "insured versus insured" claims, since there is no express exclusion in the policy for claims between the insured tenant (plaintiff) and the additional insured landlord (defendant/third-party plaintiff) (see Royal Ins. Co. of Am. v 342 Madison Ave. Assoc., 208 AD2d 389, 390 ; see also Trustees of Princeton Univ. v National Union Fire Ins. Co. of Pittsburgh, Pa., 52 AD3d 247, 247 , lv dismissed 11 NY3d 847  [noting policy's "insured versus insured" exclusion]).
CITY OF ELMIRA v SELECTIVE INSURANCE COMPANY OF NEW YORK
Calendar Date: February 17, 2011
Before: Peters, J.P., Lahtinen, Malone Jr., Kavanagh and Garry, JJ.
Calusen Miller, P.C., New York City (Melinda S.
Kollross of counsel), for appellant-respondent.
Anderson, Kill & Olick, P.C., New York City
(Marshall Gilinsky of counsel), for respondent-appellant.
MEMORANDUM AND ORDER
Cross appeals from an order of the Supreme Court (O'Shea, J.), entered April 7, 2010 in Chemung County, which denied defendant's motion for summary judgment dismissing the complaint and partially granted plaintiff's motion for summary judgment.
Plaintiff owned a historic three-story brick building in the City of Elmira, Chemung County known as the Armory Building. On March 10, 2006, a windstorm caused a portion of the Armory's southern wall to collapse. Plaintiff subsequently hired Hunt Engineers, Architects & Land Surveyors, PC to assess the Armory's condition. Hunt issued a report which concluded that the collapse of the southern wall was caused by hidden deterioration of mortar which weakened the wall and left it unable to withstand gusting winds. Hunt also reported that similar conditions existed in other areas of the Armory which rendered the building hazardous to its occupants and the public, and recommended that it be vacated until the exterior walls were rebuilt. The report was provided to plaintiff's Fire Marshall who, in his capacity as plaintiff's Code Enforcement Officer, found the Armory to be in violation of several sections of the New York State Property Maintenance Code and determined that it not be occupied until the repairs recommended by Hunt were performed. He further concluded that, if such repairs were not performed, the Armory should be demolished immediately.
After Hunt provided an estimated cost to renovate the Armory of $7,350,000, plaintiff elected to have the Armory demolished and accepted a bid from a firm for $1,022,000 to do so. Plaintiff purchased a building on another site for approximately $227,000 for relocation of the functions formerly served by the Armory. Plaintiff thereafter submitted claims to defendant, its insurer, under its "all-risk" insurance policy. Acknowledging that the collapse of the Armory's south wall was covered under the policy, defendant paid plaintiff a sum of $440,000 for the damage sustained in March 2006,[FN1] but refused to cover the cost of demolishing the undamaged portions of the Armory and purchasing a replacement building at a different location.
Plaintiff commenced this action for breach of contract, claiming that it was entitled to coverage under the "Ordinance or Law" provision of an endorsement to the policy referred to as the ElitePac endorsement, which extended coverage to include certain losses resulting from enforcement of "any ordinance or law." After the parties each moved for summary judgment, Supreme Court denied defendant's motion and partially granted plaintiff's motion, awarding plaintiff $500,000 for demolition costs and approximately $227,000 for the cost of replacing the Armory under the Ordinance or Law provision. These cross appeals ensued.
When confronted with an insurance coverage dispute, "'[c]ourts must determine the rights and obligations of parties under an insurance contract based on the policy's specific language'" (Pepper v Allstate Ins. Co., 20 AD3d 633, 634 , quoting State Farm Mut. Auto. Ins. Co. v Glinbizzi, 9 AD3d 756, 757 ; accord White v Rhodes, 34 AD3d 951, 952 ). "While unambiguous provisions of a policy are given their plain and ordinary meaning, where policy language is unclear or subject to multiple reasonable interpretations, such ambiguities are resolved against the insurer" (Matter of Progressive Ins. Cos. [Nemitz], 39 AD3d 1121, 1122  [internal quotation marks and citations omitted]; see Travelers Indem. Co. v Commerce & Indus. Ins. Co. of Can., 36 AD3d 1121, 1122-1123 ). "The test for determining whether an insurance provision is ambiguous 'focuses on the reasonable expectations of the average insured upon reading the policy'" (Butler v New York Cent. Mut. Fire Ins. Co., 274 AD2d 924, 925-926 , quoting Matter of Mostow v State Farm Ins. Cos., 88 NY2d 321, 326-327 ; see State Farm Mut. Auto. Ins. Co. v Glinbizzi, 9 AD3d at 757).
The Ordinance or Law provision of plaintiff's policy provided, in relevant part, that:
"(1) If a Covered Cause of Loss occurs to covered Building property, we will pay:
(a) For Loss or damage caused by enforcement of any ordinance or law that:
(i) Requires the demolition
of parts of the same property not
damaged by a Covered Cause of Loss;
. . .
(c) The cost to demolish and clear
the site of undamaged parts of the
property caused by enforcement of the
building, zoning or land use ordinance
As the language makes clear, the only requirement necessary to trigger the Ordinance or Law provision is the occurrence of a "Covered Cause of Loss" (see e.g. Regents of the Mercersburg Coll. v Republic Franklin Ins. Co., 458 F3d 159, 168 n 11, 170 [3d Cir 2006]; Medical Plaza, LLC v United States Fid. & Guar. Co., 2008 WL 4335572, *6, 2008 US Dist LEXIS 73661, *16-17 [SD Miss 2008]). Here, the parties agree that the damage to the Armory's south wall that occurred in March 2006 was a "Covered Cause of Loss" under the policy. Thus, plaintiff is entitled to coverage so long as the costs to demolish the Armory and clear the site of undamaged parts were caused by enforcement of the building, zoning or land use ordinance or law. In that regard, the record undisputedly reveals that, as a result of the Fire Marshall's finding that the Armory was in violation of several provisions of the Property Maintenance Code, he exercised his authority to enforce those code provisions by requiring that the portions of the Armory undamaged by the windstorm be either repaired or demolished.
Defendant contends that the Ordinance or Law provision of the endorsement cannot be invoked because the covered cause of loss — i.e., the windstorm — did not cause the enforcement of the Property Maintenance Code requiring the Armory to be renovated or demolished. The Ordinance or Law provision, however, contains no such requirement. Rather, the clear and unambiguous language of the Ordinance or Law provision required only that a covered cause of loss occur, and that plaintiff incur costs to demolish and clear the site of undamaged parts of the property as a result of the enforcement of an ordinance or law. Thus, the only causal link required under that provision is that the costs to demolish the undamaged portions of the building be caused by enforcement of an ordinance or law [FN2] . Moreover, the Ordinance or Law provision lacks any unambiguous language excluding coverage where, for example, preexisting property damage contributes to enforcement of an ordinance or law (compare Park City Estates Tenants Corp. v Gulf Ins. Co., 33 AD3d 484, 484-485 ; 61 Jane St. Tenants Corp. v Great Am. Ins. Co., 2001 WL 40774, *3, 2001 US Dist LEXIS 265, *9-10 [SD NY 2001]; see generally Westview Assoc. v Guaranty Natl. Ins. Co., 95 NY2d 334, 339 ). If defendant wished to limit its coverage to only those situations where the enforcement of an ordinance or law is caused by a covered loss, it could have easily done so through the language of the contract. It did not, however, and, under the plain and unambiguous language of the Ordinance or Law provision, plaintiff is entitled to coverage for demolition costs (see Seward Park Hous. Corp. v Greater N.Y. Mut. Ins. Co., 43 AD3d 23, 28 ; Regents of the Mercersburg Coll. v Republic Franklin Ins. Co., 458 F3d at 170; Medical Plaza, LLC v United States Fid. & Guar. Co., 2008 WL 4335572, at *6, 2008 US Dist LEXIS, at *16-17).
However, plaintiff failed to demonstrate its entitlement as a matter of law to demolition costs in the amount of $500,000. Under the Ordinance or Law provision, plaintiff is entitled to demolition costs in the amount it actually spends to demolish and clear the site, not to exceed $500,000. The only record evidence of the cost to demolish the Armory was a copy of a resolution, passed by plaintiff's City Council, accepting a bid of $1,022,000 to perform the demolition. This resolution, however, was contingent on plaintiff obtaining financing, and there is no evidence in the record as to how much plaintiff actually paid for the demolition. As such, summary judgment was not warranted as to the precise amount of demolition costs.
Defendant next contends that plaintiff is not entitled to coverage under the Ordinance or Law provision of the policy for the cost to replace the Armory because it did not incur "increased construction costs." Specifically, defendant argues that the language explicitly and unambiguously states that the insurer will only pay for a loss resulting from "[t]he increased cost to repair, rebuild or construct the property caused by enforcement of . . . [an] ordinance or law" and that, because plaintiff purchased an existing structure to replace the Armory instead of repairing, rebuilding or constructing a replacement, no coverage is afforded under the Ordinance or Law provision. We agree.
In addition to providing coverage for demolition costs, the Ordinance or Law provision provides further coverage for the "increased cost to repair, rebuild, or construct the property caused by enforcement of building, zoning or land use ordinance or law." The provision continues that "increased construction costs" will not be paid "[u]ntil the property is actually repaired or replaced, at the same premises or elsewhere." It then goes on to set forth limits on the amount defendant will pay "[i]f the property is not repaired or replaced on the same premises."
While Supreme Court correctly found that the plain language of the policy permits plaintiff to "replace" the building at a different location, it erred in concluding that the term "replace" covered the purchase of an existing structure. The policy uses the word "replace" only after explicitly stating in the coverage subsection that the insurer will only pay for the increased cost to "repair, rebuild or construct" the property. Construing the Ordinance or Law provision as a whole and giving meaning to all of the words of the provision (see Raymond Corp. v National Union Fire Ins. Co. of Pittsburgh, Pa., 5 NY3d 157, 162 ; Travelers Indem. Co. v Commerce & Indus. Ins. Co. of Can., 36 AD3d at 1122), we find that the word "replace" is modified by the repeated references to construction and, thus, encompasses only the costs to "rebuild or repair" the property. Indeed, these provisions cannot reasonably be read to permit "[p]laintiff to receive additional funds to pay for the increased cost of construction when nothing is actually built" (Snoqualmie Summit Inn, Inc. v Travelers Prop. & Cas. Co. of Am., 2007 WL 709297, *5, 2007 US Dist LEXIS 15374, *13 [WD Wash 2007]). As coverage under the Ordinance or Law provision is expressly limited to repaired, rebuilt or constructed property, Supreme Court erred in requiring defendant to cover the costs of plaintiff's purchase of an existing building to replace the Armory (see Snoqualmie Summit Inn, Inc. v Travelers Prop. & Cas. Co. of Am., 2007 WL 709297, at *3, *5, 2007 US Dist LEXIS 15374, at *9-10, *13).
Lahtinen, Malone Jr., Kavanagh and Garry, JJ., concur.
ORDERED that the order is modified, on the law, without costs, by reversing so much thereof as (1) granted plaintiff's motion for summary judgment awarding it $227,040.88 in increased construction costs and $500,000 in demolition costs and (2) denied defendant's motion for summary judgment dismissing that part of plaintiff's cause of action seeking construction costs; defendant's motion granted to that extent and matter remitted to the Supreme Court for further proceedings not inconsistent with this Court's decision; and, as so modified, affirmed.
Footnote 1:This payment is not at issue in the instant appeal.
Footnote 2: Defendant's reliance on MarkWest Hydrocarbon, Inc. v Liberty Mut. Ins. Co. (558 F3d 1184 [10th Cir 2009]), Chattanooga Bank Assoc. v Fidelity & Deposit Co. of Maryland (301 F Supp 2d 774 [ED Tenn 2004]) and St. Paul Fire & Marine Ins. Co. v Darlak Motor Inns, Inc. (1999 WL 33755848, 1999 US Dist LEXIS 23283 [MD Pa 1999], affd 205 F3d 1330 ) is misplaced. The policy language in each of those cases explicitly required that a covered loss under the policy cause the enforcement of any law or ordinance in effect at the time of covered loss (see MarkWest Hydrocarbon, Inc. v Liberty Mut. Ins. Co., 558 F3d at 1188; Chattanooga Bank Assoc. v Fidelity & Deposit Co. of Maryland, 301 F Supp 2d at 780; St. Paul Fire & Marine Ins. Co. v Darlak Motor Inns, Inc., 1999 WL 33755848, at *5, 1999 US Dist LEXIS 23283, at *9-10; see also Crabb v State Farm Fire & Cas. Co., 2006 WL 1214998, *5, 2006 US Dist LEXIS 29539, *16-17 [D Utah 2006] [ordinance or law provision provided coverage for "the cost to demolish and clear the site of the undamaged portions of the dwelling caused by the enforcement of a building, zoning or land use ordinance or law if the enforcement is directly caused by the same Loss Insured and the requirement is in effect at the time the Loss Insured occurs" (emphasis added)]; Allemand v State Farm Ins. Cos., 2011 WL 723408, *4, 2011 Wash App LEXIS 506, *9 [Ct App Wash 2011] [same]). Decided on April 5, 2011
Gould Investors, L.P. v. Travelers Casualty & Surety Company of America
Frenkel Lambert Weiss Weisman & Gordon, LLP, New York,
N.Y. (Arthur N. Lambert and M. Diane Duszak of counsel), for
Jaspan Schlesinger, LLP, Garden City, N.Y. (Steven R.
Schlesinger, Joanne L. Oweis, and
Christopher D. Palmieri of counsel), for
DECISION & ORDER
In an action to recover damages for breach of contract, the defendant appeals from an order of the Supreme Court, Nassau County (Warshawsky, J.), entered July 28, 2010, which denied its motion for summary judgment dismissing the complaint.
ORDERED that the order is affirmed, with costs.
The defendant moved for summary judgment dismissing the complaint on the ground that, inter alia, the plaintiff's settlement of separate actions with persons harmed by its employee's conduct breached a provision of a commercial crime insurance policy requiring it to preserve the defendant's subrogation rights. The Supreme Court construed the policy as making the plaintiff's obligation to preserve the defendant's subrogation rights contingent upon the defendant's payment of the claim. In light of the undisputed evidence that the defendant had not paid the claim, the Supreme Court determined that the defendant failed to make a prima facie showing of its entitlement to judgment as a matter of law and denied the motion. We affirm.
"As with any contract, unambiguous provisions of an insurance contract must be given their plain and ordinary meaning . . . and the interpretation of such provisions is a question of law for the court" (Essex Ins. Co. v Laruccia Constr., Inc., 71 AD3d 818, 819 [internal quotation marks omitted]; see Atlantic Balloon & Novelty Corp. v American Motorists Ins. Co., 62 AD3d 920, 922). "If the language of the insurance contract is ambiguous, however, the parties may submit extrinsic evidence as an aid in construction, and any ambiguity must be construed against the insurer as drafter of the policy" (Essex Ins. Co. v Laruccia Constr., Inc., 71 AD3d at 819 [citation omitted]; see United States Fire Ins. Co. v Knoller Cos., Inc., 80 AD3d 692).
Here, the provision of the policy addressing the parties' obligations regarding subrogation provided that, "you must transfer to us all your rights of recovery against any person or organization for any loss you sustained and for which we have paid or settled. You must also do everything necessary to secure those rights and do nothing after loss to impair them." The Supreme Court properly determined that the plain and ordinary meaning of the first sentence of that provision obligated the plaintiff to transfer rights of recovery only upon payment of the claim and that, accordingly, no subrogation rights had accrued to the defendant upon which it could base its motion. As any ambiguity introduced by the second sentence of that provision must be construed against the insurer as drafter of the policy (see Essex Ins. Co. v Laruccia Constr., Inc., 71 AD3d at 818; United States Fire Ins. Co. v Knoller Companies, Inc., 80 AD3d 692), the Supreme Court's determination was proper.
The defendant's remaining contentions are without merit.
In the Matter of the Liquidation of Midland Insurance Company. —
David J. Strasser, for appellants.
David Axinn, for respondents.
Barry R. Ostrager, for intervenor-respondents.
In this choice-of-law dispute between policyholders and the New York State Liquidation Bureau, the question presented is whether the insurance policies issued by Midland Insurance Company (Midland) must be interpreted under New York substantive law because Midland has been adjudged insolvent and placed into liquidation in New York. We conclude that New York law need not apply and hold that for each Midland policy in dispute an individual choice-of-law analysis must be conducted to determine which jurisdiction's law should govern.
Headquartered in lower Manhattan, Midland was incorporated under New York Law in October 1959 as a stock casualty insurer. Its charter authorized Midland to conduct business throughout the United States and in Canada. Midland carried multiline insurance, a type of insurance that typically bundles together different exposures to risks. During its existence, Midland transacted with Fortune 500 companies nationwide, underwriting a substantial amount of excess coverage policies.
In 1985, the New York State Insurance Department (the Insurance Department) commenced an investigation into Midland's financial condition. The Insurance Department's analysis of Midland's financial condition revealed that the company's liabilities exceeded its assets. On March 7, 1986, the Insurance Department warned Midland that it would seek an order placing Midland into receivership if Midland was unable to get its financial affairs in order. Midland could not comply with the Insurance Department's directives and, by a unanimous vote of its Board of Directors, consented to liquidation.
By order dated April 3, 1986 (the Liquidation Order), Supreme Court adjudged Midland insolvent and placed it into liquidation pursuant to Article 74 of the New York Insurance Law. As of this date, Midland's financial records showed that its assets totaled approximately $307 million while its liabilities totaled approximately $354 million, making it insolvent by about $47 million. The Liquidation Order authorized the Superintendent of the Insurance Department (the Liquidator) to take possession of Midland's property and to sell or otherwise dispose of it at the best obtainable price.
Following the entry of the Liquidation Order in Supreme Court, the Liquidator began the statutorily mandated process of notifying all persons with potential claims against Midland. To that end, the Liquidator mailed out over 38,000 proof of claim forms to known Midland policyholders, and other creditors. In addition to providing Midland's policyholders and creditors with notice of Midland's insolvency, the Liquidator informed them of their obligation to present their claims by filing the requisite proof of claim forms with the Insurance Department no later than April 3, 1987.[FN1]
Article 74 of the Insurance Law vests the Liquidator with the authority to review these submitted claims and make recommendations to Supreme Court on what claims should be allowed or disallowed. Claims approved by Supreme Court are entitled to a share in Midland's estate while disallowed claims are not. By order dated March 15, 1994, Supreme Court established the procedure for the disallowance of claims. The order provided that the Liquidator must send a "Notice of Recommendation of Disallowance" (NOD) to those policyholders whose claims have been recommended for disallowance. The order also permitted anyone who received a NOD to file a written objection with the Liquidator within 60 days of the posted NOD date. Objections to the NOD timely received would be referred to a Supreme Court appointed referee who would review and conduct hearings on the disputed claims.
Claimants in this appeal (Major Policyholders) are among the corporate policyholders, headquartered in various states, who have timely submitted proof of claims to the Liquidator. The Major Policyholders have asserted claims against Midland for coverage stemming from exposure to, among other things, asbestos, environmental pollution, product liability, and other toxic torts. They seek to recover a significant percentage of the billions of dollars at stake in this liquidation proceeding. Subsequent to the Major Policyholder's submission of their proof of claims against Midland, the Liquidator determined that some of their claims should be disallowed. Accordingly, the Liquidator furnished the Major Policyholders with NODs in compliance with the court-ordered procedure, and, in turn, the Major Policyholders filed timely objections.
In 2006, the Liquidator, the Major Policyholders, and Midland's reinsurers approached Supreme Court to address their disagreement concerning the Liquidator's decision to disallow certain of the Major Policyholder's claims. One of the disputes between the parties centered on the Liquidator's decision to exclusively apply substantive New York law in making its determination to disallow certain claims of the Major Policyholders. The Liquidator predicated its decision to apply New York law on the Appellate Division's decision in Matter of Midland Ins. Co. [Claim of Lac d'Amiante du Quebec, Ltee] (269 AD2d 50 [1st Dept 2000]) (Midland LAQ). The Major Policyholders disputed the precedential value of the holding in Midland LAQ and argued that, under New York law, the Liquidator cannot legitimately disallow claims without first engaging in a choice-of-law analysis to determine the substantive state law that applies to each policy.
As a result, the parties requested that Supreme Court resolve this issue. Consequently, during the spring of 2006, the parties negotiated and agreed upon a proposed case management order. Supreme Court so-ordered the document, entitled "Stipulation and Case Management Order" (CMO) on July 31, 2006. The CMO set forth a procedure to resolve the legal disputes between the parties, dividing the legal issues into two phases. The legal issue posed by phase I of the CMO, which is the subject of this appeal, is "whether New York substantive law governs the interpretation and application of Midland insurance policies at issue in this litigation or whether [Supreme Court] must conduct an analysis utilizing New York's choice-of-law test to determine which jurisdiction's or jurisdictions' law(s) apply."
After reviewing memoranda of law submitted by the parties, Supreme Court agreed with the Major Policyholders that the Liquidator erred in automatically applying New York substantive law to every claim submitted. The court held that Certain Underwriters at Lloyd's, London v Foster Wheeler Corp. (36 AD3d 17 [1st Dept 2006], affd for reasons stated below 9 NY3d 928 ) obligated the Liquidator to conduct a threshold analysis of each Midland policy to determine the applicable substantive state law according to the "grouping of contacts" approach of the Restatement (Second) of Conflict of Laws. The court observed:
"On this motion, it cannot be determined whether
analysis of the policyholders' denied claims
under the Restatement's 'grouping of contacts'
approach would have resulted in allowances of
their claims. It may be possible for the
Liquidator to defend his denial of the
[Major Policyholders'] claims even when
applying the Restatement's approach. This
must be determined on a claim-by-claim basis."
The Appellate Division reversed the order of Supreme Court (Matter of Midland Ins. Co., 71 AD3d 221 [1st Dept 2010]). The court concluded that its prior decision in Midland LAQ, which stood for the proposition that "New York law must apply to all claims in a liquidation proceeding," was the law of the case and binding on Supreme Court (id. at 226). The court distinguished Foster Wheeler from its holding in Midland LAQ noting that Foster Wheeler "involved contract claims against a solvent insurer" (id.). The court reasoned that New York law must apply to the claims in a liquidation proceeding because New York has a "paramount state interest" in ensuring that the Liquidator makes "distributions from an insolvent's insurer's estate" in an equitable manner (id.). To interpret "Midland's policies under the laws of more than one state," the court held, "would run afoul" of Insurance Law § 7434 (a), which proscribes the creation of "subclasses among the policyholders-creditors" (id. at 227).On April 29, 2010, the same panel of the Appellate Division granted the Major Policyholders leave to appeal to this Court and certified a question inquiring whether its order, which reversed the order of Supreme Court, was "properly made." We now reverse and answer the certified question in the negative.
It is well-settled that New York has long recognized "the use of 'center of gravity' or 'grouping of contacts' as the appropriate analytical approach to choice-of-law questions in contract cases" (Zurich Ins. Co. v Shearson Lehman Hutton, 84 NY2d 309, 317 ; see also Auten v Auten, 308 NY 155, 160-161 ). "The purpose of grouping of contacts is to establish which State has 'the most significant relationship to the transaction and the parties'" (Zurich, 84 NY2d at 317, quoting Restatement [Second] of Conflict of Laws § 188 ). In Auten, we held that the "grouping of contacts" theory to choice-of-law disputes "gives  the place having the most interest in the problem paramount control over the legal issues arising out of a particular factual context, thus allowing the forum to apply the policy of the jurisdiction most intimately concerned with the outcome of the particular litigation" (308 NY at 161 [internal quotation marks, brackets and citation omitted]). In the context of liability insurance contracts, the jurisdiction with the most "significant relationship to the transaction and the parties" will generally be the jurisdiction "which the parties understood was to be the principal location of the insured risk . . . unless with respect to the particular issue, some other [jurisdiction] has a more significant relationship" (Zurich, 84 NY2d at 318, quoting Restatement [Second] of Conflict of Laws § 193).
We recently affirmed the Appellate Division's application of these principles in Foster Wheeler. In that case, Foster Wheeler Corporation sought a declaratory judgment for an apportionment of the defense and indemnity costs associated with various asbestos-related personal injury claims from its insurers (Foster Wheeler, 36 AD3d at 19). "[T]he insurance policies in question cover[ed] risks that [were] spread through multiple states" (id. at 22) and the parties disputed whether New York or New Jersey law should apply when interpreting those policies (see id. at 21).
In applying New York's "grouping of contacts" approach to choice-of-law questions, the Appellate Division concluded "where it is necessary to determine the law governing a liability insurance policy covering risks in multiple states, the state of the insured's domicile should be regarded as a proxy for the principal location of the insured risk" (id. at 24; see also Steadfast Ins. Co. v Sentinel Real Estate Corp., 283 AD2d 44, 50 [3d Dept 2001] [where insurance policy at issue covered risks stemming from "the nationwide scope of (the insured's) operations, the principal location of the insured risk should be deemed to be the state where (the insured) is incorporated and has its principal place of business"]). The Appellate Division observed that this approach promotes "certainty, predictability and uniformity of result" (Restatement [Second] of Conflict of Laws § 6  [f]) in that "[t]he state of the insured's domicile is a fact known to the parties at the time of contracting, and (in the absence of a contractual choice-of-law provision) application of the law of that state is most likely to conform to their expectations" (Foster Wheeler, 36 AD3d at 23).
The Liquidator and the reinsurers do not quarrel with the holding in Foster Wheeler, but argue that the choice-of-law principles pronounced there are inapplicable to this case since Midland is in liquidation, having been adjudged insolvent in New York. They contend that Article 74 of the Insurance Law abrogates the "grouping of contacts" approach to choice-of-law questions and requires the Liquidator to uniformly evaluate the claims submitted by the Major Policyholders under New York law. We find no statutory support for their position.
Our analysis of Article 74 of the Insurance Law begins with section 7432 (b), which provides:
"Where a liquidation, rehabilitation or conservation
order has been entered in a proceeding against an
insurer under this article, all persons who may have
claims against such insurer shall present the same to
(emphasis added). Here, the claims of the Major Policyholders derive from the insurance policies issued by Midland prior to its insolvency. There can be no doubt that, if solvent, Midland and the Major Policyholders would have engaged in a "grouping of contacts" analysis to determine which jurisdiction's laws govern the claims submitted. We see no reason why the Liquidator and the Major Policyholders should be precluded from engaging in the same choice-of-law analysis simply because Midland has been adjudged insolvent in New York.
Indeed, we find further support for our conclusion that choice-of-law principles continue to apply once an insurer has been adjudged insolvent in Insurance Law § 7433 (a). That statute, which governs the proof and allowance of claims submitted by an insured, states, in part:
"A proof of claim shall consist of a written statement
. . . setting forth the claim, the consideration therefor, any securities held thereof, any payments
made thereon, and that the sum is justly owing from the
insurer to the claimant" (emphasis added). We interpret "justly owing" to mean the amount Midland would have been obligated to pay its Major Policyholder had it remained solvent. Thus, determining the "sum" of a claim "justly owing from the insurer" invariably requires a choice-of-law analysis because the methodology of calculating an insured's loss can differ from one jurisdiction to the next (see e.g. Foster Wheeler, 36 AD3d at 20-21 [New Jersey's "mathematical method of effecting a pro rata allocation of an insured loss over the period of its occurrence . . . would make tens of millions of dollars more coverage available" to the insured than New York's method]).
Furthermore, there is nothing in the provisions of section 7433 (a) setting forth what claims "may be allowed" that substantive New York law must apply in computing their value. Accordingly, we hold that a blanket application of New York law to Midland's policies would frustrate the statutory mandate requiring the submission and allowance of claims by the Liquidator "justly owed" to the Major Policyholders.
Moreover, we reject the argument that an individual choice-of-law analysis on each of Midland's policies would create "subclasses" among the Major Policyholders in violation of Insurance Law § 7434 (a) (1). Section 7434 (a) (1) merely governs the distribution of assets in a liquidation proceeding, not the allowed sum, and its reference to "subclasses" has no bearing on whether choice-of-law principles should apply to the valuation of the Major Policyholders' claims. The statute, in relevant part, provides:
"distribution payments shall be made in a manner that will assure the proper recognition of priorities and a
reasonable balance between the expeditious completion
of the liquidation and the protection of unliquidated
and undetermined claims. The priority of distribution
of claims . . . shall be in accordance with the order in which each class of claims is set forth in this
paragraph . . . Every claim in each class shall be paid
in full or adequate funds retained for such payment
before the members of the next class receive any
payment. No subclasses shall be established within any
(emphasis added)[FN2]. The purpose in including language proscribing the creation of "subclasses" is to ensure that members within a particular class are not given priority vis-a-vis one another in terms of distribution. This proscription becomes particularly important where there are insufficient funds to pay 100% of the allowed claims within a particular class as there is here. In that situation, by eliminating the establishment of "subclasses," the statute requires that the liquidator pay each member of the same class a pro-rata share of the remaining assets from the liquidated estate (see Matter of Columbia Ribbon Co., 117 F2d 999, 1002 [3d Cir 1941] [In the context of a federal bankruptcy proceeding, "[i]t does not hold that [a] court may set up a sub-classification of claims within a class given equal priority by the Bankruptcy Act."]).
Thus, the proscription against formulating "subclasses" in the distribution phase of a liquidation does not require that the Liquidator apply substantive New York law to all the claims submitted by the Major Policyholders. Rather, we conclude that Article 74 of the Insurance Law recognizes that the allowance of claims and the distribution of the liquidated assets are two separate functions. While the statute is explicit in defining which classes of claimants receive priority for distribution purposes (see Insurance Law § 7434 [a]  [i-ix]), it does not address choice-of-law at the valuation stage. If the Legislature intended for substantive New York law to apply to every claim submitted by policyholders at the allowance phase, it would have said so.
On this point, we note that the claims submitted by the Major Policyholders are rooted in common law principles of contract. It is axiomatic that "rules of the common law are to be no further abrogated than the clear import of the language used in the statute" (Transit Commn. v Long Is. R.R. Co., 253 NY 345, 255 ; see McKinney's Statutes § 301 [a], [b]). Here, since there is no provision in Article 74 of the Insurance Law that suggests otherwise, we conclude that the Major Policyholders are entitled to an evaluation of their claims by the Liquidator under the same common law choice-of-law principles that clearly applied to their claims prior to Midland's insolvency.
Notably, we are not the only Court to arrive at this determination. In Viacom, Inc. v Transit Cas. Co. (138 SW3d 723 [Mo 2004]), the Missouri Supreme Court rejected a similar argument that Missouri law should govern all insurance policies issued by an insolvent Missouri insurer, regardless of which state's law would have applied to those policies prior to its insolvency (138 SW3d at 726). Rather, the court held that the insurer's insolvency did not change its coverage obligations, which continued to be governed by the law of the state that the parties knew was controlling at the time of contracting (see id.). Moreover, the Missouri Supreme Court observed that its insurer insolvency laws did not address choice- of-law and therefore Missouri's pre-insolvency choice-of-law principles continued to govern the insurance policies at issue. "Where the insolvency code is silent, courts apply the common law" (id.; see generally McKinney's Statutes § 301 [a], [b]).Finally, even if we were to accept respondents' argument that, under stare decisis and law of the case principles, the Appellate Division's holding in Midland LAQ was binding on Supreme Court as it arose out of the same liquidation proceeding, the ruling of a lower court, of course, is "not binding upon this [C]ourt" (Roger v McCloskey, 305 NY 75, 78 ). To the extent that Midland LAQ stands for the proposition that New York substantive law must apply to all claims in the Midland liquidation, that holding, for the reasons stated herein, is no longer good authority.
Accordingly, the order of the Appellate Division should be reversed, with costs, the order of Supreme Court reinstated, and the certified question answered in the negative.
* * * * * * * * * * * * * * * * *
Order reversed, with costs, order of Supreme Court, New York County, reinstated and certified question answered in the negative. Opinion by Judge Ciparick. Chief Judge Lippman and Judges Graffeo, Read, Smith, Pigott and Jones concur.
Decided April 5, 2011
Footnote 1: The Liquidator was unable to identify every Midland creditor prior to the filing deadline. Creditors who returned their proof of claim forms after the filing deadline, but within four months of the Liquidator's mailing were deemed to have timely filed.
Footnote 2: Insurance Law § 7434 designates nine classes of claimants for asset distribution purposes. The parties do not dispute that the Major Policyholders are in "class two." Decided on April 1, 2011
Appeal from an order (denominated decision) of the Supreme Court, Monroe County (William P. Polito, J.), entered July 13, 2010 in a breach of contract action. The order granted the motion of plaintiffs to dismiss defendant's ninth affirmative defense.
TRAYNOR, SKEHAN AND MARKS, ROCHESTER (JEFFREY H. MARKS OF COUNSEL), FOR DEFENDANT-APPELLANT.
GUSTAVE J. DETRAGLIA, JR., UTICA, FOR PLAINTIFFS-RESPONDENTS.
It is hereby ORDERED that the order so appealed from is unanimously reversed on the law without costs, the motion is denied and the ninth affirmative defense is reinstated.
Memorandum: In this breach of contract action involving a dispute over fire insurance coverage, plaintiffs moved to dismiss the ninth affirmative defense alleging that defendant insurer properly disclaimed coverage based on plaintiffs' failure to submit sworn proof of loss within the time limit set forth in the insurance policy. We agree with defendant that Supreme Court erred in granting the motion. Pursuant to CPLR 3211 (b), a plaintiff may move to dismiss a defense on the ground that it has no merit (see Fireman's Fund Ins. Co. v Farrell, 57 AD3d 721, 723). When reviewing a motion to dismiss an affirmative defense, "all of defendant's allegations must be deemed to be true and defendant is entitled to all reasonable inferences to be drawn from the submitted proof" (Grunder v Recckio, 138 AD2d 923, 923). The motion must be denied if there is any doubt with respect to the availability of a defense (see Nahrebeski v Molnar, 286 AD2d 891).
Here, pursuant to the insurance policy, plaintiffs were required to submit proof of loss within 60 days of defendant's demand for such proof. Defendant submitted evidence in support of the motion establishing that plaintiffs received its demand for proof of loss in the mail on March 6, 2009. Specifically, defendant's claims manager averred in an affidavit that plaintiff Michael Stopani called her on that day and acknowledged receipt of the demand letter, which was sent by defendant two days earlier via regular first class mail. On March 9, 2009, plaintiffs received another copy of the demand letter sent to them by certified mail. It is undisputed that plaintiffs did not submit proof of loss to defendant until May 8, 2009, which was more than 60 days from their alleged receipt of the first letter but fewer than 60 days from their admitted receipt of the second letter.
As a general rule, "[w]hen an insurer gives its insured written notice of its desire that proof of loss under a policy of fire insurance be furnished and provides a suitable form for such proof, failure of the insured to file proof of loss within 60 days after receipt of such notice, or within any longer period specified in the notice, is an absolute defense to an action on the policy" (Igbara Realty Corp. v New York Prop. Ins. Underwriting Assn., 63 NY2d 201, 209-210; see Turkow v Erie Ins. Co., 20 AD3d 649, 649-650). Where, as here, the insurer's demand for proof of loss is sent by two different methods on the same day, the 60-day period should be measured from the date the insured first receives the demand letter. This rule is consistent with the reciprocal principle that "the moment from which the timeliness of an insurer's disclaimer is measured is the date on which it first receives information that would disqualify the claim" (2540 Assoc. v Assicurazioni Generali, 271 AD2d 282, 283 [emphasis added]). If the rule were otherwise, an insured could extend indefinitely the time within which he or she is required to submit proof of loss by simply refusing to accept the demand letter sent by certified mail. Because defendant alleged that plaintiffs failed to submit proof of loss within 60 days of their first receipt of the demand letter, it cannot be said that defendant's ninth affirmative defense lacks merit.
With respect to the court's conclusion that, even if the 60-day period is measured from plaintiffs' first receipt of the demand letter on March 6, 2009, the delay is "de minimis and excusable under contract law," we agree with defendant that such a conclusion is contrary to the rule that the failure to comply with a demand for proof of loss within 60 days serves as "an absolute defense to an action on the policy" (Igbara Realty Corp., 63 NY2d at 210).
Rosenblatt & McGarrity, White Plains, N.Y. (Theodore S. Green
of counsel), for third-party defendant-appellant.
Biedermann, Reif, Hoenig & Ruff, P.C., New York, N.Y.
(Michael J. Case and Madeline Moise
Cassetta of counsel), for defendant
DECISION & ORDER
In an action to recover damages for injury to property and a related third-party action, inter alia, in effect, for contractual indemnification, the third-party defendant appeals, as limited by its brief, from so much of an order of the Supreme Court, Westchester County (Lefkowitz, J.), entered December 10, 2009, as granted those branches of the motion of the defendant third-party plaintiff which were for summary judgment on its causes of action to recover damages for breach of contract for failure to procure insurance, in effect, for contractual indemnification, and for a judgment declaring that it is obligated to defend and indemnify the defendant third-party plaintiff in the main action.
ORDERED that the order is modified, on the law, (1) by deleting the provisions thereof granting those branches of the motion of the defendant third-party plaintiff which was for summary judgment on so much of its cause of action, in effect, for contractual indemnification as was based on damages allegedly sustained before and after the term of the subject lease and on so much of its cause of action which was for a judgment declaring that the third-party defendant is obligated to defend and indemnify it in the main action for damages allegedly sustained before and after the term of the subject lease, and substituting therefor a provision denying those branches of the motion, and (2) by adding a provision thereto searching the record and awarding summary judgment to the third-party defendant dismissing so much of the defendant third-party plaintiff's cause of action, in effect, for contractual indemnification as was based on damages allegedly sustained before and after the term of the subject lease, and declaring that it is not obligated to defend and indemnify the defendant third-party plaintiff in the main action for damages allegedly sustained before and after the term of the subject lease; as so modified, the order is affirmed insofar as appealed from, without costs or disbursements.
The plaintiffs commenced this action to recover damages for injuries to their land, alleging that on or before July 25, 2005, their property had been contaminated by the leaking of petroleum from gasoline storage tanks located at three nearby service stations. One of those service stations was allegedly owned and operated by the defendant third-party plaintiff, L.M.C. Partners, LLC (hereinafter LMC). LMC commenced a third-party action against Palisades Resources, Inc. (hereinafter Palisades), to whom it leased its service station from 1999 through 2004, alleging that Palisades breached the lease by failing to procure insurance, and by failing to defend and indemnify it in the action commenced by the plaintiffs.
LMC moved for summary judgment on its first cause of action to recover damages for breach of contract for failure to procure insurance, its second cause of action, in effect, for contractual indemnification, and its third cause of action for a judgment declaring that Palisades is obligated to defend and indemnify it in the main action. The Supreme Court granted LMC's motion, finding that Palisades breached its obligation under the lease to procure insurance coverage in LMC's favor, that Palisades breached its obligation under the lease to defend and indemnify LMC in the main action, and that LMC was entitled to a judgment declaring that Palisades is obligated to defend and indemnify LMC in the main action. We modify.
"A party seeking summary judgment based on an alleged failure to procure insurance naming that party as an additional insured must demonstrate that a contract provision required that such insurance be procured and that the provision was not complied with" (Rodriguez v Savoy Boro Park Assoc. Ltd. Partnership, 304 AD2d 738, 739; see Kinney v Lisk Co., 76 NY2d 215; Keelan v Sivan, 234 AD2d 516, 517; DiMuro v Town of Babylon, 210 AD2d 373). Here, LMC met this burden by submitting a copy of the lease which stated, among other things, that Palisades was to "maintain in full force and effect" certain insurance policies naming LMC as an insured party, and a letter from Palisades's insurer indicating that LMC was not named as an insured party on any policies issued to Palisades. In opposition, Palisades failed to raise a triable issue of fact, since it did not submit any evidence demonstrating that it procured an insurance policy naming LMC as an insured party (see McGill v Polytechnic Univ., 235 AD2d 400, 401-402; Keelan v Sivan, 234 AD2d at 517-518). Contrary to Palisades's contention, "a final determination of . . . liability for . . . failure to procure insurance need not await a factual determination as to whose negligence, if anyone's, caused the plaintiff's injuries" (McGill v Polytechnic Univ., 235 AD2d at 402; see Keelan v Sivan, 234 AD2d at 517-518; Mathew v Crow Constr. Co., 220 AD2d 490, 491). Accordingly, the Supreme Court properly granted that branch of LMC's motion which was for summary judgment on the issue of liability on its cause of action to recover damages for breach of contract for failure to procure insurance (see Kinney v Lisk Co., 76 NY2d 215; Keelan v Sivan, 234 AD2d at 517-518; DiMuro v Town of Babylon, 210 AD2d 373).
Contrary to Palisades's contention, the indemnification provision in the lease agreement is not rendered unenforceable by General Obligations Law § 5-321, which provides that an agreement that purports to exempt a lessor from its own negligence is void and unenforceable. "[W]here, as here, the liability is to a third party, General Obligations Law § 5-321 does not preclude enforcement of an indemnification provision in a commercial lease negotiated at arm's length between two sophisticated parties when coupled with an insurance procurement requirement" (Castano v Zee-Jay Realty Co., 55 AD3d 770; see Great N. Ins. Co. v Interior Constr. Corp., 7 NY3d 412, 417; Hogeland v Sibley, Lindsay & Curr Co., 42 NY2d 153). Under such circumstances, the purpose of the indemnity clause is not to exempt the lessor from liability to the victim, but to allocate the risk of liability to third parties between the lessor and the lessee (see Castano v Zee-Jay Realty Co., 55 AD3d at 702). Here, LMC and Palisades agreed in the indemnification provision in the lease that Palisades would be responsible for liability to third parties arising from damages incurred during the lease period.
However, the Supreme Court erred in granting that branch of LMC's motion which was for summary judgment on so much of its cause of action, in effect, for contractual indemnification as was based on damages allegedly sustained before and after the term of the lease. Here, the complaint in the main action alleged that the plaintiffs sustained damages as a result of petroleum discharges from the demised premises occurring not only during Palisades's lease term, but also before the term began and after it ended. However, LMC was not entitled to indemnification under the lease with Palisades for any petroleum discharges which occurred before or after the term of the lease (cf. Sherry v Wal-Mart Stores E., L.P., 67 AD3d 992; Barnes v New York City Hous. Auth., 43 AD3d 842).
Additionally, since Palisades is not an insurer, its duty to defend "is no broader than its duty to indemnify" (Bellefleur v Newark Beth Israel Med. Ctr., 66 AD3d 807, 809; see George v Marshalls of MA, Inc., 61 AD3d 925, 931; Bryde v CVS Pharmacy, 61 AD3d 907, 908-909; Cannavale v County of Westchester, 158 AD2d 645). Thus, since LMC is not entitled to indemnification for damages allegedly sustained before and after the term of the lease, it is also not entitled to a defense for those periods of time.
Accordingly, upon searching the record, Palisades is entitled to summary judgment dismissing so much of LMC's cause of action, in effect, for contractual indemnification as was based on damages allegedly sustained before and after the lease term, and declaring that it is not obligated to defend and indemnify LMC in the main action for damages allegedly sustained before and after the lease term.
Calendar Date: February 10, 2011
Before: Mercure, J.P., Rose, Malone Jr., Stein and McCarthy, JJ.
Fischer, Bessette, Muldowney & Hunter, Malone
(John J. Muldowney of counsel), for appellant-respondent.
Burke, Scolamiero, Mortati & Hurd, Hudson (John D.
Holt of counsel), for respondent-appellant.
Taylor & Associates, Albany (Paul Catone of
counsel), for respondent.
Cross appeals from an order of the Supreme Court (Demarest,
J.), entered April 5, 2010 in Franklin County, which, among
other things, denied plaintiff and defendants' motions for
Plaintiff commenced this action in June 2004 to recover
damages for injuries he sustained in February 2003 when defendant
Brian Crawford, while driving a vehicle owned by defendant
The Point at Saranac Lake, Inc. (hereinafter The Point) in the
course of his employment, accidently hit the gas pedal instead of
the brake pedal, pinning plaintiff between the car and a brick
wall. Defendants interposed affirmative defenses pursuant to the
Workers' Compensation Law, which expressly limits recovery
for workplace-related injuries in actions against employers and
coemployees to the compensation provided under the Workers'
Compensation Law (see Workers' Compensation Law §§ 11, 29
).[FN1] At all relevant times, The Point was owned by parent company The Garrett Hotel Group, Inc. (hereinafter Garrett). When plaintiff applied for and received workers' compensation benefits in connection with the February 2003 incident, he listed The Point as his employer on his C-3 form. However, the C-2 form that was prepared and filed by Tim Thuell, then general manager of The Point, identified Garrett as plaintiff's employer. In its 2003 decision, the Workers' Compensation Board delineated Garrett as plaintiff's employer and continued to so reference Garrett in subsequent notices and decisions. In addition, Garrett referred to itself as plaintiff's employer in various submissions to the Board. In early 2009, Garrett asserted for the first time at workers' compensation hearings that it was not plaintiff's employer. The Workers' Compensation Law Judge (hereinafter WCLJ) refused to change the name of the employer because Garrett was the employer of record and indicated that the parties could address the issue in Supreme Court. Upon administrative review, the Board agreed with the WCLJ and declined to modify the caption as to the identity of plaintiff's employer. During the pendency of this action, plaintiff moved to compel production of certain previously demanded documents, including all reports related to the accident — to which only Garrett responded — and information regarding the employment relationships of Garrett, The Point, plaintiff and Crawford. After Supreme Court directed The Point to produce the requested documents, The Point complied by submitting all documents in its possession related to Crawford's employment. However, at a subsequent deposition of Melissa Wolfe, Garrett's Director of Human Resources, it was revealed that personnel files for plaintiff and Crawford were unavailable due to the fact that they were either lost or destroyed in the course of the transfer of the files from The Point's office in New York to Garrett's Vermont office. Plaintiff then moved for summary judgment, asserting, among other things, that the Board's decision that Garrett was his employer should be given preclusive effect, that defendants' affirmative defenses should be dismissed and that The Point's answer should be stricken as a spoliation sanction. The Point and Crawford both cross-moved for summary judgment on the basis of their exclusivity defenses. Supreme Court determined that factual issues precluded summary judgment and denied all of the motions. Plaintiff and Crawford now appeal. Initially, we discern no error in Supreme Court's denial of plaintiff's request to strike The Point's answer based upon the alleged spoliation of evidence. Plaintiff did not demonstrate that he was prejudiced by the loss of the personnel files or that such loss was attributable to deliberate or negligent conduct on the part of The Point (see Scordo v Costco Wholesale Corp., 77 AD3d 725, 727 ; Utica Mut. Ins. Co. v Berkoski Oil Co., 58 AD3d 717, 718 ). In fact, a portion of the lost files, the C-2 form, has been reproduced and is included in the record, and plaintiff has failed to demonstrate that other evidence, such as Thuell's handwritten report of the accident, is crucial to his case. Under the circumstances here, we perceive no abuse of Supreme Court's broad discretion in determining what sanction, if any, to impose (see Ortega v City of New York, 9 NY3d 69, 76 ; Jones v General Motors Corp., 287 AD2d 757, 760 ), and we therefore decline to disturb its determination. Turning to the merits, we reject plaintiff's contention that the Board's designation of Garrett as his employer is binding on the parties in this action pursuant to the doctrine of collateral estoppel. The Board did not specifically adjudicate the issue of employer status (see Weitz v Anzek Constr. Corp., 65 AD3d 678, 680 ). Rather, the Board expressly indicated that it adopted Garrett as the employer based on the C-2 form that was filed approximately six years before the issue was raised and denied The Point's request for modification of the caption because it was untimely. In doing so, the Board stated that the issue of the identity of plaintiff's employer should be raised before Supreme Court. Thus, collateral estoppel is inapplicable (see Weitz v Anzek Constr. Corp., 65 AD3d at 680). Additionally, since Crawford was not a party to the workers' compensation proceeding, he would not be bound by a determination of the Board (see Matter of Howard v Stature Elec., Inc., 72 AD3d 1167, 1169 , lv dismissed 15 NY3d 906 ). We also agree with Supreme Court's determination that a question of fact exists as to who employed plaintiff, which precludes an award of summary judgment to either party on this issue (see Caiola v Allcity Ins. Co., 257 AD2d 586, 588 ). As indicated, Garrett was denominated as plaintiff's employer on the C-2 form and other submissions to the Board. On the other hand, Wolfe testified consistently with plaintiff and Crawford that they were both employees of The Point and discussed various indicia of such employment. In apparent contrast to that testimony, the evidence showed that Crawford had been awarded a certificate of completion from Garrett for certain training. Because Crawford failed to demonstrate as a matter of law that he and plaintiff were coemployees acting within the scope of their employment [FN2] (see Macchirole v Giamboi, 97 NY2d 147, 150 ), and plaintiff failed to establish the contrary, summary judgment as to the issue of defendants' liability was properly denied. Finally, we address the propriety of Supreme Court's denial of that portion of plaintiff's summary judgment motion relating to the issue of serious injury. Pursuant to Insurance Law § 5102 (d), a serious injury includes, among other things, a fracture. Here, plaintiff plainly met his initial burden of establishing a serious injury by demonstrating that he sustained a fracture as a result of the accident, thus shifting the burden to defendants to raise a triable issue of fact (see Alvarez v Prospect Hosp., 68 NY2d 320, 324, 327 ; Zuckerman v City of New York, 49 NY2d 557, 562 ). Defendants presented no evidence to the contrary; they argued only that workers' compensation is plaintiff's sole remedy. Accordingly, in the event it is ultimately determined that plaintiff's negligence action is not precluded by Workers' Compensation Law § 29 (6), plaintiff is entitled to a finding that he has suffered a serious injury for purposes of the Insurance Law. Mercure, J.P., Rose, Malone Jr. and McCarthy, JJ., concur. ORDERED that the order is modified, on the law, without costs, by reversing so much thereof as denied plaintiff's motion for summary judgment on the issue of serious injury; said motion granted to that extent; and, as so modified, affirmed.
Footnote 1:Defendants assert that plaintiff and Crawford were both employees of The Point.
Footnote 2:We are also unpersuaded that we can determine, as a matter of law, that a special employment relationship with The Point existed with respect to plaintiff and Crawford, as "'the alleged special employer's exclusive control and direction of the manner, details and ultimate results of the employee's work have not been incontrovertibly established'" (Walls v Sano-Rubin Constr. Co., 4 AD3d 599, 601 , quoting Armstrong v Foxcroft Nurseries, 283 AD2d 814, 814 ; see Thompson v Grumman Aerospace Corp., 78 NY2d 553, 557-558 ). Decided on April 1, 2011
Appeal from an order of the Supreme Court, Erie County (Paula L. Feroleto, J.), entered July 21, 2009 in a breach of contract action. The order denied the motion of defendant to dismiss the complaint.
RUPP, BAASE, PFALZGRAF, CUNNINGHAM & COPPOLA LLC, BUFFALO (MARCO CERCONE OF COUNSEL), FOR DEFENDANT-APPELLANT.
LAW OFFICE OF LAWRENCE C. BROWN, ESQ., BUFFALO (LAWRENCE C. BROWN OF COUNSEL), FOR PLAINTIFF-RESPONDENT.
It is hereby ORDERED that the order so appealed from is affirmed without costs.
Memorandum: Plaintiff commenced this action seeking, inter alia, a declaration that defendant is obligated to perform under the homeowner's insurance policy that it issued to plaintiff. We conclude that Supreme Court properly denied those parts of defendant's motion to dismiss the first cause of action pursuant to CPLR 3211 (a) (1) and (7). That cause of action seeks a declaration that defendant is obligated to perform pursuant to the policy with respect to reimbursement for the reconstruction of plaintiff's home and that defendant "shall not be entitled to avail itself of the two-year contractual bar on suits concerning . . . any disputes [under the policy that] have not yet arisen . . . ."
The Loss Settlement provision of the policy states that defendant will pay the cost to repair or replace an insured building, "but not more than the least of the following amounts: (1) [t]he limit of liability under [the] policy that applies to the building; (2) [t]he replacement cost of that part of the building damaged with material of like kind and quality and for like use; or (3) [t]he necessary amount actually spent to repair or replace the damaged building." That provision further states that defendant "will pay no more than the actual cash value of the damage until actual repair or replacement is complete." Another provision in the policy states that "[n]o action can be brought against [defendant] unless there has been full compliance with all of the terms under [the Conditions] Section . . . of [the] policy and the action is started within two years after the date of loss."
With respect to that part of the motion to dismiss the first cause of action based on documentary evidence, defendant was required to demonstrate "that the documentary evidence conclusively refutes plaintiff's . . . allegations" (AG Capital Funding Partners, L.P. v State St. Bank & Trust Co., 5 NY3d 582, 591). Defendant contends that plaintiff's failure to complete the conditions precedent for the payment of replacement cost proceeds, i.e., full reconstruction of the home, conclusively refutes plaintiff's allegation that defendant has refused to acknowledge its obligations pursuant to the policy. We reject that contention inasmuch as plaintiff does not seek immediate payment of the replacement cost of his home (see generally id. at 590-591). Contrary to the further contention of defendant, it failed to submit any evidence establishing that plaintiff failed to provide defendant with timely notice that he intended to make a claim for the replacement cost of his home.
With respect to that part of its motion to dismiss the first cause of action for failure to state a cause of action, defendant contends that the contractual two-year limitations period expired before plaintiff completed all of the repairs to his home. We reject that contention. "[U]nambiguous provisions of an insurance contract must be given their plain and ordinary meaning" (White v Continental Cas. Co., 9 NY3d 264, 267) and, here, the plain language of the Loss Settlement provision of the policy does not impose any time limit on the reconstruction of the home. Contrary to defendant's contention, the contractual provision imposing a two-year limitation on legal action does not impose a time limit on reconstruction.
We further conclude that the court properly denied that part of defendant's motion to dismiss the second cause of action for failure to state a cause of action pursuant to CPLR 3211 (a) (7). Contrary to defendant's contention, plaintiff has "alleged facts that could give rise to a cause of action for breach of contract based upon a breach of the covenant of good faith and fair dealing" (Millers Wood Dev. Corp. v HSBC Bank USA, 300 AD2d 1015, 1017; see generally New York Univ. v Continental Ins. Co., 87 NY2d 308, 319-320; Medina v State Farm Mut. Auto. Ins. Co., 303 AD2d 987, 989).
All concur except Peradotto, J., who dissents and votes to reverse in accordance with the following Memorandum: I respectfully dissent because I agree with defendant that Supreme Court erred in denying its motion to dismiss the complaint pursuant to CPLR 3211 (a) (1) and (7). Plaintiff commenced this action seeking, inter alia, a declaration that defendant is "obligated to perform its obligation under the [homeowners' insurance p]olicy" that it issued to plaintiff. According to plaintiff, defendant was obligated to provide coverage with respect to the reconstruction of plaintiff's residence, which was destroyed by fire. The Loss Settlement provision of the policy states that defendant will pay the cost to repair or replace an insured building, "but not more than the least of the following amounts: (1) [t]he limit of liability under [the] policy that applies to the building; (2) [t]he replacement cost of that part of the building damaged with material of like kind and quality and for like use; or (3) [t]he necessary amount actually spent to repair or replace the damaged building." That provision further states that defendant "will pay no more than the actual cash value of the damage until actual repair or replacement is complete" (emphasis added). Another provision in the policy states that "[n]o action can be brought against [defendant] unless there has been full compliance with all of the terms under [the Conditions] Section . . . of [the] policy and the action is started within two years after the date of loss" (emphasis added).
"A declaratory judgment action is appropriate only when there is a substantial legal controversy between the parties that may be resolved by a declaration of the parties' legal rights" (Rice v Cayuga-Onondaga Healthcare Plan, 190 AD2d 330, 333). Here, it is undisputed that plaintiff has not completed the repair or reconstruction of his residence, and thus the policy's replacement cost coverage has not yet been triggered. "Replacement cost coverage inherently requires a replacement (a substitute structure for the insured) and costs (expenses incurred by the insured in obtaining the replacement); without them, the replacement cost provision becomes a mere wager" (Harrington v Amica Mut. Ins. Co., 223 AD2d 222, 228, lv denied 89 NY2d 808). Thus, in my view, the issue whether defendant has failed or refused to perform its obligations under the replacement cost provision of the policy is not ripe for our review, and it would be "merely advisory" to grant the declaratory relief sought by plaintiff (New York Pub. Interest Research Group v Carey, 42 NY2d 527, 531; see generally Matter of Town of Riverhead v Central Pine Barrens Joint Planning & Policy Commn., 71 AD3d 679, 680-681).
I further conclude that the second cause of action, for defendant's bad faith in refusing to waive the two-year contractual limitations period, "should have been dismissed because [plaintiff does] not allege conduct by defendant constituting the requisite gross disregard of the insured's interests' necessary to support such [a] cause of action" (Cooper v New York Cent. Mut. Fire Ins. Co., 72 AD3d 1556, 1557). I would therefore reverse the order, grant defendant's motion and dismiss the complaint.
Auqui v Seven Thirty Limited Partnership
Law Offices of Annette G. Hasapidis, South Salem (Annette G.
Hasapidis of counsel), for appellants.
Fabiani Cohen & Hall, LLP, New York (Joseph J. Rava of
counsel), for respondents.
Order, Supreme Court, New York County (Carol R. Edmead, J.), entered October 7, 2009, which, insofar as appealed from, as limited by the briefs, granted defendants' motion to preclude plaintiffs from litigating the issue of plaintiff Jose Verdugo's accident-related disability beyond January 24, 2006, unanimously reversed, on the law, without costs, and the motion denied. Appeal from order, same court and Justice, entered on or about December 8, 2009, which, inter alia, upon granting reargument and renewal, adhered to the prior determination, unanimously dismissed, without costs, as academic.
The motion court erred in according collateral estoppel effect to the determination of the Workers' Compensation Law Judge that plaintiff's post-January 24, 2006 disability was not causally related to his December 24, 2003 accident. The determination that workers' compensation coverage would terminate as of a certain date for plaintiff's injuries (including head, neck and back injuries, and depression and post-traumatic stress disorder, which are not disputed, and which were caused when plaintiff was struck in the head by a falling sheet of plywood in the course of his employment) is not, nor could it be, a definitive determination as to whether plaintiff's documented and continuing injuries were proximately caused by defendants' actions. While factual issues necessarily decided in an administrative proceeding may have collateral estoppel effect, it is well settled that "an administrative agency's final conclusion, characterized as an ultimate fact or mixed question of law and fact, is not entitled to preclusive effect" (Akgul v Prime Time Transp., Inc., 293 AD2d 631, 633 ; see Tounkara v Fernicola, 63 AD3d 648  [no identity of issues between proceeding before workers' compensation board, which involved determination of whether party was plaintiff's employer for purposes of workers' compensation coverage, and third-party action, which involved determination of whether party was plaintiff's employer for purposes of indemnification provision]). The agency's determination on ultimate facts, as opposed to mere evidentiary facts, is imbued with policy considerations as well as the agency's expertise (see Matter of Engel v Calgon Corp., 114 AD2d 108, 110 , affd 69 NY2d 753 ). Therefore, the Workers' Compensation Board's determination is not entitled to preclusive effect because it involved the ultimate issues of disability and proximate cause, which were committed to the Board's discretion. Indeed, the October 13, 2009 guardianship order that was the partial basis for plaintiffs' renewal motion raises an issue of fact as to the cause of plaintiff's ongoing disability sufficient to warrant denial of defendants' motion.
All concur except Sweeny and Catterson, JJ. who dissent in a memorandum by Catterson, J. as follows:
CATTERSON, J. (dissenting)
Because I believe that the duration of plaintiff's disability was an evidentiary determination fully and fairly litigated by him at the Workers' Compensation proceeding terminating his benefits, he should be precluded from relitigating the issue of continuing disability in this personal injury action. Furthermore, in my opinion, the uncontested appointment of a guardian for the plaintiff more than three years later does not raise a triable issue of fact as to when his work-related disability ended. Therefore, I respectfully dissent.
The plaintiff, a food service deliveryman, was injured on December 24, 2003 when a sheet of plywood allegedly fell from a building under construction owned by defendant Seven Thirty One Limited Partnership. Defendant Bovis Lend Lease LMB, Inc. was the construction manager, and defendant Northside Structure, Inc. was the concrete superstructure subcontractor. The plaintiff's claim for Workers' Compensation (hereinafter referred to as "WC") benefits was approved, and he was compensated for treatment of his head, neck, and back injuries, as well as post-traumatic stress disorder and depression. While receiving benefits, the plaintiff commenced this personal injury action in Supreme Court in 2004.
The following year, in December 2005, while this action was pending, the insurance carrier for the plaintiff's employer moved the WC Board to discontinue plaintiff's benefits on the grounds that he was no longer disabled from the accident. In the January 2006 WC proceeding, the Administrative Law Judge (hereinafter referred to as "ALJ") reviewed the evidence and expert testimony submitted by the plaintiff and the insurance carrier. The ALJ found that the plaintiff no longer suffered any disability as of January 24, 2006 and terminated his benefits. The plaintiff appealed, but on February 1, 2007, a full panel of the WC Board concluded that the plaintiff was no longer disabled as of January 24, 2006, and required no further treatment.
In April 2009, the defendants in the instant personal injury action moved to preclude the plaintiff from relitigating the duration of his work-related injury on the grounds that the issue was already fully litigated and decided in the WC administrative proceeding. While the motion was pending in Supreme Court, the plaintiff's attorney commenced a separate Mental Hygiene Law article 81 proceeding to appoint a guardian for the plaintiff. On October 7, 2009, Supreme Court granted the defendants' motion to preclude.
Based on uncontested evidence of incapacity, the plaintiff's sister-in-law and wife were appointed as co-guardians on October 13, 2009. The plaintiff then moved for leave to renew and/or reargue the defendants' motion in Supreme Court on the grounds that, inter alia, the guardianship order raised a triable issue of fact with regard to the plaintiff's ongoing work-related disability. By order and decision dated December 3, 2009, Supreme Court granted the plaintiff's motion, but nonetheless adhered to its earlier determination that the plaintiff was precluded from relitigating his ongoing disability.
On appeal, the plaintiff argues that Supreme Court erred because there is no identity of issues between the causation element in a WC determination and proximate cause in a personal injury claim. In addition, the plaintiff asserts that Supreme Court further erred because the appointment of a guardian raises a triable issue of fact with regard to the plaintiff's ongoing disability.
The defendants argue that the WC determination that the plaintiff's disability ended on January 24, 2006 was factual and identical to the issue in the personal injury action, and, further, that the plaintiff had a full and fair opportunity to litigate that question before the ALJ. Therefore, he should be precluded from relitigating whether his disability extended beyond that date. For the reasons set forth below, I agree with the defendants.
The doctrine of collateral estoppel is applicable where the issue in the current litigation is identical to a material issue decided in a prior proceeding, and the party to be precluded had a full and fair opportunity to litigate the issue in that proceeding. Ryan v. New York Tel. Co., 62 N.Y.2d 494, 500-501, 478 N.Y.S.2d 823, 826-827, 467 N.E.2d 487, 490-491 (1984); Matter of Abady, 22 AD3d 71, 81, 800 N.Y.S.2d 651, 658 (1st Dept. 2005).
It is well settled that a final determination by a quasi-judicial administrative agency may be accorded preclusive effect. Ryan, 62 N.Y.2d at 499, 478 N.Y.S.2d at 825. The Workers' Compensation Board has been deemed to be such a quasi-judicial administrative agency. See e.g. Rigopolous v. American Museum of Natural History, 297 A.D.2d 728, 747 N.Y.S.2d 566 (2d Dept. 2002); Lee v. Jones, 230 A.D.2d 435, 659 N.Y.S.2d 549 (3d Dept. 1997), lv. denied, 91 N.Y.2d 802, 666 N.Y.S.2d 564, 689 N.E.2d 534 (1997); Matter of Maresco v. Rozzi, 162 A.D.2d 534, 556 N.Y.S.2d 731 (2d Dept. 1990).
Although an agency's ultimate conclusion of mixed law and fact is not entitled to preclusive effect, collateral estoppel may be applied to determinations of specific evidentiary facts essential to that conclusion. Matter of Engel v. Calgon Corp., 114 A.D.2d 108, 111, 498 N.Y.S.2d 877, 879 (3d Dept. 1986), aff'd, 69 N.Y.2d 753, 512 N.Y.S.2d 801, 505 N.E.2d 244 (1987), citing Hinchey v. Sellers, 7 N.Y.2d 287, 197 N.Y.S.2d 129, 165 N.E.2d 156 (1959); see e.g. Ryan, 62 N.Y.2d at 502, 487 N.Y.S.2d at 827 (while the ultimate fact of misconduct was not entitled to collateral estoppel effect, determinations of material factual issues by the ALJ in the plaintiff's unemployment claim precluded relitigation of those issues in his wrongful discharge action).
Here, the evidentiary fact necessarily determined in the WC proceeding was that the plaintiff was no longer disabled at all beyond January 24, 2006. The decision of the ALJ clearly indicates that the plaintiff's claim of continuing disability was rejected because he failed to present sufficient medical evidence to show any disability after that date. Observing that the plaintiff's cane appeared to be "merely a prop," the ALJ credited the defendants' orthopedic expert opinion that the plaintiff's test results were normal and necessarily rejected the testimony of the plaintiff's neurologist. Furthermore, the ALJ completely discounted the plaintiff's treating psychiatrist's opinion that the plaintiff suffered permanent psychiatric disability, noting that inconsistencies in the doctor's responses rendered his testimony not credible.
Determination of the duration of the plaintiff's work-related disability was material and the very point of the WC proceeding, and is the exact issue that the defendants seek to preclude the plaintiff from litigating in the personal injury action. Additionally, the plaintiff's representation by an attorney, presentation and cross-examination of expert testimony, and submission of medical reports, assured that he had a full and fair opportunity to litigate the issue.
In my opinion, the majority is mistaken in its characterization of the ALJ's determination as an ultimate fact involving disability and proximate cause. An agency's determination of an ultimate fact as opposed to a "pure or evidentiary fact" is based upon analysis of "unique, and often times complex, statutes and regulations which apply specifically to [that agency]." Engel, 114 A.D.2d at 110, 498 N.Y.S.2d at 878.
That is not the case here. There is no indication that the ALJ considered causation at all much less that the decision analyzed causation in the specific context of WC claims. The defendants did not contest whether the plaintiff's injuries were related to an on-the-job accident, or offer any proof that his claimed disability was caused by a prior non-work-related incident. The ALJ did not interpret complex statutes or regulations, but rather evaluated the credibility of each party's medical testimony to determine if the plaintiff was still disabled.
Nor is the duration of the plaintiff's disability an ultimate fact in the personal injury action. The length of time that a plaintiff is disabled is relevant to the quantum of damages, an evidentiary factual determination, not, as the plaintiff asserts, a mixed issue of law and fact involving proximate cause.
Moreover, the majority's reliance on Engel, Akgul, and Tounkara is entirely misplaced. The agency decisions at issue in these cases all deal with the classification of parties based upon statutory definitions. See Tounkara v. Fernicola, 63 AD3d 648, 650, 883 N.Y.S.2d 27, 29 (1st Dept. 2009); Akgul v. Prime Time Transp., 293 A.D.2d 631, 633, 741 N.Y.S.2d 553, 557 (2d Dept. 2002); Engel, 114 A.D.2d at 110-111, 498 N.Y.S.2d at 878-879 (the National Labor Relations Board's definition of the plaintiffs as employees did not preclude a finding that they were defined as sub-contractors by the Division of Human Rights). In Tounkara, the decision not to give collateral estoppel effect to a WC determination was also based on the fact that the third-party plaintiff to be precluded was not a party to the WC proceeding and therefore had no prior full and fair opportunity to litigate. Tounkara, 63 AD3d at 650, 883 N.Y.S.2d at 29. Here, there is a total identity of issues with regard to the factual determination of the duration of the plaintiff's disability, and this plaintiff had a full and fair opportunity to litigate at the WC proceeding.
Furthermore, the plaintiff's guardianship order does not raise a triable issue of fact with regard to the ALJ's determination, or have any bearing on the application of collateral estoppel in the personal injury action. The appointment of a guardian is a highly discretionary, flexible decision taking into account the individual needs of the incapacitated person, and his wishes and preferences. See N.Y. Mental Hygiene Law § 81.01. In the plaintiff's article 81 proceeding, the appointment of his wife and sister-in-law as guardians was unchallenged and fully supported by the plaintiff. The same psychiatrist that testified before the ALJ also testified in the guardianship proceeding; however, in the guardianship proceeding there was no evidence required to rebut the plaintiff's claimed incapacity or show that his incapacity more than three years later was unrelated to the accident. As such, a determination of incapacity based upon the same testimony that was discredited by the WC ALJ does not raise a triable issue of fact warranting denial of the defendant's motion.
Feinman & Grossbard, P.C., White Plains (Steven N. Feinman
of counsel), for appellants.
The Law Offices of Ross Legan Rosenberg Zelen & Flaks,
LLP, New York (Richard H. Rosenberg of counsel), for
Order, Supreme Court, Bronx County (Geoffrey D. Wright, J.), entered on or about October 15, 2010, which denied defendants' motion for summary judgment dismissing the complaint, unanimously affirmed, without costs.
Defendants failed to meet their prima facie burden with respect to plaintiff's claim of permanent consequential and significant limitations in use of the lumbar spine, since their orthopedist did not find full range of motion and noted objective signs of injury upon examination (see Feaster v Boulabat, 77 AD3d 440 ). Although the medical expert characterized plaintiff's response as subjective, there was no finding that her limitations were self-imposed or deliberate (compare Mercado-Arif v Garcia, 74 AD3d 446 ), and she apparently complied with all other tests. Defendants did not submit any medical opinion concerning the cause of the claimed lumbar spine injury. Thus, we do not examine plaintiff's submissions in opposition (Offman v Singh, 27 AD3d 284, 285 ).
Defendants also failed to meet their burden on the 90/180-day claim.
Law Offices of William Pager, Brooklyn (William Pager of
counsel), for appellants.
Kaplan, Hanson, McCarthy, Adams, Finder & Fishbein,
Yonkers (Cristin E. Calvi of counsel), for Maria T. Rothschild,
Law Offices of Michael A. Barnett, Garden City (Jay M.
Weinstein of counsel), for Singh, respondents.
Order, Supreme Court, Bronx County (Howard H. Sherman, J.), entered September 2, 2009, which, insofar as appealed from as limited by the briefs, granted defendant Maria T. Rothschild's motion for summary judgment dismissing the complaint as against her on the threshold issue of serious injury, unanimously affirmed, without costs.
The affirmed medical reports of defendant's physicians stating, inter alia, that each examined plaintiffs and found no evidence of limited range of motion or other residual injury as a result of the accident on November 23, 2005, suffice to show prima facie that plaintiffs did not sustain a permanent or significant limitation as a result of the accident (Toure v Avis Rent A Car Sys., 98 NY2d 345, 350 ).
In opposition, the plaintiffs' evidence failed to sufficiently rebut defendant's prima facie showing.