Coverage Pointers - Volume XIII, No. 1

Dear Coverage Pointers Subscribers:

We hope your Fourth was as enjoyable as ours. It was darkened only by the tragic and premature loss of a friend in St. Louis, a medical doctor, a wonderful mother of four children, a triathlete and the wife of a long-time subscriber and FDCC colleague. Our thoughts and prayers are with his family at this time of immense sadness. Enjoy every day; she surely did, embracing life at its fullest. Every day is a gift.

The courts have not disappointed us and this week's issue is chock full of your favorite coverage delicacies. Enjoy every morsel -- late notice cases, rescission, choice-of-law, "Serious Injury," four property offerings and others for your dining and dancing pleasure. Sounds like I missed lunch today.

Welcome to Volume XIII, Issue 1:

Hurwitz & Fine, P.C. is please to present the first issue of the thirteenth year of our Coverage Pointers' publication. This newsletter is a reflection of our commitment to our readers, to the insurance industry, to our corporate partners and to the legal profession. Starting with 25 subscribers, we now send directly to 2300 with many more readers on company intranets and bulletin boards.. The feedback we receive is rewarding and appreciated. For our new friends, you can find every past issue, since our first way back in May 1997 on our website by clicking here. There is a search engine available to enable readers to find cases by name or keyword.

Editorial Promotions:

With the commencement of our new year of publication, we are pleased to announce two editorial appointments. Audrey Seeley has been designated as Associate Editor (perhaps you'll see the occasional cover letter coming over her signature in the future) and Margo Lagueras as Assistant Editor of Coverage Pointers.

LinkedIn -- New York Insurance:

To augment our newsletter, we established, and maintain the New York Insurance group on the social networking site, LinkedIn. We welcome you there as well, to post your comments, questions and "take" on the issues of the day. Steve Peiper and Cassie Kazukenus have agreed to serve as moderators..

Kudos to Chris Potenza:

The Coverage Pointers team congratulates V. Christopher Potenza on his election to membership at the firm. Chris is a terrific trial lawyer and a delighful human being, two fabulous qualities. Attalawyer!

One Hundred Years Ago Today:

New York Times

July 8, 1911

Page 1

Cut Governor Wilson's Pay Again

Three Days Taken Out for Part of His Western Trip

Trenton, N.J. - When Governor Wilson got his salary check for June today he noticed that it was short about $89 of the regular amount, $880. He sent for John Riker, clerk in the State Treasurer's office, called Riker's attention to the error and said he would like to have it rectified.

Riker replied that in accordance with the State Constitution, part of which he read to the Governor, pay for three days in June, when the Governor was concluding his western trip, was sent to President Ackerman of the Senate who was acting Governor.

President Ackerman also got the greater part of the Governor's May salary, because the Governor was away in the West.

Gov. Wilson pocketed the check and accepted the explanation with a smile. He announced later that he would go to his summer home in Lyme, Conn., to remain until Monday. He does not expect to be "docked" for the vacation.

Important Court of Appeals Decision Impacting Construction Accident Cases:

We are pleased to provide a special guest review of an important Court of Appeals decision that was handed down on June 29, 2011. A special thanks to my friend Sherri N. Pavloff, Esq., of Farber, Brocks & Zane, LLC, who drafted the brief on behalf of Gallin, the general contractor, in that case and provided the summary of a significant decision that can impact many Labor Law and construction cases. In McCarthy v. Turner, et al, the Court of Appeals ruled that a vicariously liable owner is not entitled to common law indemnification from a non-negligent, vicariously liable general contractor, which did not actually supervise the work. Accordingly, in the absence of contractual indemnity, an owner held liable under, for example, Section 240(1) of the Labor Law would not be entitled to be indemnified by the general contractor, if that GC did not supervise or oversee the work of, for example, a negligent subcontractor.

Vacationing-Audrey's Angles:

I hope that you had a great July 4th Holiday.

All three upstate arbitrators have some instructive cases this edition that warrants review. Arbitrator Benziger has rendered approximately six decisions on the issue of whether the Medicare fee schedule applies to ambulances services. He has reiterated the multitude of his prior decisions, which are identical to the other three Upstate arbitrators' position that the Medicare fee schedule does not apply. Further, he notes that the insurer's argument, despite having been denied repeatedly on this issue, continues to remain the same. The message to be taken from this is to re-evaluate the position taken on this issue as the current argument does not seem to be persuasive. Of course, if the ultimate goal is to Master Arb. the decisions then the logic in the strategy is clear.

Arbitrator O'Connor provided another well-reasoned decision with regard to two peer review reports where one was persuasive and other was not. It is a good decision to understand the difference between the two reports' content as to why one was effective and other was ineffective.

Arbitrator McCorry issued a good decision on why an IME report on lack of medical necessity in a case involving a complex pre-existing condition was not persuasive. It is a reminder that when in this situation a detailed analysis of the pre-existing condition and focus on what information was known at the time the recommendation for a diagnostic testing was made must be considered and thoroughly discussed.

Finally, for those looking at training and marketing opportunities in the coming months, you should consider DRI's Annual Meeting from October 26-30 in Washington, DC. The Insurance Law Committee is co-presenting a timely and interesting topic entitled "The Distracted Nation - How Heavy Use of Technology Alters Our Behavior and Brains and Kill Two Rocket Scientists." It is featuring Pulitzer Prize winning journalist, Matthew Richtel who will discuss how our society's heavy technology use affects our behavior and our brains. In today's society the expectation is to be available at anytime and anywhere with the technology we possess. Mr. Richtel will also provide tips on staying connected yet efficient without undermining your life. If you are interested in attending but need more information, send me an email at [email protected].

Audrey

One Hundred Years Ago Today

U.S. Vice President James S. Sherman, in his capacity as President of the U.S. Senate, broke a long standing tradition in Congress of using only hand fans for cooling, by bringing the first electric fan to the Senate Chamber. The same day, other members of Congress followed suit.


Editor's Note:
Sherman, Vice-President under William Howard Taft, was from Utica, New York. He was a man of firsts, being the first Vice-President to throw out the first ball at a major league baseball game and the first to fly in an airplane.

Peiper's Prating:

Summer has finally arrived. The birds are chirping, the sun is hot and the Second Department has obviously cleared its docket before its inevitable summer slumber. Our offering this week reviews four interesting cases all out of the Court just east of Manhattan. Be sure to check out the insightful decision authored in Providence Washington a/s/o Shelofsky v. Munoz. The court addresses an often confused issue regarding the rights assumed by a subrogee (here Providence Washington), and damages available to a counter-claiming defendant. For the those interested in title insurance cases, please be certain to check out the Nisari v. Ramjohn decision.

That's it for now. See you again in two weeks.

Steve Peiper

[email protected]

And Speaking of Baseball

One hundred years ago today, pitcher Rube Marquard hit his only major league home run. For those who may not remember Marquard, later inducted into the Hall of Fame, he still holds the major league record for consecutive games won by a pitcher, with 19 in 1912. Baseball statistician Bill James described Marquard as the "probably the worst starting pitcher in the Hall of Fame."

Margo's Special Musing:

An interesting decision from the Appellate Division, Second Department, came out today entitled Matter of Countrywide Insurance Co. v. DHD Medical, P.C. The case reached the Second Department as a result of the denial of Countrywide's petition to stay arbitration, which, of course, is a judicial proceeding under CPLR § 7503. Countrywide sought to stay the arbitration arguing that DHD was a fraudulently incorporated provider of medical services and therefore ineligible to reimbursement under New York's No-Fault Law. There is nothing surprising there as we are all fully versed in the teachings of the Court of Appeals in "Mallela". What is curious is Countrywide's assertion that DHD was precluded from demanding arbitration pursuant to Insurance Law § 5106(b), and the policy of insurance it issued, presumably to DHD's assignor.

As a refresher, Insurance Law § 5106 is the "Fair claims settlement" section and subsection (b) specifically provides that:

Every insurer shall provide a claimant with the option of submitting any dispute involving the insurer's liability to pay first party benefits, or additional first party benefits, the amount thereof or any other matter which may arise pursuant to subsection (a) hereof to arbitration pursuant to simplified procedures to be promulgated or approved by the superintendent.

[Subsection (a) essentially deals with when payment is owed and due, the interest that accrues on overdue payments, and the right to attorney's fees].

Although not stated in the decision, it would appear that Countrywide based its argument, at least in part, on the contention that because DHD was fraudulently incorporated, it did not qualify as a "claimant" and thus was not entitled to opt to arbitrate. Notably, the option to arbitrate or bring a court action is the claimant's and the insurer has to live with whatever choice the claimant makes.

The court disagreed with Countrywide stating that "the defense of fraudulent incorporation is 'for the arbitrator and not for the courts.'" However, the language quoted: "for the arbitrator and not for the courts," which comes from the Court of Appeals' decision in Matter of Nassau Insurance Co. v. McMorris, did not refer to fraudulent incorporation but rather to the question of whether the policy at issue had been canceled. What the Court of Appeals actually held is that once a policy that contains an arbitration clause has been issued, all questions as to the continuation and scope of coverage are to be resolved in arbitration if the claimant so chooses.

With all due respect to the Appellate Division, Second Department, whether a medical services provider is or is not properly incorporated under New York law is not a question of either the "continuation" or "scope of coverage" of a policy of insurance. The other decisions cited in support are similarly off-point.

Stay tuned ...

Margo Lagueras
[email protected]

In This Week's Issue, Attached:

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

  • Court of Appeals Rules That Vicariously Liable Owner Is Not Entitled to Common Law Indemnification from Non-Negligent Vicariously Liable General Contractor Which Did Not Actually Supervise Work
  • Misrepresenting Dog Ownership Sufficient to Support Policy Rescission
  • No Valid Excuse Offered for Delay in Notice; Believe that Workers Compensation Was Exclusive Remedy is Insufficient
  • Broker Potentially Liable, Under New Jersey Law, for Misrepresentation of Coverage
  • Corporations Do Not Have Relatives; Volunteer Firefighter Does Not Qualify as Insured under SUM Policy
  • "Tie-In" Provision That Limits Coverage When Policies Issued by Two or More Related Carriers Is Upheld
  • Presence of Angst (or Lack of Knowledge of It) Does Not Excuse Late Notice

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

  • Trial Court Is Reversed as Plaintiff's Rebuttal Evidence Was Sufficient
  • Trial Court Is Affirmed as Plaintiff Fails to Rebut Defendants' Prima Facie Showing
  • Failure of Plaintiff's Experts to Address Pre-Existing Conditions Render Opinions on Causation Speculative
  • Conflicting Medical Testimony Creates Question of Fact
  • Again, Conflicting Reports Raise Question of Fact
  • Defendant's Expert's Conclusions Not Substantiated with Objective Medical Evidence Have No Probative Value
  • Defendant's Failure to Initially Establish That Injuries May Have Been Caused by Prior Accident Results in No Requirement on Plaintiff's Part to Respond to That Assertion
  • Yet Again, Conflicting Medical Testimony Raises Issue of Fact
  • Affirmation Based on Only Contemporaneous Examination Is Insufficient to Raise Issue of Fact with Respect to "Significance" of Injuries
  • On Appeal, Trial Court Is Reversed and Defendant's Motion Is Denied
  • Plaintiff Fails to Rebut Showing That Injuries Were Neither Serious Nor Caused by the Accident

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

ARBITRATION

  • Insurer Encouraged to Step Back and Re-Evaluate Medicare Fee Schedule Defense
  • One Peer Review Insufficient but the Second Is Sufficient Basis for Denial
  • Treating Physician's Opinion Afforded Greater Weight in Case with Complex History

LITIGATION

  • Insurer's Motion to Dismiss Should Have Been Granted Regarding Independent Contractor Status
  • Insurer Demonstrated Lack of Medical Necessity Leading to Dismissal on Summary Judgment

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

  • Counterclaim in Subrogation Action Can Only Assert "Set-Off", Not Affirmative Relief
  • Failure to Procure Insurance Coverage Is Not a Coverage Dispute
  • Tender of Settlement Check Before Request for Proof of Loss Waives 60-Day Rule
  • Certificate and Report of Title Constitutes Extrinsic Evidence Once Policy Is Delivered

CASSIE'S CAPITAL CONNECTION
Cassandra A. Kazukenus
[email protected]

With the legislative session at an end, without the usual fireworks and the Insurance Department and Banking Department in transition, Albany is quiet, for once.

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

  • What Coverage Is Triggered Under Directors & Officers Liability Policy?
  • Failure to Disclose Drug Use and Termination in Recommendation Letter Results in Denial of Coverage

JEN'S GEMS
Jennifer A. Ehman
j[email protected]

  • Accident Triggers Coverage for Owner under Tenant's Policy, but Court Determines It Is Co-Primary with Owner's Own Policy
  • In Bad Faith Action, Court Requires Disclosure of Communications Between Insurer and Defense Counsel in Underlying Action
  • For an Estoppel Claim, Is Prejudice to the Injured Party Relevant?
  • Temporary Stay of Arbitration Granted Pending Trial to Determine Whether Insurer Properly Disclaimed Coverage Based on the "Car Business Exclusion"
  • Where Indemnity Claim Has Already Been Asserted, Court Rejects Breach of Contract Claim in Separate Action
  • No Policy, No Summary Judgment

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

Lessons on Electronic Filings and Bid Submissions

Best wishes for a fabulous Bastille Day and welcome to Volume XIII.

Dan

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

Hurwitz & Fine, P.C. is a full-service law firm
providing legal services throughout the State of New York

NEWSLETTER EDITOR
Dan D. Kohane
[email protected]

ASSOCIATE EDITOR
Audrey A. Seeley
[email protected]

ASSISTANT EDITOR
Margo M. Lagueras
[email protected]

 

INSURANCE COVERAGE TEAM
Dan D. Kohane, Team Leader
[email protected]

Michael F. Perley
Katherine A. Fijal
Audrey A. Seeley
Steven E. Peiper
Margo M. Lagueras
Cassandra Kazukenus
Jennifer A. Ehman
Diane F. Bosse

FIRE, FIRST-PARTY AND SUBROGATION TEAM
Andrea Schillaci, Team Leader
[email protected]

Jody E. Briandi
Steven E. Peiper

NO-FAULT/UM/SUM TEAM
Audrey A. Seeley, Team Leader
[email protected]

Margo M. Lagueras
Cassandra Kazukenus
Jennifer A. Ehman

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

Scott M. Duquin
Diane F. Bosse

Index to Special Columns

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

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

06/28/11         McCarthy v. Turner
New York State Court of Appeals

Court of Appeals Rules That Vicariously Liable Owner Is Not Entitled to Common Law Indemnification from Non-Negligent Vicariously Liable General Contractor Which Did Not Actually Supervise Work
An owner leased a retail storefront to a lessee, which hired a general contractor to build out the space.  The contract between the lessee and the general contractor contained an indemnification clause which required the general contractor to indemnify the lessee but not the owner.  The general contractor subcontracted the installation of telephone and data cables to a subcontractor which itself subcontracted the actual installation to a sub-subcontractor.  The injured plaintiff McCarthy was an employee of the sub-subcontractor. 

The plaintiff obtained summary judgment on his Labor Law §240 claims against the owner and general contractor.  In that same decision, the court found that there was no evidence that the general contractor was negligent.  These findings were upheld on appeal.  (McCarthy v. Turner Const., Inc., 72 A.D.3d 539, 898 N.Y.S.2d 836 (1st Dep’t 2010)).

At trial, the sub-subcontractor was found not negligent.  The question then became whether the owner, who was vicariously liable but not negligent could obtain common law indemnification from the general contractor, who also was not negligent.  In other words, could the owner obtain through implied indemnity principals that which it failed to ensure via the contract?

The owner argued it was entitled to common law indemnification because the contract between the general contractor and the lessee obligated the general contractor to “assume sole responsibility and control” of the entire project.  Ergo, as between the owner and the general contractor, the general contractor was in the best position to prevent the accident.  Thus, the owner requested that the Court rule that common law indemnification exists not only where the proposed indemnitor was actually negligent, but also where the proposed indemnitor “had the authority to direct, control or supervise the injury producing work.”

The Court of Appeals rejected the owner’s argument in a lengthy decision in which it summarized a variety of less-than-clear Appellate Division decisions regarding exactly what must be established for common law indemnification to be awarded.  The Court recognized that if it were to adopt the owner’s position, “every party engaged as a general contractor or construction manager, whether by the owner or not, would owe a common law duty to indemnify the owner regardless of whether such party was actively at fault in bringing about the injury.”  Finding that such a rule was inconsistent “with the equitable purpose underlying common law indemnification”, the Court held:

a party's (e.g., a general contractor's) authority to supervise the work and implement safety procedures is not alone a sufficient basis for requiring common law ]indemnification. Liability for indemnification may only be imposed against those parties (i.e., indemnitors) who exercise actual supervision . . . Thus, if a party with contractual authority to direct and supervise the work at a job site never exercises that authority because it subcontracted its contractual duties to an entity that actually directed and supervised the work, a common law indemnification claim will not lie against that party on the basis of its contractual authority alone.

The Court thus found that the general contractor had no obligation to indemnify the owner.

Comment:  As in past decisions issued by the Court of Appeals, the Court was particularly swayed by the equities, going so far as to conclude that its decision was “in keeping with the law’s notion of what is fair and proper”.

Submitted by Sherri N. Pavloff, Esq., of Farber, Brocks & Zane, LLC, who drafted the brief on behalf of Gallin, the general contractor.

07/07/11         Security Mutual Insurance Company v.  Perkins
Appellate Division, Third Department
Misrepresenting Dog Ownership Sufficient to Support Policy Rescission
In May 2000, defendant Perkins applied to Security for a homeowners policy.  The application asked whether he had “any animals or exotic pets.” He had a dog but yet said “no” and the policy was issued. Two years later,  Vrochopoulos (hereinafter defendant) visited the home, and the dog — a German Shepherd/Pit Bull mix — bit him, causing significant injuries. .

Security then advised that it was canceling the policy because  the property had become uninsurable due to the fact that Perkins was "harboring a vicious dog — dog bite loss." Ten months later, after learning that Perkins owned the dog at the time he completed the application, plaintiff sought to rescind the policy and commenced this action seeking, among other things, a declaration that Perkins had materially misrepresented that fact and the policy was therefore void ab initio.

Even if unintentional, "if the insured made a false statement of fact as an inducement to making the contract and the misrepresentation was material," an insurer may rescind the contract and avoid liability. A response to a particular application question will only be held to be a material misrepresentation if the question is"so plain and intelligible that any applicant can readily comprehend it.  The insured argued that the combined use of the terms "animals" and "exotic pets" deprived the former term of any clear meaning. Nevertheless, we find no ambiguity because, while a dog is not an exotic pet, it clearly is an animal, and Perkins admitted that he understood that the term "any animals" included pet dogs

The fact that the policy was first canceled does not preclude a rescission action.

 

07/07/11         Nat. Union Fire Ins. Co. of Pittsburgh, PA, v. Great American E & S Ins. Co.
Appellate Division, First Department
No Valid Excuse Offered for Delay in Notice; Believe that Workers Compensation Was Exclusive Remedy is Insufficient

In November 2005, Solar, an electrical subcontractor, contracted with West-Fair Electric to provide the electrical work for a construction project undertaken by plaintiff ECF School (ECF). Under the contract with West-Fair, Solar agreed to defend, indemnify and hold harmless ECF and the project manager, Tishman, as well as to procure insurance for both entities.

Solar obtained a general liability policy through Great American and named Tishman and ECF as additional insureds on its Certificate of Insurance. The notice provision of the policy required all insureds to notify Great American of an occurrence and any ensuing claim or suit "as soon as practicable," and to immediately provide Great American with any legal papers in connection with a claim or suit.

On July 20, 2006, Best, a Solar employee, was injured at the project site when she tripped over an extension cord in an area where Solar had not yet started work. She was taken by ambulance to the hospital and was advised to remain out of work for over a month. Solar completed an "Employer's Report" and "Supervisor's 24-Hour Incident Report" detailing the accident and medical attention received by Best. Solar also faxed both reports to its workers' compensation carrier, individual insurance broker (not a Great American agent) and Tishman. Notably, the insurance broker is not an agent of or associated with Great American.

When Best Tishman and ECF in June 2007, they each served a third-party complaint on Solar, impleading it as a third-party defendant to Best's lawsuit. Tishman forwarded Best's lawsuit to Great American in June 2007, and Solar forwarded the third-party complaint to Great American in August 2007, along with a request for coverage per the general liability policy. ECF did not provide notice to Great American of the occurrence or underlying action until December 2007.

Great American refused to provide insurance coverage to all three entities based on late reporting.

Solar failed to provide timely notice of the occurrence because it did not notify Great American until August 2007.  Its contention that it believe that Best's exclusive remedy was under the Workers' Compensation Law, was not reasonable under the circumstances.  Further, it was not reasonable for Solar to believe that a claim for defense and indemnity would not be made by Tishman and ECF.

07/05/11         Bonded Waterproofing Serv.  Inc. v. Anderson-Bernard Agency, Inc.
Appellate Division, Second Department
Broker Potentially Liable, Under New Jersey Law, for Misrepresentation of Coverage
National Indemnity Company (NIC) denied coverage to its insured, Bonded, under a CGL policy the carrier issued to it.  The policy was negotiated and procured by the Anderson-Bernard Agency (“Agency”), Bonded’s brokers.  Bonded and the Agency have their principal place of business in New Jersey, where the policy was issued.

NIC denied coverage in connection with a construction accident in Queens, based on an exclusion of coverage in the policy for work performed in the five boroughs of NYC. Bonded sued the Agency for failing to obtain the proper coverage and negligently misrepresenting the coverage secured and further claimed that NIC was vicariously liable for the Agency’s conduct and therefore should be estopped from denying coverage.

The court finds that there is conflict in New York law and New Jersey law differ with regard to the elements of the cause of action sounding in negligent misrepresentation, and since the relationship and contacts between the parties (Bonded and the Agency) all center in New Jersey, that state’s laws would apply to resolve that issue.
Under New Jersey law, the claim was properly stated against the Agency and a motion to dismiss the pleading was not permitted. Bonded alleged that A-B and Bernard issued a certificate of liability insurance to Bonded which misrepresented that Bonded was covered for the work conducted in Queens under the policy issued by NIC, and that Bonded reasonably and justifiably relied on that certificate to its detriment.

Bonded also sufficiently stated a cause of action against A-B and Bernard to recover damages for breach of contract. Bonded alleged that it entered into an agreement with A-B and Bernard, whereby A-B and Bernard would procure appropriate liability coverage for Bonded on an annual basis, and that A-B and Bernard breached that agreement by procuring deficient coverage, which ultimately resulted in the disclaimer by NIC, relegating Bonded to defending itself in the underlying action.

The court also found that the negligence claims against Agency were not time-barred.  The time to commence a negligence action accrue run until the insured was harmed and the harm did not occur until NIC denied coverage.

The claim against NIC, however, is dismissed. There was no proof offered that Agency was NIC’s agent and therefore, NIC cannot be liable for any misdeeds the Agency may have committed.

06/28/11         Matter of American Alternative Insurance Corp v. Pelszynski
Appellate Division, Second Department
Corporations Do Not Have Relatives; Volunteer Firefighter Does Not Qualify as Insured under SUM Policy
Pelszynski, a volunteer fireman for the North Babylon Volunteer Fire Company (hereinafter the Fire Company), was driving to the scene of an emergency when his car was struck by another vehicle.  He settled with the owners of that vehicle for the maximum amount of bodily injury coverage allowable under their auto insurance policy and then sought underinsured motorists coverage (SUM) from the Fire Company's CGL policy issued by American Alternative Insurance Corp. (“AAIC”).

Pelszynski is not an insured under the following definition of "insured" in the SUM endorsement: "You, as the named insured and, while residents of the same household, your spouse and the relatives of either you or your spouse."  "You" in the definition refers to the Fire Company, which cannot have a spouse or relative Contrary to Pelszynksi's contention, this interpretation of the SUM endorsement does not render the coverage meaningless, as the endorsement also includes, in the definition of an insured, any person in a vehicle insured for SUM benefits under the policy.

06/28/11         Bruckmann, Rosser, Sherrill & Co., L.P v. Marsh USA, Inc.
Appellate Division, Second Department
“Tie-In” Provision That Limits Coverage When Policies Issued by Two or More Related Carriers Is Upheld
This is a dispute between the insured plaintiffs (“BRS”) and its broker, Marsh. The issue before the court is whether a Marsh-placed policy issued to BRS by American International Surplus Lines Insurance Company (AISLIC) – an AIG company -- was limited by a "tie-in" provision, also referred to as an "anti-stacking" provision.

BRS, a private equity fund, purchases and provides advice about selected business ventures (portfolio companies) for the fund's investors.  BRS retained defendant Marsh as insurance broker to place insurance programs for BRS and its portfolio companies. BRS requested of Marsh to place $20 million in excess directors and officers (D & O) insurance for BRS.

Marsh placed a policy with ASLIC.  BRS and Jitney, one of the portfolio companies, (and their respective directors) were sued for damages up to $1 billion,  Jitney was insured by National Union, another AIG company, for $15 million.  When Jitney and BRS notified AIG of the lawsuit and sought coverage under their respective $15 million and $20 million policies, AIG notified BRS that based on a limit of liability clause in BRS's policy with AISLIC (referred to by the parties as a "tie-in provision" or "non-stacking" provision), the combined limit of liability for this claim was $20 million for both policies.  AIG took the position that, based on this provision, its maximum aggregate limit for all losses arising out of this claim was $20 million (the greater of the limits of the BRS policy and the Jitney policy for $15 million). 

BRS settled the action for $33.5 million, and AIG paid $6.9 million in defending the suit, which was deducted from the limits of the Jitney policy.  The total losses for BRS and Jitney thus amounted to $40,400,000.  AIG paid the full $15 million policy limit under the Jitney policy, and pursuant to its claim that the tie-in provision capped BRS' coverage at $5 million (the amount remaining out of the $20 million coverage)

BRS agreed to settle the coverage action against AIG for $9 million out of the $15 million that it was seeking.  BRS's settlement with AIG left BRS $6 million short of the $20 million of excess D & O coverage that BRS maintained Marsh was supposed to procure.

The provision, as is relevant here, would read as follows:
"In the event other insurance is provided to . . . a Portfolio Entity . . . and such other insurance is provided by the Insurer [AISLIC] or any other member company of American International Group, Inc., (AIG) . . . then the Insurer's [AISLIC'S] maximum aggregate Limit of Liability for all Losses combined in connection with a Claim covered, in part or in whole, by this policy and such other insurance policy issued by AIG shall not exceed the greater of the Limit of Liability of this policy or the limit of liability of such other AIG insurance policy."
That provision clearly limits coverage when more than one policy is issued by an AIG company.

06/25/11         Zimmerman v. Peerless Insurance Company
Appellate Division, Second Department
Presence of Angst (or Lack of Knowledge of It) Does Not Excuse Late Notice

On October 31, 2006, while jogging, Angst was bitten by Zimmerman’s unleashed dog.  Angst and Zimmerman had a brief verbal confrontation, during which Zimmerman saw blood on Angst's hand.  He offered to pay Angst's medical expenses, but Angst declined, and the two men did not exchange contact information.  Zimmerman knew his dog has bitten a neighbor some time before.  Within 48 hours of the incident involving Zimmerman's dog and Angst, the Suffolk County Department of Health requested the dog's vaccination records and informed Zimmerman that the dog would be restricted to Zimmerman's property.

When Zimmerman was sued by Angst in May 2007, he turned the suit papers over to Peerless.  Peerless timely denied on late reporting.  Since the policy was issued before January 17, 2009, the insurer was not compelled to establish prejudice.

An insured can justify a delay in giving notice if he or she had a “reasonable belief in non-liability."  The burden of demonstrating the reasonableness of the excuse lies with the insured.

Here, the insured knew that his dog had bitten Angst and that the dog had a previous “bite” (thus potential liability).  Zimmerman's argument that the policy was ambiguous as to whether he was obligated to give notice of the occurrence before learning of the possible claimant's identity was rejected.

Peerless, therefore, has no obligation to defend or indemnify Zimmerman in the underlying action.

 

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

07/05/11         Awadh v. Moronta
Appellate Division, Second Department
Trial Court Is Reversed as Plaintiff’s Rebuttal Evidence Was Sufficient

Although defendant met his prima facie burden of showing that plaintiff did not sustain a serious injury to his lumbar spine, the trial court erred in granting defendant’s motion for summary judgment because plaintiff proffered sufficient competent medical evidence to rebut defendant’s showing, as well as a reasonable explanation for his cessation of treatment.

07/05/11         Frederique v. Krapf
Appellate Division, Second Department
Trial Court Is Affirmed as Plaintiff Fails to Rebut Defendants’ Prima Facie Showing

Defendants established that plaintiff did not sustain serious injuries as alleged to his left hip and knee as well as to his cervical and lumbosacral spine.  Defendants additionally established that plaintiff did not sustain a serious injury under the 90/180-day category.  Plaintiff failed to rebut defendants’ showing and, therefore, the trial court properly dismissed the complaint.

06/30/11         Arroyo v. Morris
Appellate Division, First Department
Failure of Plaintiff’s Experts to Address Pre-Existing Conditions Render Opinions on Causation Speculative

Defendants submitted evidence that the MRI of plaintiff’s lumbar spine revealed pre-existing degenerative disc disease, that the MRI of plaintiff’s left knee showed a pre-existing chronic condition, and that neither MRI revealed any recent trauma or evidence of a causally related injury.  In opposition, plaintiff failed to rebut defendants’ showings and his experts did not address the findings on the MRIs rendering their opinions as to causation speculative.  In addition, because plaintiff did not establish causal relationship of his alleged injuries to the accident, his claim under the 90/180-day category also failed and the trial court’s dismissal of the complaint was affirmed.

06/28/11         Rojas v. Livo Car Inc.
Appellate Division, First Department
Conflicting Medical Testimony Creates Question of Fact

Plaintiff, a 32 year old pedestrian, was knocked to the ground by defendants’ vehicle, and sustained short-term loss of consciousness.  Defendants’ examining experts found plaintiff had normal ranges of motion, no neurological deficits and that any injury was due to unrelated pre-existing degenerative conditions.  In opposition, plaintiff’s orthopedist, who treated plaintiff two weeks after the accident and continuously thereafter, testified that plaintiff’s ranges of motion were not normal, that plaintiff suffered from severe headaches, that plaintiff would never fully recover and that the injuries were caused by the accident. 

Moreover, the doctor testified that the seeming degenerative conditions were caused by the accident.  This conflicting testimony was sufficient to create a question of fact as to serious injury.  However, with respect to plaintiff’s claim under the 90/180-day category, the trial court was reversed because plaintiff only missed ten days of work and he failed to submit competent medical evidence to support the claim.

06/28/11         Castillo v. Cinquina
Appellate Division, First Department
Again, Conflicting Reports Raise Question of Fact

Defendant’s expert orthopedic surgeon found plaintiff had full range of motion in her neck and back and that her injuries had resolved.  However, plaintiff’s treating chiropractor, based on both contemporaneous and recent testing, determined plaintiff had diminished range of motion caused by the accident.  The chiropractor’s findings were further supported by MRI reports indicating bulging discs in the cervical and lumbar spine.  This was sufficient to warrant a reversal of the trial court’s grant of summary judgment to defendant. 

06/21/11         Jean v. New York City Transit Authority
Appellate Division, Second Department
Defendant’s Expert’s Conclusions Not Substantiated with Objective Medical Evidence Have No Probative Value

In 2002, plaintiff, a home health aide for 23 years, was injured while sitting in her car outside her client’s home with the driver’s door ajar when she tried to prevent the door from being torn off the car by defendant’s bus by holding it with her left hand.  Although she immediately felt pain in her left shoulder, she declined treatment and finished her day’s work.  A week later, she sought treatment from an orthopedist for neck and left shoulder pain and underwent several months of physical therapy.  Three months after the accident, another orthopedist recommended surgery and two months after that she had surgery to remove an inflamed bursa.  Plaintiff was unable to return to work for three months following the surgery and ultimately, in 2005, left her job.

On appeal, the trial court was reversed as it was determined that defendant failed to meet its prima facie burden.  Defendant’s examining orthopedic surgeon found range of motion restrictions in plaintiff’s left shoulder and documented those findings with numeric values.  However, he then failed to address the documented findings in his conclusion and instead stated that the surgery was unrelated as the bursa was a degenerative condition, the impingement was developmental, not traumatic, and that the cervical MRI findings were degenerative, pre-existing and unrelated.  He failed, however, to substantiate or explain the basis for his conclusions, which resulted in them lacking any probative value.  As defendant failed to meet its prima facie burden, the court did not need to consider plaintiff’s opposing papers.

06/21/11         Jin Ying Zi v. Sang Cheol Lee
Appellate Division, Second Department
Defendant’s Failure to Initially Establish That Injuries May Have Been Caused by Prior Accident Results in No Requirement on Plaintiff’s Part to Respond to That Assertion

The vehicle operated by defendant collided with the vehicle operated by plaintiff/counterclaim defendant, in which plaintiffs were passengers.  Defendant asserted a claim for indemnification/contribution against plaintiff/counterclaim defendant and both defendant and plaintiff/counterclaim defendant moved for summary judgment.  The trial court denied the motions and both moved to reargue.  Upon reargument, the trial court vacated its prior order and granted the motions.  The Appellate Court reversed finding that, although defendant met his burden with the submission of affirmed reports of an orthopedic surgeon, plaintiffs raised an issue of fact through the affidavits of their treating chiropractor.  The court further noted that plaintiff Lim was not required to respond to the allegation that his injury was caused by a prior accident because defendant did not initially establish that, if Lim had an injury, it was causally related to the prior accident. 

06/21/11         Khaimov v. Armanious
Appellate Division, Second Department
Yet Again, Conflicting Medical Testimony Raises Issue of Fact

Defendants met their prima facie burden though the submission of the affirmed reports of a radiologist who found unrelated degenerative conditions in plaintiff’s cervical and lumbar spine and no evidence of trauma to plaintiff’s left knee.  However, plaintiff’s treating physician affirmed, based on examinations, medical history, records and reports that plaintiff’s injuries were permanent, progressive and caused by the accident.  This sufficiently rebutted defendants’ showing and their motion should not have been granted.

06/21/11         Lively v. Fernandez
Appellate Division, Second Department
Affirmation Based on Only Contemporaneous Examination Is Insufficient to Raise Issue of Fact with Respect to “Significance” of Injuries

Defendant met her prima facie burden through the report of her examining neurologist who found that the limitations in plaintiff’s cervical range of motion were insignificant.  In opposition, plaintiff’s submission of his treating physician’s affirmation was insufficient as it failed to set forth any objective medical findings from a recent examination in support of the claim under the permanent consequential limitation of use category.  The affirmation was based on only one examination performed shortly after the accident and did not, therefore, establish that the injury existed for a sufficient period of time so as to qualify as “significant.”  The court reiterated that while an allegation of injury under that category need not be permanent, to rise to the level of “significant” both the extent of the injury and its duration must be shown. 

06/21/11         Midiri v. McQueen
Appellate Division, Second Department
On Appeal, Trial Court Is Reversed and Defendant’s Motion Is Denied

In a decision without details, plaintiff claimed cervical injuries under the permanent consequential and/or significant limitation of use categories.  While defendant submitted sufficient competent evidence to meet her prima facie case, plaintiff successfully rebutted and raised a triable issue of fact warranting denial of defendant’s motion.

06/21/11         Oginsky v. Rasporskaya
Appellate Division, Second Department
Plaintiff Fails to Rebut Showing That Injuries Were Neither Serious Nor Caused by the Accident

Defendant submitted sufficient evidence to meet his prima facie burden establishing that plaintiff’s alleged injuries to the lumbosacral spine and knees did not constitute serious injuries and that those injuries, as well as the alleged cervical injury, were not causally related to the accident.  In addition, defendant submitted evidence showing that plaintiff did not sustain an injury qualifying under the 90/180-day category.  In opposition, plaintiff failed to raise a triable issue of fact so the trial court properly granted defendant’s motion.

 

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

ARBITRATION
06/27/11         Rural/Metro Medical Services v. Respondent
Arbitrator Kent L. Benziger, Erie County
Insurer Encouraged to Step Back and Re-Evaluate Medicare Fee Schedule Defense

This decision was one of six rendered by Arbitrator Benziger to the same insurer and an affiliated insurer.  The issue in all six decisions was whether the Medicare fee schedule applied to the reimbursement of ambulance services.  Arbitrator Benziger determined, as he has on a multitude of awards on this issue for this insurer, that the Medicare fee schedule does not apply.  Arbitrator Benziger noted that perhaps the insurer should re-evaluate its defense strategy on this issue since it has continued to rely upon the same defense with no new insight or argument which has been previously rejected on a number of times. 

[ANGLE:  There have been numerous awards rejecting this argument within the past year by all four arbitrators in the Upstate area.  It is unclear whether the insurer has a strategy to seek Master Arbitration on all of these decisions, hence the continuation of obtaining the award even though it is evident what the outcome will be.  If not, then consideration should be given as to whether this continued path is a good course of action].

06/27/11         Walden-Bailey Chiropractic Center v. Respondent
Arbitrator Veronica K. O’Connor, Erie County
One Peer Review Insufficient but the Second Is Sufficient Basis for Denial

The Applicant sought reimbursement for the conduction of an upper EMG study and physical performance testing on a patient allegedly arising out of an August 8, 2009, motor vehicle accident.  The insurer denied the upper EMG study based upon the peer review of Dr. Edward Weiland. 

Dr. Weiland opined that there was no medical necessity for the testing based upon the limited medical records provided to him at the time.  He was open to reviewing additional records from Applicant if they became available to re-evaluate his opinion.  However, the Applicant’s records failed to demonstrate how the course of treatment would change through utilizing this testing.

The assigned arbitrator determined that this peer review was not persuasive since it was not based upon the review of all of the Applicant’s medical records.

The insurer denied the physical performance testing based upon the peer review of Dr. Robert Sohn.  Dr. Sohn set forth a lengthy opinion that the chiropractic standards were not met to establish medical necessity for this testing.  Dr. Sohn specifically pointed out what the treating records must contain to demonstrate necessity for this testing, which he opined were not present in the medical records. 
The assigned arbitrator determined that the peer review was sufficient to uphold the denied as the Applicant’s medical records did not rebut the findings set forth in Dr. Sohn’s report.

06/24/11         Richard Ferguson, MD v. Respondent
Arbitrator Thomas J. McCorry, Erie County
Treating Physician’s Opinion Afforded Greater Weight in Case with Complex History

The Applicant’s assignor was involved in a January 15, 2003, motor vehicle accident and eventually referred over a year later for a neurological consultation.  The assignor had a laminectomy over 20 years ago and apparently since the motor vehicle accident had progressive lumber and cervical symptoms.  Due to the assignor experiencing bilateral arm numbness and weakness as well as the inability to walk due to leg numbness she was referred to Applicant for electrodiagnostic testing. 

The insurer denied the testing based upon the peer review of Dr. Joan Puglia.  Dr. Puglia opined that the was no evidence of neurological compromise or neurological deficit.  Therefore, the testing was not justified at that time.

The assigned arbitrator determined that the peer review did not opine lack of medical necessity since the assignor presented to her treating physician with a complex history and multitude of symptoms.  Here, the assigned arbitrator determined that the treating physician’s opinion as to whether the testing should have been performed was afforded greater weight.  Dr. Puglia’s opinion seemed to be provided with the hindsight of the testing’s results instead of the history and symptoms presented.

LITIGATION

06/14/11         Health & Endurance Med., PC a/a/o Shakeel Rehman v. Travelers Prop. Cas. Ins. Co.
Appellate Term, Second Department
Insurer’s Motion to Dismiss Should Have Been Granted Regarding Independent Contractor Status

The insurer’s 3211(a)(7) motion based upon the fact that the services rendered were by an independent contractor should have been granted.  The insurer was not precluded from asserting such a motion after interposing an answer.  The plaintiff’s claim forms indicate that the services rendered were by an independent contractor.  Thus, the independent contractor, and not the plaintiff, is entitled to seek payment of the bill.  The statement contained in the claim form cannot be corrected once the plaintiff commences litigation, even if the statement is erroneous.

06/14/11       Five Boro Psychological Services, PC a/a/o Vincent Scott v. Utica Mut. Ins. Co.
Appellate Term, Second Department
Insurer Demonstrated Lack of Medical Necessity Leading to Dismissal on Summary Judgment

The insurer’s cross-motion for summary judgment should have been granted as it demonstrated that two bills were timely denied based upon lack of medical necessity, which was unrebutted by plaintiff.  The third bill was not due as outstanding verification was owed by plaintiff. 

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

06/28/11         Providence Wash. Ins. Co. a/s/o Shelofsky v. Munoz
Appellate Division, Second Department
Counterclaim in Subrogation Action Can Only Assert “Set-Off”, Not Affirmative Relief
This action arises out of a automobile collision between a car driven by Shelofsky and a car driven by Munoz.  The Shelofsky automobile was insured by Providence Washington.  Upon paying the property damage portion of this loss, Providence Washington commenced an action in subrogation against Munoz seeking to recover the costs of the repairs to the Shelofsky’s vehicle.  In response, Munoz instituted a counter-claim seeking to recover damages sustained to the Munoz vehicle which were allegedly caused by the negligence of Shelofsky. 

At approximately the same time, Munoz commenced a personal injury action against Shelofsky.  Finally, Providence Washington commenced a second subrogation action seeking to recover certain no fault benefits that it had paid to Shelofsky as a result of the collision with the Munoz vehicle (editor’s note – not sure how that happened).  In any event, both of Providence Washington’s subrogation actions were consolidated with Munoz’s personal injury action and set for trial in Nassau County Supreme Court.

Providence Washington then voluntarily moved to discontinue its claims against Munoz.  By discontinuing the action, Providence Washington maintained that Munoz’s subrogation claim was rendered moot.  In response, Munoz cross-moved for an award of costs and attorney’s fees.

The Second Department held that Providence Washington was permitted to discontinue its two subrogation actions.  Further, the Court also noted that Munoz’s counter-claim was rendered moot because its claim against Providence Washington could only be used to “set off” damages recovered by Providence Washington. As Providence Washington was not the alleged tortfeasor, it followed that Munoz could not obtain affirmative relief.  Rather, any claim for affirmative relief must be prosecuted directly against the alleged tortfeasor (here, Shelofsky). 

In response to Munoz’s motion for costs and sanctions, the Second Department noted that no such award was appropriate in the current circumstance.  This was because, at the time the action was commenced, it was not frivolous, nor brought in bad faith.

06/28/11         Global Imports Outlet, Inc. v The Signature Group, LLC
Appellate Division, Second Department
Failure to Procure Insurance Coverage Is Not a Coverage Dispute
The Second Department affirmed the Trial Court’s denial of defendant Signature’s motion to sever.  Signature had argued that it would be prejudiced if it was forced to proceed in an action involving insurance coverage issues.  While the Court noted that generally issues of insurance coverage must be severed from tort actions to avoid prejudice, here the matter involved not a dispute over insurance coverage but rather a failure to procure insurance claim.  Where the failure to procure insurance was central to the overall claim, the court found that there was no likelihood of confusion among jurors.  The only potential prejudice would have been sustained by the plaintiff because, as the Court  noted, severance of this matter would further delay plaintiff’s ability to proceed to trial on this issue.

06/28/11         Richman v Harleysville Worcester Insurance Company
Appellate Division, Second Department
Tender of Settlement Check Before Request for Proof of Loss Waives 60-Day Rule
Harleysville denied its insured, Richman’s, claim for coverage resulting from a raccoon infestation when Richman failed to submit a sworn proof of loss within 60 days of its request.  In response, Richman commenced this instant action seeking coverage under the Harleysville policy.  In addition, Richman also asserted a claim for conversion against Alexander Wall.  Both Harleysville and Wall moved for summary judgment, and the Trial Court denied both applications on a question of fact.  On appeal, both denials were affirmed by the Second Department.

With regard to the Harleysville motion, the Court noted that failure to submit a proof of loss within 60 days can result in the loss of coverage.  However, a violation of the 60 day rule can be overcome where the insured can establish the carrier waived its right to rely upon the 60 day rule or was estopped from asserting the defense. 

Here, the Court noted that plaintiff Richman had presented enough evidence to raise a question of fact as to Harleysville’s waiver.  In so holding, the Court explained that Harleysville tendered a settlement check prior to requesting a proof of loss.  It was only after the proposed settlement was rejected by Mr. Richman that Harleysville first sent a demand for the proof of loss.  In light of this, the Court found a question of fact existed as to whether the carrier waived its right to demand compliance with the proof of loss rule.

With regard to the conversion claim against Mr. Wall, the Court noted that a question of fact existed as to whether Wall interfered with Mr. Richman’s possessory rights of property removed from the insured premises.  Conversion is characterized as “the intentional and unauthorized exercise of control over personal property owned by another that interferes with the owner's right of possession.”  In the instant case, the versions presented by Mr. Wall and Mr. Richman show significant differences relative to Mr. Richman’s ability to access his property.

06/21/11         Nisari v Ramjohn
Appellate Division, Second Department
Certificate and Report of Title Constitutes Extrinsic Evidence Once Policy Is Delivered
Plaintiff purchased a parcel of real property from defendant Ramjohn.  At the time of the purchase, plaintiff also procured a policy of title insurance from defendant Commonwealth Land Title Insurance Company. 

After purchase, it was discovered that the land may not have been properly subdivided from a larger parcel.  In addition, it was discovered that plaintiff may not hold good and marketable title to the premises it purchased from defendant Ramjohn.  As such, Nisari made a claim for coverage under the policy issued by Commonwealth.  Commonwealth responded by denying the claim based upon an exclusion in the policy. 

Accordingly, plaintiff commenced the instant action against Ramjohn and Commonwealth, respectively.  Plaintiff asserted two causes of action against Commonwealth which alleged, in essence, the failure to receive good title was covered under the terms of the Commonwealth policy. 

Commonwealth moved to dismiss the Complaint on the grounds that plaintiff’s claim was entirely removed from coverage by way of an exclusion within the policy.  In so moving, Commonwealth conceded that the policy provided coverage for unmarketability of title.  However, the policy, by its plain and unambiguous terms, precluded coverage for “ [a]ny law, ordinance or governmental regulation . . . restricting, regulating, prohibiting or relating to . . . the occupancy use, or enjoyment of the land . . . the character, dimensions or location of any improvement now or hereinafter erected on the land . . . [or] a separation in ownership or a change in the dimensions or area of the land or any parcel of which the land is or was a part.”

Accordingly, based upon the clear language of the exclusion, the Court granted Commonwealth’s motion to dismiss.  At the same time, the Court also denied plaintiff’s motion to amend its Complaint to assert additional causes of action against plaintiff.  In denying plaintiff’s motion to amend, the Court noted that an amendment of a pleading is not permissible where the claims asserted therein are devoid of merit.

CASSIE’S CAPITAL CONNECTION
Cassandra A. Kazukenus
[email protected]
With the legislative session at an end, without the usual fireworks and the Insurance Department and Banking Department in transition, Albany is quiet, for once.

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

07/01/11         MBIA, Inc. v. Federal Insurance Company, et. al.
United States Court of Appeals for the Second Circuit – New York
What Coverage Is Triggered Under Directors & Officers Liability Policy?
Although this is a very long and, at times, complicated decision we will attempt to provide you with the critical points addressed by the Court.  If you would like a copy of the decision, please contact me at [email protected]

MBIA is a Connecticut corporation based in Armonk, New York.  It provides municipalities and other government entities with financial guarantee insurance for their bonds or structured finance obligations; this insurance is a guarantee of payment of principal and interest due.  MBIA purchased directors and officers [“D & O”] coverage from Federal Insurance Company [“Federal”] and Ace American Insurance Company [“Ace”].  The Ace policy would not be triggered until the Federal policy was exhausted. 

The policies covered “Securities Claims,” which include “a formal or informal investigative order or similar document.”  The policies also cover “Securities Defense Costs,” which include costs “incurred in defending or investigating “Securities Claims”. The policies also provide that MBIA must give the insurers “the opportunity to effectively associate . . . in the investigation, defense and settlement” of any claim against MBIA and then seek the insurers’ consent before settling any covered claim or incurring any costs defending such a claim.

The claim arises out of an investigation by SEC and the New York Attorney General [“NYAG”] into certain accounting practices in the insurance industry.  Federal and State regulators targeted MBIA in November 2004.  The SEC issued a formal order of investigation on March 9, 2001, ordering an inquiry into certain companies’ compliance with securities laws, their financial recordkeeping, their financial reporting, and related matters.  Pursuant to that investigation the SEC issued the first of several subpoenas to MBIA on November 12, 2004.  The subpoena compelled MBIA to produce, among other things, all documents concerning transactions involving “non-traditional products”.  On November 18, 2004, the NYAG followed suit and issued its first subpoena, which mirrored the SEC’s.

Ultimately, three of MBIA’s transactions came under regulatory scrutiny. First, MBIA’s purchase of reinsurance on its guarantee of bonds issued by a hospital group owned by Allegheny Health, Education and Research Foundation [“AHERF”] - the aim of this scheme was to allow MBIA to avoid recognizing a large, one-time insurance loss by disguising the loss and spreading payment for it over a long period of time, increasing its stated earning.  Second, a transaction which involved MBIA’s purchase of an interest in Capital Asset Holdings GP, Inc. [“Capital Asset”], a company that bought delinquent tax liens - the transaction of concern was designed to avoid MBIA’s recognizing a loss on the deal it had with Capital Asset immediately, instead spreading the loss out over time because of the way the guarantee was structured. Third, a transaction which involved MBIA’s guarantee of securities used to purchase airplanes for U.S. Airways.  Again, the transaction was formulated to avoid recognizing a loss.

In the summer of 2005, the SEC and NYAG considered issuing additional subpoenas; however, MBIA requested that the regulators accept voluntary compliance with the demands for records in order to avoid adverse publicity.  The regulators agreed and MBIA complied with their demands for documents concerning the Capital Asset and US Airways transactions.

In May 2005, MBIA initiated the claims process by informing its insurers that it was the target of a regulatory investigation and by providing them with the subpoenas.  The insurers took the position that the subpoenas were not sufficient to trigger coverage but accepted the subpoenas as notice of a potential claim under the policies.  MBIA proceeded to hire attorneys and defend, and respond to the regulatory inquiries.

In August 2005, the regulators advised MBIA that they would take action against it for securities law violations.  Settlement discussions continued and on September 27, 2005, MBIA sought consent from the insurers to settle with the regulators.  On October 11, 2005, Federal responded by advising MBIA that it did not believe a settlement would be covered, but it allowed MBIA to proceed with settlement, stating also that it would not “raise the lack of its written consent to settlements as a defense to coverage”.  In December, Ace essentially took the same position.

MBIA signed an offer of settlement for both the state and federal claims on October 28, 2004, but that offer was preliminary, as the regulators had not completed their investigation into Capital Asset and US Airways transactions.  To allow settlement talks to proceed, MBIA and the regulators agreed that an independent consultant, paid by MBIA, could complete a review of those transactions and report on a proposed remedy if misconduct was uncovered.  The insurers were first notified of this development in September 2006.

By December 2006, the SEC and MBIA reached an agreement in principle under which MBIA would pay $50 million in civil penalty for the AHERF transaction. The settlement was executed by both the SEC and NYAG in January 2007.  The independent consultant ultimately exonerated MBIA of any wrongdoing for the Capital Asset and US Airways transaction, and the investigations were closed in 2007.

After the investigations became public, lawsuits against MBIA alleging financial wrongdoing were filed.  As relevant here, one lawsuit was filed in the U.S. District Court for the Southern District of New York and one was filed in the New York Supreme Court.  Two shareholders sent separate demand letters to MBIA asked the board to file suit against directors and officers for the alleged wrongdoing being investigated by regulators at the time.  Thereafter, MBIA set up a committee of independent directors, the Demand Investigation Committee [“DIC”], to investigate these demands. MBIA did not act on the shareholders demands, which, under governing Connecticut law, was effectively a rejection of the demands.  The shareholders responded by filing two derivative lawsuits.  After the lawsuits were filed, MBIA reconstituted the DIC as the Special Litigation Committee [“SLC”] to determine whether maintaining these suits was in the best interest of the MBIA. The SLC determined it was not and the suits were terminated. 

Ultimately, Federal agreed to pay approximately $6.4 million to cover losses from the SEC’s AHERF transaction investigation and related lawsuits, including $200,000 for the DIC’s investigation.  Federal refused to cover losses related to the Capital Asset and US Airways transactions and to the NYAG’s AHERF transaction investigation.

MBIA disagreed with the insurers’ coverage position and filed suit to compel the insurers to cover costs related to (1) both regulators investigations of all three transactions; (2) the independent consultant’s investigation pursuant to the settlement; and, (3) the work of SLC.  The district court agreed with MBIA with respect to (1) and (3) and granted summary judgment to the insurers with respect to (2).  Both appealed.  For the following reasons the Second Circuit affirmed in part and reversed in part.

The Court began its analysis by agreeing with the district court and the parties that the contract is unambiguous, so the plain meaning of its terms control. 

In reviewing Insuring Clause 3, which states:  “The Company shall pay on behalf of any organization all Securities Loss for which it becomes legally obligated to pay on account of any Securities Claim first made against it during the policy period; and the definition for Securities Claim in the policy which is “a formal or informal administrative or regulatory proceeding or inquiry commenced by the filing of a notice of charges, formal or informal investigative order or similar document”, the court recognized that the question to be answered  is whether the expenses claimed in connection with the regulators investigations fell within this definition.

With respect to the NYAG investigation of AHERF the Court agreed with the district court that NYAG;s subpoena on the AHERF transaction was a “Securities Claim”.  The court concluded that backed by the enforcement authority of the state, the NYAG subpoena is at least a “similar document” to a “formal or informal investigative order” that commenced a regulatory proceeding, as stated in the policies.  The Court reject the insurers position that the subpoena was a “mere discovery device” that is not even “similar” to an investigative order. The Court’s position was based on New York law which it stated made “crystalline” that a subpoena is the “primary investigative implement in the NYAG’s toolshed.”  The court also rejected the insurers’ argument that because the definition does not include a proceeding commenced by the service of a subpoena, a subpoena is not included, stating that this argument placed form over substance.  The Court concluded that because the plain-language understanding of a
“Securities Claim” includes this subpoena, “Securities Loss” arising from the investigation is covered. 

With respect to the Capital Assets and US Airways transactions the court noted that the determination of whether these two transactions is covered turns on two factors:  (1)  whether the SEC’s investigation of these transactions was within the scope of its formal order; and (2) whether the NYAG’s similar investigation was within the scope of its AHERF investigation, which is covered as a Securities Claim. 

In analyzing whether the costs of the SEC investigation were covered the Court noted that the three transactions at issue all involved MBIA’s attempts not to report or to delay reporting a loss.  The Court determined that although the mechanics MBIA employed in each of the three transactions differed somewhat they all involved efforts to delay, reduce or eliminate the reporting of a loss, precisely as described in the subpoena.  The Court held that these courses of business fall within the scope of the transactions for which documents were subpoenaed by the SEC as “Non-Traditional Products”.  The Court noted that this circumstance is highly probative of the scope of the investigation authorized by the SEC’s formal order.  The Court concluded that the plain meaning of the formal order includes these transactions within its scope because they involved a courts of business “of similar purport or object” to that described in the formal order.  The operative language of the order contains no limitation in scope to a certain “product”, nor does it appear to contemplate such a limitation.

The Court also disagreed with the insurers’ argument that these investigations were conducted by way of oral request rather than subpoena or other formal process.  The Court determined that the investigation, whether oral or by way of subpoena, was connected to the formal order. The Court also pointed out that the reason that the SEC did not issue subpoenas is that the MBIA requested this procedure, and the SEC believed that MBIA would fully comply on a voluntary basis.  Furthermore, the policy provided coverage for “informal investigative orders”, and the oral inquiries would fit that description.

For the same reasons that the Court held that “Securities Loss” related to the SEC’s investigation into the Capital Asset and US Airways transactions is covered, such loss related to the NYAG’s investigation into these transactions is also covered.

Next, the Court addressed whether there was coverage for the shareholders derivative litigation.   Because MBIA was a Connecticut Corporation the Court applied Connecticut law. The insurers argued that the SLC was not an “insured person” under the policies.  Again, the Court disagreed with the insurers.  The Court reasoned that the dismissal of the suits was MBIA’s decision, undertaken pursuant to the powers granted to MBIA under Connecticut law, and exercised by the SLC as permitted under Connecticut Law.  Corporate powers and management are exercised by agents “under the authority of” or “under the direction of” the board.  The SLC was one way MBIA exercised its powers and therefore, an insured under the policy.

The insurers then argued that under Insuring Clause 4, there was a $200,000 sublimit for expenses involved with shareholder demands.  The Court found that the insurer’s argument requires that the $200,000 sublimit operate as an exclusion of coverage and therefore, the insurer bears the burden of proving that the claims fall within the scope of the exclusion.  The Court held that the insurers did not meet its burden.  The Court held, however, that at this stage it was Insuring Clauses 2 and 3 which would apply because both provide coverage for costs “incurred in . . . investigating” “claims” or “Securities Claims,” respectively, each of which is defined expressly to include lawsuits.  Accordingly, the Court reversed the district court on this issue and held that the costs incurred by the SLC are covered under the policies.

The final issue the court addressed was whether the costs of independent consultants were covered.  The district court held that the addition of the IC which reviewed the Capital Asset and US Airways transactions during the course of settlement discussions breached the “right to associate” clause in the policies and that as a result, the IC related costs were not covered.  The Court disagreed.  In essence, the Court determined that because MBIA gave the insurers the opportunity to exercise meaningfully their option to participate in settlement discussions and adequately informed them of the nature and amount of claims under consideration for settlement, it did not breach its contractual obligation under the association clause.

The court determined that the IC review component grew out of the natural course of settlement discussions about the same claim in which the insurers could have participated all along.

The case was remanded to the district court for entry of judgment.                                                                                                                                                                                                                               

06/23/11         William Preau III v. St. Paul Fire Marine Insurance Company
United States Court of Appeals for the Fifth Circuit – Louisiana
Failure to Disclose Drug Use and Termination in Recommendation Letter Results in Denial of Coverage
Plaintiff, William Preau, was a shareholder in Louisiana Anesthesia Associates (“LAA”).  In late 2000 or early 2001, Preau and the other LAA shareholders learned that Dr. Robert Lee Berry, an employee of LAA, may have been abusing Demerol and other narcotics.  On March 27, 2001, Preau and three other LAA shareholders signed a letter terminating Berry after he failed to answer a page while on duty and admitted to taking Valium. 

After his termination Berry sough employment as a traveling physician with an agency called Staff Care, Inc. Preau provided a recommendation letter for Berry to Staff Care just 68 days after his termination.  The letter stated:  “This is a letter of recommendation for Dr. Lee Berry.  I have worked with him here at Lakeview Regional Medical Center for four years.  He is an excellent anesthesiologist.  He is capable in all fields of anesthesia including OB, peds, C.V. and all regional blocks.  I recommend him highly.” 

Preau did not disclose Berry’s drug use.  In October 2001, Berry sought privileges at Kadlec Medical Center in Washington State.  In addition to other materials Kadlec reviewed and relied upon Preau’s recommendation letter, and granted him privileges to practice at Kadlec. On November 12, 2002, Berry failed to properly administer anesthesia to a patient, Kimberly Jones, because he was under the influence. As a result of Berry’s error the patient fell into a permanent vegetative state.

Jones later sued Kadlec, Berry and LAA, among others, in a Washington state court.  The suit was dismissed against LAA due to a perceived lack of personal jurisdiction.  Kadlec ultimately settled the suit for $7.5 million, after incurring approximately $744,000 in attorneys’ fees.

Kadlec then brought suit against, among others, LAA, Preau and other LAA shareholders in the District Court for the Eastern District of Louisiana.  A jury found that Preau committed intentional and negligent misrepresentation by failing to disclose Berry’s drug abuse and termination in his recommendation letter.  The jury awarded Kadlec a total of $8,244,000, which represented the amount Kadlec paid to settle the Jones suit plus attorneys’ fee Kadlec incurred defending the suit. The judgment was affirmed on appeal.

St. Paul Fire & Marine Insurance insured LAA under a commercial general liability policy when Preau wrote the letter.  St. Paul agreed to defend the Kadlec suit but reserved its right to deny coverage.   St. Paul denied coverage after the verdict was rendered.

Preau then brought suit against St. Paul. Ultimately both parties moved for summary judgment on the issue of coverage.  St. Paul argued that the Kadlec judgment was not covered under the policy because it was for economic damages stemming from Preau’s misrepresentation and not “for covered bodily injury or property damage,” as required by the policy.  Preau argued that the Kadlec judgment was covered under the policy because it directly represented the damages Kadlec paid to Jones, which were for her bodily injuries.  The district court agreed with Preau.  St. Paul appealed.

The Fifth Circuit Court of Appeals looked to the policy language and agreed with St. Paul holding that the damages in the Kadlec suit were not covered under the plain terms of the Policy.  The court stated that Preau was not “legally required” to pay damages “for covered bodily injury.”  Rather, Preau was “legally required” to pay Kadlec for the economic injuries it suffered as a result of Preau’s misrepresentation.  The Court concluded that the economic damages Kadlec sought for Preau’s tortious misrepresentations are distinct from the damages Jones or any other party may seek for her bodily injuries.  The Court stated that the fact that the amount of damages that Kadlec sought was directly related to the amount it paid to defend and settle the Hones suit does not mean that Preau became legally required to pay Jones for bodily injury.

 

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

06/24/11         Lawrence Ruben Co., Inc. v. Admiral Indem. Co.
Supreme Court, New York County
Accident Triggers Coverage for Owner under Tenant’s Policy, but Court Determines It Is Co-Primary with Owner’s Own Policy
Bolivar Amill, while working as a dishwasher at Blair Perrone Steakhouse, fell off a ladder while retrieving a box of glasses from a mechanical room located above the kitchen of the restaurant.  The restaurant was owned by Four Little Ones, LLC (“Four”); however, the space was leased from Tower Plaza Associates, LP.  Mr. Amill testified that there were two ladders leading to the mechanical room:  a stationary ladder, and an extension ladder alongside it.  When he was descending from the mechanical room, he put one foot on the extension ladder and then it slipped out. 

Pursuant to the lease agreement between Four and Tower, Four was required to obtain insurance naming Tower as an AI.  Four complied with this requirement and obtain a policy from defendant; however, the policy provided that Tower was only an AI for “liability arising out of the ownership, maintenance or use of that part of the premises leased to [Four] and shown in the Schedule.”  Defendant took the position that the accident did not arise out of the premises leased to Four; rather, it arose out of the use of the mechanical room, which was not a portion of the demised premises.

The court determined that coverage was triggered for Tower as Mr. Amill’s complaint “potentially [gave] rise” to a claim by it as an additional insured.   Next, the court considered priority of coverage.  The policy issued to Tower provided that it was excess over “[a]ny other primary insurance available to you covering liability for damages arising [out] of the premises or operations for which you have been added as an additional insured by attachment of an endorsement.”  

Interestingly, defendant’s policy contained this identical provision; however, it included additional language, which provided that it was also excess to “[a]ny other valid and collectible insurance…This insurance shall be specifically excess of any other policy by which another insurer has a duty to defend a ‘suit’ for which this insurance may also apply.”  Thus, according to the court, as both policies alleged to be excess, the provisions cancelled each other out and, instead, they were co-primary.

06/23/11         Hauc v. Maryland Cas. Co.
Supreme Court, New York County
In Bad Faith Action, Court Requires Disclosure of Communications Between Insurer and Defense Counsel in Underlying Action
Frederick Hauc slipped and fell sustaining injury.  He brought an action against non-party Fred Greenberg and two corporations, 20/20 Hotel Services (“20/20”) and Titan Resources, Inc. (“Titan”).  Defendants assigned one counsel to defend all parties. 

Thereafter, counsel won summary judgment dismissing the claims against Titan only.  After this decision was entered, defendants disclaimed coverage and moved to withdraw defense counsel.  They asserted that 20/20 was only added as a named insured on the primary policy four months after the accident occurred.  Further, the remaining claim against Mr. Greenberg was solely in his capacity as owner of 20/20.  Thus, because 20/20 was not an insured on the date of the accident, Mr. Greenberg, as owner of 20/20, also did not qualify as an insured.  Following defendants withdrawing, Mr. Greenberg entered into a consent judgment and assigned any claims he had against defendants to Mr. Hauc.  Mr. Hauc then brought an action as assignee seeking coverage for his claim and asserting a bad faith allegation.

In this dispute over discovery, Mr. Hauc sought, among other things, access to the communications and work product of counsel that initially defended all parties in the underlying action.  The court determined that attorney-client and attorney work product privileges did not apply to prevent discourse of these documents to the insured.   In other words, as Mr. Hauc was standing in the shoes of Mr. Greenberg, and these privileges belonged to Mr. Greenberg, he could waive them.   Accordingly, the court ordered the documents to be disclosed.  Notably, the court disregarded the argument that this disclosure would impede defendants’ ability to dispute the amount of the judgment entered into by Mr. Greenberg. 

06/22/11         B & R Consol., LLC v. Zurich Am. Ins. Co.
Supreme Court, Nassau County
For an Estoppel Claim, Is Prejudice to the Injured Party Relevant?
In June 2007, counsel for B & R Consolidated, LLC’s (B & R) stole approximately $450,000 of the company’s money from his escrow account.  The money was initially received as repayment of a mortgage owned by B & R.  The attorney did not tell B & R the money had been repaid, but rather made periodic payments under the guise of interest payments.  He neglected to tell the company that the money had been received for over one year.

In October 2008, a grievance complaint was filed against the attorney and then two months later a suit was filed.  The attorney did not notify his professional liability insurance carrier, Zurich Am. Ins. Co. (“Zurich”), until January 2, 2009.  As the complaint alleged fraud, conversion and conspiracy, the Zurich reserved its rights under the criminal acts exclusion and based on late notice of “suit.”  After the reservation of rights letter was issued, B & R amended its complaint to allege negligence claims instead of fraud and misappropriation.  Upon receipt of this amended complaint, Zurich disclaimed outright based on late notice. 

B & R was eventually granted summary judgment against the attorney with a damages trial that followed.  Ultimately, a judgment was entered against the attorney.  With this judgment, B & R sued Zurich.  Zurich then moved to dismiss the complaint pursuant to CPLR 3211(a)(1) and (a)(7).

In considering these facts, the court determined that the attorney’s notice to the insurer was late and that he had no reasonable belief in nonliability to excuse the late notice.  Interestingly, the court refused to dismiss the complaint because it found that the insurer failed to conclusively establish that B & R (not the insured) was not prejudiced by the 5 month delay in disclaiming coverage.  Remember, since this is not a wrongful death or bodily injury case, 3420(d) does not apply.  But, as B & R did here, estoppel can still be argued. 

The court next considered the exclusion for “intentional, criminal, fraudulent, malicious or dishonest act[s]…”   In the underlying court’s decision, on B & R’s motion for summary judgment, the attorney was not adjudicated to have misappropriated funds; rather, he was found to have breached his fiduciary duty.  Thus, according to the court, in the absence of a “final adjudication” that the attorney’s acts fit into the definition, this branch of the motion should also have been dismissed. 

Comment:  One questions how prejudice to B & R is at all relevant especially as Zurich did not contract with B & R, but rather the attorney.  Is not an injured party always prejudiced when coverage is denied? 

06/21/11         Matter of American Tr. Ins. Co. v Diba
Supreme Court, New York County
Temporary Stay of Arbitration Granted Pending Trial to Determine Whether Insurer Properly Disclaimed Coverage Based on the “Car Business Exclusion”
On May 14, 2010, Khadim Diba took his vehicle, insured by State Farm, to EKG Car Care to be repaired.  While the vehicle was at the shop, an employee of EKG Car Care took the vehicle and was involved in a rear-end accident. 

Thereafter, by letter dated, September 2, 2010, State Farm notified the employee that it was in receipt of bodily injury claims arising from the accident.  However, as its investigation revealed that he was operating the vehicle while in the course of his employment in a “car business,” there was no coverage for the claim. 

The injured party then made an uninsured motorist claim with his own vehicle’s insurer, petitioner.  The court granted a temporary stay of arbitration and ordered a trial to determine whether State Farm properly disclaimed coverage based on the insurance policy’s “Car Business exclusion.”

06/17/11         City of New York v. Zurich Am Ins. Co.
Supreme Court, New York County
Where Indemnity Claim Has Already Been Asserted, Court Rejects Breach of Contract Claim in Separate Action
Roxanne Bailey brought an action against the City of New York (“the City”) and Bovis Lend Lease LMB (“Bovis”) for injuries she allegedly sustained after a trip and fall accident.  In the answers served by both the City and Bovis, they asserted claims for contribution and indemnity against each other. 

The City then commenced its own action against Bovis’s insurer, Zurich, asserting that it was entitled to defense and indemnity as an additional insured under the policy it issued to Bovis.  Thereafter, the City served a supplemental summons and complaint adding Bovis as a named defendant based on a claim that it breached its obligations to obtain insurance for the City.

Where the City already had a claim that Bovis breached its contractual duty to indemnify, the breach of contract claim against Bovis in the coverage action was dismissed based on CPLR 3211(a)(4).  According to the court, the City did not seek any damages here that were independent from those sought in the Bailey action.  Specifically, the damages alleged in both actions were for the costs associated with defending itself in the Bailey action or for any judgment rendered in that action.   

06/13/11         Rutgers Cas. Ins. Co. v. Orozco
Supreme Court, New York County
No Policy, No Summary Judgment
Rutgers sought rescission of a homeowners’ insurance policy it issued to Gerado Orozco based on material misrepresentations made in the application.  In Mr. Orozco’s insurance application, he indicated that he resided at this address and it was his primary residence.  In fact, he used the home as an investment property and rented it out to another family.

In a lesson to all practitioners, Rutgers’ motion for summary judgment was denied as it neglected to include a copy of either the policy or the application in its moving papers.  Although it tried to correct this error on reply, the court held that it would not consider this evidence as it was improperly submitted for the first time on reply.  Without this evidence, Rutgers failed to make a prima facie showing of entitlement to judgment as a matter of law.

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

LESSONS ON ELECTRONIC FILINGS AND BID SUBMISSIONS

More and more bids and contracts are being proposed or confirmed electronically via e-mail, and court cases regarding such practices are occurring more frequently.  One such case was Watterson Construction Co. v. United States, 2011 U.S. Ct. Fed. Cl., No.10-587c (March 29, 2011) where the Court of Federal Claims overturned a government agency’s rejection of a supposedly late electronic bid submittal.

Watterson was a bidder submitting proposal revisions to the Army Corps of Engineers for construction of a military facility in Alaska.  The Corps required the revisions to be submitted by noon on a certain date.  Watterson’s proposal did not “arrive” in the contracting officer’s e-mail inbox until four minutes after the designated time and was eliminated from consideration.  The bidder challenged that determination by claiming the bid was not late, and that any delay was due to interference in the Corps’ own e-mail system. 

The proposal was e-mailed to the contracting officer at 11:01 a.m.  The message was “received” initially by Corps servers at 11:29 a.m.  The bid did not actually register in the contracting officer’s e-mail inbox until 12:04 p.m. because of unexplained “interference and delays” in the government e-mail servers. 

The Court first looked at prior cases dealing with non-electronic bid submission, and determined that the government “receives” a bid when the bidder relinquishes control.  If this bid had arrived in the mail at the designated street address before the deadline, it would have been considered timely even if it had not reached the contracting officer’s desk.  The Court essentially agreed with that reasoning in this case.  The Federal Acquisition Regulations (“FAR”) define a late bid as one received at the government office designated in the solicitation after the exact time specified.  The solicitation here stated that proposals could be submitted either by express mail delivery to a physical street address or to the contracting officer’s e-mail address.  The Court determined that the e–mail address was the “designated office.”  The evidence showed that the bid reached and was received by the government e-mail servers before the deadline, therefore the bid was not late.  The Court ruled that the bidder should not be responsible after relinquishing control of an e-mail proposal for the risk of late delivery due to technical problems out of its control.  This was particularly so here where the e-mail proposal was “received” at the designated office and “under the government’s control” prior to the bid deadline. 

The lessons of Watterson are to first make sure that complete bids and proposals are e-mailed to the proper and designated office or e-mail address.  Second, it may be advisable to e-mail bids and proposals earlier than merely an hour before a deadline to allow some time for late delivery, or for having to re-send an e-mail proposal that is rejected or not accepted by recipient servers.  Third, make sure that all parts of a bid and proposal, and any attachments such as compliance documents, separate price schedules, lists of subcontractors, etc., are all part of the bid proposal and e-mailed at the same time so that the entire bid package can be said to be electronically transmitted and received prior to any deadline.

Other lessons from Watterson are as follows:

a)         Courts will use old rules and analogies to analyze e-filing disputes to determine if the “old rules” apply;

b)         Problems with e-mail receipt will be attributed to the recipient not the sender;

c)         If a recipient authorizes e-mail delivery, their systems need to accept and accommodate the transmittals; and

d)         Electronic receipts and tag lines are very accurate in indicating or confirming whether an e-mail or electronic submission was received and when.

Although the bidder was able to get its bid restored here, if it had submitted its bid at 10:00 a.m. and not at 11:00 a.m., there would have been no court case.  Electronic delivery and capability should not be an excuse for last minute delivery leaving no leeway for delays, errors or mishaps in filing and receipt.

 

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

07/01/11         Arceneaux v. Amstar Corporation
Louisiana Supreme Court
Insurer Breached Duty to Defend but Did Not Waive Its Right to Invoke Policy Defenses
In February of 1999, four employees of Tate & Lyle North America Sugars, Inc. (“T&L”) sued for damages from noise exposure during their employment at T&L’s Domino Sugar Factory. Continental Casualty Insurance Company (“Continental”) had issued 8 general liability policies to T&L, 7 of which included an exclusion for “bodily injury arising out of the course and scope of employment.” The 8th and final policy’s bodily injury exclusion was deleted by special endorsement, unbeknownst to Continental. In defending T&L, Continental did not reserve its rights to contest coverage or to assert any policy defenses. In April of 2001, plaintiffs added 125 new plaintiffs to the suit. In May of 2003, without Continental’s consent, T&L settled with the first flight of plaintiffs. Continental then withdrew from defense in a letter that reserved its right to deny coverage per the bodily injury exclusions it thought blanketed its policies; it extended that reservation to any “future litigation regarding these policies.”

 In July of 2003, T&L sued Continental for breach of duty to defend. In April of 2005, without Continental’s consent, T&L announced it had settled with all the remaining plaintiffs. The trial court held Continental liable for the full amount of all settlements paid by T&L. It found Continental waived its right to invoke its policy exclusions for claims made by employees — even the ones that came forward after Continental reserved its right to deny coverage — when Continental breached its duty to defend. The appellate court found the trial court had erred when it ruled that this waiver extended to the post-denial plaintiffs, but the trial court re-affirmed its erroneous finding on remand. Continental appealed to the Supreme Court of Louisiana, arguing that this violated the law of the case.

The Court rendered judgment against Continental for the post-denial plaintiffs’ settlements, but only held it liable for a pro rata share of the entire settlement based on the dates of exposure corresponding to the policies’ coverage period and the dates when the employee exclusion was not in effect. The Court also held that an insurer’s breach of the duty to defend does not automatically result in a waiver of all policy defenses; the trial court had erred in confusing breach and waiver in the insurance context. A waiver of policy defenses results when 1) an insurer with knowledge of facts indicating non-coverage 2) undertakes to defend an insured and 3) so defends without reserving its right to deny coverage. Accordingly, in spite of breaching its duty to defend, Continental was entitled to rely on its policy defenses in limiting its indemnity to the post-denial plaintiffs.

Submitted by: Gerald A. Melchiode and JJ Reeves of Galloway, Johnson, Tompkins, Burr & Smith, APLC

REPORTED DECISIONS
Zimmerman v. Peerless Insurance Company

Goldberg Segalla, LLP, Mineola, N.Y. (Joanna M. Roberto of
counsel), for appellant-respondent.
Charles G. Eichinger & Associates, P.C., Islandia, N.Y. (Denise
K. O'Rourke of counsel), for
respondents-appellants.

DECISION & ORDER
In an action for a judgment declaring that the defendant, Peerless Insurance Company, is obligated to defend and indemnify the plaintiff, Erwin Zimmerman, in an underlying action entitled Angst v Zimmerman, pending in the Supreme Court, Suffolk County, under Index No. 12184/07, the defendant appeals, as limited by its brief, from so much of an order of the Supreme Court, Suffolk County (Rebolini, J.), dated April 28, 2010, as denied its motion for summary judgment declaring that it is not obligated to defend or indemnify Erwin Zimmerman in the underlying action, and Erwin Zimmerman cross-appeals, as limited by his brief, from so much of the same order as denied his cross motion for summary judgment.

ORDERED that the order is reversed insofar as appealed from, on the law, the defendant's motion for summary judgment declaring that it is not obligated to defend or indemnify Erwin Zimmerman in the underlying action is granted, and the matter is remitted to the Supreme Court, Suffolk County, for the entry of a judgment declaring that the defendant, Peerless Insurance Company, is not obligated to defend and indemnify Erwin Zimmerman in the underlying action entitled Angst v Zimmerman, pending in the Supreme Court, Suffolk County, under Index No. 12184/07; and it is further,

ORDERED that the order is affirmed insofar as cross-appealed from; and it is further,

ORDERED that one bill of costs is awarded to the defendant.

On October 31, 2006, while jogging in Eaton's Neck, Arthur Angst allegedly was bitten by Erwin Zimmerman's dog, which was not on a leash. Angst and Zimmerman had a brief verbal confrontation, during which Zimmerman saw blood on Angst's hand. He offered to pay Angst's medical expenses, but Angst declined, and the two men did not exchange contact information. Zimmerman was aware of an incident several years before, in which his dog had "nipped" a neighbor. Within 48 hours of the incident involving Zimmerman's dog and Angst, the Suffolk County Department of Health requested the dog's vaccination records and informed Zimmerman that the dog would be restricted to Zimmerman's property.

On May 8, 2007, Zimmerman was served with the summons and complaint in the underlying personal injury action. The next day, for the first time, he notified his insurer, Peerless Insurance Company (hereinafter Peerless), of the incident. Zimmerman's insurance policy (hereinafter the policy) required that
"in case of an . . . occurrence,' the insured' will perform the following duties that apply. . .
Give written notice to us or our agent as soon as is practical, which sets forth:
(1) The identity of the policy and insured';
(2) Reasonably available information on the time, place and circumstances of the . . . occurrence'; and
(3) Names and addresses of any claimants or witnesses"

The policy defined an "occurrence" as "an accident . . . which results, during the policy period, in: . . . Bodily injury' . . . , and "Bodily injury" was defined, in relevant part, as "bodily harm."

By letter dated May 11, 2007, Peerless disclaimed coverage on the ground that Zimmerman had not complied with the notice provisions of the policy. Zimmerman commenced this action seeking a judgment declaring that Peerless was required to defend and indemnify him in the underlying action. Following discovery, Peerless moved, and Zimmerman cross-moved, for summary judgment. The Supreme Court denied the motion and cross motion, and both parties appeal.

"Where an insurance policy requires that notice of an occurrence be given as soon as practicable,' notice must be given within a reasonable time in view of all of the circumstances" (Ponok Realty Corp. v United Natl. Specialty Ins. Co., 69 AD3d 596, 597; see Great Canal Realty Corp. v Seneca Ins. Co., Inc., 5 NY3d 742, 743; Courduff's Oakwood Rd. Gardens & Landscaping Co.,Inc. v Merchants Mut. Ins. Co., ___ AD3d ___, 2011 NY Slip Op 03795 [2d Dept 2011]; Bigman Bros., Inc. v QBE Ins. Corp, 73 AD3d 1110, 1111; Genova v Regal Mar. Indus., 309 AD2d 733, 734; cf. 120 Whitehall Realty Assoc., LLC v Hermitage Ins. Co., 40 AD3d 719, 721). With respect to policies issued before January 17, 2009 (see Insurance Law § 3420[c][2][A]), as Zimmerman's was, an insurer could disclaim coverage without regard to prejudice when the insured failed to satisfy the notice condition (Ponok Realty Corp. v United Natl. Specialty Ins. Co., 69 AD3d at 597; cf. Insurance Law § 3420[a][5]; Waldron v New York Cent. Mut. Fire Ins. Co., ___ AD3d ___, 2011 NY Slip Op 03704 [3d Dept 2011]). The insured's failure is seen as " a failure to comply with a condition precedent which, as a matter of law, vitiates the contract'" (Great Canal Realty Corp. v Seneca Ins. Co., Inc., 5 NY3d at 743, quoting Argo Corp. v Greater N.Y. Mut. Ins. Co., 4 NY3d 332, 339; see Ponok Realty Corp. v United Natl. Specialty Ins. Co., 69 AD3d at 597; Sputnik Rest. Corp. v United Natl. Ins. Co., 62 AD3d 689). Nevertheless, even with respect to claims involving policies in which the insurer was not required to demonstrate prejudice before disclaiming, the insured is permitted to demonstrate the existence of circumstances that would "excuse or explain the insured's delay in giving notice, such as a reasonable belief in nonliability" (Genova v Regal Mar. Indus., 309 AD2d at 734; see Great Canal Realty Corp. v Seneca Ins. Co., Inc., 5 NY3d at 743-744; Courduff's Oakwood Rd. Gardens & Landscaping Co., Inc. v Merchants Mut. Ins. Co.,AD3d, 2011 NY Slip Op 03795 [2d Dept 2011]; Ponok Realty Corp. v United Natl. Specialty Ins. Co., 69 AD3d at 597). The burden of demonstrating the reasonableness of the excuse lies with the insured (see Bigman Bros., Inc. v QBE Ins. Corp., 73 AD3d at 1112; Ponok Realty Corp. v United Natl. Specialty Ins. Co., 69 AD3d at 597; Genova v Regal Mar. Indus., 309 AD2d at 734).

Generally, the existence of a good faith belief that the injured party would not seek to hold the insured liable and the reasonableness of such belief are questions of fact, but summary judgment may be awarded to the insurer if, construing all inferences in favor of the insured, the evidence establishes as a matter of law that the insured's belief in nonliability was unreasonable or in bad faith (see Courduff's Oakwood Rd. Gardens & Landscaping Co., Inc. v Merchants Mut. Ins. Co.,AD3d, 2011 NY Slip Op 03795 [2d Dept 2011]; Ponok Realty Corp. v United Natl. Specialty Ins. Co., 69 AD3d at 597; Bigman Bros., Inc. v QBE Ins. Corp., 73 AD3d at 1111).

Here, Peerless established its prima facie entitlement to judgment as a matter of law that Zimmerman's failure to notify Peerless for six months was not based on a reasonable or good faith belief in nonliability by demonstrating that Zimmerman knew immediately that his dog allegedly bit Angst and that Angst may have been injured by the bite. Indeed, Zimmerman knew within 48 hours that a complaint had been made about the incident, even if he did not know Angst's identity. In addition, Zimmerman knew of at least one substantiated incident involving his dog prior to the incident with Angst (see Steinberg v Hermitage Ins. Co., 26 AD3d 426, 427; C.C.R. Realty of Dutchess v New York Cent. Mut. Fire Ins. Co., 1 AD3d 304, 305; 120 Whitehall Realty Assoc., LLC v Hermitage Ins. Corp., 40 AD3d at 721; cf. Courduff's Oakwood Rd. Gardens & Landscaping Co., Inc. v Merchants Mut. Ins. Co.,AD3d, 2011 NY Slip Op 03795 [2d Dept 2011]; Ponok Realty Corp. v United Natl. Specialty Ins. Co., 69 AD3d at 597; Sputnik Rest. Corp. v United Natl. Ins. Co., 62 AD3d at 689). Consequently, the burden shifted to Zimmerman to raise a triable issue of fact as to whether there existed a reasonable excuse for his delay in notifying Peerless (see Ponok Realty Corp. v United Natl. Specialty Ins. Co., 69 AD3d at 597; Sputnik Rest. Corp. v United Natl. Ins. Co., 62 AD3d at 689). Even construing all inferences in favor of Zimmerman, he failed to raise a triable issue of fact (see Hanson v Turner Constr. Co., 70 AD3d 641, 643; 120 Whitehall Realty Assoc., LLC v Hermitage Ins. Corp., 40 AD3d at 721; Steinberg v Hermitage Ins. Inc., 26 AD3d at 427; C.C.R. Realty of Dutchess v New York Cent. Mut. Fire Ins. Co., 1 AD3d at 305). We reject Zimmerman's argument that the policy was ambiguous as to whether he was obligated to give notice of the occurrence before learning of the possible claimant's identity (see Magistro v Buttered Bagel, Inc., 79 AD3d 822).

Accordingly, the Supreme Court erred in denying Peerless' motion for summary judgment declaring that it is not obligated to defend or indemnify Zimmerman in the underlying action. In light of this determination, the Supreme Court properly denied Zimmerman's cross motion for summary judgment.

Since this is a declaratory judgment action, we remit the matter to the Supreme Court, Suffolk County, for the entry of a judgment declaring that Peerless is not obligated to defend and indemnify Zimmerman in the underlying action (see Lanza v Wagner, 11 NY2d 317, 334, appeal dismissed 371 US 74, cert denied 371 US 901).

McCarthy v. Turner Construction, Inc


Carol R. Finocchio, for appellants.
Andrew L. Klauber, for respondent.

JONES, J.:
The issue before the Court is whether defendant-property owners Boston Properties, Inc. and Times Square Tower Associates, LLC (the "property owners") are entitled to common law indemnification from defendant-general contractor John Gallin & Son, Inc. ("Gallin"). For the reasons that follow, we hold they are not.
The property owners leased a retail storefront located at 7 Times Square Tower (the "premises") to non-party Ann Taylor, Inc. By agreement dated December 20, 2004, Ann Taylor, Inc. engaged Gallin, as construction manager, to build out its space. Pursuant to the agreement, Gallin was required to "supervise and direct the Work, using [its] best skill and attention[, and] be solely responsible for and have control over construction means, methods, techniques, sequences and procedures for coordinating all portions of the Work under the Contract . . . ." The agreement further stated that Gallin was required to take reasonable safety precautions to protect the workers from injury. The name of the construction project was "Ann Taylor 7 Times Square."
Pursuant to a purchase order dated December 29, 2004, Gallin engaged Linear Technologies, Inc. ("Linear") as its subcontractor to install telephone and data cables. About two weeks later, Linear, by purchase order, hired Samuels Datacom, LLC ("Samuels") as its subcontractor to perform the actual cable installation for the project. Plaintiff, an electrician, was an employee of Samuels.
On March 2, 2005, plaintiff, while working on the project site, was injured when he fell from an A-frame ladder. Plaintiff, and his wife derivatively (collectively, "plaintiff"), brought a personal injury action against Turner Construction, Inc., Gallin and the property owners, asserting claims under Labor Law §§ 200, 240 (1) and 241 (6) and common law negligence [FN1] . In their answer, the property owners asserted cross claims for contribution and common law indemnification, contractual indemnification and breach of contract against Gallin. Subsequently, Gallin impleaded Linear, and Linear impleaded Samuels. After the completion of discovery and the filing of the note of issue, motions and cross motions for summary judgment were brought regarding, inter alia, the parties' Labor Law § 240 (1) liability and the property owners' contractual indemnification claim against Gallin.
Supreme Court granted plaintiff summary judgment on his Labor Law § 240 (1) claim, finding that the property owners and Gallin were vicariously liable for plaintiff's injuries under the statute [FN2] . Further, the court denied that portion of the property owners' cross motion for summary judgment seeking contractual indemnification against Gallin, finding that there was no contract between the property owners and Gallin, and that the property owners were not third-party beneficiaries of the agreement between Ann Taylor, Inc. and Gallin such that they could avail themselves of any contractual indemnification claim that might be owed by Gallin [FN3] . In addition, the court found and held that:
"[T]he record contains no evidence of Gallin's negligence. Although Gallin interacted with Linear, Gallin had no supervisory authority over Samuel's work. [Further,] Kondracki [— Gallin's vice president and project manager —] stated that Gallin would not have directed [plaintiff] how to perform his work, and [that] Gallin did not provide any tools or ladders to the subcontractors who worked at the [project] site."

The defendants eventually settled plaintiff's claims for $1.6 million, with the property owners contributing $800,000 and Gallin contributing $800,000.
Relying primarily on the agreement between Ann Taylor, Inc. and Gallin, the property owners then moved for judgment on their cross claim for common law indemnification against Gallin. Supreme Court denied the motion and dismissed the property owners' claim, concluding they failed to establish that Gallin "had direct control over the work giving rise to the injury" (i.e., plaintiff's work). The Appellate Division affirmed, stating "Gallin neither was negligent nor directly supervised and controlled plaintiff's work" (72 AD3d 539, 539 [1st Dept 2010] [citation omitted]).
The Appellate Division, First Department granted the property owners leave to appeal and certified the following question to the Court: "Was the order of Supreme Court, as affirmed by this Court, properly made?" We now affirm the order of the Appellate Division, and answer the certified question in the affirmative.
The property owners argue they are entitled to common law indemnification, whether or not Gallin directly supervised and controlled plaintiff's work, since Gallin, by virtue of its agreement with Ann Taylor, Inc., contractually assumed sole responsibility and control of the entire project, and had the contractual authority to (1) direct, supervise and control the means and methods of plaintiff's work, and (2) institute safety precautions to protect the workers. Based on this authority, the property owners argue, only Gallin was in the position to take any steps to protect plaintiff and prevent the accident. The property owners thus request that this Court adopt the following general rule: a party may be liable for common law indemnification upon a showing that the party (i.e., the proposed indemnitor) either was actually negligent or had the authority to direct, control or supervise the injury producing work, even if it did not exercise that authority. In essence, the property owners are equating a party with mere authority to direct, control or supervise with a party who is actively at fault in bringing about the injury suffered by the plaintiff.
We reject the property owners' arguments and their proposed articulation of the applicable rule because under their rule, every party engaged as a general contractor or construction manager, whether by the owner or not, would owe a common law duty to indemnify the owner regardless of whether such party was actively at fault in bringing about the injury. This proposed rule is not consistent with the equitable purpose underlying common law indemnification.
Labor Law § 240 (1) imposes upon owners and general contractors, and their agents, a nondelegable duty to provide safety devices necessary to protect workers from risks inherent in elevated work sites (see Rocovich v Consolidated Edison Co., 78 NY2d 509, 512-513 [1991]; Ross v Curtis-Palmer Hydro-Elec. Co., 81 NY2d 494, 500 [1993]; Felker v Corning, Inc., 90 NY2d 219, 223-224 [1997]). However, Labor Law § 240 (1) — which holds owners and general contractors absolutely liable for any breach of the statute even if "the job was performed by an independent contractor over which [they] exercised no supervision or control" (Rocovich, 78 NY2d at 513) — does not obviate the right of an owner or general contractor, who is only vicariously liable by statute, to seek "full indemnification from the party wholly responsible for the accident" (Kelly v Diesel Constr. Div. of Carl A. Morse, Inc., 35 NY2d 1, 6 [1974]).
A party's right to indemnification may arise from a contract or may be implied "based upon the law's notion of what is fair and proper as between the parties" (Mas v Two Bridges Assoc., 75 NY2d 680, 690 [1990]). "Implied [,or common law,] indemnity is a restitution concept which permits shifting the loss because to fail to do so would result in the unjust enrichment of one party at the expense of the other" (id., citing McDermott v City of New York, 50 NY2d 211, 216-217 [1980]; see also Rosado v Proctor & Schwartz, Inc., 66 NY2d 21, 24 [1985] [indemnity may be implied "to prevent a result which is regarded as unjust or unsatisfactory" and "is frequently employed in favor of one who is vicariously liable for the tort of another"] [internal quotation marks and citation omitted]). Common law indemnification is generally available "in favor of one who is held responsible solely by operation of law because of his relation to the actual wrongdoer" (Mas, 75 NY2d at 690; see D'Ambrosio v City of New York, 55 NY2d 454, 460 [1982]).
Consistent with the equitable underpinnings of common law indemnification, our case law imposes indemnification obligations upon those actively at fault in bringing about the injury, and thus reflects an inherent fairness as to which party should be held liable for indemnity (see e.g., Rogers v Dorchester Assoc., 32 NY2d 553 [1973]; Kelly v Diesel Constr. Div. of Carl A. Morse, Inc., 35 NY2d 1 [1974]; Felker v Corning, Inc., 90 NY2d 219 [1997]). The Rogers Court concluded that common law indemnification was available to the owner and manager of an apartment building, held statutorily liable under Multiple Dwelling Law § 78 — which imposes a nondelegable duty on owners to maintain their premises in a reasonably safe condition — for plaintiff's injuries resulting from an elevator accident, against Otis Elevator Company because Otis, under a maintenance contract, assumed "the exclusive duty to maintain the elevators" and "the owner and manager had the right . . . to look to Otis to perform their entire duty to plaintiff" (Rogers, 32 NY2d at 563; see Mas, 75 NY2d 680 [same]). In Kelly, the Court held that a general contractor was entitled to full indemnity from subcontractor hoist company whose negligence was the sole cause of plaintiff's (who was subcontractor's employee) accident. Although the general contractor "undertook to furnish, maintain and operate the hoist," it, through various subcontracts, delegated responsibility for supply and maintenance of the hoist "particularly its brakes and other safety devices" to the hoist company, which inspected the equipment before and after installation (Kelly, 35 NY2d at 4-5). Felker involved a plaintiff who was injured when he fell over an eight-foot alcove wall and through a suspended ceiling to the floor nine feet below. This Court held that the general contractor was entitled to common law indemnification from the subcontractor (plaintiff's employer) notwithstanding the absence of a showing of negligence on the part of the subcontractor and the existence of a contractual agreement to indemnify the general contractor only if the subcontractor is negligent (see Felker, 90 NY2d at 226). The Court based its holding on the fact the subcontractor supervised and controlled the work of the injured plaintiff (id.).
Although our case law imposes the duty to indemnify on those parties who actually supervised and controlled the injury-producing work, some of the Appellate Division decisions have reached different conclusions regarding what sort of showing must be made to establish a claim for common law indemnification where the proposed indemnitor is not actually negligent in causing the injury. A number of decisions have suggested that a party may be obligated to indemnify under the common law solely on the basis of that party's authority to supervise the work at a site (see e.g., Rodriguez v Metro. Life Ins. Co., 234 AD2d 156, 156 [1st Dept 1996] [held that the subcontractor was obligated to indemnify defendants (owner and general contractor); the court stated, "A subcontractor may be obligated to indemnify under the common law upon proof that its actual negligence caused an accident, but it can also be held liable where it 'had the authority to direct, supervise and control the work giving rise to the injury'" (234 AD2d at 156, quoting Terranova v City of New York, 197 AD2d 402, 402 [1st Dept 1993])]; Hernandez v Two E. Ave. Apt. Corp., 271 AD2d 570, 571 [2d Dept 2000] [quoting Rodriguez (234 AD2d at 156), the court repeats rule that a subcontractor may be liable for common law indemnification based on its authority to direct, supervise and control the work giving rise to the injury] ["Hernandez I"]; Hernandez v Two E. End Ave. Apt. Corp., 303 AD2d 556, 557 [2d Dept 2003] [same as Hernandez I; summary judgment on owner's common law indemnification claim precluded because material issue of fact existed as to whether the injured plaintiff's employer was only the entity with the authority to direct, supervise, and control work giving rise to plaintiff's injury]).
In addition, there are cases that support the view that an entity may be liable for common law indemnification on the basis of its authority, by virtue of a contractual duty, to supervise the work (see e.g., Ortega v Catamount Constr. Corp., 264 AD2d 323 [1st Dept 1999]). In Ortega, the court found a common law indemnity obligation where the proposed indemnitee, the property owner, "did not exercise any actual control or supervision over the work" because the owner had "hired [the construction manager] to exercise such control and supervision" (264 AD2d at 324). The Ortega decision specifically refers to "the absence of any evidence of the construction manager's direct supervision of the work in which plaintiff was engaged" (id.).
On the other hand, a number of cases have held that common law indemnity is available against the party that "actually supervised, directed and controlled the work that caused the injuries" (Keck v Bd. of Tr. of Corning Comm. Coll., 229 AD2d 1016, 1017 [4th Dept 1996] [emphasis added]; see Landgraff v 1579 Bronx Riv. Ave., LLC, 18 AD3d 385 [1st Dept 2005] [In this Labor Law § 240 (1) action, the building owner brought a third-party claim for common law indemnification against a building tenant. The court held that owner was not entitled to indemnification from tenant, noting that tenant was not an active tortfeasor and did not exercise any actual control or supervision of the injury-producing work]). In further support of the view that there must be actual supervision over the injury-producing work, the Second Department, in Perri v Gilbert Johnson Enters., Ltd. (14 AD3d 681 [2d Dept 2005]), spoke of common law indemnification being available against a party that "exclusively supervised and controlled plaintiff's work site" (14 AD3d at 685).
To be sure, there are cases that appear to stand for the proposition that contractual authority to supervise, direct and control, standing alone, is enough to hold a party liable for indemnity under the common law. However, these cases do not adequately address the question whether a party who is contractually responsible for supervision at a work site is liable in indemnity even if there is a showing that another party, with authority, engaged in actual supervision of the injury-producing work at the site. Moreover, a close examination of a preponderance of the case law reveals that in spite of the different articulations of the applicable standard, the Appellate Division Departments have usually, consistent with the equitable principles of common law indemnification and this Court's teachings, imposed the obligation to indemnify on parties who were actively at fault in bringing about the injury.
Based on the foregoing, a party cannot obtain common law indemnification unless it has been held to be vicariously liable without proof of any negligence or actual supervision on their own part. But a party's (e.g., a general contractor's) authority to supervise the work and implement safety procedures is not alone a sufficient basis for requiring common law indemnification. Liability for indemnification may only be imposed against those parties (i.e., indemnitors) who exercise actual supervision (see Felker, 90 NY2d at 226; see also Colyer v K Mart Corp., 273 AD2d 809, 810 [4th Dept 2000] [for standard]). Thus, if a party with contractual authority to direct and supervise the work at a job site never exercises that authority because it subcontracted its contractual duties to an entity that actually directed and supervised the work, a common law indemnification claim will not lie against that party on the basis of its contractual authority alone.
Here, Gallin and non-party Ann Taylor, Inc., not the property owners, entered an agreement under which Gallin was Ann Taylor, Inc.'s general contractor/construction manager. Further, Gallin engaged a subcontractor (Linear), which, in turn, engaged its own subcontractor (Samuels), the entity which employed plaintiff. Although the agreement, inter alia, required Gallin to supervise and direct the work at the premises owned by the property owners, this fact alone was insufficient to establish that Gallin actually supervised or directed the injured plaintiff's work, especially in light of the fact that Gallin contracted the work that resulted in plaintiff's injury out to a subcontractor, and Supreme Court's findings that Gallin (1) had no supervisory authority over Samuels's (plaintiff's employer's) work, (2) would not have directed plaintiff as to how to perform his work, and (3) did not provide any tools or ladders to the subcontractors who worked at the site.
Gallin's demonstrated lack of actual supervision and/or direction over the work is sufficient to establish that Gallin was not required to indemnify the property owners for bringing about plaintiff's injury. Further, the property owners' vicarious liability (under Labor Law § 240 [1]) may not be passed through to Gallin, the non-negligent, vicariously liable general contractor with whom they did not contract.
Thus, under the facts and circumstances of this case, the property owners are not entitled to common law indemnification from Gallin. This result is in keeping with the law's notion of what is fair and proper as between Gallin and the property owners (see Mas, 75 NY2d at 690).
Accordingly, the order of the Appellate Division should be affirmed, with costs, and the certified question answered in the affirmative.
* * * * * * * * * * * * * * * * *
Order affirmed, with costs, and certified question answered in the affirmative. Opinion by Judge Jones. Chief Judge Lippman and Judges Ciparick, Graffeo, Read, Smith and Pigott concur.
Decided June 28, 2011
Footnotes

Footnote 1: By stipulation dated November 30, 2005, the action against Turner Construction, Inc. was discontinued.

Footnote 2: Summary judgment, dismissing so much of plaintiff's complaint as alleged violations of Labor Law §§ 200 and 241 (6) and common-law negligence, was granted in the property owners' favor.
Footnote 3: No claim for contractual indemnification is before us.
Bruckmann, Rosser, Sherrill & Co., L.P v. Marsh USA, Inc.

Defendants appeal from an order of the Supreme Court, New York County (Milton A. Tingling, J.), entered June 29, 2010, which denied its second motion for summary judgment dismissing the complaint.

Willkie Farr & Gallagher LLP, New York
(Christopher J. St. Jeanos of
counsel), for appellants.
Anderson Kill & Olick, P.C., New York (Marshall
Gilinsky, Finley T. Harckham
and Diana Shafter Gliedman
of counsel), for respondents.

ABDUS-SALAAM, J.
This action, which is before us for the second time on appeal, involves a dispute between plaintiffs-insureds (BRS) and their broker. The remaining causes of action sound in breach of contract and negligence. On this appeal, we are asked to determine, as a matter of law, whether the coverage afforded to BRS by its policy with American International Surplus Lines Insurance Company (AISLIC), placed by defendant Marsh, was limited by a "tie-in" provision, also referred to as an "anti-stacking" provision. We find that there is such a limitation of coverage. Thus, we affirm the motion court's denial of summary judgment to defendants, but for grounds other than those stated by the motion court, which found triable issues of fact.
BRS, a private equity fund, purchases and provides advice about selected business ventures (portfolio companies) for the fund's investors. BRS retained defendant Marsh as insurance broker to place insurance programs for BRS and its portfolio companies. This action arises out of BRS's request of Marsh to place $20 million in excess directors and officers (D & O) insurance for BRS.
According to BRS, it believed that it had such coverage through its policy placed by Marsh with AISLIC, an American Insurance Group (AIG) family company, until a suit was filed in 2001 (the Wells Fargo action) by the creditors' committee for Jitney-Jungle Stores of America, one of the portfolio companies, against, among others, Jitney's directors and BRS. The plaintiffs in that suit sought damages ranging up to $1 billion. Jitney was insured by National Union, an AIG company, for $15 million. When Jitney and BRS notified AIG of the lawsuit and sought coverage under their respective $15 million and $20 million policies, AIG notified BRS that based on a limit of liability clause in BRS's policy with AISLIC (referred to by the parties as a "tie-in provision" or "non-stacking" provision), the combined limit of liability for this claim was $20 million for both policies. AIG took the position that based on this provision, its maximum aggregate limit for all losses arising out of this claim was $20 million (the greater of the limits of the BRS policy and the Jitney policy for $15 million). It is the interpretation of this provision which is the subject of this appeal.
BRS settled the Wells Fargo action for $33.5 million, and AIG paid $6.9 million in defending the suit, which was deducted from the limits of the Jitney policy. The total losses for BRS and Jitney thus amounted to $40,400,000. AIG paid the full $15 million policy limit under the Jitney policy, and pursuant to its claim that the tie-in provision capped BRS' coverage at $5 million (the amount remaining out of the $20 million coverage), paid that amount and refused to pay anything more. BRS was then faced with the choice of bringing an action against Marsh for its failure to procure the $20 million in excess insurance coverage that BRS maintains it requested, or, of first trying to obtain the unpaid portion from AIG. BRS offered to settle with Marsh and assign to Marsh its claims against AIG for the unpaid portion of the Wells Fargo claim, but Marsh declined. Accordingly, BRS and Marsh agreed to toll the statute of limitations on any malpractice claims against Marsh and to try to mitigate BRS's losses by suing AIG for the $15 million that BRS maintained it was entitled to under its policy with AISLIC.
BRS filed a suit against AIG and made a motion for partial summary judgment, arguing that because AISLIC was defined as the "insurer" under the policy, the tie-in provision would only be triggered where two policies were issued by AISLIC. The reasoning was that because Jitney was insured by National Union, another AIG company, and not AISLIC, the tie-in provision did not apply to limit AISLIC's liability to less than the $20 million sought by BRS from AISLIC. AIG opposed the motion for summary judgment, arguing that BRS's interpretation of the tie-in provision did not make sense and was contrary to the intent of this and any other type of "anti-stacking" provision, and that the parties clearly intended for a maximum aggregate liability for multiple policies issued by AIG companies that implicated a single loss or covered event.
After the summary judgment motion was fully briefed, but before it was heard by the court, BRS agreed to settle the coverage action against AIG for $9 million out of the $15 million that it was seeking. As explained by BRS's counsel Mr. Zensky at his deposition, the motion was made before any depositions had been taken and at the very outset of document discovery. He advised BRS that it had the highest point of leverage with AIG in terms of settlement while the motion was pending, and that while he believed BRS had a good chance of prevailing on the summary judgment motion, it was not a slam dunk, and even if they won, there would be an appeal [FN1]. Zensky was questioned as to whether he recalled that Marsh had been sued by the New York Attorney General in connection with contingent commission agreements, and whether he had considered that this might be used as leverage against Marsh to settle BRS's claims in this case. Zensky replied that he did so recall, and that he believed it cast Marsh in an extremely bad light after learning from Marsh's counsel that the BRS policy was one of the policies that was in the Marsh unit receiving commissions, and that Marsh had been paid by AIG.
BRS's settlement with AIG left BRS $6 million short of the $20 million of excess D & O coverage that BRS maintained Marsh was supposed to procure. Accordingly, BRS filed this action against Marsh, alleging, among other things, breach of contract and negligence. Following completion of discovery, Marsh moved for summary judgment on two grounds:(1) that BRS could not establish any breach of duty because it could not prove that the tie-in provision applied and (2) BRS could not establish proximate cause because it had settled its action against AIG. The motion court did not decide whether the tie-in provision applied, but granted summary judgment on the reasoning that BRS's settlement with AIG for a lesser amount than the $20 million was the proximate cause of BRS's damages and superseded any breach by Marsh. This Court modified to the extent of reinstating the causes of action for breach of contract and negligence, holding that "[p]laintiffs' settlement of their underlying claim against the insurer, under circumstances in which the merits of the claim for coverage were equivocal, did not break the chain of proximate causation with respect to their claim against their broker for failure to procure appropriate coverage" (65 AD3d 865, 866 [2009]).
The litigation returned to Supreme Court, and Marsh again moved for summary judgment on the ground that the tie-in provision did not apply to limit BRS's coverage, asserting that it had raised this argument in its first motion, but that it had not been addressed by the court. The motion court found that it had not specifically addressed that issue in its prior decision, and denied the motion, finding that there were issues of fact in dispute concerning whether the stacking exclusion applied. Marsh is back before us, arguing that "now squarely before this Court is the applicability of the Stacking Exclusion." Marsh argues that BRS cannot establish that the anti-stacking provision applied to limit coverage, and that to the extent there is any ambiguity in the provision, it must be construed in favor of BRS, the insured, to find that there was no limitation of coverage. While we affirm the motion court's denial of summary judgment to defendants, we do so on different grounds, finding that there is no issue of fact as to the applicability of the tie-in provision, that there is no ambiguity in the provision and that the provision clearly limits the liability of AISLIC when it and another AIG company provide coverage for the same claim.
Regarding Marsh's argument that the provision is ambiguous, a reading of the provision by replacing the term "insurer" with AISLIC dispels any ambiguity. The provision, as is relevant here, would read as follows:
"In the event other insurance is provided to . . . a Portfolio Entity . . . and such other insurance is provided by the Insurer [AISLIC] or any other member company of American International Group, Inc., (AIG) . . . then the Insurer's [AISLIC'S] maximum aggregate Limit of Liability for all Losses combined in connection with a Claim covered, in part or in whole, by this policy and such other insurance policy issued by AIG shall not exceed the greater of the Limit of Liability of this policy or the limit of liability of such other AIG insurance policy."
Put plainly, AISLIC is providing $20 million in coverage to the directors and officers of BRS through this policy. However, if a Portfolio Entity (in this case Jitney-Jungle) is insured by AISLIC or any other member of AIG (National Union, which is an AIG member), and both BRS and Jitney seek coverage for the same claim, then AISLIC's maximum aggregate limit for all losses combined in connection with a claim covered by this policy and the other AIG policy will be the greater of either this policy ($20 million) or the Jitney policy ($15 million). If AISLIC's policy is all that matters in this provision, then it would make no sense for the provision to refer to other insurance provided by AISLIC or any member of AIG, or to make reference to "a Claim covered, in part or in whole, by this policy and such other insurance policy issued by AIG" (emphasis added). For that matter, if AISLIC's policy is the only relevant policy here, then the language about how the insurer's maximum aggregate limit of liability shall not exceed the greater of this policy or the limit of such other AIG policy is meaningless because of course, AISLIC's liability is limited by its policy and there would be no need to include that language absent a tie-in with the coverage afforded by another AIG policy.
Any awkwardness over the use of the word "insurer" does not obscure the intent of the provision, when the word is read in the context of the entire provision. To read the provision as proffered by Marsh would render all references to AIG, AIG insurance policy, or member company of AIG superfluous and without meaning. "Courts are obliged to interpret a contract so as to give meaning to all of its terms" (Mionis v Bank Julius Baer & Co., 301 AD2d 104, 109 [2002]; see also Greater N.Y. Mut. Ins. Co. v Mutual Mar. Off., 3 AD3d 44, 50 [2003]). Marsh argues that the plain wording of the policy does no more than limit AISLIC's total exposure to a given claim. That is accurate, as far as it goes. But the crux of the matter is the formula, or method, by which AISLIC's total exposure is limited. According to this provision, all losses are combined in connection with a claim under this policy and the same claim under any other AIG policy, and that is how AISLIC's aggregate limit of liability is determined.
The reason that AIG would want to include such a tie-in provision for all policies issued by any of its member companies is clear — to limit its aggregate liability for the same claim. The reason why this is a problem for BRS is also clear. As is alleged by BRS as the underpinning for its breach of contract and negligence claims:
"Notwithstanding that Marsh brokered nearly all of the applicable underlying insurance coverage for the portfolio companies, knew that the underlying coverage was purchased from other AIG companies, knew or should have known that other markets could have provided excess D & O coverage to BRS, and knew that a non-AIG insurance company had offered to provide excess D & O coverage that was not susceptible to the reduction in limits (since that company did not provide any underlying coverage), Marsh recommended that BRS buy the excess D & O coverage from the AIG company . . ."
Based on the foregoing, we affirm the motion court's denial of defendant's motion for summary judgment, and searching the record, we determine that partial summary judgment should be granted in favor of plaintiffs to the extent of determining that the tie-in provision was applicable to limit the coverage afforded under the policy (see Murphy v RMTS Assoc. LLC, 71 AD3d 582, 583-589 [2010] [Appellate Division has power to search the record and award summary judgment to a nonmoving party that did not appeal]). Plaintiffs' request for sanctions is denied.
Accordingly, the order of the Supreme Court, New York County (Milton A. Tingling, J.), entered June 29, 2010, which denied defendants' second motion for summary judgment dismissing the complaint should be modified, on the law, to grant, upon our search of the record, partial summary judgment to plaintiffs to the extent of determining that the tie-in provision was applicable to limit the coverage afforded under the policy, and otherwise affirmed, without costs.
All concur.

Order, Supreme Court, New York County (Milton A. Tingling, J.), entered June 29, 2010, modified, on the law, to grant, upon our search of the record, partial summary judgment to plaintiffs to the extent of determining that the tie-in provision was applicable to limit the coverage afforded under the policy, and otherwise affirmed, without costs.
Footnotes
Footnote 1:  Another indication of Mr. Zensky's thoughts regarding settlement is reflected in an e-mail that he wrote to BRS memorializing his discussion with "Marsh's attorney." Although Marsh argues here that this e-mail is inadmissible hearsay and should not be considered by this Court, it may be considered, not for the truth of what is stated in that e-mail, but for what BRS's counsel believed to be the weaknesses in BRS's litigation with AIG. The e-mail states: "1. Marsh's testimony will not likely be helpful to us. They read the clause as evidencing an intent to tie in the limits of all AIG companies. Further, they think the premium makes sense in that context. "2. They have not made any further settlement overtures but will try if we want them to. They do not think they can get AIG close to $13M. "3. I told him about our SJ motion - he agreed that it was sound strategically and could be our best chance to settle (given that the testimony all around will not be helpful in his view), especially while it is pending. "4. Finally, as to the Marsh incentive agreements with AIG, he said it is almost a certainty that your policy counted towards AIG's payment (i.e. kickback) obligations to Marsh. I was astounded he admitted it to me so readily. So not only did Marsh not have an incentive to beat AIG up over the coverage for you, they had an incentive to stick all of your companies with AIG, even though it obviously was not in your best interests at least once you bought a Fund level policy. If the SJ motion does not succeed it may be time to send a visitor to Marsh with a summons and complaint."
Matter of American Alternative Insurance Corp v. Pelszynski

Kevin T. Grennan, PLLC, Garden City, N.Y. (Shayne, Dachs,
Corker, Sauer & Dachs, LLP [Jonathan A. Dachs], of counsel), for
appellant.
Hannigan Law Firm, PLLC, Latham, N.Y. (Terence S.
Hannigan of counsel), for respondent.

DECISION & ORDER
In a proceeding pursuant to CPLR article 75 to permanently stay arbitration of a claim for supplemental underinsured motorist benefits, Christopher R. Pelszynski appeals from an order of the Supreme Court, Suffolk County (Cohen, J.), dated March 15, 2010, which granted the petitioner's motion for leave to reargue its motion to stay arbitration, which was denied by order of the same court dated January 27, 2010, and for leave to reargue its opposition to his cross motion to compel arbitration, which had been granted by the order dated January 27, 2010, and, upon reargument, vacated the order dated January 27, 2010, and thereupon granted the petitioner's motion to stay arbitration, and denied his cross motion to compel arbitration.
ORDERED that the order dated March 15, 2010, is affirmed, with costs.
Christopher R. Pelszynski, a volunteer fireman for the North Babylon Volunteer Fire Company (hereinafter the Fire Company), was driving to the scene of an emergency when his car was struck by another vehicle. He settled with the owners of that vehicle for the maximum amount of bodily injury coverage allowable under their auto insurance policy. He then sought supplemental underinsured (hereinafter SUM) coverage under the Fire Company's Commercial General Liability insurance policy issued by the petitioner, American Alternative Insurance Corp. (hereinafter AAIC).
AAIC disclaimed coverage and moved to stay arbitration. Pelszynksi cross-moved to compel arbitration. The Supreme Court denied AAIC's motion and granted Pelszynski's cross motion. AAIC moved for leave to reargue its motion to stay arbitration and its opposition to Pelszynski's cross motion to compel arbitration. The Supreme Court granted the motion for leave to reargue and, upon reargument, vacated the prior order, and thereupon granted AAIC's motion and denied Pelszynski's cross motion. Pelszynski appeals.
A motion for leave to reargue "shall be based upon matters of fact or law allegedly overlooked or misapprehended by the court in determining the prior motion, but shall not include any matters of fact not offered on the prior motion" (CPLR 2221[d][2]). The determination to grant leave to reargue a motion lies within the sound discretion of the court (see Barnett v Smith, 64 AD3d 669, 670-671; Long v Long, 251 AD2d 631; Loland v City of New York, 212 AD2d 674). Here, the Supreme Court providently exercised its discretion in granting AAIC's motion for leave to reargue.
Furthermore, upon reargument, the Supreme Court correctly determined that Pelszynski is not an insured under the following definition of "insured" in the SUM endorsement: "You, as the named insured and, while residents of the same household, your spouse and the relatives of either you or your spouse." "You" in the definition refers to the Fire Company, which cannot have a spouse or relative (see Buckner v Motor Veh. Acc. Indem. Corp., 66 NY2d 211, 214; Siragusa v Granite State Ins. Co., 65 AD3d 1216, 1218; Hogan v CIGNA Prop. & Cas. Cos., 216 AD2d 442, 443). Contrary to Pelszynksi's contention, this interpretation of the SUM endorsement does not render the coverage meaningless, as the endorsement also includes, in the definition of an insured, any person in a vehicle insured for SUM benefits under the policy (see Buckner v Motor Veh. Acc. Indem. Corp., 66 NY2d at 214-215; Siragusa v Granite State Ins. Co., 65 AD3d at 1218). Pelszynski does not, however, fall within that definition of an insured either, since his car was not insured for SUM benefits under the policy.
Arroyo v. Morris

Law Office of Mark S. Gray, New York (William Ricigliano
and Mark S. Gray of counsel), for appellant.
Baker McEvoy Morrissey & Moskovits, P.C., New York
(Stacy R. Seldin of counsel), for respondents.
Order, Supreme Court, Bronx County (Betty Owen Stinson, J.), entered March 19, 2010, which granted defendants Juldeh Bah and Nigeriya Car's motion for summary judgment dismissing the complaint on the ground that plaintiff did not suffer a "serious injury" within the meaning of Insurance Law § 5102(d), unanimously affirmed, without costs.
Defendants-appellants established prima facie that plaintiff did not sustain a serious injury by submitting a radiologist's affirmed reports stating that the MRI films of the lumbar spine revealed evidence of degenerative disc disease predating the accident and no evidence of recent traumatic or causally related injury, and that the MRI films of the left knee revealed evidence of a preexisting chronic condition and no radiographic evidence of recent traumatic or causally related injury (see Valentin v Pomilla, 59 AD3d 184, 186 [2009]). In opposition, plaintiff failed to refute defendants' evidence of a preexisting degenerative condition of the lumbar spine or a preexisting chronic condition of the left knee, and therefore failed to raise an inference that injury to either the spine or the knee was caused by the accident (see id.; see also Jimenez v Rojas, 26 AD3d 256 [2006]; Diaz v Anasco, 38 AD3d 295 [2007]). Further, none of plaintiff's doctors made any reference to either the degenerative or the chronic condition; without an explanation for ruling out these conditions as the cause of plaintiff's injuries, the doctors' opinions that the injuries were caused by the accident are speculative (see Valentin, 59 AD3d at 186).
As there is no objective medical evidence that plaintiff's injuries were caused by the accident, plaintiff's statement that he was out of work for nine months is insufficient to establish his 90/180-day claim (see Linton v Nawaz, 62 AD3d 434, 443
[2009], affd 14 NY3d 821 [2010]; see also Hutchinson v Beth Cab Corp., 207 AD2d 283 [1994]).
Rojas v. Livo Car Inc.


Baker, McEvoy, Morrissey & Moskovitz, P.C., New York
(Stacy R. Seldin of counsel), for appellants.
Daniel Neveloff, New York, for respondent.
Order, Supreme Court, Bronx County (Alan Saks, J.), entered on or about January 5, 2010, which denied defendants' motion for summary judgment seeking to dismiss the complaint on the ground that plaintiff did not suffer a serious injury within the meaning of Insurance Law § 5102(d), unanimously modified, on the law, to grant the motion as to plaintiff's 90/180-day claim, and otherwise affirmed, without costs.
On March 28, 2007, plaintiff, who was 32 years old at the time, was injured when a vehicle struck him while he was walking and knocked him to the ground. Plaintiff sustained a short-term loss of consciousness. The impact caused plaintiff to lose his glasses and shoes.
The motion court was correct to conclude that the conflicting medical testimony created a question of fact as to serious injury. Defendants submitted reports from several doctors who found, after examining plaintiff, that he had normal ranges of motion, that there was no neurological disability and that any injury was attributable to preexisting, degenerative conditions unrelated to the accident.
However, in opposition, the report from plaintiff's treating orthopedist, who initially saw plaintiff just two weeks after the accident and continued to treat him thereafter, raised an issue of fact as to whether plaintiff sustained a "permanent consequential limitation of use of a body organ or member" and a "significant limitation of use of a body function or system" (Insurance Law § 5102[d]). Plaintiff's doctor stated that plaintiff did not have normal range of motion in many areas, including his spine, left shoulder and both knees. He also noted that plaintiff suffered from severe headaches, that each specific area of injury was "a permanent condition directly attributable to the trauma of 3/28/07" from which plaintiff "will not fully recover" and that plaintiff has "a permanent impairment/disability due to the injuries sustained in said accident" (see McClelland v Estevez, 77 AD3d 403, 404 [2010]; Vera v Islam, 70 AD3d 525 [2010]). The doctor's report also raised an issue of fact as to whether the accident caused plaintiff's injuries. Indeed, the doctor stated that any seeming degenerative changes were the result of the accident (see McDuffie v Rodriguez, 72 AD3d 568 [2010]).
However, plaintiff failed to raise an issue of fact as to his 90/180-day claim because the record shows he returned to work within 10 days of the accident. Furthermore, he did not submit competent medical evidence or documentation showing that the injuries he allegedly sustained in the accident rendered him unable to perform substantially all of his usual and customary daily activities for not less than 90 of the first 180 days following the accident (see Insurance Law § 5102[d]; Lazarus v Perez, 73 AD3d 528 [2010]; Rubin v SMS Taxi Corp., 71 AD3d 548, 549 [2010]).
Castillo v. Cinquina


W. Matthew Sakkas, New York, for appellant.
Cohen, Kuhn & Associates, New York (Robert D. Wilkins of
counsel), for respondent.
Order, Supreme Court, Bronx County (Lucindo Suarez, J.), entered on or about July 7, 2010, which, to the extent appealed from as limited by the briefs, granted defendant's motion for summary judgment dismissing the complaint based on the failure to establish a "permanent consequential limitation" or "significant limitation" within the meaning of Insurance Law § 5102(d), unanimously reversed, on the law, without costs, and the motion denied.
Defendant made a prima facie showing of entitlement to judgment as a matter of law. Defendant submitted the affirmed report of an orthopedic surgeon who, after conducting an independent examination of plaintiff, found that she had full range of motion in her neck and back and concluded that her
injuries were resolved (see Dennis v New York City Tr. Auth.,
84 AD3d 579 [2011]).
In opposition, plaintiff raised triable issues of fact. Plaintiff submitted an affidavit of her treating chiropractor who, based on testing performed both recently and contemporaneous with plaintiff's accident, found diminished range of motion in the cervical and lumbar spine and concluded that such limitations were caused by the accident (see id.). The chiropractor's opinion was supported by objective medical evidence, namely, MRI reports indicating that plaintiff had bulging discs in the cervical and lumbar spine (see Toure v Avis Rent A Car Sys., 98 NY2d 345, 353 [2002]).
Jean v. New York City Transit Authority

Kelner and Kelner, New York, N.Y.
(Brian P. Hurley of counsel), for appellants.
Wallace D. Gossett (Steven S. Efron, New York, N.Y.
(Renee L. Cyr of counsel), for respondents.

DECISION & ORDER
In an action to recover damages for personal injuries, etc., the plaintiffs appeal from so much of an order of the Supreme Court, Queens County (Lane, J.), dated June 3, 2009, as granted that branch of the defendants' motion which was for summary judgment dismissing the complaint on the ground that the plaintiff Jocelyne Jean did not sustain a serious injury within the meaning of Insurance Law § 5102(d).
ORDERED that the order is reversed insofar as appealed from, on the law, with costs, and that branch of the defendants' motion which was for summary judgment dismissing the complaint on the ground that the plaintiff Jocelyne Jean did not sustain a serious injury within the meaning of Insurance Law § 5102(d) is denied.
According to the deposition testimony and affidavit of the plaintiff, Jocelyne Jean (hereinafter the injured plaintiff), the accident occurred on August 5, 2002, while she was sitting inside her car. At the time she was working as a home health aide and had arrived outside her client's home and parked on the street with her driver side door slightly ajar, when the rear door of the defendants' bus struck her car. The injured plaintiff unsuccessfully used her left hand to try to prevent the door from opening and kept her hand on the door even as the impact ripped the door off her car. She immediately felt pain in her left shoulder. After the police arrived, she declined medical treatment, and, with assistance, pushed her car out of the street. She finished work for the day and first sought medical attention one week later, complaining of left shoulder and neck pain. She was initially treated by an orthopedist, Dr. Michelle Pfeffer, and underwent physical therapy for several months.
On November 19, 2002, only three months after the accident, the injured plaintiff was first examined by Dr. Anthony S. Horvath, an orthopedist, who determined on that date that she was a surgical candidate. Less than two months later, on January 8, 2003, Dr. Albert Graziosa removed an inflamed bursa from the injured plaintiff's left shoulder. The injured plaintiff was unable to return to work for three months after the surgery and, as a result of her injuries, in 2005 she left her job as a home care attendant, which she had held for 23 years.
The plaintiffs commenced this action against the defendants in October 2003. After joinder of issue and filing of the note of issue, the defendants moved for summary judgment dismissing the complaint on the ground, inter alia, that the injured plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d). In the order appealed from, the Supreme Court, among other things, granted that branch of the defendants' motion, concluding that, in opposition to their prima facie case, the plaintiffs failed to raise a triable issue of fact. We reverse the order insofar as appealed from.
The defendants failed to establish, prima facie, that the injured plaintiff did not sustain a serious injury under the significant limitation of use category of Insurance Law § 5102(d) (see Toure v Avis Rent A Car Sys., 98 NY2d 345; Gaddy v Eyler, 79 NY2d 955, 956-957). The defendants submitted, among other things, an affirmed report of Dr. Alan J. Zimmerman, their examining orthopedic surgeon, who found range-of-motion restrictions in the injured plaintiff's left shoulder and documented the less-than-normal findings in the numeric values he gave for each specific range of motion. However, in the conclusion of his report, Dr. Zimmerman failed to even address these losses of range of motion to the injured plaintiff's left shoulder. Moreover, his opinions that the left shoulder surgery treated a "non-causally related condition," that "[a] bursa is a degenerative [condition] and not causally related," that "[i]mpingement is a developmental condition, not a traumatic condition which was pre-existing and not causally related," and that "[a]ll of the cervical [magnetic resonance imaging] findings are degenerative, pre-existing and not [causally] related," are without probative value, as he failed to explain or substantiate, with objective medical evidence, the basis of his conclusions (see Reitz v Seagate Trucking, Inc., 71 AD3d 975; Ortiz v S & A Taxi Corp., 68 AD3d 734; Powell v Prego, 59 AD3d 417). Since the defendants failed to meet their prima facie burden, we need not consider the sufficiency of the papers submitted by the plaintiffs in opposition (see Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853).
Jin Ying Zi v. Sang Cheol Lee


Sim & Park, LLP, New York, N.Y. (Sang J. Sim of counsel), for
appellants and Sang Cheol Lee as appellant.
Epstein, Frankini & Grammatico, Woodbury, N.Y. (Michele A.
Musarra of counsel), for
defendant/counterclaim plaintiff-respondent.
Cheven, Keely & Hatzis, New York, N.Y. (Constantine Hatzis
and Mayu Miyashita of counsel), for
Sang Cheol Lee as counterclaim
defendant-respondent.

DECISION & ORDER
In an action, inter alia, to recover damages for personal injuries, the plaintiffs Jin Ying Zi and Kyu Sung Lim and the plaintiff/counterclaim defendant, Sang Cheol Lee, appeal, as limited by their brief, from so much of an order of the Supreme Court, Queens County (Taylor, J.), entered December 1, 2008, as, upon reargument, vacated the original determination in an order dated July 14, 2008, denying the defendant's motion for summary judgment dismissing the complaint on the ground that none of the plaintiffs sustained a serious injury within the meaning of Insurance Law § 5102(d) and denying the separate motion of the plaintiff/counterclaim defendant, Sang Cheol Lee, for summary judgment dismissing the complaint insofar as asserted by the plaintiffs Jin Ying Zi and Kyu Sung Lim on the ground that neither of those plaintiffs sustained a serious injury within the meaning of Insurance Law § 5102(d), and, thereupon, granted the motions for summary judgment.
ORDERED that the appeal by the plaintiff/counterclaim defendant, Sang Cheol Lee, from so much of the order entered December 1, 2008, as, upon reargument, vacated so much of the order dated July 14, 2008, as denied his motion for summary judgment and, thereupon, granted his motion for summary judgment is dismissed, as he is not aggrieved by that portion of the order (see CPLR 5511); and it is further,
ORDERED that the order entered December 1, 2008, is reversed insofar as reviewed, on the law, with one bill of costs, and, upon reargument, the original determination in the order dated July 14, 2008, is adhered to.
In the early morning hours of December 30, 2005, a motor vehicle operated by the defendant collided with a motor vehicle operated by the plaintiff/counterclaim defendant, Sang Cheol Lee (hereinafter Lee), in which the plaintiffs Jin Ying Zi (hereinafter Zi) and Kyu Sung Lim (hereinafter Lim) were passengers. In his answer to the plaintiffs' complaint, the defendant asserted a counterclaim against Lee for indemnification or contribution. The defendant moved for summary judgment dismissing the complaint on the ground that none of the plaintiffs sustained a serious injury within the meaning of Insurance Law § 5102(d). Lee separately moved for summary judgment dismissing the complaint insofar as asserted by Zi and Lim on the same ground.
In an order dated July 14, 2008, the Supreme Court denied the motions. The defendant subsequently moved, and Lee separately moved, for leave to reargue their respective summary judgment motions. In an order entered December 1, 2008, the Supreme Court granted the motions and, upon reargument, vacated its prior order dated July 14, 2008, and granted the prior motions for summary judgment. We reverse.
The defendant established, prima facie, that none of the plaintiffs sustained a serious injury within the meaning of Insurance Law § 5102(d) through the affirmed medical reports of orthopedic surgeon Edward Toriello (see Toure v Avis Rent A Car Sys., 98 NY2d 345; Gaddy v Eyler, 79 NY2d 955; McIntosh v O'Brien, 69 AD3d 585). However, in opposition, the plaintiffs raised triable issues of fact through the affidavits of their treating chiropractor regarding the limitations they allegedly suffered as a result of the subject motor vehicle accident (see Bachan v Paratransit, 71 AD3d 610; Reyes v Dagostino, 67 AD3d 983). We note that, under the circumstances, Lim was not required to respond to the defendant's argument that Lim's claimed injuries may have been caused by a prior accident in which Lim was involved, since the defendant never initially established, prima facie, that if Lim did have an injury, that injury was causally connected to the prior accident (see Stukas v Streiter, 83 AD3d 18; Hightower v Ghio, 82 AD3d 934, 935; cf. Franchini v Palmieri, 307 AD2d 1056, affd 1 NY3d 536).
Accordingly, upon reargument, the Supreme Court should have adhered to its original determination denying the motions for summary judgment.
Khaimov v. Armanious

William Pager, Brooklyn, N.Y., for appellant.
James G. Bilello, Westbury, N.Y. (Patricia McDonagh of
counsel), for respondent Maged Armanious.
Baker, McEvoy, Morrissey & Moskovits, P.C., New York, N.Y.
(Stacy R. Seldin of counsel), for
respondents MDT, Inc., and Mikhaylo
Stapinskyy.

DECISION & ORDER
In an action to recover damages for personal injuries, the plaintiff appeals from an order of the Supreme Court, Kings County (Miller, J.), dated February 4, 2010, which granted the motion of the defendants MDT, Inc., and Mikhaylo Stapinskyy and the cross motion of the defendant Maged Armanious for summary judgment dismissing the complaint insofar as asserted against them on the ground that he did not sustain a serious injury within the meaning of Insurance Law § 5102(d).
ORDERED that the order is reversed, on the law, with one bill of costs payable by the defendants appearing separately and filing separate briefs, and the motion and cross motion for summary judgment dismissing the complaint are denied.
The defendants met their prima facie burden of showing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident (see Toure v Avis Rent A Car Sys., 98 NY2d 345; Gaddy v Eyler, 79 NY2d 955, 956-957). In support of their respective motion and cross motion, the defendants relied, inter alia, on the affirmed medical reports of Dr. Jessica F. Berkowitz, a radiologist, who found degenerative conditions in the plaintiff's cervical and lumbar spine unrelated to the subject accident and no evidence of "acute traumatic injury" to the plaintiff's left knee.
In opposition, however, the plaintiff raised a triable issue of fact. The plaintiff relied on, inter alia, the affirmation of Dr. Viktor Gribenko, the plaintiff's treating physician. Based upon, among other things, his physical examinations of the plaintiff and the plaintiff's medical history, medical records, and reports, Dr. Gribenko concluded that the plaintiff's injuries were permanent, progressive in nature, and directly related to the subject accident. Accordingly, the plaintiff rebutted the defendants' prima facie showing and, thus, raised a triable issue of fact (see Jilani v Palmer, 83 AD3d 786; Fraser-Baptiste v New York City Tr. Auth., 81 AD3d 878; Harris v Boudart, 70 AD3d 643, 644; Sinfelt v Helm's Bros., Inc., 62 AD3d 983, 983-984).
Accordingly, the Supreme Court should have denied the respective motion and cross motion for summary judgment.
Lively v. Fernandez


Ruffo Tabora Mainello & McKay, P.C., Lake Success, N.Y.
(Michael J. Murphy of counsel), for appellants.
Richard T. Lau, Jericho, N.Y. (Marcella Gerbasi Crewe of
counsel), for respondent.

DECISION & ORDER
In an action to recover damages for personal injuries, etc., the plaintiffs appeal, as limited by their brief, from so much of an order of the Supreme Court, Queens County (Siegal, J.), entered November 9, 2009, as granted that branch of the defendant's cross motion which was for summary judgment dismissing the complaint insofar as asserted by the plaintiff Michael Lively on the ground that he did not sustain a serious injury within the meaning of Insurance Law § 5102(d).
ORDERED that the appeal by the plaintiff Emily Lively is dismissed, as she is not aggrieved by the portion of the order appealed from (see CPLR 5511); and it is further,
ORDERED that the order is affirmed insofar as appealed from by the plaintiff Michael Lively; and it is further,
ORDERED that one bill of costs is awarded to the defendant.
The defendant met her prima facie burden of showing that the plaintiff Michael Lively (hereinafter the plaintiff) did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident (see Toure v Avis Rent A Car Sys., 98 NY2d 345; Gaddy v Eyler, 79 NY2d 955, 956-957). The limitation noted in the range of motion of the plaintiff's cervical spine during the examination conducted by the defendant's examining neurologist was insignificant within the meaning of Insurance Law § 5102(d) (see Licari v Elliot, 57 NY2d 230; see also Casco v Cocchiola, 62 AD3d 640; Waldman v Dong Kook Chang, 175 AD2d 204).
In opposition, the plaintiff failed to raise a triable issue of fact. The affirmation of the plaintiff's treating physician, Dr. Mitchell Goldstein, failed to raise a triable issue of fact as to whether the plaintiff sustained a serious injury under the permanent consequential limitation of use category of Insurance Law § 5102(d) since Dr. Goldstein failed to set forth any objective medical findings from a recent examination (see Jean v Labin-Natochenny, 77 AD3d 623; Clarke v Delacruz, 73 AD3d 965; Kin Chong Ku v Baldwin-Bell, 61 AD3d 938; Diaz v Lopresti, 57 AD3d 832, 832-833; Soriano v Darrell, 55 AD3d 900, 900-901; Diaz v Wiggins, 271 AD2d 639, 640; Kauderer v Penta, 261 AD2d 365, 366; Marin v Kakivelis, 251 AD2d 462, 463).
Moreover, while a significant limitation of use of a body function or member "need not be permanent in order to constitute a serious injury,' . . . any assessment of the significance' of a bodily limitation necessarily requires consideration not only of the extent or degree of the limitation, but of its duration as well" (Partlow v Meehan, 155 AD2d 647, 648), notwithstanding the fact that Insurance Law § 5102(d) "does not expressly set forth any temporal requirement for a significant limitation'" (id.). Here, Dr. Goldstein's affirmation, in which he opined that the plaintiff sustained significant limitations of motion in the cervical and lumbar regions of his spine, is based on only one examination of the plaintiff, conducted shortly after the accident. Under these circumstances, where Dr. Goldstein failed to establish that he examined the plaintiff after that one examination, his affirmation was insufficient to raise a triable issue of fact as to whether these limitations existed for a sufficient period of time to rise to the level of "significance" and, thus, whether the plaintiff sustained a significant limitation of use of a body function or member.
The magnetic resonance imaging reports of Dr. Robert Diamond were insufficient to raise a triable issue of fact since they were unaffirmed and, thus, in inadmissible form (see Grasso v Angerami, 79 NY2d 813; Pierson v Edwards, 77 AD3d 642; Vasquez v John Doe #1, 73 AD3d 1033).
Furthermore, the plaintiff failed to adequately explain the cessation of his treatment after 2007 (see Pommells v Perez, 4 NY3d 566, 574; Vasquez v John Doe #1, 73 AD3d at 1034; Haber v Ullah, 69 AD3d 796).
Lastly, the plaintiff failed to raise a triable issue of fact as to whether his injuries prevented him from performing substantially all of his usual and customary daily activities during at least 90 of the first 180 days following the subject accident (see McLoud v Reyes, 82 AD3d 848; Roman v Fast Lane Car Serv., Inc., 46 AD3d 535; Sainte-Aime v Ho, 274 AD2d 569).
Midiri v. McQueen


Greenberg & Kelly, P.C., Ronkonkoma, N.Y. (John Aviles of
counsel), for appellant.
Richard T. Lau, Jericho, N.Y. (Linda Meisler 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, Suffolk County (Mayer, J.), dated April 13, 2010, which granted the defendant's motion for summary judgment dismissing the complaint on the ground that she did not sustain a serious injury within the meaning of Insurance Law § 5102(d).
ORDERED that the order is reversed, on the law, with costs, and the defendant's motion for summary judgment dismissing the complaint is denied.
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). The plaintiff alleged that as a result of the subject accident, she sustained, inter alia, certain injuries to the cervical region of her spine. The defendant provided evidence establishing, inter alia, that the alleged injuries to the cervical region of the plaintiff's spine did not constitute a serious injury within the meaning of Insurance Law § 5102(d) (see Toure v Avis Rent A Car Sys., 98 NY2d at 352; Gaddy v Eyler, 79 NY2d at 955-956; Rodriguez v Huerfano, 46 AD3d 794, 795).
However, in opposition, the plaintiff provided evidence raising a triable issue of fact as to whether the injuries to the cervical region of her spine constituted a serious injury under the permanent consequential limitation of use and/or significant limitation of use categories of Insurance Law § 5102(d) (see Dixon v Fuller, 79 AD3d 1094, 1094-1095). Accordingly, the Supreme Court should have denied the defendant's motion for summary judgment dismissing the complaint.
Oginsky v. Rasporskaya


Sacks and Sacks, LLP, New York, N.Y. (Scott N. Singer of counsel),
for appellant.
Kaplan, Hanson, McCarthy, Adams, Finder & Fishbein, Yonkers,
N.Y. (E. Richard Vieira 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, Richmond County (Minardo, J.), dated August 12, 2010, which granted the defendant's motion for summary judgment dismissing the complaint on the ground that she did not sustain a serious injury within the meaning of Insurance Law § 5102(d).
ORDERED that the order is affirmed, with costs.
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). The plaintiff alleged that as a result of the subject accident, the cervical and lumbosacral regions of her spine, as well her knees, sustained certain injuries. The plaintiff also alleged that she sustained a serious injury under the 90/180-day category of Insurance Law § 5102(d). However, the defendant provided competent medical evidence establishing, prima facie, that the alleged injuries to the lumbosacral region of the plaintiff's spine (see Rodriguez v Huerfano, 46 AD3d 794, 795), and the alleged injuries to the plaintiff's knees (see Licari v Elliott, 57 NY2d 230, 236; cf. Thompson v Katz, 5 AD3d 760, 760-761), did not constitute serious injuries within the meaning of Insurance Law § 5102(d) (see Toure v Avis Rent A Car Sys., 98 NY2d at 352; Gaddy v Eyler, 79 NY2d at 955-956). The defendant also provided competent medical evidence establishing, prima facie, that those alleged injuries, as well as the alleged injuries to the cervical region of the plaintiff's spine, were not caused by the subject accident (see Pommells v Perez, 4 NY3d 566, 579; Jilani v Palmer, 83 AD3d 786). Finally, the defendant submitted evidence establishing, prima facie, that the plaintiff did not sustain an injury or impairment which prevented her from performing substantially all of the material acts which constituted her usual and customary daily activities for more than 90 days during the 180 days immediately following the subject accident (cf. Scott v Hing Chee Leung, 287 AD2d 612).
In opposition, the plaintiff failed to raise a triable issue of fact. Accordingly, the Supreme Court properly granted the defendant's motion for summary judgment dismissing the complaint.
Providence Washington Insurance Company, a/s/o Shelofsky v Munoz


Serpe, Andree & Kaufman, Huntington, N.Y. (Cynthia G. Gamana
of counsel), for appellant.
Bandel & Bandel, Garden City, N.Y. (Steven Bandel of
counsel), for respondents.

DECISION & ORDER
In two related subrogation actions to recover insurance benefits paid to the plaintiff's insured in Action Nos. 1 and 3 and a related action to recover damages for personal injuries (Action No. 2), the plaintiff in Action Nos. 1 and 3 appeals, as limited by its brief, from so much of an order of the Supreme Court, Nassau County (Parga, J.), dated June 17, 2010, as denied that branch of its motion which was, in effect, to dismiss the counterclaim asserted against it in Action No. 3 and, in effect, granted the cross motion of the defendants in Action Nos. 1 and 3 for an award of costs and an attorney's fee against it pursuant to CPLR 8303-a and 22 NYCRR 130-1.1.
ORDERED that the order is reversed insofar as appealed from, on the law, on the facts, and in the exercise of discretion, with costs, that branch of the motion of the plaintiff in Action Nos. 1 and 3 which was, in effect, to dismiss the counterclaim asserted against it in Action No. 3 is granted, and the cross motion of the defendants in Action Nos. 1 and 3 for an award of costs and an attorney's fee against the plaintiff in Action Nos. 1 and 3 pursuant to CPLR 8303-a and 22 NYCRR 130-1.1 is denied.
Allegedly, on June 8, 2003, a vehicle operated by Scott Shelofsky and owned by Scott Shelofsky and/or Toni Ann Shelofsky (hereinafter together the Shelofskys) collided with a vehicle operated by Rebecca E. Munoz and owned by Bina E. Munoz. Providence Washington Insurance Company (hereinafter Providence) paid the Shelofskys' insurance claim for damage to their vehicle resulting from the collision, pursuant to an insurance policy it had issued to them. Thereafter, Providence, as subrogee of the Shelofskys, commenced an action in the District Court, Nassau County, against Bina E. Munoz and Rebecca E. Munoz (hereinafter together the defendants) to recover the insurance benefits it paid to the Shelofskys (hereinafter Action No. 3). In their answer, the defendants interposed a counterclaim against Providence to recover damages for injury to property, alleging that damage to their vehicle was caused by Scott Shelofsky's negligent operation of the Shelofsky vehicle. Providence then commenced a second subrogation action against the defendants in the Supreme Court, Nassau County, this time to recover certain no-fault and uninsured motorist benefits it had paid to the Shelofskys (hereinafter Action No. 1).
In an order dated June 25, 2007, the Supreme Court transferred Action No. 3 from the District Court to the Supreme Court and joined Action Nos. 1 and 3 for purposes of trial, together with a related personal injury action commenced by Rebecca Munoz against the Shelofskys in connection with the same collision (hereinafter Action No. 2). Thereafter, Providence moved pursuant to CPLR 3217(b) to voluntarily discontinue its causes of action in Action Nos. 1 and 3 and, in effect, to dismiss the defendants' counterclaim asserted against it in Action No. 3. Providence contended that because a counterclaim in a subrogation action may be employed only to assert a set-off against the subrogee's claim, the voluntary discontinuance of its causes of action warranted dismissal of the counterclaim in Action No. 3. The defendants cross-moved for an award of costs and an attorney's fee against Providence pursuant to CPLR 8303-a and 22 NYCRR 130-1.1. The Supreme Court granted that branch of Providence's motion which was to voluntarily discontinue its causes of action in Action Nos. 1 and 3, but denied that branch of Providence's motion which was, in effect, to dismiss the defendants' counterclaim asserted against it in Action No. 3 and, in effect, granted the defendants' cross motion. We reverse the order insofar as appealed from.
Contrary to the defendants' contention, their counterclaim against Providence in Action No. 3 "cannot effect an affirmative recovery against [Providence], but rather may be maintained . . . only to the extent of setting off [Providence]'s claim" (Peerless Ins. Co. v Michael Beshara, Inc., 75 AD3d 733, 736; see Allstate Ins. Co. v Babylon Chrysler Plymouth, 45 AD2d 969; U.S. Underwriters Ins. Co. v Greenwald, 31 Misc 3d 1206[A], affd 82 AD3d 411). Accordingly, the Supreme Court, upon granting that branch of Providence's motion which was to voluntarily discontinue its causes of action in Action Nos. 1 and 3, also should have granted that branch of Providence's motion which was, in effect, to dismiss the defendants' counterclaim asserted against it in Action No. 3.
Moreover, the Supreme Court improvidently exercised its discretion in granting the defendants' cross motion for an award of costs and an attorney's fee against Providence pursuant to CPLR 8303-a and 22 NYCRR 130-1.1. The defendants failed to demonstrate that Providence's conduct was frivolous within the meaning of 22 NYCRR 130-1.1(c), or that its actions were commenced or continued in bad faith (see CPLR 8303-a[c][i]; Broich v Nabisco, Inc., 2 AD3d 474, 475; Karnes v City of White Plains, 237 AD2d 574, 576). We note that the Supreme Court did not follow the proper procedure for imposing costs and an attorney's fee, since it failed to specify in a written decision the conduct upon which the award was based and the reasons why it found the conduct to be frivolous (see 22 NYCRR 130-1.2; Badillo v Badillo, 62 AD3d 635, 636; Hamilton v Cordero, 10 AD3d 702, 703).
Global Imports Outlet, Inc. v The Signature Group, LLC


Keidel, Weldon & Cunningham, LLP, White Plains (Jeffrey A.
Lesser of counsel), for appellant.
Frankfort & Koltun, Deer Park (Robert D. Frankfort of
counsel), for respondent.
Order, Supreme Court, New York County (Joan M. Kenney, J.), entered July 2, 2010, which, to the extent appealed from as limited by the briefs, denied defendant The Signature Group, LLC's motion to sever plaintiff's insurance procurement claim against it from the property damage claim against the other defendants, unanimously affirmed, with costs.
The motion court providently exercised its discretion in denying the motion, since Signature failed to demonstrate that a joint trial would result in substantial prejudice (see CPLR 603; Geneva Temps, Inc. v New York World Communities, Inc., 24 AD3d 332, 334 [2005]). An insurance company or broker would be prejudiced if an insurance-coverage claim and a negligence claim were tried before the same jury (see Kelly v Yannotti, 4 NY2d 603 [1958]; Hoffman v Kew Gardens Hills Assoc., 187 AD2d 379 [1992]; Transamerica Ins. Co. v Tolis Inn, 129 AD2d 512 [1987]; see also Taylor v Fazio, 291 AD2d 293 [2002]). However, this case does not involve a dispute about insurance coverage. Rather, it involves the failure to procure insurance coverage. Further, there is no claim that additional discovery is required, or that the trial would otherwise be delayed if the motion is denied (see Neckles v VW Credit, Inc., 23 AD3d 191, 192 [2005]). Nor is there any alleged "threat of jury confusion" based on the number of issues or witnesses (Witherspoon v New York City Hous. Auth., 238 AD2d 276, 276 [1997]). Lastly, plaintiff would be prejudiced by severance. Indeed, Signature filed its motion after the note of issue was filed and more than a year after the issuance of an order consolidating this action with another related action (cf. Kelly, 4 NY2d at 605, 607-608).
Richman v Harleysville Worcester Insurance Company


Morrison Mahoney LLP, New York (Arthur J. Liederman of
counsel), for Harleysville Worcester Insurance Company,
appellant.
Ahmuty, Demers & McManus, Albertson (Brendan T.
Fitzpatrick of counsel), for Alexander Wall Corporation, appellant.
Phillips Nizer LLP, New York (Donald L. Kreindler of counsel),
for respondent.
Order, Supreme Court, New York County (Emily Jane Goodman, J.), entered December 1, 2009, which denied the motions of defendants Harleysville Worcester and Alexander Wall for summary judgment dismissing the complaint and all cross claims as against them, unanimously affirmed, without costs.
In this action for insurance coverage and damages resulting from a raccoon infestation and alleged faulty remediation, plaintiff's submissions raised triable issues of fact.
While failure to submit a signed proof of loss within 60 days after the insurer's request, as called for in the policy, can be an absolute defense to an action on the policy, this is true only in the absence of a waiver or conduct by the insurer that results in an estoppel against the assertion of that defense (see Igbara Realty Corp. v New York Prop. Ins. Underwriting Assn., 63 NY2d 201 [1984]). Here, questions exist as to whether Harleysville's actions in — among other things — issuing a check that it deemed "in satisfaction" of the damages to the house without requesting a sworn proof of loss, constituted a waiver of its right to a sworn statement in proof of loss, inasmuch as it is only when Richman rejected the proffered amount did Harleysville seek a sworn proof of loss, fully aware that it was impossible to ascertain the full extent of the damage until remediation was completed.
Questions of fact also exist as to whether Alexander Wall was an agent of Harleysville, whether the remediation work was properly performed, and whether Alexander Wall's actions in connection with the removal and storage of plaintiff's personal property and the interference with her right of possession supports the conversion claim.
Conversion is the intentional and unauthorized exercise of control over personal property owned by another that interferes with the owner's right of possession (Colavito v New York Organ Donor Network, Inc., 8 NY3d 43 [2006]). Here, Richman asserts that she did not know that the contents of her home would be removed until Alexander Wall actually began to remove them, and that she never authorized Alexander Wall to do so. Significantly, Alexander Wall does not deny that it refused Richman access to her belongings. Clearly there is an issue as to whether Alexander Wall interfered with Richman's possessory rights. Cohen v Allied Van Lines (2002 NY Slip Op 50038[U] [2002]) which Alexander Wall cites for the proposition that it cannot be liable for conversion since Richman was aware of the location of her belongings, is clearly distinguishable. In Cohen, there was a contract which allowed for the temporary storage of furniture, too large to be moved on the subject building's elevator, pending the plaintiff's approval and consent to hoisting at an additional cost. Here, there was no such contract between Richman and Alexander Wall.
Furthermore, Alexander Wall's purported offer to make Richman's possessions available for inspection was conditioned on her advanced payment of alleged storage and labor fees associated with the inspection. Even then, Alexander Wall would not allow the return of Richman's possessions.
Nisari v Ramjohn


Lamb & Barnosky, LLP, Melville, N.Y. (Michelle S. Feldman of
counsel), for appellant.
Salfarlie, Salfarlie & Assoc., P.C., Jamaica, N.Y. (Donald A.
Salfarlie of counsel), for plaintiffs-
respondents.

DECISION & ORDER
In an action, inter alia, to recover damages for breach of a title insurance policy, the defendant Commonwealth Land Title Insurance Company appeals from an order of the Supreme Court, Queens County (Golia, J.), dated September 30, 2009, which denied its motion to dismiss the complaint insofar as asserted against it pursuant to CPLR 3211(a)(1) and (7) and granted the plaintiffs' cross motion for leave to serve an amended complaint.
ORDERED that the order is reversed, on the law, with costs, that branch of the motion of the defendant Commonwealth Land Title Insurance Company which was to dismiss the complaint pursuant to CPLR 3211(a)(1) insofar as asserted against it is granted, that branch of the motion which was to dismiss the complaint pursuant to 3211(a)(7) is denied as academic, and the plaintiffs' cross motion is denied.
The plaintiffs purchased a parcel of real property (hereinafter the subject property) from the defendants Azard Ramjohn and Vishmani Mohan (hereinafter the sellers). The plaintiffs obtained a title insurance policy (hereinafter the policy) from the defendant Commonwealth Land Title Insurance Company (hereinafter Commonwealth).
The plaintiffs commenced this action against, among others, the sellers, alleging, inter alia, that the subject property was a part of a larger parcel of property owned by the sellers, and that the sellers breached their contract with the defendants by failing to obtain a certificate of occupancy and subdivision approval from certain government agencies prior to the sale. The plaintiffs also asserted two causes of action against Commonwealth. The eleventh cause of action alleged that the plaintiffs were entitled to recover the value of the property from Commonwealth on the ground that Commonwealth "failed to raise an exception in the title report with regard to the lack of proper subdivision of the premises," and the twelfth cause of action alleged that the title delivered to them was unmarketable.
Commonwealth moved to dismiss the complaint insofar as asserted against it pursuant to CPLR 3211(a)(1) and (7). In support of its motion, Commonwealth submitted, among other things, the policy. The plaintiffs opposed Commonwealth's motion and cross-moved for leave to amend the complaint to add two additional causes of action against Commonwealth. In support of their position, the plaintiffs submitted, among other things, a certificate and report of title. The Supreme Court denied Commonwealth's motion and granted the plaintiff's cross motion. We reverse.
To succeed on a motion to dismiss pursuant to CPLR 3211(a)(1), the documentary evidence which forms the basis of the defense must resolve all factual issues as a matter of law and conclusively dispose of the plaintiff's claim (see Goldman v Metropolitan Life Ins. Co., 5 NY3d 561, 571; FG Harriman Commons, LLC v FBG Owners, LLC, 75 AD3d 527, 527-528; GuideOne Specialty Ins. Co. v Admiral Ins. Co., 57 AD3d 611, 613). Although the facts alleged in the complaint are regarded as true, and the plaintiffs are afforded the benefit of every favorable inference (see Leon v Martinez, 84 NY2d 83, 87-88), allegations consisting of bare legal conclusions as well as factual claims flatly contradicted by documentary evidence are not entitled to any such consideration (see Adler v 20/20 Cos., 82 AD3d 915; Prudential Wykagyl/Rittenberg Realty v Calabria-Maher, 1 AD3d 422, 422-423; New York Community Bank v Snug Harbor Sq. Venture, 299 AD2d 329, 330; see also Maas v Cornell Univ., 94 NY2d 87, 91).
The policy submitted by Commonwealth in support of its motion insured the plaintiffs against, among other things, unmarketability of the title. The term "[u]nmarketability of the title" was defined as "an alleged . . . matter affecting the title to the land, not excluded or excepted from coverage, which would entitle the purchaser . . . to be released from the obligation to purchase by virtue of a contractual condition requiring the delivery of marketable title."
The policy excepted from coverage loss or damage which arose by reason of "[a]ny law, ordinance or governmental regulation . . . restricting, regulating, prohibiting or relating to . . . the occupancy use, or enjoyment of the land . . . the character, dimensions or location of any improvement now or hereinafter erected on the land . . . [or] a separation in ownership or a change in the dimensions or area of the land or any parcel of which the land is or was a part."
"[A] policy of title insurance is a contract by which the title insurer agrees to indemnify its insured for loss occasioned by a defect in title" (L. Smirlock Realty Corp. v Title Guar. Co., 52 NY2d 179, 188; see Darbonne v Goldberger, 31 AD3d 693, 695). "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" (White v Continental Cas. Co., 9 NY3d 264, 267; see Appleby v Chicago Tit. Ins. Co., 80 AD3d 546, 549).
Here, the policy is clear and unambiguous with respect to the limits of coverage afforded. Accordingly, no consideration should have been given to the certificate and report of title submitted by the plaintiffs since, by its own terms, it was rendered null and void upon the delivery of the policy, and therefore constituted extrinsic evidence (see GuideOne Specialty Ins. Co. v Admiral Ins. Co., 57 AD3d 611, 613; Krystal Investigations & Sec. Bur., Inc. v United Parcel Serv., Inc., 35 AD3d 817, 818). Moreover, the " [m]ere assertion by one that contract language means something to him, where it is otherwise clear, unequivocal and understandable when read in connection with the whole contract, is not in and of itself enough to raise a triable issue of fact'" (Goldman v Metropolitan Life Ins. Co., 5 NY3d 561, 571, quoting Bethlehem Steel Co. v Turner Constr. Co., 2 NY2d 456, 460).
We conclude that the documentary evidence submitted by Commonwealth flatly contradicted the assertions made in the eleventh and twelfth causes of action and warranted their dismissal (see Adler v 20/20 Cos., 82 AD3d 915; Cohen v Nassau Educators Fed. Credit Union, 37 AD3d 751, 752; Prudential Wykagyl/Rittenberg Realty v Calabria-Maher, 1 AD3d at 422-423; New York Community Bank v Snug Harbor Sq. Venture, 299 AD2d at 330). Accordingly, the Supreme Court should have granted Commonwealth's motion to dismiss the complaint insofar as asserted against it.
Furthermore, the Supreme Court improvidently exercised its discretion in granting the plaintiffs' cross motion for leave to serve an amended complaint. While generally leave to amend should be freely given (see CPLR 3025 [b]), leave should not be granted where "the proposed amendment is palpably insufficient as a matter of law or is totally devoid of merit" (Morton v Brookhaven Mem. Hosp., 32 AD3d 381, 381; see Jenal v Brown, 80 AD3d 727, 728). Here, the proposed amendments were totally devoid of merit. Accordingly, the Supreme Court should have denied the plaintiffs' cross motion for leave to serve an amended complaint.
Bonded Waterproofing Services, Inc. v Anderson-Bernard Agency, Inc., et al



Milber Makris Plousadis & Seiden, LLP, Woodbury, N.Y. (David
C. Zegarelli of counsel), for appellants Anderson-Bernard Agency,
Inc., and Thomas Bernard.
White Fleischner & Fino LLP, New York, N.Y. (Janet P. Ford
and Benjamin A. Fleischner of
counsel), for appellant National Indemnity
Company.
Profita & Associates, LLC, New York, N.Y. (Michael Profita
and Richard Kolber of counsel), for
respondent.
In an action, inter alia, to recover damages for breach of contract
and negligent misrepresentation, the defendants Anderson-Bernard
Agency, Inc., and Thomas Bernard appeal, as limited by their brief,
from so much of an order of the Supreme Court, Richmond County
(McMahon, J.), dated April 30, 2010, as denied those branches of
their motion which were pursuant to CPLR 3211(a)(1), (5), and (7)
to dismiss the amended complaint insofar as asserted against them,


DECISION & ORDER
and the defendant National Indemnity Company separately appeals from so much of the same order as denied its separate motion for summary judgment dismissing the amended complaint insofar as asserted against it.
ORDERED that the order is reversed insofar as appealed from by the defendant National Indemnity Company, on the law, and the motion of the defendant National Indemnity Company for summary judgment dismissing the amended complaint insofar as asserted against it is granted; and it is further,
ORDERED that the order is affirmed insofar as appealed from by the defendants Anderson-Bernard Agency, Inc., and Thomas Bernard; and it is further,
ORDERED that one bill of costs is awarded to the defendant National Indemnity Company, payable by the plaintiff, and one bill of costs is awarded to the plaintiff, payable by the defendants Anderson-Bernard Agency, Inc., and Thomas Bernard.
This action arises from a disclaimer of insurance coverage by the defendant National Indemnity Company (hereinafter NIC) under a general commercial liability policy issued to the plaintiff, Bonded Waterproofing Services, Inc. (hereinafter Bonded). The subject policy was negotiated and procured for Bonded by the defendant Anderson-Bernard Agency, Inc. (hereinafter A-B), and Thomas Bernard, the principal of A-B, who were insurance brokers who procured coverage for Bonded on an annual basis. Bonded and A-B have their principal places of business [*2]in New Jersey, where Bernard also resides and where the subject policy was procured and executed.
NIC disclaimed coverage in connection with a claim asserted by a worker who was injured at a Bonded construction work site in Queens. The disclaimer was based on an express exclusion from coverage in the policy for work performed within the five boroughs of the City of New York. Bonded thereafter commenced this action against A-B, Bernard, and NIC, alleging, among other things, that A-B and Bernard had misrepresented the coverage obtained on Bonded's behalf, had breached their contract with Bonded to obtain appropriate coverage, and were negligent in failing to obtain adequate insurance. Bonded further alleged that NIC was vicariously liable for the conduct of A-B and Bernard, and should be estopped from denying coverage because A-B and Bernard acted as its agents.
A-B and Bernard moved, inter alia, pursuant to CPLR 3211(a)(1), (5), and (7) to dismiss the amended complaint insofar as asserted against them, and NIC separately moved for summary judgment dismissing the amended complaint insofar as asserted against it. The Supreme Court denied the motions.
As an initial matter, the parties disagree as to whether the law of New York or New Jersey should apply to this action. In determining that question, the first inquiry must be whether there is an actual conflict between the laws of the two jurisdictions (see Matter of Allstate Ins. Co. [Stolarz—New Jersey Mfrs. Ins. Co.], 81 NY2d 219, 223; Shaw v Carolina Coach, 82 AD3d 98). There is no conflict between the laws of New York and New Jersey with regard to the causes of action alleging breach of contract (see JP Morgan Chase v J.H. Elec. of N.Y., Inc., 69 AD3d 802, 803; Murphy v Implicito, 392 NJ Super 245, 265, 920 A2d 678, 689-690), negligent procurement of coverage (see Jual Constr. Ltd. v A.C. Edwards, Inc., 74 AD3d 1150; Aden v Fortsh, 169 NJ 64, 79, 776 A2d 792, 800-801), and breach of the implied covenant of good faith and fair dealing (see Turkat v Lalezarian Devs., Inc., 52 AD3d 595, 596; Kalogeras v 239 Broad Ave., LLC, 202 NJ 349, 366, 997 A2d 943, 953-954). Moreover, the principles of agency and apparent authority are substantively the same in New York and New Jersey (see Hallock v State of New York, 64 NY2d 224, 231; New Jersey Lawyers' Fund for Client Protection v Stewart Tit. Guar. Co., 203 NJ 208, 220, 1 A3d 632, 639-640).
However, New York law and New Jersey law differ with regard to the elements of the cause of action sounding in negligent misrepresentation, since New York requires a showing of "a special or privity-like relationship" between the parties that New Jersey does not (J.A.O. Acquisition Corp. v Stavitsky, 8 NY3d 144, 148; cf. Kaufman v i-Stat Corp., 165 NJ 94, 109, 754 A2d 1188, 1195-1196). The state with the most significant relationship to the particular issue in conflict (see Indosuez Intl. Fin. v National Reserve Bank, 98 NY2d 238, 245; J. Zeevi & Sons v Grindlays Bank [Uganda], 37 NY2d 220, 226-227, cert denied 423 US 866) is New Jersey, since all of the relevant contacts lie in New Jersey. Accordingly, the law of that state should be applied to the negligent misrepresentation cause of action, as it is "the jurisdiction having the greatest interest in resolving the particular issue" (Cooney v Osgood Mach., 81 NY2d 66, 72).
In view of the foregoing, the Supreme Court properly denied that branch of the motion of A-B and Bernard which was pursuant to CPLR 3211(a)(7) to dismiss the negligent misrepresentation cause of action, since the elements of that cause of action were adequately pleaded under New Jersey law. Bonded alleged that A-B and Bernard issued a certificate of liability insurance to Bonded which misrepresented that Bonded was covered for the work conducted in Queens under the policy issued by NIC, and that Bonded reasonably and justifiably relied on that certificate to its detriment (see Kaufman v i-Stat Corp., 165 NJ at 109, 754 A2d at 1195-1196).
Bonded also sufficiently stated a cause of action against A-B and Bernard to recover damages for breach of contract. Bonded alleged that it entered into an agreement with A-B and Bernard, whereby A-B and Bernard would procure appropriate liability coverage for Bonded on an annual basis, and that A-B and Bernard breached that agreement by procuring deficient coverage, which ultimately resulted in the disclaimer by NIC, relegating Bonded to defending itself in the underlying action (see JP Morgan Chase v J.H. Elec. of N.Y., Inc., 69 AD3d at 803; Murphy v [*3]Implicito, 392 NJ Super at 265, 920 A2d at 689-690).
Furthermore, the documentary evidence submitted by A-B and Bernard, including the insurance policy and the certificate of insurance, did not resolve "all factual issues as a matter of law, and conclusively dispose[ ] of the plaintiff's claim[s]" (Trade Source v Westchester Wood Works, 290 AD2d 437, 437 [internal quotation marks omitted]; see 511 W. 232nd Owners Corp. v Jennifer Realty Co., 98 NY2d 144, 152). Therefore, the Supreme Court properly denied those branches of the motion of A-B and Bernard which were pursuant to CPLR 3211(a)(1) to dismiss the amended complaint insofar as asserted against them.
The Supreme Court also properly denied that branch of the motion of A-B and Bernard which was pursuant to CPLR 3211(a)(5) to dismiss, as time-barred, the cause of action to recover damages for negligence asserted against them. A-B and Bernard contend that the negligence cause of action accrued at the time that the allegedly defective coverage was first procured, which occurred no later than March 2005. Since the complaint was filed more than three years later, they argue that the negligence cause of action was time-barred. The Court of Appeals, however, has held that the statute of limitations "does not [begin to] run until there is a legal right to relief" (Kronos, Inc. v AVX Corp., 81 NY2d 90, 94). In other words, "accrual occurs when the claim becomes enforceable, i.e., when all elements of the tort can be truthfully alleged in a complaint" (id. at 94). Since damages are a necessary element of a negligence cause of action (see Lewiarz v Travco Ins. Co., 82 AD3d 1464, 1466; Hesse v Speece, 204 AD2d 514), such a cause of action is not cognizable until damages are sustained. "[W]here, as here, a claim against an insurance agent or broker relating to the failure of insurance coverage sounds in tort, the injury occurred and the plaintiffs were damaged when coverage was denied" (Lewiarz v Travco Ins. Co., 82 AD3d at 1466; see Lavandier v Landmark Ins. Co., 26 AD3d 264; Venditti v Liberty Mut. Ins. Co., 6 AD3d 961, 962; see also Bond v Progressive Ins. Co., 82 AD3d 1318). Any loss of "an intangible property right" that may have been sustained by the plaintiff does not constitute an actual injury (Kronos, Inc. v AVX Corp., 81 NY2d at 95). Since the plaintiff could not have established any harm of a tortious nature until its request for coverage and a defense was denied by NIC, its negligence cause of action against A-B and Bernard did not accrue until that time and, thus, its negligence cause of action was not time-barred. To the extent that prior decisions of this Court would require a different result (see Atlantic Balloon & Novelty Corp. v American Motorists Ins. Co., 62 AD3d 920, 922; Mauro v Niemann Agency, 303 AD2d 468), they should no longer be followed.
The remaining contention of A-B and Bernard regarding the cause of action alleging breach of the implied covenant of good faith and fair dealing is without merit.
However, NIC's motion for summary judgment dismissing the complaint insofar as asserted against it should have been granted. NIC met its prima facie burden on the motion by demonstrating that it could not be held vicariously liable because A-B and Bernard were not its agents, nor were they cloaked with apparent authority to act on its behalf (see generally Hallock v State of New York, 64 NY2d at 231; New Jersey Lawyers' Fund for Client Protection v Stewart Tit. Guar. Co., 203 NJ at 220, 1 A3d at 639-640). Bonded failed to raise a triable issue of fact in opposition to NIC's motion.

Awadh v. Moronta


Joseph Giaramita, Jr., Brooklyn, N.Y., for appellant.
Cheven, Keely & Hatzis, New York, N.Y. (William B. Stock
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, Kings County (Vaughan, J.), dated July 7, 2010, which granted the defendant's motion for summary judgment dismissing the complaint on the ground that he 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 denied.
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). The plaintiff alleged, inter alia, that he sustained certain injuries to the lumbar region of his spine as a result of the subject accident. The defendant, among other things, provided competent medical evidence establishing, prima facie, that the alleged injuries to the lumbar region of the plaintiff's spine did not constitute a serious injury within the meaning of Insurance Law § 5102(d) (see Perl v Meher, 74 AD3d 930; Gonzales v Fiallo, 47 AD3d 760).
However, in opposition, the plaintiff provided competent medical evidence raising a triable issue of fact as to whether the alleged injuries to the lumbar region of his spine constituted a serious injury under the permanent consequential limitation of use and/or significant limitation of use categories of Insurance Law § 5102(d) (see Dixon v Fuller, 79 AD3d 1094, 1094-1095). Furthermore, contrary to the Supreme Court's determination, he provided a reasonable explanation for the cessation of his medical treatment (see Abdelaziz v Fazel, 78 AD3d 1086).
Accordingly, the Supreme Court should have denied the defendant's motion for summary judgment dismissing the complaint.
Frederique v. Krapf


Harmon, Linder & Rogowsky, New York, N.Y. (Mitchell Dranow
of counsel), for appellant.
Robert P. Tusa (Sweetbaum & Sweetbaum, Lake Success,
N.Y. [Marshall D. Sweetbaum], of
counsel), for respondents.

DECISION & ORDER
In an action to recover damages for personal injuries, the plaintiff appeals from an order of the Supreme Court, Nassau County (Mahon, J.), entered August 11, 2010, which granted the defendants' motion for summary judgment dismissing the complaint on the ground that he did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident.
ORDERED that the order is affirmed, with costs.
The defendants met their prima facie burden of establishing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident (see Toure v Avis Rent A Car Sys., 98 NY2d 345; Gaddy v Eyler, 79 NY2d 955, 956-957). The plaintiff alleged that, as a result of the subject accident, he sustained certain injuries to his left hip, the cervical and lumbosacral regions of his spine, and his left knee. However, the defendants provided competent medical evidence establishing, prima facie, that none of those alleged injuries constituted a serious injury under the permanent consequential or significant limitation of use categories within the meaning of Insurance Law § 5102(d) (see Staff v Yshua, 59 AD3d 614; Rodriguez v Huerfano, 46 AD3d 794, 795). Furthermore, while the plaintiff also alleged that he sustained a serious injury under the 90/180-day category of Insurance Law § 5102(d), the defendants provided evidence establishing, prima facie, that during the 180-day period immediately following the subject accident, he did not have an injury or impairment which, for more than 90 days, prevented him from performing substantially all of the acts that constituted his usual and customary daily activities (cf. Ingram v Doe, 296 AD2d 530, 531). In opposition, the plaintiff failed to raise a triable issue of fact.
Accordingly, the Supreme Court properly granted the defendants' motion for summary judgment dismissing the complaint.
Nat. Union Fire Ins. Co. of Pittsburgh, PA, v. Great American E & S

Rivkin Radler LLP, Uniondale (Michael A. Kotula of counsel),
for appellant.
Welby, Brady & Greenblatt, LLP, White Plains (Gregory J.
Spaun of counsel), for respondent.

Order, Supreme Court, Bronx County (Kenneth L. Thompson, Jr., J.), entered March 5, 2010, which, insofar as appealed from, denied so much of defendant Great American E & S Insurance Company's (Great American) motion for summary judgment dismissing the cross claim asserted against it by defendant Solar Electric Systems, Inc. (Solar) and declaring that it has no duty to defend or indemnify Solar in the underlying personal injury action, unanimously reversed, on the law, without costs, to grant Great American's motion to the extent of declaring that it has no duty to defend or indemnify Solar in the underlying action. Appeal from order, same court and Justice, entered on or about October 7, 2010, which denied Great American's motion for reargument, unanimously dismissed, without costs, as taken from a nonappealable order.

In November 2005, Solar, an electrical subcontractor, contracted with nonparty West-Fair Electric Contractors to provide the electrical work for a construction project undertaken by plaintiff Ethical Culture Fieldston School (ECF). Under the contract with West-Fair, Solar agreed to defend, indemnify and hold harmless ECF and the project manager, Tishman, as well as to procure insurance for both entities. Solar subsequently obtained a general liability policy through Great American and named Tishman and ECF as additional insureds on its Certificate of Insurance. The notice provision of the policy required all insureds to notify Great American of an occurrence and any ensuing claim or suit "as soon as practicable," and to immediately provide Great American with any legal papers in connection with a claim or suit.

On July 20, 2006, Lisa Best, a Solar employee, was injured at the project site. Best tripped over an extension cord, fell and injured her knee when she and her supervisor were completing a preliminary review of the project site in an area where Solar had not yet started work. She was taken by ambulance to the hospital and was advised to remain out of work for over a month as a result of her knee injury. On the day of the accident, Solar completed an "Employer's Report" and "Supervisor's 24-Hour Incident Report" detailing the accident and medical attention received by Best. Solar also faxed both reports to its workers' compensation carrier, individual insurance broker and Tishman. Notably, the insurance broker is not an agent of or associated with Great American. Additionally, Solar filed the appropriate form with the New York State Workers' Compensation Board, and Best started receiving workers' compensation benefits on July 21, 2006.

In June 2007, Best commenced a personal injury lawsuit naming Tishman and ECF as defendants (the "underlying action"). In August 2007, Tishman and ECF served a third-party complaint on Solar, impleading it as a third-party defendant to Best's lawsuit. Tishman forwarded Best's lawsuit to Great American in June 2007, and Solar forwarded the third-party complaint to Great American in August 2007, along with a request for coverage per the general liability policy. ECF did not provide notice to Great American of the occurrence or underlying action until December 2007. Great American refused to provide insurance coverage to all three entities.

Tishman and ECF commenced this action seeking a declaratory judgment that Solar's insurer, Great American, was obligated to defend and indemnify them in the underlying action. Solar cross claimed against Great American for a declaration that Great American is obligated to defendant and indemnify it in the underlying action. Great American subsequently moved for summary judgment dismissing the complaint and Solar's cross claim against it, and declaring that it has no duty to defend or indemnify Solar in the underlying action.

The motion court should have granted Great American's motion as to Solar to the extent of declaring that Great American is not required to provide coverage in the underlying action. The notice provision in the general liability policy operates as a condition precedent to coverage, and absent a valid excuse, failure to comply with the requirement vitiates the contract (Great Canal Realty Corp. v Seneca Ins. Co., Inc., 5 NY3d 742, 743 [2005]). Solar failed to provide timely notice of the occurrence because it did not notify Great American until August 2007, over one year after the accident. Indeed, this Court has found shorter delays to be untimely (Brownstone Partners/AF & F, LLC v A. Aleem Constr., Inc., 18 AD3d 204, 205 [2005] [five month delay]; Paramount Ins. Co. v Rosedale Gardens, 293 AD2d 235 [2002] [seven month delay]).

Although a reasonable good-faith belief of nonliability may, in certain circumstances, excuse a failure to give timely notice (Great Canal, 5 NY3d at 743), such circumstances do not exist here. Solar contends that because it believed Best's exclusive remedy was under the Workers' Compensation Law, it could not be held liable for her injuries. However, this claimed belief was not reasonable under the circumstances (see Macro Enters., Ltd. v QBE Ins. Corp., 43 AD3d 728 [2007] [holding that the plaintiff's belief that the injured employee's exclusive remedy was under the Workers' Compensation Law was not reasonable]). Moreover, Solar never sought clarification of the coverage at issue, either from its counsel or insurance carrier. Thus, Tesler v Paramount Ins. Co. (220 AD2d 334 [1995]), cited by the motion court and Solar, is distinguishable because, in that case, the insurance agent specifically advised the insured that there was no indication a claim could be brought against it. Here, there was no evidence that Solar was advised by any insurance agent as to nonliability.

Additionally, Solar's contract with West-Fair required it to defend, indemnify and hold harmless Tishman and ECF. Best was injured on property owned by ECF and managed by Tishman. It was not reasonable for Solar to believe that Best would not seek further recovery from the site owner and project manager, both of which Solar had agreed to defend and indemnify. In the face of this indemnification requirement, coupled with the fact that Best was taken by ambulance to the hospital and remained out of work for over a month, Solar is unable to show a reasonable belief in nonliability.

Security Mutual Insurance Company v.  Perkins



Calendar Date: May 31, 2011
Before: Mercure, J.P., Spain, Kavanagh, Garry and Egan Jr., JJ.


Williamson, Clune & Stevens, Ithaca (John H. Hanrahan III
of counsel), for appellant.
Law Office of Lynn Beesecker, Cornwall (Lynn A. Beesecker
of counsel), for respondent.
MEMORANDUM AND ORDER


Spain, J.
Appeal from an order of the Supreme Court (Kramer, J.), entered July 13, 2010 in Schenectady County, which denied plaintiff's motion for summary judgment seeking a declaration that, among other things, the homeowners' insurance policy of defendant George E. Perkins is void ab initio.

In May 2000, defendant George E. Perkins applied to plaintiff for a homeowners' insurance policy to insure a residence he was purchasing in the City of Schenectady, Schenectady County. The application asked whether Perkins had "any animals or exotic pets" and, although he owned a dog, he responded "no." Some two years later, defendant Peter Vrochopoulos (hereinafter defendant) visited the home, and the dog — a German Shepherd/Pit Bull mix — bit him, causing significant injuries. Thereafter, defendant submitted a claim to plaintiff.

Several weeks later, plaintiff notified Perkins that it was canceling his homeowners' insurance because it found that the property had become uninsurable due to the fact that Perkins was "[h]arboring a vicious dog — dog bite loss." Some 10 months later, after learning that Perkins owned the dog at the time he completed the application, plaintiff sought to rescind the policy and commenced this action seeking, among other things, a declaration that Perkins had materially misrepresented that fact and the policy was therefore void ab initio. After issue was joined, plaintiff moved for summary judgment. Supreme Court denied the motion, and plaintiff appeals.

We reverse. Even if unintentional, "if the insured made a false statement of fact as an inducement to making the contract and the misrepresentation was material," an insurer may rescind the contract and avoid liability (Curanovic v New York Cent. Mut. Fire Ins. Co., 307 AD2d 435, 436 [2003]; see Insurance Law § 3105 [a], [b]; McLaughlin v Nationwide Mut. Fire Ins. Co., 8 AD3d 739, 740 [2004]). However, a response to a particular application question will only be held to be a material misrepresentation if the question is "so plain and intelligible that any applicant can readily comprehend [it]," and any ambiguity will be construed against the insurer (Nadel v Manhattan Life Ins. Co., 211 AD2d 900, 901 [1995]). Here, Supreme Court found the pet-ownership question unclear and construed the ambiguity against plaintiff. In that vein, defendant contends that the combined use of the terms "animals" and "exotic pets" deprived the former term of any clear meaning. Nevertheless, we find no ambiguity because, while a dog is not an exotic pet, it clearly is an animal, and Perkins admitted that he understood that the term "any animals" included pet dogs.[FN1]

Additionally — and contrary to the determination of Supreme Court — our decision in Stein v Security Mut. Ins. Co. (38 AD3d 977 [2007]) does not preclude an insurer from rescinding an insurance policy, if, after canceling the policy following a loss, it later learns that the insured materially misrepresented facts in the insurance application. In Stein, the insurer learned that the insured had made a material misrepresentation on the application but, "[w]ith that knowledge in hand," the insurer chose to cancel — effective 33 days later — rather than rescind the policy (id. at 979). Prior to the effective date of the cancellation, a loss was suffered, and we held that the insurer's prior election to cancel barred it from thereafter rescinding the policy (id. at 978-979).

In contradistinction to the instant facts, when the loss in Stein occurred, the insured would have been prejudiced had the insurer been able to later rescind the policy, given the insurer's representation that it had affirmatively elected to continue coverage through the date of cancellation in spite of the availability of the remedy of rescission. Accordingly, Supreme Court herein erred in denying plaintiff's motion for summary judgment declaring that the policy is void ab initio.
Defendant's remaining contentions have been examined and found to be without merit. [

Mercure, J.P., Kavanagh, Garry and Egan Jr., JJ., concur.

ORDERED that the order is reversed, on the law, with costs, plaintiff's motion for summary judgment granted, and it is declared that the homeowners' insurance policy issued by plaintiff to defendant George E. Perkins is void ab initio.
Footnotes


Footnote 1:Perkins testified that he neither read nor personally filled out the application but averred that, had he been asked if he had "any animals or exotic pets," he would have responded affirmatively. Notably, his assertion that he did not read the application is irrelevant to the question of the materiality of the misrepresentation, as "[t]he signer of a contract is conclusively bound by it regardless of whether he or she actually read it" (Curanovic v New York Cent. Mut. Fire Ins. Co., 307 AD2d at 437; accord Prime Commercial, L.L.C. v Rogner, 52 AD3d 1097, 1099 [2008]).

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