Dear Coverage Pointers Subscribers:

We know that spring is just around the corner.  Around here it will be an early spring as Lake Erie remains open water, free from ice.  The ground hog whispered that it will freeze next when the Bills win the Super Bowl.  Nothing to worry about for a few years.

This is another blockbuster issue of Coverage Pointers with all kinds of interesting and significant cases reported.  We have a Fourth Department decision involving the merger of an insured into another company and the quest for coverage by the successor.  We have offerings from two guest contributors, Larry Schiffer, who offers expert insight into a reinsurance case and Max Gershweir, who critiques a decision on additional insured coverage. In addition, Steve Peiper reviews what may be the most significant decision on litigation holds on electronic evidence yet to be rendered.

This issue is 83 pages long.  If you want print out the case summaries only, print out the first 32 pages of the attached issue.  The remaining 51 are the cases themselves.

So, since six more weeks of winter have been predicted, sit back and relax and enjoy the reading.

Labor Law Pointers:

Dave Adams and our Labor Law team just published its monthly Labor Law Pointers newsletter.  Want to subscribe?  Just let Dave know at [email protected]. .

One Hundred Years Ago:  American Football Rules Change

The rules of American football were revised by a special NCAA meeting, following two days of deliberations. Among the alterations were that the length of the field was shortened from 110 yards to 100, teams would now have four down instead of three to try to gain ten yards, kickoffs were to be made from the 40 yard line rather than the middle of the field, and the touchdown was now worth 6 points instead of 5.

From Audrey Seeley, the Queen of No Fault”

Happy Groundhog Day!  Today I read the results from 23 different Groundhog Day predictions around the US and Canada and only three predicted six more weeks of winter.  I also watched Punxsutawney Phil this morning who was one of the three that predicted six more weeks of winter.  It was announced that Punxsutawney Phil has never been wrong in his prediction.  Our own Dunkirk Dave though predicted an early spring.  Despite the lack of winter this year, I am personally hoping Dunkirk Dave was correct, as an early spring would be great.  Further, in reading the list of Groundhog Day predictions it makes me wonder where the groundhog’s name came from.  In some cases the name emanated from the city but in others I am at a loss.  Some of my favorites were Gus from Athens, Georgia, Chuckles from Manchester, Connecticut, and Poor Richard from York, Pennsylvania.

Also, DRI’s Insurance Law Committee is presenting its annual Insurance Coverage and Claims Institute in Chicago from March 28-30.  Aside from the Wednesday afternoon program being devoted to bad faith this year, Thursday morning begins with an emerging trends discussion from the policy holder attorney’s perspective with John Vishneski, of Reed Smith, LLP.  Also, Paul White from Tressler, LLP will be presenting on the role of brokers, agents and managing general agents in procuring insurance as well as their liability for unauthorized acts.  If you need additional information to register for this program please send me an email at [email protected]

Audrey

Training:

This is the time insurers are thinking about spring and summer training sessions.  Contact us to schedule topics and times.

Jen’s Gem of the Week:
Greeting!  I write this note as I quietly mourn being back in Buffalo after a nice 5 day trip to Bonita Springs, Florida.  The weather was in the high 70s/low 80s.  As a lifelong “Buffalonian,” you sometimes cannot help but wonder (mostly, when you are wearing shorts in January), why do we do it?  With that said, this is probably not the year to lodge such complaints since we have been having a milder than usual winter.  In fact, my driveway has only needed to be shoveled once.  But, moving on, in the last few weeks, there have been a few interesting decisions out of the New York trial courts.  In the New York County decision, Virginia Sur. Co. Ins., Inc. v. Travelers Prop. Cas. Co. of Am., the court was presented an issue that was recently raised in the First Department decision, W & W Glass Systems, Inc. v. Admiral Insurance Company (see Dan’s summary from last week).  The question being, in an additional insured endorsement, is there a difference between the phrases “arising out of” and “caused by”?   The court in W & W Glass said “no,” which seems to be the same way the court in Virginia Surety was leaning.  At this point, as W & W Glass is the only appellate level decision on this issue that I am aware of, it will be interesting to see when any other courts take this issue up.  Another decision you may want to look at is Matter of Progressive Ins. Co. v. Herschberg, out of Nassau County, where the court considered the impact of Facebook photos that seemingly conflicted with EUO testimony provided by the insured in relation to a demand for UIM benefits.  The case is a nice reminder to always watch what you post online. 

Jenifer Ehman
[email protected]

 

One Hundred Years Ago:

New York Times
February 3, 1912
Page 1
WOULD LABEL SINGLE MEN
Philadelphia Prosecutor Favors Plan for Protection of Young Women

Joseph Rogers, Assistant District Attorney of Philadelphia County has come out in favor of labeling single men.  He believes that they should be distinctly marked with some conspicuous label, and suggested that a neat bachelor button would be about the proper thing.

In advocating this innovation, Mr. Rogers gives several reasons, the chief one being to protect young women from married men, as with the single men distinctly labeled, he declares, the lack of a label would also mark the married man and place him in a position where he could not flirt with unsuspecting girls.

Mr. Rogers bases his suggestion on his long years of experience in criminal courts, especially in the desertion and non-support courts.  He also says that he has gained some knowledge in divorce courts, where he has seen many homes wrecked through the naming of a single person as correspondent.  While this bachelor button would not eliminate this trouble entirely he believes it would go a great way toward remedying the evil where persons possessing consciences was concerned.

The last reason given by Mr. Rogers for the button is that it would be a sure sign for guidance of the poor unmarried girl.  When she saw a button it only would be necessary to steer for it and snare the wearer if he was susceptible.

“But how would you enforce the wearing of the button,” Mr. Rogers was asked.

“Oh,” he replied.  “I am not going to discuss that matter.  That is a nut for some other person to crack.  All I say is that such an innovation would be a good thing.”
Editor’s Note:          Apparently single men are still not labeled but ADA Rogers was soon elevated to the bench and served on the Court of Common Pleas until his untimely death due to pneumonia in 1922.  He was not a single man at the time of his death, leaving a wife and two children.

 

Peiper’s Pipings:
Happy Groundhog’s Day.   First, an opening mea culpa.  Just in case anyone noticed may absence in last issue’s cover note (and hopefully at least someone did), I was regrouping after a harrowing flight back from NYC.  That landing marked the first time I’ve been on a plane where the snow was falling so hard that I couldn’t see the terminal.  In any event, a stiff drink was more pressing than my weekly missive.  For that, I apologize. 

One more note on travel.  Consider it a public service announcement, if you will.  If you are ever on a ½ full airplane and you are seated directly next to someone, do the right thing and ask the flight attendant to move to one of the open rows.  Believe me, your compatriots on the flight will thank you – or at least not look at you with utter disdain. Yeah, you know who you are!

Now, on to the good stuff.  Finally, something to report on!  After months of decisions trickling out, the flood gates finally opened this week.  In addition to several interesting first party decisions, we want to focus your attention on the Voom v. EchoStar decision.  The First Department offers the most comprehensive review of e-discovery requirements that we’ve seen in some time.  The most important part of the decision focuses on when, and to what extent, a party must preserve electronically stored data (including e-mail).  While the decision does not depart from established law, it is a great checklist to review in a case where massive discovery may become an issue. 

That’s it for this issue.  See you in two more weeks. 

Steve Peiper
[email protected]

 

A Century Ago:

Olean (NY) Evening Times
February 3, 1912
Darrow Pleads to Indictments

Labor Attorney Denies Charges of Attempted Bribery in McNamara Case

Los Angeles:  Clarence S. Darrow, the Chicago lawyer associated for years with the cause of labor, today entered a plea of not guilty to two indictments charging him with bribery and attempting to influence jurors in the trial of James B. McNamara.  His trial is set for February 14

From 1886 to 1917, Harrison Gray Otis was the owner and publisher of the Los Angeles Times. The newspaper was a conservative publication with strong anti-union editorials.

On October 1, 1910, in the middle of a strike called to unionize the metal trades of the city, Los Angeles Times building was dynamited. At least 20 were killed.  There was a loss of life of at least 20, and about the same number injured, and the event was called, the "crime of the century" for many years thereafter.

The mayor hired a private investigator that was able to implicate a number of men in the bombing, including Ortie McManigal, James B. McNamara, and his brother John J. McNamara (secretary-treasurer of the International Union of Bridge and Structural Iron Workers). McManigal agreed to testify against the McNamara brothers.

Samuel Gompers, president of the American Federation of Labor and other union officials looked at the criminal prosecution as an attack on the union movement, and hired Clarence Darrow to defend the brothers. However, by the time the trial began, however, Darrow had come to the conclusion that the brothers were guilty. He convinced the brothers to plead guilty. That decision stunned the city and angered the union leadership.

James McNamara received a life sentence, while his brother received a sentence of 15 years. Two others were later implicated and received life sentences. The damage from the trial was to plague Clarence Darrow for the rest of his life. Darrow himself was tried twice on charges that he attempted to bribe jurors in the case. He was acquitted in the first trial and there was a hung jury in the second. The prosecution agreed to forgo a third prosecution if Darrow promised never to practice law in California.

 

Highlights of This Week’s Issue, Attached:

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

  • Another Win for the Good Guys:  Non-Assignment Clause Wins the Day in Claim Arising After Companies Merge
  • SUM Policy Not Ambiguous
  • Second Department Breaks with Precedent Regarding Scope of Additional-Insured Lessors Endorsement
  • Once Timely Application to Stay UM Arbitration Is Made, Amendment Made Thereafter Considered Timely as Well
  • New York Appellate Court Upholds Cedent’s Follow-the-Fortunes Judgment on Asbestos Losses

 

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

[email protected]

  • Plaintiff Fails to Adequately Address, Given Past History, How Current Problems Are Related to Accident
  • Evidence of Contemporaneous ROM Limitations Is Not Prerequisite to Claim
  • Another Complaint Reinstated
  • Defendant Argues No Causation But Her Submissions Reveal Issue of Fact
  • Under the New Standard, Plaintiff’s Complaint Is Reinstated
  • Ignoring Claims in the Bill of Particulars Is Fatal
  • Plaintiff’s Cross-Motion to Compel Defendants to Accept Supplemental Bill of Particulars Granted on Appeal
  • Plaintiff Raises Issue of Fact With Respect to Lumbar Spine
  • Bulging Discs Are Not Per Se Evidence of Serious Injury
  • Orthopedic Examination Noting Significant Limitations Over One Year After Accident Does Not Support Defendants’ Motion

 

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

ARBITRATION

  • Peer Review Report Partially Persuasive But Reliance Upon Journal Pertaining To Work Place Low Back Injuries Not Persuasive
  • Peer Review Sufficient to Deny LSO Brace and Cervical Traction Unit
  • Applicant Was Offered Employment Pre-Accident and Entitled to Lost Wages
  • C-4YY (09-01) Form Sufficient To Provide Notice of Claim
  • Ambulance Bills Not Subject to Medicaid Fee Schedule
  • Reasonable Excuse Provided for IME No Show

 

LITIGATION

  • Insurer’s Summary Judgment Motion On Lack of Medical Necessity Should Have Been Granted
  • Again, Insurer’s Summary Judgment Motion Should Have Been Granted

 

PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper

[email protected]

Property

  • Motion for Summary Judgment for Material Misrepresentation Denied Where there is a Question of Fact as to Carrier’s Underwriting Practices
  • Minimal Errors in Plaintiff’s Proof of Loss Did Not Give Rise to Fraud
  • Knowledge of Prior Acts Fatal to Coverage Claim

 

And Potpourri

  • Duty to Preserve E-Data is Triggered As Soon As Litigation Can be Anticipated; Threats of Litigation Can be Enough to Trigger the Duty
  • Plaintiff’s Claim Against MVAIC Precluded by Statute of Limitations
  • Reckless Standard Under V&T Law § 1104 Does Not Apply to Non-Emergency Situations

 

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

  • Legislative Introductions

 

FIJAL’S FEDERAL FOCUS
Katherine A. Fijal

[email protected]

  • Did Injuries Arise Out of Ownership, Maintenance or Use of an Uninsured Auto?

 

JEN’S GEMS
Jennifer A. Ehman

[email protected]

  • Underlying Complaints Trigger Duty to Defend; Whether Accident was Caused By Insured’s Work a Question of Fact
  • No Additional Insured Coverage Where Contract Submitted in Support of Motion for Summary Judgment was Not Executed by Both Parties and Relevant Names Were Undecipherable
  • No Coverage Where Plaintiff Sold Artwork, but Was Never Paid
  • Although Facebook Photos Seemingly Conflicted with the EUO Testimony Provided by the Insured, the Court still Refuses to Deny Coverage based on Fraud or Misrepresentation

 

EARL’S PEARLS
Earl K. Cantwell

[email protected]

SUBCONTRACTORS AND CONTRACTORS NEED TO PUT IT IN WRITING

All for now.  We do love your comments and feedback and I share them with our entire CP  team.
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 
LinkedIn: www.linkedin.com/in/kohane

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
Liening Tower of Perley
Peiper on Property and Potpourri
Cassie’s Capital Connection
Fijal’s Federal Focus
Earl’s Pearls
Across Borders

 

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

01/31/12         Greenhomes America, LLC v. Farm Family Ins. Co.
Appellate Division, Fourth Department
Another Win for the Good Guys:  Non-Assignment Clause Wins the Day in Claim Arising After Companies Merge
Hughesco was a Farm Family insured under two policies.  Hughesco and Greenhomes were to merge but a paperwork snafu delayed the legal merger for a year beyond the date the two companies intended.  The parties conceded, however, that there was a de facto merger in September 2005 when Hughesco ceased operations and all of its employees went under the Greenhomes banner.

Within two months of the merger, Greenhomes did insulation work that allegedly led to the home in which the work was undertaken to burn to the ground.  A subrogation case was brought against Hughesco and Greenhomes.  Defense was offered to Hughesco but not Greenhomes.  Of course, Hughesco had no liability for the loss.  Greenhomes argued that it when it acquired Hughesco’s assets it included its right to the policies and therefore was a Farm Family insured.  Farm Family successfully argued that a non-assignment clause in the policy precluded the policy from being transferred without the insurer’s consent in cases where post-merger negligence was claimed. 

The clause read:  "your rights and duties under this policy may not be transferred without our written consent except in the case of death of an individual Named Insured.”  Farm Family had no obligation to defend or indemnify Greenhomes for Greenhomes’ alleged negligence.
Editor’s Note:  Yours truly on the appeal, aided by the ever-talented and creative Diane Bosse, on the brief.

01/26/12         Rivera v. Amica Insurance Company
Appellate Division, First Department
SUM Policy Not Ambiguous
The policy provided limits of $100,000 for SUM (underinsured motorists) coverage.

Condition “6” of the SUM Endorsement reads:

            6.         Maximum SUM Payments: Regardless of the number of insureds, our maximum payment under this SUM endorsement shall be the difference between:

                        (a)       the SUM limits; and

                        (b)       the motor vehicle bodily injury liability insurance or bond payments received by the insured or the insured's legal representative, from or on behalf of all persons that may be legally liable for the bodily injury sustained by the insured.

            The SUM limit shown on the Declarations is the amount of coverage for all damages due in bodily injury in any one accident.  (The SUM limit shown on the Declarations for "Each Person" is the amount of coverage for all damages due to bodily injury to one person.  The SUM limit shown under "Each Accident" is, subject to the limit for each person, the total amount of coverage for all damages due to bodily injury to two or more persons in the same accident).

The insureds argued that the term “insured” was ambiguous and that there should be $100,000 per person injured under this endorsement.  The court found no ambiguity and ruled that there was $100,000 for all those injured in the accident, not $100,000 per person.

01/24/12         Christ the King Regional High School v. Zurich Ins. Co. of N.A.
Appellate Division, Second Department
Second Department Breaks with Precedent Regarding Scope of Additional-Insured Lessors Endorsement
Interpreting the standard ISO Additional Insured - Managers and Lessors of Premises endorsement, which covers lessors for liability arising out of the ownership, maintenance or use of that part of the premises demised to the named-insured lessee, the New York courts on multiple occasions have found that coverage extends beyond the boundaries of the leased premises, based on their broad interpretation of the introductory phrase "arising out of."  (See, e.g., Ambrosio v Newburgh Enlarged City Sch. Dist., 5 AD3d 410 [2d Dept 2004]; N.Y. Conv. Ctr. Oper. Corp. v Morris Cerrullo World Evangelism, Inc., 269 AD2d 275 [1st Dept 2000]).

In Cerrullo, for example, the court found that the Javits Center’s owner was entitled to additional-insured coverage under a policy Cigna issued to Cerrullo, a licensee of certain space at the center, for an accident that occurred outside that space, in an area that the owner was obligated to maintain, because that area was incidental to the space’s use and the claimant was injured while on her way to Cerrullo’s convention.

For similar reasons, in Ambrosio, the court found that the additional-insured school was entitled to coverage under a policy issued to a kennel club that leased portions of the school and the school’s fields for a dog show for an accident involving a kennel-club member who was injured while walking on a sidewalk abutting the school between the school building and the fields.

The Second Department, without mentioning these or similar cases, found that this same additional-insured language did not cover a school that had leased portions of its premises to the named insured for a dance competition in connection with an accident involving a woman who was injured while walking on a sidewalk from a parking lot behind the school to the school's front entrance to attend the competition.  In its short comment addressing the subject additional-insured language, the court merely stated that the defendant insurer "met its prima facie burden of demonstrating that the plaintiffs failed to satisfy this portion of the policy by showing that the contract defined the leased premises as the school auditorium and three classrooms, and that the accident . . . occurred outside the school building."
Editor’s Note:  This summary was provided to you as a courtesy by Max Gershweir, Managing attorney, Law Office of Max W. Gershweir, who comments – and It is difficult to disagree, that he sees “no way to harmonize this opinion with existing case law on the subject.”

This case provides a good read on a timely and popular topic.  Questions about the breadth of additional insured status still perplex the courts these days.  Frequent readers of this column know that the yin and yang of AI coverage are BP Air Conditioning and Worth Construction Company, two decisions from the Court of Appeals.  BP provided a broad reading of AI coverage for defense obligations and Worth offered a narrow reading of AI coverage for indemnity obligations.   This case ends up closer to Worth. 

01/24/12         GEICO v. Albino
Appellate Division, Second Department

Once Timely Application to Stay UM Arbitration Is Made, Amendment Made Thereafter Considered Timely as Well
Albino sought uninsured motorist (“UM”) benefits under a GEICO policy, claiming he was injured in a hit-and-run accident.  Within 20 days of receiving the petition, GEICO moved to stay arbitration for reasons not spelled out in the decision.  After the 20 day period expired, GEICO moved to amend its petition seeking to claim that no hit-and-run accident had occurred.  Court allowed the amendment as the proposed amendment did not result in any surprise.  The appellate court also upheld the decision in the framed issue hearing that, in fact there was no physical contact between Albino’s car and the alleged hit-and-run vehicle.
Editor’s Note:  A reminder:  if an uninsured or underinsured carrier (SUM policy) seeks an adjudication that the petitioner is not entitled to coverage because of a question of law that application must be made within twenty days of the demand or request for arbitration.  In this case, the arbitrator would not have had the power to determine that there was no physical contact between the claimant’s car and the hit-and-run vehicle.  That decision must be made by a court, preliminary to the arbitration, and the right to have that matter decided would be lost if an application for stay is not made within 20 days.

01/24/12         USF&G v. American Re-Insurance Co.
Appellate Division, First Department
New York Appellate Court Upholds Cedent’s Follow-the-Fortunes Judgment on Asbestos Losses
In a long-standing reinsurance coverage dispute over significant asbestos losses, a New York appellate court has affirmed, with one dissent, summary judgment in favor of the cedent and against the reinsurers upholding the cedent’s allocation of these asbestos losses to its reinsurance contract on follow-the-fortunes grounds. 

This dispute arises out of the sale, distribution, and installation of asbestos-containing products in the 1950s and 1960s.  The insured’s business dissolved in 1967 and was taken over by a successor company.  Starting in the 1970s, personal injury actions were brought against the successor based on exposure to the insured’s products.  The successor sued the cedent for coverage of these personal injury actions in 1993 and the cedent disclaimed, arguing among other defenses, that it had not insured the successor.  In 1997, a California appeals court held that the successor was not entitled to coverage under the cedent’s policies issued to the insured, so the successor resurrected the insured and assigned its insurance policy rights to the successor.  The cedent’s claim that the assignment was unenforceable was rejected by the court and the cedent ultimately settled the insurance coverage action in 2002 for a substantial sum.  As part of the settlement, the successor filed for bankruptcy protection and a trust fund was created to the payment of existing and future asbestos claims.

The reinsurance dispute involved a series of excess-of-loss reinsurance contracts over many years.  Following the 2002 insurance coverage settlement, the cedent submitted reinsurance billings to its reinsurers by allocating the settlement to the 1959 policy year and all the reinsurance claims to the 1959 treaty year.  The reinsurers resisted the billing based on a different understanding of the cedent’s retention under the reinsurance agreements and that the successor’s bad faith claim exposure was being ceded when that exposure was not covered.  The reinsurers commenced this litigation in 2002 and the parties moved for summary judgment.  The motion court granted the cedent’s motion and denied the reinsurers’ motion.

On appeal, the reinsurers contended that the cedent acted in bad faith from its initial denial of its duty to defend and indemnify the successor to its reinsurance presentation.  The reinsurers claimed that the cedent’s bad faith breached its duty of utmost good faith.  In affirming the grant of summary judgment to the cedent, the appellate court distilled the dispute down to a question of fact concerning the increase of the cedent’s retention in the excess-of-loss reinsurance agreements, and a question of law concerning the application of the follow-the-fortunes doctrine.

The appellate court made short shrift of the reinsurers’ factual argument, pointing to evidence that demonstrated without question in the court’s view that the increase in the cedent’s retention related only to the excess-of-loss contracts from 1962 forward and did not apply to the reinsurance agreements before 1962.  On the follow-the-fortunes point, the court upheld the motion court’s holding that the follow-the-fortunes doctrine required the reinsurers to accept the reinsurance presentation made by the cedent.  The court stated that all of the reinsurers’ arguments on bad faith, allocation, valuation, changes to the loss presentation, were all efforts to second guess the cedent’s decisions and were barred by the follow-the-fortunes doctrine.  Further, the court stated that even if considered on the merits, the reinsurers’ complaints would not excuse the reinsurers from their obligations.

The appellate court also addressed the reinsurers’ argument that the court’s prior decision in Allstate Ins. Co. v. Am. Home Assurance Co., 43 A.D.3d 113 (A.D. 1st Dep’t 2007), mandated reversal of the motion court’s judgment.  In rejecting the reinsurers’ argument, the court pointed out the significant distinction in the facts of the case, where the cedent in Allstate sought to maximize its recovery against the reinsurers by abandoning an allocation directed by a federal court ruling, among other differences.  In this case, the court held, the reinsurers had not demonstrated the existence of an issue of fact with evidence directly contradicting the cedent’s treatment of the underlying claims as separate accidents.

The lone dissent focused on the factual issues and found a genuine issue of triable fact as to whether a portion of the cedent’s settlement with the successor was for bad faith claims, which were not covered under the reinsurance treaty.
Editor’s Note: This summary was provided to you as a courtesy by Larry P. Schiffer, Dewey & LeBoeuf LLP, [email protected] and we are appreciative, as always, for his insight on reinsurance issues.

 

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

01/31/12         Briody v. Melecio
Appellate Division, Fourth Department
Plaintiff Fails to Adequately Address, Given Past History, How Current Problems Are Related to Accident

Plaintiff was rear-ended by defendant and alleged injuries under the permanent consequential and significant limitation of use categories.  In support of her motion, defendant properly submitted medical records which were admissible because they were received from plaintiff’s counsel. Defendant also submitted the affidavit of an orthopedic surgeon who reviewed Plaintiff’s medical records and concluded that the only objective findings were related to a preexisting degenerative condition of the spine.  Defendant’s expert noted that a CT scan, taken several years prior to the accident after plaintiff fell down some stairs, revealed a fractured C6 vertebrae.

In opposition, plaintiff submitted the affirmation of her treating neurosurgeon who asserted that the injury was “new” and caused by the accident.  However, his comparison was based on an MRI report from a year prior to the CT scan.  He also failed to address defendant’s expert’s conclusions that the changes were degenerative.  Plaintiff also submitted reports from an orthopedic surgeon but those reports also did not address defendant’s expert’s findings of pre-existing degenerative changes and the CT scan.  As such, plaintiff did not raise a triable issue of fact because her submissions did not adequately address how, in light of her past medical history, her current problems were related to the subject accident.

01/26/12         Paulino v. Rodriguez
Appellate Division, First Department
Evidence of Contemporaneous ROM Limitations Is Not Prerequisite to Claim

While dismissal of the claims with respect to the cervical and lumbar spine is affirmed, plaintiff’s claim with respect to her left shoulder is reinstated.  Her subjective complaints were supported by an MRI taken approximately two weeks after the accident and which revealed fluid in the subscapular bursa consistent with the diagnosis of bursitis.  She continued to exhibit range-of-motion limitations even after undergoing arthroscopic surgery.  On appeal, and relying on the recent Court of Appeals decision in Perl v Meher, the court noted that “[s]ince injuries may worsen over time, evidence of contemporaneous range or motion limitations is not a prerequisite to plaintiff’s claim.” 

The appellate court also reiterated the well-established rule that although defendants showed that plaintiff’s cervical and lumbar injuries did not meet threshold, if the trier of fact found that the shoulder injury did, then damages could also be awarded for the cervical and lumbar injuries.

01/24/12         Franco v. Supreme Poultry, Inc.
Appellate Division, Second Department
Another Complaint Reinstated

Yet another complaint, this time for a left shoulder injury under the permanent consequential and/or significant limitation of use categories, reinstated based on Perl v Meher.

01/24/12         Howell v. Skody
Appellate Division, Second Department
Defendant Argues No Causation But Her Submissions Reveal Issue of Fact

Plaintiff alleged injuries to the cervical and lumbar spine under the permanent consequential and/or significant limitation of use categories.  Defendant submitted evidence that the injuries were not serious and also argued that they were not causally related to the accident.  Her evidence submissions, however, revealed the existence of a triable issue of fact, and plaintiff submitted sufficient competent medical evidence to withstand defendant’s motion.  Again citing Perl v Meher, the court determined that summary judgment should have been denied.

01/24/12         Kyoung Yun Kim v. Emkay Inc. Trust
Appellate Division, Second Department
Under the New Standard, Plaintiff’s Complaint Is Reinstated

On appeal, another complaint alleging injuries under the permanent consequential and/or significant limitation of use categories, this time for injuries to the cervical and lumbar spine, right shoulder and knee, is reinstated based on Perl v Meher.

01/24/12         Martinez v. Yi Zhong Chen
Appellate Division, Second Department
Ignoring Claims in the Bill of Particulars Is Fatal

Defendant Romero’s motion should have been denied because she did not address plaintiff’s claim of injury to the left ankle set forth in her bill of particulars and did not submit any report of examination of the left ankle.  Although defendant Chen did meet his burden through the reports of his examining orthopedist and neurologist, and also argued that the injuries were not caused by the accident, in opposition plaintiff raised a triable issue of fact through the report of her treating specialist in physical medicine and rehabilitation.  Her specialist concluded that she sustained permanent injuries to her lumbar spine resulting in significant range-of-motion limitations.  This was sufficient to raise an issue of fact under the permanent consequential and/or significant limitation of use categories.  She also submitted sufficient evidence as to causation such that Chen’s motion also should have been denied.
Note:  Again, Perl v Meher

01/24/12         Thaler v. Felsberg
Appellate Division, Second Department
Plaintiff’s Cross-Motion to Compel Defendants to Accept Supplemental Bill of Particulars Granted on Appeal

The trial court’s order granting defendants’ motions and denying, as academic, plaintiff’s cross motion to compel defendants to accept a supplemental bill of particulars, is reversed.  Plaintiff was the trustee of the injured person’s bankruptcy estate.  The claim was that she allegedly sustained serious injuries to her cervicothoracic spine.  Defendants argued that the injuries were not causally related to the accident, but their evidentiary submissions revealed the existence of issues of fact.  Defendants therefore failed to meet their prima facie burdens and the court was not required to consider plaintiff’s opposing papers.  Under such circumstances, plaintiff did not need leave of the court to serve a supplemental bill of particulars and the cross-motion should have been granted.

01/17/12         Nichols v. Thiruvinayagan Thurairajasingam
Appellate Division, Second Department
Plaintiff Raises Issue of Fact With Respect to Lumbar Spine

In a decision with no details, the court affirmed the trial court’s denial of defendants’ motion because, although defendants met their prima facie burden, plaintiff submitted sufficient competent medical evidence to raise an issue of fact with respect to alleged injuries to his lumbar spine under the permanent consequential and/or significant limitation of use categories.

01/17/12         Scheker v. Brown
Appellate Division, Second Department
Bulging Discs Are Not Per Se Evidence of Serious Injury

On appeal, the order of the trial court is modified to grant defendant’s motion with respect to the infant plaintiff, Beverly, but affirmed with regard to plaintiff Scheker. 

With respect to Scheker, the affirmed report and treatment notes were properly before the court and sufficient to raise an issue of fact concerning the alleged cervical and lumbar injuries under the permanent consequential and/or significant limitation of use categories.  However, the report and treatment notes with respect to the infant plaintiff were unaffirmed and therefore not admissible.  In addition, the affirmed report concerning an MRI, which revealed bulging discs from C3-4 through C6-7, was insufficient to establish serious injury absent objective medical evidence as to the extent and duration of the alleged physical limitations.  Moreover, that same report failed to relate the bulging discs to the accident and, as such, defendant’s motion should have been granted with respect to the infant plaintiff.

01/17/12         Katanov v. County of Nassau
Appellate Division, Second Department
Orthopedic Examination Noting Significant Limitations Over One Year After Accident Does Not Support Defendants’ Motion

In October 2008, plaintiff-pedestrian was struck in the parking lot of an assisted living facility by a police car responding to a 911 call.  Plaintiff sued the officer, Nassau County and the Police Department.  The trial court granted summary judgment to defendants, which order was reversed on appeal.  The appellate court found that defendants relied on the report of their orthopedic surgeon who, upon examination of plaintiff a year and a half after the accident, found significant limitations in her shoulders and neck.  Defendants therefore failed to meet their initial burden and their motion should have been dismissed.

The appellate court also found that the trial court applied the wrong standard with respect to liability.  The trial court applied the reckless disregard standard applicable in cases of emergency operation under Vehicle & Traffic Law § 1104, where, under the facts of this case, a standard or ordinary negligence should have been the standard applied.  Therefore, defendants’ motion to dismiss on the ground that the officer’s conduct could not form the basis of liability should also have been dismissed.

 

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

ARBITRATION
01/24/12         Applicant v. GEICO Ins. Co.
Arbitrator Kent L. Benziger, Erie County
Peer Review Report Partially Persuasive But Reliance Upon Journal Pertaining to Work Place Low Back Injuries Not Persuasive

The Applicant sought reimbursement for a TENS unit, LSO brace, and cervical traction unit that were prescribed by Walden Bailey Chiropractic Center as a result of an April 1, 2011 accident.  The treating chiropractor’s letter of medical necessity indicated that the TENS unit was necessary to control and manage pain by blocking the pain message from being sent to the brain without the risk of drugs.

The insurer denied the durable medical equipment based upon a peer review report by chiropractor Snitkoff.  Mr. Snitkoff questioned prescribing the devices so quickly after the accident when the equipment was not complimentary to chiropractic techniques used to increase range of motion and mobility.  He cited to a medical journal to support lack of medical necessity for the LSO brace.  With regard to the traction unit, Mr. Snitkoff opined that a “prudent clinician” would have a patient undergo a course of conservative care and see if there was response to same before prescribing equipment for chronic pain syndrome.  He also cited to a supporting medical journal.

The assigned arbitrator found the peer review report partially persuasive as to the cervical traction unit.  However, the medical journal article relied upon by Mr. Snitkoff for the LSO brace pertained to avoiding job related back injuries which was not related to the issue here.

01/23/12         Applicant v. Respondent
Arbitrator Kent L. Benziger, Erie County
Peer Review Sufficient to Deny LSO Brace and Cervical Traction Unit

The Applicant sought reimbursement for an LSO brace and cervical traction unit prescribed by John Ward, DC arising out of injuries from an April 4, 2011 accident.  The assignor was rear-ended in a KFC drive-thru line and complained of mid back pain, neck and low back pain.  Mr. Ward prescribed the durable medical equipment to decrease pain and increase stability and function.

The insurer denied the durable medical equipment based upon the peer review of Michael Silver, DC.  Mr. Silver cited to a medical journal article which did not support the use of an LSO brace for acute musculoskeletal injuries.  He further opined that the use of such a device only delays the recovery.  Mr. Silver opined with regard to the cervical traction unit that no in-office trial use occurred to determine its effectiveness.  He further relied upon a medical journal for the opinion that traction should be used in combination with manual and physical therapy provided there is evidence of a continuing measureable improvement, which did not exist here.

The assigned arbitrator determined that the peer review report was persuasive as it relied upon multiple sources to document the peer reviewer’s opinion.  Meanwhile, the Applicant submitted minimal records and a cursory checklist prescription/letter of medical necessity which did not rebut the insurer’s contentions.

01/23/12         Applicant v. New York Central Mut. Fire Ins. Co.
Arbitrator Kent L. Benziger, Erie County
Applicant Was Offered Employment Pre-Accident and Entitled to Lost Wages

The Applicant sought lost wages from December 1, 2010 through September 14, 2011, arising out of a July 1, 2010, accident.  The issue at the arbitration was whether the Applicant had been offered employment prior to the accident thus entitling him to lost wages.  The Applicant contented he was offered a custodian job in the Buffalo Public School System with a July 19, 2010, start date.  The Applicant submitted a disability slip and a note from the prospective employer verifying Applicant’s contention.  Based upon this, the insurer paid Applicant lost wages from July 2010 through November 2010.

In December 2010, the Applicant’s claim was assigned to a different adjuster who deemed the prior verification insufficient to substantiate a lost wage claim.  That adjuster requested additional verification due to “new procedures.”  The prospective employer was asked to provide a wage verification form and answer specific questions.  Thereafter, SIU questioned the prospective employer who admitted the Applicant was his long-time friend and that he had advised the Applicant that when someone left he would offer him a job.  The Applicant applied for a position between June and July 19, 2010.  He was offered a position two weeks prior to July 19, 2010 – which would be July 5, 2010, after the motor vehicle accident.  SIU also questioned the Applicant, with his counsel present.  The Applicant advised that he was laid off of his job as a sheet metal worker in May 2010.  He was offered a position with the Buffalo Public School System in May or June 2010 with a July 19, 2010, start date.  The Applicant did not fill out an application but had a verbal agreement with the prospective employer.

The insurer denied the lost wage claim on the ground that the Applicant did not provide credible evidence of a lost wage claim.  However, the assigned arbitrator determined that the Applicant did supply evidence of a lost wage claim.  He rejected any contention that the Applicant provided inconsistent testimony.  Rather, the assigned arbitrator believed that the assigned adjuster kept asking the same question until an answer was provided that could support a denial.  Also, the assigned arbitrator determined that the NF-10’s box 33 did not contain specific enough language to apprise the Applicant of the basis for the denial.

01/20/12         Applicant v. GEICO Ins. Co.
Arbitrator Veronica K. O’Connor, Erie County
C-4YY (09-01) Form Sufficient to Provide Notice of Claim

The Applicant challenged a denial of all no-fault benefits on the ground that the Applicant failed to provide written notice of claim within 30 days from the accident.  On June 25, 2007, the Applicant was involved in an accident wherein she was treated and released from the emergency room.  That evening the Applicant collapsed and was hospitalized until July 4, 2007.  The Applicant’s husband testified that he was employed by the insurer and was going through a divorce from the Applicant at the time of this accident.  He contacted the insurer within a week after the Applicant’s accident to report the accident’s details.  The insurer provided the no-fault application dated July 9, 2007 to the Applicant.  The Applicant’s husband helped her fill out claim forms once she was released from the hospital.  A C-4YY (09-01) was submitted to the insurer on July 22, 2007.  The form contained questions related to the accident’s details.

The insurer requested, on February 19, 2008, verification in the form of a completed no-fault application.  This was in response to a bill from the hospital received by the insurer on February 15, 2008.  The insurer issued a denial on February 22, 2010, citing to the violation of the 30 day rule.

The assigned arbitrator determined that the C-4YY (09-01) form satisfied the notice requirements under the regulations.  Also, she was very persuaded by the Applicant’s and her husband’s testimony at the hearing that the insurer received timely notice of the claim. 

01/20/12         RB Lawrence Ambulance v. Allstate Ins. Co.
Arbitrator Mary Anne Theiss, Onondaga County
Ambulance Bills Not Subject to Medicaid Fee Schedule

The assigned arbitrator rejected the insurer’s contention that reimbursement of an ambulance bill is based upon the Medicaid fee schedule.  She referenced her prior decisions which were master arbitrated and affirmed.  Further, the master arbitrator’s decision was subjected to a motion to vacate which was denied.  Accordingly, the assigned arbitrator relied upon her prior decisions which have been affirmed on this issue.

01/20/12         Applicant v. GEICO Cas. Ins. Co.
Arbitrator Kent L. Benziger, Erie County
Reasonable Excuse Provided for IME No Show

The insurer denied the Applicant’s no-fault claim based upon her failure to appear for two scheduled independent medical examinations (“IME”).  The insurer scheduled the first IME for February 26, 2009, but the Applicant did not attend as she had an adverse reaction to an injection for pain the day before.  The Applicant testified she called the adjuster the day of the IME to advise of this situation and advised she could not attend the examination.  A second IME was scheduled for March 26, 2009, which the Applicant confused the time of the exam.  She realized her error and began driving to the examination.  The Applicant called the IME scheduling service who told her to stay home.  She also called the adjuster who instructed her to write a letter explaining the situation and requesting a new exam be scheduled.  Instead, the insurer denied the claim on failure to attend scheduled IMEs.

The assigned arbitrator found the Applicant’s testimony credible and candid.  He determined that she presented a reasonable excuse and the denial was not proper.

LITIGATION

01/25/12         Diagnostic Med., PC a/a/o Angelo Kitkas v. Clarendon Nat. Ins. Co.
Appellate Term, First Department
Insurer’s Summary Judgment Motion on Lack of Medical Necessity Should Have Been Granted

The insurer’s summary judgment motion should have been granted as it demonstrated proper and timely mailing of the denials and were based upon a sworn peer review evidencing lack of medical necessity.  The plaintiff’s attorney affirmation, without any medical evidence, was insufficient to raise any issue of fact precluding summary judgment.

01/17/12         Elmont Open MRI & Diag. Radiology, PC a/a/o Marlene Eskanazy v. Tri State Consumer Ins. Co.
Appellate Term, Second Department
Again, Insurer’s Summary Judgment Motion Should Have Been Granted

The insurer’s summary judgment motion should have been granted.  The plaintiff conceded the insurer timely mailed the denials, which were based upon lack of medical necessity and billing in excess of the fee schedule.  The insurer also presented an affirmed peer review report.  The plaintiff did not submit any medical evidence to raise a triable issue of fact precluding summary judgment.

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

Property

01/31/12         Ashkenazi v AXA Equitable Life Insurance Company
Appellate Division, First Department
Motion for Summary Judgment for Material Misrepresentation Denied Where there is a Question of Fact as to Carrier’s Underwriting Practices
Plaintiff, in his capacity as trustee for a Life Insurance Trust, commenced the instant action against AXA after the carrier denied the trust’s claim for coverage.  AXA’s denial, and attempted recession, was premised upon the belief that the assured had misrepresented her net wealth in the application. 

AXA later moved for summary judgment on the basis of the assured’s material misrepresentation, and plaintiff opposed.  In denying the motion on a question of fact, the Court ruled that additional discovery was warranted to determine if AXA’s underwriting guidelines were actually followed, and whether AXA had previously decided to ignore underwriting guidelines in similarly situated cases. 

The First Department also dismissed plaintiff’s request for a refund of premiums.  Simply stated, the court noted that if coverage were triggered the refund would be inapplicable.  As such, the threshold issue of coverage must first be answered before a decision on premium refunds could be addressed.

01/31/12         Alghein v Utica First Ins. Co.
Appellate Division, Fourth Department
Motion for Summary Judgment Fails Where There is No Evidence that the Proposed Exclusion for a Central Station Fire Alarm was Triggered
Plaintiff commenced the instant action after Utica First disclaimed and denied plaintiff’s fire claim.  Apparently, Utica First’s denial was based upon an exclusion in the policy which precluded coverage for losses where plaintiff failed to maintain a central station fire alarm.  Unfortunately for Utica First, the Court ruled that the carrier had failed to establish, as a matter of law, that no such fire alarm existed.  Where Utica First had not established their prima facie case, accordingly its motion for summary judgment had to be denied.

01/26/12         Magie v. Preferred Mutual Insurance Company
Appellate Division, Third Department
Minimal Errors in Plaintiff’s Proof of Loss Did Not Give Rise to Fraud
Plaintiff’s home was rendered a total loss due a fire that occurred in August of 2005.  As a result, plaintiff submitted a proof of loss which alleged damages in excess of the $487,000 in dwelling coverage and $340,900 in personal property coverage. 

In March of 2006, Preferred disclaimed coverage on the basis that plaintiff had fraudulently misrepresented the amount of loss sustained to personal property.  As such, Preferred stated that it was considering the policy void ab initio

The matter ultimately proceeded to a bench trial which resulted in plaintiff being awarded $252,000 under the dwelling portion of the policy, and $340,900 in losses under the personal property portion.  In so holding, the Court noted that the discrepancies in plaintiff’s proof of loss were only minor.  This was especially true in light of the overwhelming amount of material plaintiff submitted to the carrier.  Accordingly, the trial court ruled that Preferred had failed to establish the plaintiff had an “intent to defraud.” 

In refusing to disturb the trial court’s ruling, the Appellate Division noted that plaintiff had adequately established his losses as a result of the fire.  In addition, the Court also refused to apply the co-insurance clause of the policy.  As explained in the decision, the co-insurance policy must be plead as an affirmative defense and it was not in this case.  In any event, with respect to a total loss (as this was) the co-insurance set off is in applicable.

01/26/12         Capital Bank & Trust Co. v Gulf Insurance Company
Appellate Division, Third Department
Knowledge of Prior Acts Fatal to Coverage Claim
Plaintiff procured a financial institution bond from Gulf which was in effect from December 12, 2002 through December 12, 2003.  The bond provided coverage for losses which resulted from fraudulent or dishonest acts. 

In October of 2003, plaintiff learned that a loan officer had been forging the bank’s president’s name on loan transactions which resulted in losses of more than $1.7 million.  Upon learning of the loss, plaintiff submitted a claim under its coverage with Gulf.  Gulf declined the request for coverage, and the instant action was commenced. 

In the course of discovery, plaintiff’s president testified that he had previously learned that the loan officer had been forging signatures on loan documents.   This was prior to the bond being issued by Gulf.  However, because the forged signatures had not resulted in any loss, and because the loan officer was a top performer at the company, nothing was reported.

At the close of discovery, Gulf moved for summary judgment.  In support of its motion, Gulf cited an exclusion for “losses arising out of circumstances known before the inception of the policy.”  In addition, Gulf also relied upon an exclusion for employee conduct the moment it becomes known to a “non-conspiring” director or officer. 

Plaintiff opposed the motion by arguing that the acts previously committed by the wayward loan officer were not fraudulent or dishonest acts because they did not result in loss to the plaintiff.  The Appellate Division was not persuaded where, as here, the exclusion at issue did not have a loss requirement.  Indeed, all Gulf was required to establish was the existence of a dishonest act.  Clearly, forging documents without authority is, by its nature, dishonest.  Moreover, the court went on to state that the knowledge of the dishonesty, as confirmed in the deposition of the bank president, likewise precluded coverage. 

And Potpourri

01/31/12         Voom HD Holdings, LLC v. EchoStar Satellite L.L.C.
Appellate Division, First Department
Duty to Preserve E-Data is Triggered As Soon As Litigation Can be Anticipated; Threats of Litigation Can be Enough to Trigger the Duty
This matter arises out of contractual dispute between a media company (Voom), and the entity contractually obligated to distribute the product.  Essentially, EchoStar agreed to distribute Voom’s programming over a period of 15 years.  It appears that less than two years into the deal, EchoStar came to the realization that its agreement with Voom was not financially beneficial.

Thereafter, it appears that EchoStar undertook a concerted effort to develop arguments which would ultimately result in the contract being renegotiated or voided.  EchoStar argued that Voom had failed to invest the requirement amount of money into service, and also made material breaches of its duties to produce certain content. 

Accordingly, EchoStar sent a series of letters to Voom alleging that Voom’s conduct had breached the agreement.  The first was issued in June of 2007, and advised Voom at that time that EchoStar was entitled to terminate the agreement at its option.  In July of 2007, EchoStar again wrote Voom.  This time, EchoStar pointedly noted that it was reserving all of its rights in equity or at law.   Several other letters of sabre-rattling followed throughout July of 2007. 

In last July of 2007, Voom recognized the potential of litigation and accordingly placed a “litigation hold” on all electronically stored data.  This included the preservation of all e-mails. 

In October of 2007, EchoStar’s own internal documents (which were fortuitously captured in an earlier litigation) established that the company was contemplating formal legal action against Voom.  In November of 2007, EchoStar formally threatened to terminate the agreement if Voom did not consent to a series of concessions demanded by EchoStar.  Ultimately, EchoStar attempted to terminate the agreement in July of 2008.  Voom commenced the instant litigation on the next day.

Despite apparently concocting the scheme to terminate or renegotiate the agreement in June of 2007, threatening to avail itself of all available rights at law in July of 2008, and actively discussing litigation at internal meetings in November of 2007, EchoStar never placed a litigation hold on electronically stored data (including e-mails).  Indeed, EchoStar did not change its normal document destruction policy until four months after the commencement of this litigation. 

During the time leading up to the commencement of the suit, EchoStar destroyed all e-mails, not otherwise preserved, within seven days.  Shortly after the commencement of this lawsuit, EchoStar slightly altered its plan to require each employee to make a judgment call as to the content of each particular e-mail and its possible relevance in the instant lawsuit. 

Naturally, Voom moved for sanctions based upon EchoStar’s alleged spoliation of electronically stored data.  Voom argued that EchoStar’s conduct was particularly egregious where it had previously been sanctioned, in a totally different lawsuit, for engaging in, essentially, the same activity.  In moving, Voom urged the Court to follow the standing precedent of Zubulake v UBS which provided that “[o]nce a party reasonably anticipates litigation, it must suspend its routine document retention/destruction policy and put in place a litigation hold to ensure the preservation of relevant documents.”

In following the majority of courts around the Country, the First Department noted that a “litigation hold” became required as soon as EchoStar reasonably could have anticipated litigation.  In applying this standard, the Court had little trouble determining that EchoStar should have anticipated litigation when it, itself, began threatening litigation in July of 2007. Notably, this was the same time period that Voom instituted its own “litigation hold.” 

In so holding, the Court declined to accept EchoStar’s position that a “litigation hold” was not necessary until a specific claim is raised.  The Court noted that waiting until there was a formal litigation claim before requiring a “litigation hold” would enable litigants to erect a facade that they were attempting to resolve a matter without the need of litigation all the while preparing for the inevitable behind the scenes.

In addition, the Court also rejected EchoStar’s position that it should be able to rely upon its employees’ discretion as an appropriate “litigation hold.”

After determining that EchoStar had failed to enact a proper “litigation hold” when it became required to do so, the Court next focused on the appropriate remedy for Voom.

Initially, the Court noted that a movant for spoliation sanctions must establish:

  • The party against whom the sanction is sought had control over the documents;
  • The documents were destroyed with a culpable state of mind (including negligence); and,
  • The destroyed evidence was relevant.

 

The Court also stressed that any of the following would constitute a finding of “gross negligence”:

  • failure to issue a “litigation hold” (when appropriate);
  • failure to identify key players and ensure their respective electronic data is preserved; or,
  • failure to cease the deletion of e-mails.

 

The First Department also established a burden of proof on spoliation cases like the instant matter:

  • Intentional or willful destruction is sufficient to presume relevance;
  • Gross negligence is sufficient to presume relevance; and
  • Mere negligence does not give rise to a presumption, but rather relevance must be proved by the party seeking sanctions.

 

Importantly, any presumption of relevance may be rebutted by a demonstration that:

  • the information sought is already in the possession of the moving party;
  • the evidence sought would not support the moving parties claims.

 

In the instant case, the Court noted that EchoStar’s failure to preserve electronically stored dated (including e-mails) was a result of gross negligence.  In addition, the Court also noted that the incident prejudiced Voom’s ability to prosecute the instant case because the items sought in e-discovery were certainly material to the conduct of EchoStar. 

As a result of EchoStar’s conduct, the Court ruled that Voom would be entitled to “adverse inference” at the time of trial.  However, it is notable that the Court stopped short of striking EchoStar’s Answer. 

01/24/12         Al-Amin Johnson v MVAIC
Appellate Division, First Department
Plaintiff’s Claim Against MVAIC Precluded by Statute of Limitations
Plaintiff’s action was barred where it failed to commence the action within the applicable statute of limitations.  Although the time to file had been tolled due to the infancy of the plaintiff, it unquestionably expired on plaintiff’s twenty-first birthday.

In so holding, the Court noted that concurrent litigation related to whether the plaintiff qualified as an insured under a policy of insurance issued to his stepfather did not excuse the failure to timely commence the action against MVAIC.  The Court noted that nothing stopped the plaintiff from filing the action against MVAIC, while the other matter was ongoing.

01/17/12         Katanov v County of Nassau
Appellate Division, Second Department
Reckless Standard Under V&T Law § 1104 Does Not Apply to Non-Emergency Situations
Plaintiff was injured when he was struck by a police cruiser.  At the time of the incident, the police officer operating the vehicle was responding to a call.  From the facts of the case, it is revealed that the police cruiser was traveling at approximately 2 mph at the time of the incident and was in the process of turning into a parking space. 

In any event, the County moved for summary judgment arguing that it was absolved from liability by operation of V&T Law § 1104(e) which provides that an emergency vehicle can only give rise to liability if it is operated with reckless disregard.  Here, there was no recklessness, and as such the County reasoned that plaintiff’s claim must be precluded as a matter of law.

In affirming the trial court’s denial of the County’s motion, the Appellate Division noted that the reckless disregard standard only applies in emergency situations where the injury-causing conduct is specifically exempted by statute.  Other conduct that is not specifically exempted will be governed by an ordinary negligence standard.  Where the incident involved a police cruiser pulling into a parking space at minimal speed, it was deemed not to be a situation where the reckless conduct standard applied.

 

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

We are beginning to see some activity on the property and casualty side of things.  However, most of the bills before either the Assembly or the Senate are bills each have passed previously.  The Senate Insurance Committee met on Monday with no bills on the calendar related to the property and casualty industry.  There were a few health, life and disability insurance related bills. 

One bill that has been introduced for a few years in a row is S3057-A.  This bill has passed the Senate for the past few years and died in the Assembly.  It seeks to establish the “Interstate Insurance Product Regulation Compact” which would regulate individual and group annuity, life insurance, disability income and long-term care insurance products among member states.  The purpose of the bill is to promote and protect the interest of consumers as well as creating more uniformity in insurance products throughout the states.  The goal is to improve the coordination of regulatory resources in setting uniform standards.

If a state agrees to join the Compact, the states that are members would develop uniform standards that are developed through a rule making committee that requires approval of 2/3 of the members.  However, a state may opt out of the uniform standard by regulation or legislation if it does not agree with a product standard.  The individual states will still regulate the products issued in its states.

My understanding is that states are concerned with joining the compact and still maintaining their ability to make rules specific to the concerns of the residents of their particular state.  Thus, the opt-out provision.

S578

This bill was introduced and passed in the Senate last year, but it died in the Assembly.  This bill seeks to include within the class D felony of forgery in the second degree, the forgery of a certificate of insurance or an insurance identification card.  This becomes a class C felony of forgery in the first degree if there are 10 or more written instruments.

 

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

01/26/12         Allstate Property & Casualty Ins. Co. v. Squires
Third Circuit Court of Appeals – Pennsylvania
Did Injuries Arise Out of Ownership, Maintenance or Use of an Uninsured Auto?
On October 20, 2008, Squires was driving his pickup on State Highway 51 in Beaver County, Pennsylvania when he was injured after swerving to avoid a two foot square cardboard box lying in the middle of the lane. The parties were uncertain as to how the box came to be left in the road but, for purposes of its motion in the district court, Allstate stipulated that an unidentified vehicle dropped the box.  Squires argued that another vehicle must have dropped the box because at the time of the accident he was traveling on a limited access highway with no adjacent sidewalks or other means of pedestrian access.

After the accident Squires made a claim for UM benefits.  After Allstate rejected the claim it filed this action.  Squires responded with counterclaims for breach of contract and insurance bad faith under 42 Pa. Cons. Stat. Ann. §8371.

Squire’s policy provides in relevant part:  “We [Allstate] will pay damages to an insured person [Squires] for bodily injury which an insured person is legally entitled to recover from the owner or operator of an uninsured auto.  Bodily injury must be caused by an accident and arise out of the ownership, maintenance, or use of an uninsured auto.”  The policy’s language track the Pennsylvania Motor Vehicle Financial Responsibility Law [“MVFRL”] which requires that insurers offer UM benefits in motor vehicle liability insurance policies.  The MVFRL defines “uninsured motor vehicle” to include, inter alia:  “An unidentified motor vehicle that causes an accident resulting in injury provided the accident is reported to the police or proper governmental authority and the claimant notifies his insurer within 30 days, or as soon as practicable thereafter, that the claimant or his legal representative has legal action arising out of the accident.”

The sole issue to be determine was “whether an accident caused by a box which fell from an uninsured motor vehicle can be attributed, as a matter of law, to the ‘ownership, maintenance or use’ of an automobile.”

The district court answered this question in the negative, concluding that there is UM coverage for policies containing the “arising out of” language only when a vehicle – and not some other object such as the box – was the instrumentality causing the accident.

The Third Circuit Court of Appeals [“Court”] reversed.  The Court began its analysis by reviewing the Pennsylvania Supreme Court Case, Manufacturers Casualty Insurance Co. v Goodville Mutual Casualty Co. (170 AD2d 571 [Pa. 1961]).  In that case the court held that, “construed strictly against the insurer, ‘arising out of’ [in an insurance policy] means causally connected with, not proximately caused by.  ‘But for’ causation, i.e., a cause and result relationship, is enough to satisfy the provisions of the policy.”  The Court pointed out that this formulation of “arising out of” is now well settled in Pennsylvania, and has been applied in various insurance law setting, both when interpreting insurance policies and assessing issues arising by operation of statutes.  Accordingly, the court stated that at this time Squires only needed to adequately allege that the unidentified vehicle’s use was a ‘but-for’ cause of his injuries.

In its analysis, the Court recognized that Pennsylvania intermediate appellate courts quite broadly have indicated that if injuries are caused by “an instrumentality or external force other than the motor vehicle itself,” the vehicle will not be regarded as having contributed to the cause of the injuries pursuant to the “arising out of” language.  (See e.g., Smith v United States Automobile Ass’n, 572 A2d 785 [Pa. Super Ct 2005](boy in hay wagon being pulled by tractor throws hay in face of boy riding bicycle)).  The Court found those cases to be distinguishable because in this case, in contrast to what the Court called incidental involvement of the vehicle in the boy’s injury in Smith, the Court inferred that the unidentified vehicle directly was involved in the accident as it was transporting the box as cargo – a common use for many types of vehicles traveling on a roadway.  The Court determined that when the unidentified vehicle dropped the cardboard box, it had more than an incidental involvement in the situation that gave rise to Squire’s injuries.  Rather, the accident was a direct consequence of the use of the vehicle for its intended purpose.

The Court noted that accepting for purposes of this appeal that the unidentified vehicle that dropped the box on the highway was an “uninsured” vehicle, there was sufficient causal connection for the Court to determine that Squire’s injuries “arose out of” the use of a vehicle under his insurance policy.

Finally, the Court noted that the MVFRL is to be liberally construed in order to afford the greatest possible coverage to injured claimants and “in close or doubtful insurance cases, a court should resolve the meaning of insurance policy provisions or legislative intent in favor of coverage for the insured.” 

In concluding, the Court held that in light of Allstate’s concession for purposes of its motion for judgment on the pleadings that the accident was caused by a box dropped from an unidentified vehicle, Squire’s accident “arose out of the maintenance, ownership, or use” of an uninsured vehicle under his insurance policy.

 

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

01/12/12         Virginia Sur. Co. Ins., Inc. v. Travelers Prop. Cas. Co. of Am.
Supreme Court, New York County
Underlying Complaints Trigger Duty to Defend; Whether Accident Was Caused by Insured’s Work Is a Question of Fact
Virginia Surety Co. Ins. (“Virginia Surety”) issued a CGL policy to GM Crocetti Flooring (“Crocetti”).  Crocetti was hired by Bovis Lend Leasing to perform work on a construction site.  In the contract, Crocetti agreed to name Bovis as an additional insured on its CGL policy.  On December 1, 2005, an elevator accident occurred.  With the exception of one, all passengers injured in the elevator accident were employees of Crocetti.  Thereafter, Bovis tendered its defense in the eventual lawsuits to Virginia Surety, who assumed the defense without a reservation of rights letter.

The elevator at issue was furnished, installed and maintained by another company, Fujitec America, Inc. (“Fujitec”).  Fujitec likewise entered into a contract with Bovis in which it agreed to name Bovis as an additional insured.  Fujitec complied with this provision by obtaining a policy with Travelers. Bovis likewise tendered its defense to Travelers; however, Travelers only agreed to defend and indemnify Bovis under a reservation of rights letter.  Specifically, it notified Bovis that there was no coverage for Bovis' sole negligence or independent acts and omissions.  The letter further noted that Bovis was only an additional insured for acts caused by Fujitec's "work" for Bovis.

In 2008 and 2009, Virginia Surety settled five underlying lawsuits.  It then sought to have Travelers indemnify it for half of the settlement amount and half of the defense costs.  When Travelers refused, Virginia Surety brought this action and moved for summary judgment.

In opposition to this motion, Travelers argued that there where issues of fact as to whether Bovis was solely negligent for the accident in that it overloaded the elevator and added protective material reducing the elevator’s capacity.  Further, Travelers argued that its endorsement only provided that Bovis was an additional insured “with respect to liability caused by [Fujitec's] work for [Bovis]."  Based on this endorsement, Travelers argued that the record did not show that the elevator accident was caused by Fujitec's work but, rather, demonstrated that the accident was the sole result of Bovis' negligence.  

In considering this matter, the Court repeated the well-known rule that “[a]n insurer's duty to defend its insured is exceedingly broad.”  Here, according to the court, the underlying complaints were sufficient to trigger a duty to defend on the part of Travelers.  Notably, however, the court held that Travelers was only required to pay have of the defense costs for the underlying actions.  It was not obligated to reimburse Virginia Surety for any amounts its expended seeking coverage. 

With respect to the duty to indemnify, the court held that in order for Bovis to recover under the endorsement in the Traveler's policy with Fujitec it must be shown that Fujitec's work "caused" the elevator accident, and that the accident was not result of the independent acts and omissions of Bovis.  Based on the record, here, it could not be said as a matter of law that Fujitec's work, which included installing and maintaining the elevator at issue, did or did not cause the accident.   Accordingly, the portion of Virginia Surety’s motion seeking indemnity was denied.
Take Away:  In this decision, the Virginia Surety and Travelers policies contained different AI endorsements, a fact that was acknowledged by the court.  The Virginia Surety policy provided that Bovis qualified as an additional insured for liability "arising out of your work' [i.e. Crocetti's work]..."  In comparison, the Travelers policy provided coverage to Bovis as an additional insured for liability "caused by your [i.e. Fujitec's] work." 
It is clear that Travelers attempted to make the same argument that the defendant made in W & W Glass Systems, Inc. v. Admiral Insurance Company, a case reported on by Dan Kohane last week (i.e., that “caused by” has a negligence trigger”).  In rebuffing defendant’s argument, the First Department stated that the phrase “caused by the named insured’s operations” in an additional insured endorsement is as broad as the phrase “arising out of the named insured’s operations.”  Essentially, it rejected the idea that there was a negligence trigger when the phrase “caused by” is used.  Here, the court did not go that far, but it clearly was hesitate to accept that “arising out of” was significantly different than “caused by.”  Due to this hesitancy, it appears that the court elected to find a question of fact. 

01/11/12         Indemnity Ins. Corp. RRG v. Scottsdale Ins. Co.
Supreme Court, Nassau County
No Additional Insured Coverage Where Contract Submitted in Support of Motion for Summary Judgment Was Not Executed by Both Parties and Relevant Names Were Undecipherable
MGM Productions (“MGM”) and its insurer commenced this action seeking defense and indemnity from Scottsdale in relation to a bar brawl and resulting lawsuit.  MGM had entered into a security contract with Scottsdale’s insured, Alpha 1 Security Inc. (“Alpha”).  MGM asserted that the brawl was due to Alpha’s failure to protect patrons from harm as it was required to under the contract.

The contract, allegedly in effect at the time of the incident, provided as follows, “Alpha 1 warrants and represents that it has in full force and effect applicable insurance (and that a) Certificate of Insurance is available upon request.”  Upon receipt of MGM’s tender, Scottsdale denied the request essentially asserting that pursuant to the contract Alpha only agreed to name MGM as an additional insured on a professional liability policy, not a commercial liability policy.  Scottsdale also asserted that there was no contract in effect at the time of the loss. 

In opposition, MGM argued that Scottsdale was estopped from denying the existence of a contract between MGM and Alpha since it provided MGM coverage for a different incident related to Alpha’s security. 

Ultimately, the court held, notwithstanding plaintiffs’ assertions to the contrary, that the record was devoid of "undisputed evidence" demonstrating MGM's status as an additional insured under the Scottsdale policy. Plaintiffs failed to proffer a written agreement between the MGM, and Alpha requiring Alpha to name MGM, as an additional insured on is general liability coverage as required by the Scottsdale policy.  Notably, the contract MGM submitted in support of its motion for summary judgment in this action was undated; it did not include MGM’s signature; and the names of the client company and witness were undecipherable.  Further, based on the plain language of the contract, even assuming it was in effect, there was no explicit requirement that MGM be named as an additional insured.

With regard to the final argument, the court held that, generally, judicial estoppel, or the doctrine of inconsistent positions precludes a party who assumed a certain position in a prior legal proceeding from, and who secured a judgment in its favor from assuming a contrary position in another action simply because its interests have changed.  No such showing was made here. 

01/11/12         Carter v. Praetorian Ins. Co.
Supreme Court, New York County
No Coverage Where Plaintiff Sold Artwork, but Was Never Paid
Defendant issued plaintiff a policy of insurance on six pieces of artwork.  Plaintiff alleges in his complaint that the artwork was stolen or converted by Lawrence Salander, and he is entitled to compensation.  Apparently, Salander, the owner of an art gallery, met plaintiff, a collector.  In 2005, Salander offered to purchase the artwork for $1.5 million.  However, when the date came to exchange the artwork for the check, Salander failed to bring it with him.  Rather, he told plaintiff that he would give him the check soon.  Plaintiff never received full payment.  The two parties eventually entered into a security agreement and executed a promissory note to secure the outstanding debt. 

When the debt was never paid, in 2008, plaintiff made a claim under the defendant’s policy.  It asserted that the artwork was not sold, but rather only consigned to Salander.  Eventually, defendant denied coverage based on, among other things, late notice of claim, no physical loss and a lack of an insurable interest.

In considering the issues raised by both parties, the court granted defendant’s motion for summary judgment.  Initially, the court held that plaintiff’s notice was late.  The loss occurred in 2005 when plaintiff gave the property to Salander; yet, a claim was not made until 2008.  Further, even assuming plaintiff had a valid reason for the delay in seeking return of the artwork (and in turn immediate notice may not have been appropriate), it eventually did sue Salander under the note eleven months prior to giving notice.  Next, with regard to the lack of a physical loss, the court agreed with defendant that the property was sold.  While plaintiff submitted an affidavit in opposition to this motion attesting that the property was merely consigned, this conflicted with prior EUO testimony and was insufficient to create a question of fact.  Lastly, the court found that as plaintiff sold the artwork, he did not have an insurable interest in him.  In other words, he had no “substantial economic interest in the safety or preservation of the property from loss, destruction or pecuniary damage.”   

01/09/12         Matter of Progressive Ins. Co. v. Herschberg
Supreme Court, Nassau County
Although Facebook Photos Seemingly Conflicted with the EUO Testimony Provided by the Insured, the Court Still Refuses to Deny Coverage Based on Fraud or Misrepresentation
This decision arises from a framed-issue hearing.  It examines the impact of photos posted on Facebook that contradict EUO testimony provided by defendant.  Defendant was involved in a motor vehicle accident and made a claim with his insurer for UIM benefits.  Progressive brought this action to stay an UIM arbitration based on fraud or misrepresentation.  The relevant endorsement provided “[w]e may cancel this policy and deny coverage under this policy at any time including after the occurrence of an accident or loss, if you:  (1) made incorrect statements or representations to us with regard to any material fact or circumstance; (2) concealed or misrepresented any material fact or circumstance; or (3) engaged in fraudulent conduct at the time of application or in connection with the presentation or settlement of a claim.”

Progressive sought to say the arbitration based on photos it discovered on defendant’s Facebook page.  The photos showed defendant standing on top of a pool slide, climbing the ladder to the pool slide and bending over a boat trailer.  These photos seemingly conflicted with testimony given at his EUO that, among other things, he could not lift, run, ski, dance or walk upstairs.  Further, he provided testimony that he had not gone on his boat, and had problems bending and walking. 

Based on these issues, Progressive asserted that defendant testified falsely by misrepresenting material facts at the EUO.  In reply, defendant argued that his Facebook pages contained puffery and fantasy, not factual statements. 

Ultimately, the court held that Progressive failed to meet its heavy burden of proof.  The court could not conclude from the record at the subject hearing that defendant’s answers to a hand-picked group of questions were material in the context of his entire EUO testimony, which was not placed into evidence.  While defendant admitted certain of his answers were false or mistaken, he also explained that some of those answers were oversights and misunderstandings at the EUO.

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

SUBCONTRACTORS AND CONTRACTORS NEED TO PUT IT IN WRITING

            A contractor and a subcontractor were apparently used to working together, often without a written contract, which led the subcontractor to its detriment by ignoring the written contract for handling alleged extra work and change orders in the case of Carolina Conduit Systems, Inc., vs MasTec, North America, Inc., (2011 U.S.Dist. LEXIS 122578 [E.D. Va. October 24, 2011]).  The subcontractor, Carolina Conduit, sued the general contractor, MasTec, in connection with a project to construct a duct system and underground conduit system.  Carolina Conduit sought expenses for additional work, but the contractor contended the alleged extra work fell within the scope of the subcontract and, furthermore, Carolina Conduit had not complied with contract provisions governing changes to the work.  The court agreed with MasTec and denied the claim.

            The recovery sought was for “excess flowable fill” allegedly required because, although design drawings called for duct banks to be placed vertically, in the field the ducts had to be constructed horizontally.  Carolina Conduit apparently signed the contract four (4) months after learning about this vertical vs. horizontal placement issue.  The subcontract also contained a requirement that any additional work would be handled via change orders specifying approved pricing or unit prices. 

            Carolina Conduit did not submit a change order for the excess flowable fill.  The court ruled that it had the responsibility to submit a written change order and obtain MasTec’s approval.  The subcontractor’s failure to follow the change order provision was convincing to the court even though Carolina Conduit cited two instances where MasTec employees told Carolina Conduit “not to worry” about the costs associated with the excess fill due to the horizontal duct banks.  The court also deemed important the fact that Carolina Conduit did not cite any other instances where MasTec disregarded the change order provisions on this contract.

            This case stresses the importance of contractors and subcontractors adhering to the change order process in the contract, even if they are familiar and have a good working relationship with each other.  Even though the parties may have some agreement or understanding, at critical times it may be third parties such as sureties, bonding and insurance companies making the decisions and arguments, not the company principals. 

            This case also represents the limited nature of “course of performance” or “course of dealing” which may be inadmissible or not convincing to a court in the face of a detailed construction contract which often contains provisions that it contains the entire agreement of the parties, may not be changed other than by a writing signed by all parties, etc. 

            Carolina Conduit apparently learned about this issue before it signed the contract.  It should not have signed the contract without a pre-approved change order or amendment to the scope of work, or signed the agreement and promptly filed for the change order at that point.  Carolina Conduit’s claim in this instance was further damaged by the fact that it never submitted a change order for the work in question for the contractor or owner to even consider and disallow. 

 

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

01/20/12         Khan v. Dell, Inc.
Third Circuit Court of Appeals
On First Impression, Third Circuit Concludes that the Federal Arbitration Act Permits the Appointment of a Substitute Arbitrator When the Arbitral Body Designated in the Parties’ Agreement is Not Available
The Third Circuit considers on first impression whether Section 5 of the Federal Arbitration Act (FAA) permits the appointment of a substitute arbitrator when the arbitrator designated in the parties’ agreement is unavailable. The relevant arbitration provision stipulated that all claims “shall be resolved exclusively and finally by binding arbitration administered by the National Arbitration Forum (NAF)” under its Code of Procedure. Rule 1 of the NAF Code calls for arbitration administration only by the NAF or by an entity under agreement with NAF. The parties’ agreement did not designate an alternate arbitrator in the event that NAF was unavailable, but its terms and conditions incorporated the FAA by reference.
Plaintiff filed a putative consumer class action in July 2009, alleging design defects in computers manufactured by Dell. When the lawsuit was filed, NAF was barred from conducting consumer arbitrations by a Consent Judgment that resolved litigation brought by the Attorney General of Minnesota. Denying Dell’s motion to compel arbitration and stay plaintiff’s claims, the New Jersey District Court held the arbitration provision unenforceable because it called for the parties to arbitrate exclusively before a forum that was unavailable when plaintiff commenced suit, and the arbitrator designation was “integral” to the arbitration clause.

The District Court declined to appoint a substitute arbitrator, reasoning that it could not compel the parties to submit to an arbitral forum to which they had not agreed. The Third Circuit first examined whether the designation of NAF was “integral” to the arbitration provision and concluded that the provision would only be deemed integral if the parties unambiguously expressed their intent not to arbitrate if NAF was unavailable. This requirement was not satisfied because the designation provision was ambiguous insofar as “exclusively” could be read to modify “binding arbitration,” “the National Arbitration Forum,” or both. The Court concluded that the NAF requirement was also ambiguous as to what should happen if NAF is unavailable. Pointing to the “fundamental presumption in favor of arbitration” and language in the NAF rules calling for their interpretation in a manner consistent with the FAA, the Third Circuit resolved the ambiguity in favor of arbitration and held that FAA Section 5 requires the court to address NAF’s unavailability by appointing a substitute arbitrator. The Third Circuit vacated the District Court judgment and remanded for further proceedings.
Submitted by: Barbara O’Donnell and Aliya Page, Zelle McDonough & Cohen LLP -

Reported Decisions

Nichols v. Thiruvinayagan Thurairajasingam


Wollerstein & Futoran (Mitchell Dranow, Sea Cliff, N.Y., of counsel), for appellant.
Baron Associates, P.C., Brooklyn, N.Y. (Daniel Davidovic of counsel), for respondent.

DECISION & ORDER
In an action to recover damages for personal injuries, the defendant Grant Mazzon, Jr., appeals from an order of the Supreme Court, Kings County (Solomon, J.), dated July 14, 2011, which denied his motion for summary judgment dismissing the complaint insofar as asserted against him on the ground that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d).
ORDERED that the order is affirmed, with costs.
The appellant 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, inter alia, that as a result of the subject accident, the lumbar region of his spine sustained certain injuries. The appellant submitted evidence establishing, prima facie, that the alleged injuries to the region did not constitute a serious injury within the meaning of Insurance Law § 5102(d) (see Rodriguez v Huerfano, 46 AD3d 794, 795).
However, in opposition, the plaintiff submitted 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 or significant limitation of use categories of Insurance Law § 5102(d) (see Perl v Meher, ___ NY3d ___, 2011 NY Slip Op 08452, * 4-5 [2011]). Accordingly, the Supreme Court properly denied the appellant's motion for summary judgment dismissing the complaint insofar as asserted against him.
Scheker v. Brown


Richard T. Lau, Jericho, N.Y. (Gene W. Wiggins of counsel), for appellant.
Day & Associates, P.C., Great Neck, N.Y. (Eric S. Hack of counsel), for respondents.

DECISION & ORDER

In an action to recover damages for personal injuries, etc., the defendant appeals, as limited by her brief, from so much of an order of the Supreme Court, Kings County (Bunyan, J.), entered May 19, 2011, as denied her motion for summary judgment dismissing the complaint on the ground that neither of the plaintiffs sustained a serious injury within the meaning of Insurance Law § 5102(d).

ORDERED that the order is modified, on the law, by deleting the provision thereof denying that branch of the defendant's motion which was for summary judgment dismissing the complaint insofar as asserted on behalf of the plaintiff Beverly Guerrero on the ground that she did not sustain a serious injury within the meaning of Insurance Law § 5102(d), and substituting therefor a provision granting that branch of the motion; as so modified, the order is affirmed insofar as appealed from, without costs or disbursements.

On August 24, 2007, the plaintiff Denia Scheker was operating a motor vehicle in which the infant plaintiff Beverly Guerrero was a passenger. The plaintiffs allegedly were injured when their vehicle was involved in an accident with a vehicle owned and operated by the defendant. In the order appealed from, the Supreme Court, inter alia, denied the defendant's motion for summary judgment dismissing the complaint on the ground that neither of the plaintiffs sustained a serious injury within the meaning of Insurance Law § 5102(d). The defendant appeals. We modify.

The defendant met her prima facie burden of showing that neither of the plaintiffs sustained a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident (see Toure v Avis Rent A Car Sys., 98 NY2d 345; Gaddy v Eyler, 79 NY2d 955, 956-957).

In opposition to the defendant's prima facie showing, as to Guerrero, the plaintiffs relied, inter alia, upon the medical report of Dr. Lev Aminov, dated September 4, 2007, as well as his treatment notes, which were insufficient to raise a triable issue of fact because they were unaffirmed and, therefore, in inadmissible form (see Grasso v Angerami, 79 NY2d 813; Lively v Fernandez, 85 AD3d 981; Pierson v Edwards, 77 AD3d 642; Vasquez v John Doe #1, 73 AD3d 1033). The only other medical submission proffered by the plaintiffs in opposition to the defendant's motion as to Guerrero was the affirmed report of Dr. Robert Solomon, concerning a magnetic resonance imaging scan of Guerrero's cervical spine. This report, while in admissible form, merely revealed evidence of disc bulges from C3-4 through C6-7. The mere existence of a bulging disc, in the absence of objective evidence as to the extent of the alleged physical limitations resulting from the injuries and their duration, is not evidence of serious injury (see Pierson v Edwards, 77 AD3d at 643). Moreover, Dr. Solomon failed to proffer any conclusion as to the cause of the disc pathology noted in his report (see Sorto v Morales, 55 AD3d 718; Collins v Stone, 8 AD3d 321, 322). Thus, the plaintiffs failed to raise a triable issue of fact as to whether Guerrero sustained a serious injury as a result of the subject accident.

However, as to Scheker, the medical reports and treatment notes of Dr. Aminov were properly before the Supreme Court, as those submissions were affirmed to the extent they concerned Scheker. Moreover, Dr. Aminov's submissions, as applied to Scheker, raised a triable issue of fact as to whether the alleged injuries to the cervical and lumbar regions of Scheker's spine constituted a serious injury under the permanent consequential limitation of use or significant limitation of use categories of Insurance Law § 5102(d) (see Perl v Meher,NY2d, 2011 NY Slip Op 08452, *4-5 [2011]).

The defendant's remaining contentions have been rendered academic in light of our determination.

Accordingly, the Supreme Court should have granted that branch of the defendant's motion which was for summary judgment dismissing the complaint insofar as asserted on behalf of Guerrero on the ground that she did not sustain a serious injury within the meaning of Insurance Law § 5102(d), but properly denied that branch of the defendant's motion which was for summary judgment dismissing the complaint insofar as asserted by Scheker.

Katanov v. County of Nassau


The Orlow Firm, Flushing, N.Y. (Adam M. Orlow and Louis A. Badolato of counsel), for appellant.
John Ciampoli, County Attorney, Mineola, N.Y. (Jackie L. Gross and Nazneen Malik 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 (Brandveen, J.), entered December 15, 2010, which granted the defendants' motion for summary judgment dismissing the complaint.

ORDERED that the order is reversed, on the law, with costs, and the defendants' motion for summary judgment dismissing the complaint is denied.

On the morning of October 21, 2008, the plaintiff, a pedestrian, was struck by a police car in the parking lot of an assisted living facility in the Town of North Hempstead. The police car was being operated by the defendant Scott Blanshan, a Nassau County Police Officer (hereinafter the police officer), while he was responding to a 911 call originating from the facility. The plaintiff commenced this action against the police officer and the defendants County of Nassau and Nassau County Police Department. The defendants moved for summary judgment dismissing the complaint on the grounds that the police officer's conduct could not form the basis of liability and that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the accident. The Supreme Court granted the motion, and the plaintiff appeals. We reverse.

The Supreme Court erred in granting that branch of the defendants' motion which was for summary judgment dismissing the complaint on the ground that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the accident (see Toure v Avis Rent A Car Sys., 98 NY2d 345; Gaddy v Eyler, 79 NY2d 955, 956-957). In support of that branch of their motion, the defendants relied upon, inter alia, the affirmed medical report of Dr. Jerrold M. Gorski, their examining orthopedic surgeon. Dr. Gorski examined the plaintiff on March 22, 2010, and, during that examination, he noted significant limitations in her shoulders and neck (see Grisales v City of New York, 85 AD3d 964, 965; Torres v Torrano, 79 AD3d 1124; Mondevil v Kumar, 74 AD3d 1295, 1296; Smith v Hartman, 73 AD3d 736; Quiceno v Mendoza, 72 AD3d 669). Since the defendants failed to meet their prima facie burden with respect to the issue of serious injury, it is unnecessary to determine whether the plaintiff's opposition papers were sufficient to raise a triable issue of fact in this regard (see Grisales v City of New York, 85 AD3d at 965; Coscia v 938 Trading Corp., 283 AD2d 538).

The Supreme Court also erred in granting that branch of the defendants' motion which was for summary judgment dismissing the complaint on the ground that the police officer's conduct could not form the basis of liability. In concluding that the actions of the police officer, in the emergency operation of his vehicle, were subject to the reckless disregard standard under Vehicle and Traffic Law § 1104(e), the Supreme Court failed to apply the correct standard. "[T]he reckless disregard standard of care in Vehicle and Traffic Law § 1104(e) only applies when a driver of an authorized emergency vehicle involved in an emergency operation engages in the specific conduct exempted from the rules of the road by Vehicle and Traffic Law § 1104(b)" (Kabir v County of Monroe, 16 NY3d 217, 220). "Any other injury-causing conduct of such a driver is governed by the principles of ordinary negligence" (id.). Here, the injury-causing conduct of the police officer, i.e., making a turn into a parking space located within the parking lot while traveling at approximately two miles per hour, did not fall within any of the categories of privileged conduct set forth in Vehicle and Traffic Law § 1104(b) (see Kabir v County of Monroe, 16 NY3d 217; Tatishev v City of New York, 84 AD3d 656, 657). Thus, the plaintiff's claim was governed by principles of ordinary negligence.

A driver is negligent when an accident occurs because he or she failed to see that which through the proper use of his or her senses he or she should have seen (see Heath v Liberato, 82 AD3d 841; Kucar v Town of Huntington, 81 AD3d 784, 785; Dominguez v CCM Computers, Inc., 74 AD3d 728, 729; Mohammad v Ning, 72 AD3d 913, 915). Here, the police officer admitted during his deposition testimony, which the defendants submitted in support of their motion, that he never saw the plaintiff until after he struck her with his car as he was trying to park.

Accordingly, because the defendants failed to make a prima facie showing that the police officer's conduct could not form the basis of liability, the Supreme Court should have denied that branch of their motion which was for summary judgment dismissing the complaint on that ground, regardless of the sufficiency of the plaintiff's opposition papers as to the issue of liability (see Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853).
We decline the plaintiff's request to search the record and award her summary judgment on the issue of liability.

United States Fidelity & Guaranty Co. v. American Re-Insurance Co.


Defendants American Re-Insurance Company, Excess Casualty Reinsurance Association, ACE Property & Casualty Company, Century Indemnity Company, and OneBeacon America Insurance Company appeal from a judgment of the Supreme Court, New York County (Richard B. Lowe III, J.), entered October 25, 2010, in favor of plaintiffs and bringing up for review an order, same court and Justice, entered August 20, 2010 and amended October 22, 2010, which granted plaintiffs' motion for summary judgment and denied defendants' motion for summary judgment.

Wachtell, Lipton, Rosen & Katz, New York (Herbert M. Wachtell and Ben M. Germana of counsel), for American Re-Insurance Company, appellant.
Quinn Emanuel Urquhart & Sullivan, LLP, New York (Kathleen M. Sullivan, Michael B. Carlinsky, Jane M. Byrne and Sanford I. Weisburst of counsel), for Excess Casualty Reinsurance Association and OneBeacon America Insurance Company, appellants.
Boies, Schiller & Flexner, LLP, Albany (George F. Carpinello and Benjamin I. Battles of counsel), for ACE Property & Casualty Company and Century Indemnity Company, appellants.
Simpson Thacher & Bartlett LLP, New York (Mary Kay Vyskocil, Chet A. Kronenberg and Seth A. Ribner of counsel), for respondents.
Freeborn & Peters LLP, Chicago, Illinois (Kerry E. Slade, Joseph T. McCullogh IV, and Robin E. Dusek of counsel), for Reinsurance Association of America, amicus curiae.
Chaffetz Lindsey LLP, New York (Peter R. Chaffetz and Andreas A. Frischknecht of counsel), for Complex Insurance Claims Litigation Association and Chartis Inc., amici curiae.

ACOSTA, J.,

This case presents us with a reinsurance coverage dispute arising out of asbestos litigation which has spanned several decades and involved the state and federal courts of several jurisdictions [FN1] . For the sake of brevity, we presume familiarity with the case, and provide a general overview of the facts directly relevant to this appeal.

The underlying asbestos claims

In the 1950s and 1960s, Western Asbestos was a company that sold, distributed and installed asbestos-containing products. In 1967, Western Asbestos dissolved. Its business was taken over by Western MacArthur Company (MacArthur). Beginning in the 1970s, individuals with asbestos-related health injuries began suing MacArthur based on their exposure to Western-Asbestos related products. In 1993, MacArthur sued plaintiff herein, United States Fidelity & Guaranty Co. (USF & G), and another insurance company in California state court seeking coverage under policies allegedly issued to Western Asbestos. USF & G initially declined coverage. USF & G argued several defenses to the action, including that it had insured Western Asbestos, not MacArthur; that MacArthur was not a successor in interest to the policies; that it could not locate the policies; that even if it had the policies, the policies did not provide products liability coverage; and that even if the policies did provide liability coverage the claims would have exceeded the policies' aggregate limits. Significantly, in 1997, the California Court of Appeal held that MacArthur was not entitled to coverage under Western Asbestos's insurance policies (General Acc. Ins. Co. v Superior Ct., 55 Cal App 4th at 1445, 1451 [In holding for the insurance companies, including USF & G, the Court commented, "It is one thing to deem the successor corporation liable for the predecessor's torts; it is quite another to deem the successor corporation a party to insurance contracts it never signed, and for which it never paid a premium, and to deem the insurer to be in a contractual relationship with a stranger"]).

MacArthur countered the California appellate decision by resurrecting the then-defunct Western Asbestos in 1997 for the purpose of assigning its insurance rights to MacArthur. MacArthur had a former Western Asbestos officer sign an assignment of insurance rights to MacArthur, and then successfully persuaded a California court to "revive" Western Asbestos to ratify the assignment. Western Asbestos intervened in the MacArthur action as a co-plaintiff. The action proceeded to trial in 2002. USF & G argued that the assignment and ratification were unenforceable. The court rejected the claim.

USF & G ultimately settled the insurance coverage action with MacArthur in 2002. USF & G and the other insurers agreed to pay approximately $975 million in satisfaction of all asbestos injury-related claims. Pursuant to the settlement agreement, MacArthur was required to file for bankruptcy protection. As part of the bankruptcy proceeding, MacArthur was to seek, pursuant to 11 USC § 524(g), an injunction to supplement the injunctive effect of the bankruptcy discharge. Essentially, in exchange for the creation of a trust fund by USF & G and the other insurers, which was to receive the $975 million payment for the compensation of existing and future asbestos claimants, MacArthur was to seek an injunction that would bar future claims against the insurance companies. Prior to the issuance of the injunction, the bankruptcy court was required to find that Western MacArthur had contributed something of value to the trust (11 USC § 524[g][4][B][ii]).

The bankruptcy petition was filed in and approved by the United States Bankruptcy Court for the Northern District of California. In its lengthy decision and order confirming the reorganization plan of MacArthur, including the settlement of the asbestos-injury claims and the creation of the trust, the court found first that the value of MacArthur itself was insufficient to support creation of the trust. The bankruptcy court did find, though, that MacArthur was contributing value to the trust in the form of its business loss claims. These "business loss claims" included "potential bad faith claims" against USF & G for its longstanding refusal to either indemnify, defend, or settle or otherwise pay the asbestos-injury claims. The court noted that while the bad faith claims were of "sufficient value" to justify the issuance of the injunctions, it was not deciding the merits or the specific value of the bad faith claims despite what it termed the "substantial evidence" to support them. Rather, the bankruptcy court merely stated that "some portion" of the $2 billion being contributed to the trust must be attributed to those bad faith claims, and that the value of the bad faith claims was at least in excess of MacArthur's $17 million net liquidation value.

The Reinsurance Treaties

Beginning in 1945, USF & G entered into a series of reinsurance treaties with defendants American Re-Insurance (American Re) and the Excess Casualty Reinsurance Association (ECRA), each of which provided 50% of the coverage under the terms of the reinsurance treaties. ECRA was a pool of reinsurers, each of which was responsible for a portion of ECRA's 50% of the treaty. The pool members were ACE Property and Casualty Company, Century Indemnity Company, OneBeacon America Insurance Company, and American Re.[FN2]

The treaty is an excess-of-loss contract, which requires the reinsurers to reimburse a portion of each covered loss over and above the amount of loss to be retained by USF & G (the retention). The first treaty, covering the period from 1945 to 1951, required USF & G to retain, for its own account, the first $50,000 arising from each covered loss. For the treaties running from 1951 to 1956 and 1956 to 1962, USF & G's retention increased to $100,000. For the treaties covering the years 1962 to 1975, USF & G's retention increased to $500,000, and for the treaties covering the years 1975 to 1980, USF & G's retention was $1,000,000. For the reinsurance treaty years 1957 to 1962, in dispute here, the maximum amount of loss payable by the reinsurers, after the $100,000 retention, was $4,900,000 for any one loss, subject to a limit of $3,000,000 for personal injury liability or property damage liability.

Following the settlement, in or about November 2002, USFG submitted its reinsurance billing under the treaties for the reinsurer's share of the loss. In the settlement, the parties stipulated that USF & G issued thirteen comprehensive general liability policies to Western Asbestos, the first of which incepted in 1948 and the last of which incepted on July 1, 1959. Following the execution of the settlement agreement, USF & G, in consultation with MacArthur and claimant's counsel, determined to allocate the losses to the policy covering the period July 1, 1959 through July 1, 1960. The 1959 policy year was one of the policy years with the highest per person limits of $200,000, allowing a higher payout to injured claimants. In addition, USF & G determined that the 1959 policy was the only policy year that covered all potential claims for anyone exposed to asbestos during the settlement period. In accordance with its decision to allocate all the settlement claims to the 1959 insurance contract year, USF & G allocated all of its reinsurance claims to 1959 as well.

USF & G states that in preparing the reinsurance cession, it treated each injury as a separate accident, applying the $100,000 retention to each claimant's injury. For past claims, the judgment amount attributable to USF & G was capped at the $200,000 policy limit, and only the portion exceeding the retention was ceded to the reinsurers. For future claims, only two types of asbestos injuries were valued above the $100,000 retention: lung cancer, valued at $200,000, and mesothelioma, valued at $500,000. USF & G's overall liability was calculated by multiplying the expected number of claimants in each category by $200,000. Half of that amount was then ceded to the reinsurers.

American Re and ECRA, however, refused to pay USF & G's reinsurance claim because, among other reasons, they believed that the retention under the 1956 to 1962 treaty had been increased from $100,000 to $3 million, and, that, notwithstanding the terms of the underlying settlement agreement as approved by the bankruptcy court, it was clear that USF & G was paying for Western's bad faith claims against it, which were not covered under the treaty. In or about December 2002, American commenced this lawsuit as a declaratory judgment action, but the parties were realigned to make USF & G the plaintiff. The parties subsequently submitted motions for summary judgment. The IAS court granted USF & G's motion, and denied the reinsurers'.

Defendants now appeal, arguing primarily that the "bad faith" of USF & G that they contend suffuses every layer of this action, from USF & G's initial denial of its duty to indemnify and defend MacArthur through its reinsurance presentation to the defendants, warrants summary judgment in their favor. Defendants believe that USF & G's bad faith has been so extensive that it has breached its duty of utmost good faith to them as the reinsurers.[FN3]

These dramatic contentions, however, can be distilled into basic questions of law and fact that defendants believe the motion court erred in resolving. The question of fact, framed mainly by ECRA, concerns the increase of the retention in the 1956-1962 treaty to $3 million, an increase ECRA maintains was agreed upon by all parties. ECRA contends that even if the reinsureds did not agree to the increase in retention, sufficient conflicting evidence exists barring summary resolution of the issue. The issue of law, zealously pursued by both parties, concerns what they believe was the IAS court's erroneous application of the "follow the fortunes" doctrine, peculiar to reinsurance law. For the reasons set forth herein, we find defendants' arguments unavailing, and now affirm.
The Retention Amount

ECRA contends that in 1981, USF & G agreed to increase the retention amount on all of its reinsurance treaties from 1945 forward, to $3 million for claims reported on or after July 1, 1981. In support of this contention, ECRA asserts that its underwriter, Tom Renko, was concerned because claims from past years were "coming out of the woodwork," creating "rapidly ballooning exposures" that were hard to estimate. Renko, to address these concerns, contacted USF & G's broker and agent, James Steen of Guy Carpenter & Co, to negotiate the increase. ECRA points to numerous pieces of evidence in the record, including a memorandum of a conversation between Renko and Steen where the retention increase allegedly had been agreed to, a letter from Joseph K. Conwell, USF & G's Superintendent of Reinsurance, to Steen, acknowledging that the "old" Casualty first layer would increase to a $3,000,000 retention for new claims after July 1, 1981, and a letter from Guy Carpenter & Co. to USF & G in 1987 stating that "it is clear that the original intent of the agreement between the reinsurers and USF & G was to "clearly eliminate" any further losses to the "old First Excess of Loss reinsurance layer, irrespective of the effective date of such covers." ECRA also points to the course of conduct of the parties following the alleged 1981 retention increase, where it claims USF & G, in unrelated claims to the one herein, acknowledged that the retention was over $3 million for all claims, including ones that occurred before 1962.

Despite this evidence pointed to by ECRA, we find that the motion court correctly concluded that the retention increase to $3 million was limited to those claims submitted under the 1962 to 1967 treaty and later treaty years. To be sure, USF & G points to other evidence claiming that it had only agreed to increase the retention to $3 million for claims post-1962, including that only the reinsurance treaties going back to 1962 were endorsed to reflect the change in retention and a 1992 letter from Guy Carpenter to Rentko stating that the agreement negotiated in 1981-1982 was that "all new claims against USF & G's old first layer' casualty cover (in force from 1/1/62 to 6/30/80) will be subject to a $3,000,000 retention."

However, the motion court found the affidavit submitted by the aforementioned Joseph Conwell of USF & G dispositive of this issue, and we agree. Conwell stated first that the "old First Excess" treaties mentioned in the correspondence cited by ECRA were for the treaty years starting in 1962, because 1962 was the first year in which USF & G's first and second layers of reinsurance were covered in separate treaties. Furthermore, Conwell states that when the retention for the 1962 policies was increased, the reinsurers were not suffering losses in the pre-1962 years, so no modification of those treaties was required. Finally, and most persuasively, the coverage limit for personal injuries under the 1957-1962 treaty was $3,000,000. Conwell stated that to increase the retention limit to $3,000,000 would effectively wipe out USF & G's reinsurance, as it would be forced to retain the reinsurance limit of its personal liability coverage. ECRA, in all of its arguments on appeal, fails to squarely address this affidavit, or to demonstrate an issue of fact showing how or why USF & G was prepared to basically forfeit its reinsurance for the 1957-1962 treaty years.
The Follow the Fortunes doctrine

The reinsurance treaty here contains a follow the fortunes
clause, which states:

"All claims in which this reinsurance is involved, when allowed by the Company (USF & G), shall be binding upon the Reinsurers, which shall be bound to pay or allow, as the case may be, their proportion of such loss. It is understood, however, that when so requested, the Company will afford the reinsurers an opportunity to be associated with the Company, at the expense of the Reinsurers, in the defense of any claim or suit or proceeding involving this reinsurance, and the Company and the Reinsurers shall cooperate in every respect in the defense or control of such claim or suit or proceeding, provided that the Company (USF & G) shall have the right to defend, settle, or compromise any such claim, suit or proceeding, and such action on the part of the Company shall be binding upon its reinsurers."

The requirement that a reinsurer "follow the fortunes"of the reinsured is as old as the business of reinsurance itself. The doctrine is broad in its application, and is said to derive from the Latin phrase: iste secundus assecurator tenetur ad solvendum omne totum quod primus assecurator solverit," which although "indeterminate and general in its expression" (New York State Marine Ins. Co. v Protection Ins. Co., 18 F Cas 160, 161 (D Mass 1841]) has been translated to mean that "the reinsurer is held in full to the result that the primary insurer (reinsured) obtained" (North Riv. Ins. Co. v Cigna Rein. Co., 52 F 3d 1194, 1205, n 16 [3rd Cir 1995]). Put simply, the reinsurer agrees to follow the insurer's financial obligations (fortunes), wherever they lead either company.

In modern parlance, follow the fortunes "burdens the reinsurer with those risks which the direct insurer bears under the direct insurer's policy covering the original insured" (Bellefonte Rein. Co. v Aetna Cas. & Sur. Co., 903 F2d 910, 912 [2d Cir 1990]), in effect protecting the "risk transfer mechanism by providing that covered losses pass uninterrupted along the risk transfer chain" (North River Ins. Co., 52 F 3d at 1205). It "simply requires payment where the [insurer's] good faith payment is at least arguably within the scope of the insurance coverage that was reinsured" (Mentor Ins. Co [UK] v Brannkasse, 996 F2d 506, 517 [2d Cir 1993]), preventing the reinsurer from second guessing the good faith liability determinations made by its reinsured (see e.g. Insurance Co. v Associated Manufacturers' Corp., 70 App Div 69 [1902], affd 174 NY 541 [1903]) as well as precluding "wasteful relitigation" by a reinsurer in cases where the insured has paid in good faith (National Union Fire Ins. Co. of Pittsburgh, Pa. v American Re-Insurance Co., 441 F Supp 2d 646, 650 [SD NY 2006]).

We find that the motion Court correctly determined that the follow-the-fortunes doctrine required defendants to accept the reinsurance presentation made by USF & G herein. Accordingly, all of defendants' efforts to second guess USF & G's decisions concerning allocation of the loss, whether it be the alleged bad faith claims; the decision to allocate the losses to the 1959 USF & G/MacArthur policy year and corresponding failure to spread the losses over the 13 policy years; the valuation of the lung cancer and mesothelioma claims; the alleged alteration of the loss presentation from an accident to occurrence basis; and the failure of USF & G to otherwise spread the loss out over the life of the policies as purportedly required by California law, which governed the USF & G/MacArthur policies, are precluded from this court's review (see e.g. id at 650-651). However, even if we were to consider these arguments on the merits, we would disagree that they excused the reinsurers from their obligation to follow the fortunes of USF & G or created an issue of fact barring summary resolution.

As a basis for precluding summary judgment, the dissent points to MacArthur's claim in its coverage action that USF & G initially disclaimed coverage in bad faith, and discerns evidence in the record to support that claim. However, MacArthur's prior bad faith claim has no bearing on the reinsurers' obligations because the settlement agreement that resolved the coverage action does not allocate any of the settlement funds to compensating MacArthur for USF & G's alleged bad faith. The parties that negotiated the settlement, including MacArthur and its affiliates, the asbestos plaintiffs, and USF & G, confirm that the settlement amount was solely allocated to establish and administer the trust fund to compensate asbestos claimants and reimburse MacArthur's litigation fees and costs.

Defendants nonetheless argue that, because of a statement by the bankruptcy court in its decision confirming MacArthur's reorganization plan, the doctrine of collateral estoppel requires us to find that some of the settlement amount is attributable to bad faith claims. We disagree. Preclusion only applies to an issue that was "actually litigated, squarely addressed and specifically decided" (Ross v Medical Liab. Mut. Ins. Co., 75 NY2d 825, 826 [1990]). Here, the parties to the bankruptcy proceeding never litigated whether USF & G paid monies to MacArthur on account of bad faith. The issue only arose tangentially when the bankruptcy court addressed whether the reorganization plan was "proposed in good faith," as required pursuant to 11 USC § 1129(a)(3). Specifically, the court was considering the objection by some parties that the plan had not been proposed in good faith because the amount that MacArthur was contributing to the trust to compensate existing asbestos claims was insufficient to entitle it to an injunction against future claims.

was contributing) something of adequate value to the trust in exchange for its insulation from further lawsuits.

It also bears mentioning that, during MacArthur's coverage action, USF & G raised at least one legitimate defense that found favor with the courts and cannot be attributed to bad faith. USF & G argued that MacArthur lacked standing to sue under insurance policies that USF & G had issued to Western Asbestos. In 1997, the California Court of Appeal held that Western MacArthur was neither the insured nor a proper beneficiary of the policy (General Acc. Ins. Co. v Superior Ct., 55 Cal App 4th at 1454-1455). Although the issue was later resolved in MacArthur's favor when Western Asbestos was resurrected for the sole purpose of transferring the USF & G policies to MacArthur, USF & G cannot be faulted for litigating the issue (see Bosetti v United States Life Ins. Co. in City of New York, 175 Cal App 4th 1208, 1237 ["(a)n insurer denying or delaying the payment of policy benefits due to the existence of a genuine dispute with its insured as to the existence of coverage liability or the amount of the insured's coverage claim is not liable in bad faith even though it might be liable for breach of contract"] [internal quotation marks and citations omitted]).

Insofar as defendants contend that the motion court also erred in stating that the settlement agreement was structured so that all losses were deemed to have occurred in 1959, we find that while the settlement agreement did not provide that those losses would be specifically allocated to that year, it was not improper for USF & G to do so in consultation with MacArthur and claimant's counsel. First, we must note again that, as with the alleged increase of the retention limit to $3 million, to require USF & G to spread the payment associated with each individual asbestos claimant over multiple policy years, thereby applying more than one reinsurance retention, would in all likelihood have left USF & G without reinsurance coverage. Next, USF & G has made it clear that 1959 was selected in order to provide a maximum benefit to the actual injured persons and because 1959 was the only policy year that covered every potential claimant. Neither do we find the law cited by defendants to warrant a different result. California's "all sums" rule militates against spreading the loss across several policies, as it specifically forbids the stacking of policy limits (see e.g. California v Continental Ins. Co., 170 Cal App 4th 160, 178 [2009], pet for review granted 203 P3d 425 [Cal 2009] ["in California, when there is a continuous loss spanning multiple policy periods, any insurer that covered any policy period is liable for the entire loss, up to the limits of its policy"] [emphasis omitted]). In addition, under California law, "[o]ther insurance' clauses become relevant only where several insurers insure the same risk at the same level of coverage" (Dart Indus., Inc. v Commercial Union Ins. Co., 28 Cal 4th 1059, 1078 n 6 [internal quotation marks, citation and emphasis omitted]), and "[e]quitable contribution applies only between insurers" (Aerojet-Gen. Corp. v Transport Indem. Co., 17 Cal 4th 38, 72 [1997] [citations omitted]). Neither does New York law favor the multiplication of deductibles (see In re Prudential Lines Inc., 158 F3d 65, 86 [2d Cir 1998]).

We note, in brief, that the defendants' repeated invocation of this Court's prior decision in Allstate Ins. Co. v Am. Home Assurance Co., 43 AD3d 113 [2007], lv denied 10 NY3d 711 [2008]) is unavailing. The facts of that case are inapposite to the facts herein. In Allstate, the reinsured sought to maximize its recovery against the reinsurer by abandoning, in an environmental pollution clean up case, the one occurrence per polluted site allocation directed by a district court ruling and the multi-occurrence position taken by both sides in the underlying litigation and settlement negotiations. Here, by contrast, defendants have not demonstrated the existence of an issue of fact with evidence directly contradicting USF & G's evidence that in negotiating the settlement, the parties treated each asbestos injury as a separate accident.
The Judgment

Finally, we note that ECRA contends that it was error for the motion court to enter judgment against it, as it ceased being a functioning entity in 1982. However, a review of the judgment demonstrates that the judgment was entered against ECRA and its constituent companies, assigning each of the constituent companies a specific dollar amount based on its percentage participation in the pool.

Accordingly, the judgment of the Supreme Court, New York County (Richard B. Lowe III, J.), entered October 25, 2010, in favor of plaintiffs in the amount of $420,425,536.15, and bringing up for review an order, same court and Justice, entered August 20, 2010 and amended October 22, 2010, which granted plaintiffs' motion for summary judgment and denied defendants-appellants' motions for summary judgment, unanimously affirmed, without costs. Appeal from the aforesaid order unanimously dismissed, without costs, as subsumed in the appeal from the judgment.

All concur except Abdus-Salaam, J.who dissents in an Opinion as follows:

ABDUS-SALAAM, J. (dissenting)

I respectfully dissent. There is a genuine triable issue of fact as to whether a portion of the $987.3 million settlement that United States Fidelity & Guaranty Company (USF & G) reached with Western MacArthur was for bad faith claims, which are not covered by the reinsurance treaty issued by defendants. Accordingly, I would deny plaintiffs' motion for summary judgment and vacate the judgment.

As an initial matter, while plaintiffs argue here that the treaty covers extra-contractual liabilities such as bad faith liability, the plain language of the treaty indicates otherwise. The treaty provides reinsurance for "any loss in connection with each policy," with certain exceptions, such as burglary and theft, health insurance and worker's compensation. A "loss" arises out of an "accident," and an "accident" is defined as an accident or occurrence arising out of products personal injury liability and products property damage liability, personal injury liability (other than automobile and products) and property damage liability (other than automobile and products). Bad faith damages incurred as a result of the reinsured's refusal to provide coverage to its insured do not fall within the ambit of a loss arising out of an accident as defined in the treaty (see Consolidated Edison Co. of N.Y. v Allstate Ins. Co., 98 NY2d 208, 220 [2002] ["the requirement of a fortuitous loss is a necessary element of insurance policies based on either an accident' or occurrence'"].

The exceptions to coverage that are listed could all arguably be considered losses arising out of an accident, and they are specifically excluded. Because bad faith damages cannot reasonably be considered to be a loss arising out of an accident, the absence of their mention in the exclusions to the policy is not probative when determining the coverage provided.

Plaintiffs' citation to Peerless Ins. v Inland Mut. Ins. (251 F.2d 696, 704 [4th Cir 1958]) for the proposition that bad faith damages are a covered loss under the reinsurance treaty is unpersuasive. In Peerless, the court held that a reinsurer who acquiesced in the defense strategy not to settle a claim within the policy limits, and knew as much about the underlying case as the insurer, was bound to follow the liability of the insurer and was thus liable to the insurer for damages paid to settle a negligence action brought by the insured for failure to settle. There is no evidence here that defendants participated in the handling of MacArthur's claim against USF & G, or acquiesced in plaintiffs' strategy to deny that the underlying policies provided coverage to MacArthur. Even if defendants had participated, a "follow the fortunes" clause does not serve to create coverage where there is none (see Travelers Cas. & Sur. Co. v Certain Underwriters at Lloyd's of London, 96 NY2d 583, 596 [2001] [a "follow the fortunes" clause "does not alter the terms or override the language of reinsurance policies"]; see also North Riv. Ins. Co. v Cigna Reins. Co., 52 F 3d 1194, 1206 [1995] ["(w)here the reinsured's liability attaches from a settlement or binding judgment, the reinsurer is not accountable if the liability arises from uninsured activity"] [citation omitted]). Thus, the majority is incorrect when it concludes that all of defendants' efforts to second guess plaintiffs' decisions, including the settlement of bad faith claims which are not covered, are precluded by virtue of the "follow the fortunes" clause.

The motion court erred when it concluded that defendants had not presented evidence to raise a triable issue of fact as to whether a portion of the settlement was attributable to Western MacArthur's bad faith claim against USF & G. There is ample evidence, including the findings made by the Bankruptcy Court, and the record in the underlying coverage action brought by Western MacArthur against USF & G, to support defendants' position that part of the settlement represented bad faith damages.

I disagree with the majority's analysis that whether plaintiffs actually engaged in bad faith is of no moment "because the parties present at the settlement negotiations agreed that the settlement amount included no payment for settlement of bad faith claims." In fact, it is evident from the Bankruptcy Court's decision that the Court would not have approved the bankruptcy plan if it believed that there had been no payment for bad faith claims. This matter was not merely addressed "tangentially" by the Bankruptcy Court, as found by the majority, but was an essential element of the court's approval.

In concluding that defendants had not raised any issue of fact, the motion court and the majority note that the Bankruptcy Court stated it was not determining the merit or potential value of any bad faith claim. However, the Bankruptcy Court made some determinations which clearly demonstrate the Court concluded that bad faith damages had been part of the settlement and that contribution by Western MacArthur of their bad faith claims to the Trust in order to pay asbestos claims against the debtors was integral to the Court's confirmation of the bankruptcy plan. Responding to the Objecting Insurers' assertion that the debtors had not contributed enough to the Trust, the Court stated:

"This argument ignores the value of the Debtors' bad faith claims against Settling Insurers. . . [T]he evidence presented at the confirmation hearing convinced the Court that the Debtors had colorable claims for bad faith against each of these two insurers. While the Court cannot allocate to these bad faith claims a specific percentage of the settlement amounts, even if the bad faith claims represent only ten percent of the settlement amount, this gives them a value of approximately $200 million" (In re Western Asbestos Company, et al., U.S. Bankruptcy Court, ND CA, Case No. 02-46284 T, at 24-25 [February 3, 2004, Tchaikovsky, J.]).

The Bankruptcy Court also determined that the debtors are contributing "business loss claims" to the Trust, which "include their potential bad faith claims against USF & G and Hartford as well as the remaining Objecting Insurers" (id. at 63).

"As discussed in connection with the USF & G and Hartford Settlement Agreements, there was substantial evidence to support the Debtor's bad faith claims against USF & G and Hartford.40 Some portion of the over $2 billion being contributed to the Trust pursuant to the USF & G and Hartford Settlement Agreements must be attributed to those claims. These claims belong to the Debtors, not to the asbestos claimants. While the Court is not able to ascribe a specific value to these claims, the Court is persuaded that their value is in excess of the value of the Debtors' net liquidation value: i.e., $17 million. The Court finds the contribution of the Debtors' bad faith claims sufficient to justify the issuance of an 11 U.S.C. §§ 524(g) injunction."
40"As noted above, by finding that the Debtors' bad faith claims were of sufficient value to justify the issuance of the injunctions, the Court is not actually deciding the merits or specific value of the Debtors' potential bad faith claims against any insurer (emphasis supplied)"(id. at 64).

Contrary to the majority's position, these findings by the Bankruptcy Court are clearly more than just a recognition that evidence of bad faith allegations existed. While the majority acknowledges many of the Bankruptcy Court's findings, it reaches the mystifying conclusion that there is no genuine issue as to whether the settlement included bad faith damages. The majority is apparently persuaded that because counsel involved in the settlement have stated that the settlement represented only compensatory damages, the Bankruptcy Court's determination that some portion of the settlement was for bad faith claims is irrelevant. Although I concur that defendants are mistaken when they urge that collateral estoppel prevents us from considering the issue of bad faith, I do not agree with the majority that there are no issues of fact.

Significantly, examination of the record in the underlying coverage litigation between Western MacArthur and USF & G buttresses the Bankruptcy Court's conclusion that there was substantial evidence to support the bad faith claims against USF & G, and that payment for these bad faith claims was a part of the settlement. The litigation in California state court between Western MacArthur and USF & G dragged on for nine years. While the majority emphasizes that plaintiffs had, for most of those years, a legitimate basis for declining coverage based on a defense that Western MacArthur was not its insured or a proper beneficiary of the policy, it is the other defenses, and the missing policies, that were the basis of the bad faith claims, as detailed below. USF & G took the position that its policies (which neither party could locate) did not provide products liability coverage, and that even if there were such coverage, the policies would have contained aggregate limits on such coverage. USF & G, the insurance company that maintained it did not possess copies of its own policies, was nonetheless certain that the policies did not cover the claims brought by individuals with health-related injuries due to exposure to asbestos.

During the course of the coverage litigation, it was discovered that USF & G had "donated" documents establishing the existence of coverage to the Baltimore Museum of Industry. And at trial, Western MacArthur presented secondary evidence that USF & G's "lost" policies provided products coverage without the aggregate limits that USF & G had steadfastly insisted were in the policies. It was during this phase of the trial that the Western MacArthur action settled.

Additionally, a reading of the California trial court's rulings on a motion by USF & G for summary adjudication of Western MacArthur's bad faith claims and in limine motions is illuminating. The insurer's motion for summary judgment was denied, the court finding triable issues of fact as to whether USF & G acted in bad faith by alleged conduct including destruction of insurance policies, falsely stating that it had no documents in its possession, "donation" of key documents to a museum without ever informing plaintiffs that it had done so, and interfering with a subpoena that Western MacArthur had obtained in order to review the documents that had been "donated" to the museum (Western MacArthur v USF & G, Superior Court, CA, Sept. 12, 2001, Kawaichi, J., Case No. 721595-7).

A motion in limine by USF & G "to exclude evidence that USF & G donated documents to the Baltimore Museum of Industry and motion to exclude evidence regarding USF & G's failure to produce documents from its "Claims Legal Collection"" was denied (Western MacArthur v USF & G, Superior Court, CA, March 22, 2002, Sabraw, J., Case No. 721595-7), as was another in limine motion by USF & G to exclude evidence or argument that USF & G had destroyed documents as part of a "1984 Document Destruction Program." The Court ruled:

"Plaintiffs may present evidence of the 1984 document Destruction Program; i.e., evidence inferring that the destruction of documents was done willfully due to USF & G's concerns about a "litigation crisis" and asbestos liability under old policies and that USF & G's intent in destroying the documents was to make it more difficult for insureds to establish coverage and the terms and conditions of their policies"(id. at 4).

In sum, the record raises a genuine issue of fact as to whether the settlement of the underlying coverage action included
payment of bad faith damages. Thus, summary judgment in favor of plaintiffs was not warranted.

Judgment, Supreme Court, New York County (Richard B. Lowe III, J.), entered October 25, 2010, and bringing up for review an order, same court and Justice, entered August 20, 2010 and amended October 22, 2010, affirmed, without costs. Appeal from the aforesaid order dismissed, without costs, as subsumed in the appeal from the judgment.
Opinion by Acosta, J. All concur except Abdus-Salaam, J. who dissents in an Opinion.
Footnotes

Footnote 1: See e.g. General Acc. Ins. Co. v Superior Ct., 55 Cal App 4th 1444, 1445 (1997), review denied 1997 Cal LEXIS 6025 [1997]; Kaminski v Western MacArthur Co., 175 Cal App 3d 445, 451 (1985); and this Court's prior decision in American Re-Insurance Co. v United States Fid. & Guar., 40 AD3d 486 (2007).

Footnote 2: In addition to providing 50% of the reinsurance coverage, American Re was an 8% participant in the pool coverage.

Footnote 3: Despite these allegations of rampant bad faith, the record demonstrates that the reinsurers were kept duly advised of the course of the underlying litigation and settlement negotiations. The reinsurers manifestly had the right, under the treaty, to associate in the defense of the claim, but chose not to do so.

Christ the King Regional High School v. Zurich Ins. Co.


Melito & Adolfsen P.C., New York, N.Y. (Ignatius John Melito and Kira Tsiring of counsel), for appellant.
Conway, Farrell, Curtin & Kelly P.C., New York, N.Y. (Jonathan Uejio of counsel), for respondents.

DECISION & ORDER

In an action for a judgment declaring that the defendant is obligated to defend and indemnify the plaintiffs in an underlying personal injury action entitled Levine v Christ the King Regional High School, commenced in the Supreme Court, Kings County, under Index No. 26408/06, the defendant appeals from an order of the Supreme Court, Queens County (McDonald, J.), dated May 3, 2010, which denied its motion for summary judgment declaring that it is not obligated to defend and indemnify the plaintiffs in the underlying action.

ORDERED that the order is reversed, on the law, with costs, the defendant's motion for summary judgment declaring that it is not obligated to defend and indemnify the plaintiffs in the underlying action is granted, and the matter is remitted to the Supreme Court, Queens County, for the entry of a judgment declaring that the defendant is not obligated to defend and indemnify the plaintiffs in the underlying action.

The plaintiffs entered into an agreement with All American Talent (hereinafter All American), whereby All American was to rent the auditorium and three classrooms in the plaintiff Christ the King Regional High School (hereinafter the school) for two days for a dance competition. The written contract between the plaintiffs and All American required All American to provide "a [c]ertificate of [i]nsurance freeing [the school] of all liability."

Shirley Levine allegedly was injured when she fell on a sidewalk while walking from the parking lot behind the school to the school's front entrance in order to attend the dance competition. Levine commenced an action against the present plaintiffs, alleging that her fall was caused by a sidewalk defect. The plaintiffs sought defense and indemnification in that action from the defendant, under an additional insured endorsement of a general liability policy issued by the defendant to All American. When the defendant denied that request, the plaintiffs commenced this action for a judgment declaring that the defendant is obligated to defend and indemnify them in the underlying personal injury action. The defendant moved for summary judgment declaring that it is not so obligated, on the basis that the plaintiffs were not entitled to additional insured coverage under the subject policy. The Supreme Court denied the motion, concluding that certain language in a "Building and Personal Property Coverage Form" in the policy was sufficiently ambiguous to preclude the granting of summary judgment.

The Supreme Court erred in relying on the "Building and Personal Property Coverage Form" to deny the defendant's motion. The plaintiffs did not seek coverage under that endorsement, which provided coverage for property damage.

The defendant established its prima facie entitlement to judgment as a matter of law by demonstrating that the plaintiffs did not qualify for additional insured coverage under Section II, 2.f of the Commercial General Liability Coverage Form of the subject policy. That provision defines an "insured" to include any organization to whom All American was obligated, by virtue of a written contract for a lease of premises, "to provide insurance such as is afforded by this policy, but only with respect to liability arising out of the ownership, maintenance, or use of that part of any premises leased to you."

As an initial matter, contrary to the defendant's contention, the portion of the above-referenced provision which requires that All American be obligated to provide insurance by virtue of a written contract, in order for the plaintiffs to qualify for additional insured coverage, was satisfied here. In that regard, a provision in a written contract "cannot be interpreted as requiring the procurement of additional insured coverage unless such a requirement is expressly and specifically stated. In addition, contract language that merely requires the purchase of insurance will not be read as also requiring that a contracting party be named as an additional insured" (Trapani v 10 Arial Way Assoc., 301 AD2d 644, 647; see Empire Ins. Co. v Insurance Corp. of N.Y., 40 AD3d 686, 688). Therefore, this Court has held that additional insured coverage was not available where the named insured had entered into a contract requiring it to obtain liability insurance for itself (see 140 Broadway Prop. v Schindler El. Co., 73 AD3d 717, 718; Empire Ins. Co. v Insurance Corp. of N.Y., 40 AD3d at 688), or to provide a certificate of insurance showing that it held liability insurance in its own name (see Trapani v 10 Arial Way Assoc., 301 AD2d at 647). Furthermore, it has been held that additional insured coverage was not available where the named insured had entered into a contract whereby it agreed to obtain liability insurance in its own right and to hold the other party harmless (see Mangano v American Stock Exch., 234 AD2d 198, 199; Public Adm'r of Bronx County v Equitable Life Assur. Socy. of U.S., 198 AD2d 105; Bishop v Port Auth. of N.Y. & N.J., 170 AD2d 565, 567).

None of these circumstances is present here. Rather, here, the subject contract required All American to provide a "[c]ertificate of [i]nsurance freeing [the school] of all liability" (emphasis added), and did not contain any provision requiring All American to hold the school harmless for any liability. Thus, the relevant contractual provision, which, unlike the provision at issue in Trapani, refers directly to the school, cannot be interpreted as requiring only that All American obtain liability insurance for itself, as that would render the phrase "freeing [the school] of all liability" meaningless. Nor, in the absence of a hold-harmless provision, can the relevant contractual provision reasonably be read to require that All American obtain liability insurance for itself and free the school from liability by holding the school harmless. Instead, the contract provision can only be reasonably read to require All American to include the school as an additional insured on its liability policy, such as would allow it to provide the plaintiffs with a certificate of insurance "freeing [the school] of all liability." Accordingly, the defendant failed to demonstrate the absence of the requisite written contract.

However, the above-quoted provision of the subject policy only provides additional insured coverage for "liability arising out of the . . . use of that part of any premises leased" to All American. The defendant met its prima facie burden of demonstrating that the plaintiffs failed to satisfy this portion of the policy by showing that the contract defined the leased premises as the school auditorium and three classrooms, and that the accident that is the subject of the underlying action occurred outside the school building.

In opposition, the plaintiffs attempted to raise a triable issue of fact by showing that coverage was nonetheless available under Section II, 2.e of the Commercial General Liability Coverage Form, under which, as relevant here, an "insured" is defined to include any organization to whom All American was obligated, by virtue of a written contract, to provide liability insurance, "but only with respect to liability arising out of [its] operations." This provision requires that there be " some causal relationship between the injury and the risk for which coverage is provided'" (Regal Constr. Corp. v National Union Fire Ins. Co. of Pittsburgh, PA, 15 NY3d 34, 38, quoting Maroney v New York Cent. Mut. Fire Ins. Co., 5 NY3d 467, 472; see Worth Constr. Co., Inc. v Admiral Ins. Co., 10 NY3d 411, 415). The plaintiffs failed to raise a triable issue of fact as to the existence of such a causal relationship. All American's "operations" consisted of conducting a dance competition in the school auditorium and three classrooms. Bodily injury occurring outside the leased premises, in an area which All American had no responsibility to maintain or repair, "was not a bargained-for risk" (Maroney v New York Cent. Mut. Fire Ins. Co., 5 NY3d at 473). Rather, All American's "operations" at the school merely furnished the occasion for the accident, much like in Worth Constr. Co., where the fact that the named-insured subcontractor installed a staircase on which the injured plaintiff fell, thus furnishing "the situs of the accident," did not demonstrate that the accident, caused by the installation of fireproofing on the staircase by another subcontractor, arose from the named-insured subcontractor's "operations" (Worth Constr. Co., Inc. v Admiral Ins. Co., 10 NY3d at 416; cf. Castillo v Amjack Leasing Corp., 84 AD3d 1298, 1298 ["liability may not be imposed upon a party who merely furnishes the condition or occasion for the occurrence of the event but is not one of its causes" (internal quotation marks omitted)]).

Accordingly, the Supreme Court should have granted the defendant's motion for summary judgment declaring that it is not obligated to defend and indemnify the plaintiffs in the underlying action.

Since this is a declaratory judgment action, the matter must be remitted to the Supreme Court, Queens County, for the entry of a judgment declaring that the defendant is not obligated to defend and indemnify the plaintiffs in the underlying personal injury action entitled Levine v Christ the King Regional High School, commenced in the Supreme Court, Kings County, under Index No. 26408/06 (see Lanza v Wagner, 11 NY2d 317, 334, appeal dismissed 371 US 74, cert denied 371 US 901).
GEICO v. Albino

Michael D. Ribowsky, Richmond Hill, N.Y., for appellant.
Morris Duffy Alonso & Faley, New York, N.Y. (Anna J. Ervolina and Andrea M. Alonso of counsel), for respondent.

DECISION & ORDER
In a proceeding pursuant to CPLR article 75 to permanently stay arbitration of an uninsured motorist claim, Juan R. Albino appeals from a judgment of the Supreme Court, Queens County (Rios, J.), dated May 12, 2011, which, after a framed-issue hearing, granted the amended petition.
ORDERED that the judgment is affirmed, with costs.

The appellant sought uninsured motorist benefits under a policy of insurance issued by the petitioner for physical injuries he alleged were sustained in a hit-and-run accident. The petitioner commenced this proceeding to permanently stay the arbitration.

Contrary to the appellant's contention, the Supreme Court providently exercised its discretion in, in effect, granting the petitioner leave to amend the petition to include, inter alia, a claim that no hit-and-run accident had occurred. While CPLR 7503(c) provides that a party served with a demand for arbitration must seek a stay within 20 days thereafter or be precluded from doing so, it does not prohibit amendment of a timely petition (see Matter of Allcity Ins. Co. [Russo], 199 AD2d 88). Here, the petitioner sought a stay of arbitration within 20 days of being served with a demand for arbitration, and the proposed amendment did not result in any prejudice or surprise to the appellant (see CPLR 3025[b]; Matter of Allcity Ins. Co. [Russo], 199 AD2d at 88).

Where, as here, a case is determined after a hearing held before a justice, this Court's power to review the evidence is as broad as that of the hearing court, taking into account in a close case the fact that the hearing judge had the advantage of seeing the witnesses (see Northern Westchester Professional Park Assoc. v Town of Bedford, 60 NY2d 492, 499; Matter of Allstate Ins. Co. v Tae Hong Ji, 81 AD3d 940). We decline to disturb the Supreme Court's determination, made after a framed-issue hearing, that there was no physical contact between the appellant's vehicle and an alleged hit-and-run vehicle (see Matter of Allstate Ins. Co. v Tae Hong Ji, 81 AD3d at 940; Matter of Government Employees Ins. Co. v Steinmetz, 51 AD3d 1022).

The petitioner's remaining contention is without merit.

Rivera v. Amica Mutual Insurance Company

Shapiro Law Offices, PLLC., Bronx (Ernest S. Buonocore of counsel), for appellants.
Miranda Sambursky Slone Sklarin Verveniotis, LLP, Elmsford (Richard S. Sklarin of counsel), for respondent.
Order, Supreme Court, Bronx County (Howard H. Sherman, J.), entered March 21, 2011, which, to the extent appealed from, determined that petitioners were entitled to recover a total of $100,000 under their insurance policy's supplemental underinsured motorist (SUM) coverage provisions, unanimously affirmed, without costs.

In Butler v New York Cent. Mut. Fire Ins. Co. (274 AD2d 924 [2000]), the Third Department held that whether the term "insured," as used in an identical Condition 6 of the SUM Endorsement, "refers to each independent insured" or "a cumulative grouping of all who qualify as insureds" was ambiguous, and should be construed against the insurer (id. at 925-26). However, in this case, Condition 6 cannot be viewed as ambiguous because such provision refers to "[t]he SUM limit shown on the Declarations," and the Declarations clearly set forth a "per accident" limit (see Matter of Automobile Ins. Co. Of Hartford v Ray, 51 AD3d 788, 790 [2008]; Matter of Government Empls. Ins. Co. v Young, 39 AD3d 751, 752-53 [2007]; Matter of Graphic Arts Mut. Ins. Co. [Dunham], 303 AD2d 1038, 1038-39 [2003]). Petitioners' piecemeal view of Condition 6 runs afoul of the principle that "[w]hen interpreting a contract, we must consider the entire writing and not view particular words in isolation" (Wachter v Kim, 82 AD3d 658, 661 [2011]).

Paulino v. Rodriguez


Pollack, Pollack, Isaac & DeCicco, New York (Michael H. Zhu of counsel), for appellant.
Law Offices of Edward M. Eustace, White Plains (Heath A. Bender of counsel), for respondents.

Order, Supreme Court, Bronx County (Geoffrey D. Wright, J.), entered on or about July 14, 2010, which, insofar as appealed from as limited by the briefs, granted defendants' motion for summary judgment dismissing the complaint for failure to satisfy the "serious injury" threshold of Insurance Law § 5102 (d), unanimously modified, on the law, to the extent of denying the motion with respect to plaintiff's claim of serious injury to her left shoulder, and otherwise affirmed, without costs.

Defendants met their prima facie burden of establishing their entitlement to judgment as a matter of law. Defendants demonstrated that plaintiff did not suffer a serious injury to her cervical spine, lumbar spine, or left shoulder by relying on the medical reports of plaintiff's treating physician which concluded, approximately four months after the accident, that she had full ranges of motion and that the MRIs of her cervical and lumbar spine were normal (see Insurance Law § 5102 [d]; Toure v Avis Rent a Car Sys., 98 NY2d 345, 350 [2002]; Newton v Drayton, 305 AD2d 303, 304 [2003]).

In opposition, plaintiff raised an issue of fact regarding the injury to her left shoulder. Plaintiff's subjective complaints of persistent pain were substantiated by objective medical evidence, including an MRI of her left shoulder, taken approximately two weeks after the accident, which showed the presence of fluid in her subscapular bursa, consistent with the diagnosis of bursitis. Plaintiff also submitted medical evidence that she tested positive for a painful arc test and an impingement sign test, suffered persistent pain despite conservative treatment, and continued to exhibit range of motion deficits in her left shoulder even after undergoing arthroscopic surgery (see Morris v Cisse, 58 AD3d 455 [2009]; Jones v Norwich, 283 AD2d 809 [2001]). Since injuries may worsen over time, evidence of contemporaneous range of motion limitations is not a prerequisite to plaintiff's claim (Perl v Meher, __ NY3d __, 2011 NY Slip Op 08452 [2011]).

Plaintiff submitted no further evidence of serious injury to her spine. However, if the trier of fact determines that a serious injury has been sustained, it may award damages for all injuries causally related to the accident (see Linton v Nawaz, 14 NY3d 821 [2010]; Rubin v SMS Taxi Corp., 71 AD3d 548, 549-550 [2010]).

Plaintiff did not plead a 90/180-day claim in her bill of particulars. In any event, defendants established that plaintiff returned to her part-time job within one month after the accident and there was no medical determination that she was unable to engage in substantially all of her material and customary daily activities for 90 out of the first 180 days after the accident (see Torain v Bah, 78 AD3d 588 [2010]).

Franco v. Supreme Poultry, Inc.

Joel J. Turney, LLC, New York, N.Y. (Jeffrey B. Manca 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, Kings County (Silber, J.), dated December 20, 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).

ORDERED that the order is reversed, on the law, with costs, and the defendants' motion for summary judgment dismissing the complaint is 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). The plaintiff alleged, inter alia, that as a result of the subject accident, he sustained certain injuries to his left shoulder. The defendants submitted competent medical evidence establishing, prima facie, that the alleged injuries to the plaintiff's left shoulder did not constitute a serious injury within the meaning of Insurance Law § 5102(d) (see Rodriguez v Huerfano, 46 AD3d 794, 795). In opposition, however, the plaintiff submitted competent medical evidence raising a triable issue of fact as to whether the alleged injuries to his left shoulder constituted a serious injury under the permanent consequential limitation of use category or the significant limitation of use category of Insurance Law § 5102(d) (see Perl v Meher, 18 NY3d 208 *5).

Accordingly, the Supreme Court should have denied the defendants' motion for summary judgment dismissing the complaint.

Howell v. Skody


William Pager, Brooklyn, N.Y., for appellant.
Abamont & Associates, Garden City, N.Y. (Jonathan Hirschhorn of counsel), for respondent.

DECISION & ORDER

In an action to recover damages for personal injuries, the plaintiff appeals from an order of the Supreme Court, Queens County (Strauss, J.), entered January 31, 2011, which, in effect, granted that branch of the defendant's motion which was 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 that branch of the defendant's motion which was 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, inter alia, that as a result of the subject accident, she sustained certain injuries to the cervical and lumbar regions of her spine. The defendant submitted evidence establishing, prima facie, that the alleged injuries to those regions of the plaintiff's spine did not constitute serious injuries within the meaning of Insurance Law § 5102(d) (see Staff v Yshua, 59 AD3d 614). Although the defendant further argued that those alleged injuries were not caused by the subject accident (see Pommells v Perez, 4 NY3d 566, 569), her submissions revealed the existence of a triable issue of fact as to causation (see Luby v Tsybulevskiy, 89 AD3d 689; Kelly v Ghee, 87 AD3d 1054; see also Hightower v Ghio, 82 AD3d 934, 935).

In opposition, the plaintiff submitted competent medical evidence raising a triable issue of fact as to whether the alleged injuries to the cervical and lumbar regions of her spine constituted serious injuries under the permanent consequential limitation of use or significant limitation of use categories of Insurance Law § 5102(d) (see Perl v Meher, 18 NY3d 208 *4-5). Accordingly, the Supreme Court should have denied that branch of the defendant's motion which was for summary judgment dismissing the complaint.

Kyoung Yun Kim v. Emkay Inc. Trust

Sim & Park, LLP, New York, N.Y. (Sang J. Sim of counsel), for appellant.
Perez & Varvaro, Uniondale, N.Y. (Alex M. Temple 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, Queens County (Weiss, J.), entered November 30, 2010, which granted the defendants' motion for summary judgment dismissing the complaint on the ground that she did not sustain a serious injury within the meaning of Insurance Law § 5102(d).

ORDERED that the order is reversed, on the law, with costs, and the defendants' motion for summary judgment dismissing the complaint is denied.

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). The plaintiff alleged, inter alia, that as a result of the subject accident, she sustained certain injuries to the cervical and lumbosacral regions of her spine, her right shoulder, and her knee. The defendants submitted evidence establishing, prima facie, that the alleged injuries to the cervical and lumbosacral regions of the plaintiff's spine, her right shoulder, and knee did not constitute serious injuries within the meaning of Insurance Law § 5102(d) (see Rodriguez v Huerfano, 46 AD3d 794, 795).

However, in opposition, the plaintiff submitted competent medical evidence raising a triable issue of fact as to whether the alleged injuries to the cervical and lumbosacral regions of her spine, and to her right shoulder, constituted serious injuries under the permanent consequential limitation of use or significant limitation of use categories of Insurance Law § 5102(d) (see Perl v Meher, 18 NY3d 208 *4-5). Accordingly, the Supreme Court should have denied the defendants' motion for summary judgment dismissing the complaint.

In light of the foregoing determination, the parties' remaining contentions have been rendered academic.

Martinez v. Yi Zhong Chen

Costella & Gordon, LLP, Garden City, N.Y. (Roy C. Gordon of counsel), for appellant.
Baker McEvoy Morrissey & Moskovits, P.C., New York, N.Y. (Stacy R. Seldin of counsel), for respondent Yi Zhong Chen.

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 September 29, 2010, which granted the motion of the defendant Yi Zhong Chen and the separate motion of the defendant Jasmine Romero for summary judgment dismissing the complaint insofar as asserted against each of them on the ground that she did not sustain a serious injury within the meaning of Insurance Law § 5102(d).

ORDERED that the order is reversed, on the law, with costs, and the defendants' motions for summary judgment dismissing the complaint insofar as asserted against each of them are denied.

The defendant Jasmine Romero failed to make a prima facie 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 Insurance Law § 5102[d]; Toure v Avis Rent A Car Sys., 98 NY2d 345, 352; Gaddy v Eyler, 79 NY2d 955, 955-956). On her motion for summary judgment, Romero did not address the injuries to the plaintiff's left ankle alleged in the plaintiff's bill of particulars, and did not submit a report from any physician who examined the plaintiff's left ankle (see Bitterman v Dennis, 78 AD3d 627; McMillian v Naparano, 61 AD3d 943; Lopez v Felton, 60 AD3d 822; O'Neal v Bronopolsky, 41 AD3d 452). Since Romero did not sustain her prima facie burden, the Supreme Court should have denied her motion regardless of the sufficiency of the plaintiff's opposition papers (see Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853; Kharzis v PV Holding Corp., 78 AD3d 1122, 1123; Kelly v County of Suffolk, 62 AD3d 837).

In support of his separate motion for summary judgment, the defendant Yi Zhong Chen (hereinafter Chen) sustained 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 at 956-957). Chen made a prima facie showing, through the affirmed reports of his examining orthopedist and neurologist, that the injuries the plaintiff allegedly sustained to the lumbar region of her spine, her left knee, and her left ankle did not constitute a serious injury within the meaning of Insurance Law § 5102(d) (see McKenna v Williams, 89 AD3d 698; Dunbar v Prahovo Taxi, Inc., 84 AD3d 862, 863; Estaba v Quow, 74 AD3d 734; Staff v Yshua, 59 AD3d 614; Rodriguez v Huerfano, 46 AD3d 794, 795), and, in any event, were not caused by the subject accident (see Carballo v Pacheco, 85 AD3d 703; Jilani v Palmer, 83 AD3d 786, 787). However, in opposition, the plaintiff submitted, inter alia, the affirmed report of her treating specialist in physical medicine and rehabilitation, which concluded that she had suffered permanent injuries to the lumbar region of her spine resulting in significant range-of-motion limitations. The plaintiff's submissions were sufficient to raise a triable issue of fact as to whether she sustained a serious injury under the permanent consequential limitation of use or the significant limitation of use categories of Insurance Law § 5102(d), and as to whether those injuries were caused by the subject accident (see Perl v Meher, 18 NY3d 208; Tudor v Yetman, 88 AD3d 870). Accordingly, the Supreme Court should have also denied Chen's motion for summary judgment dismissing the complaint insofar as asserted against him.

Thaler v. Felsberg


Siben & Siben, LLP, Bay Shore, N.Y. (Alan G. Faber of counsel), for appellant.
Carman, Callahan & Ingham, LLP, Farmingdale, N.Y. (Tracy S. Reifer of counsel), for respondents John W. Felsberg and John J. Felsberg, and John T. Ryan & Associates, Lake Success, N.Y. (David M. Reilly of counsel), for respondents Selma Stewart and Phillip C. Stewart (one brief filed).

DECISION & ORDER
In an action to recover damages for personal injuries, the plaintiff appeals, as limited by his brief, from so much of an order of the Supreme Court, Suffolk County (Pitts, J.), dated September 30, 2010, as granted the separate motions of the defendants John W. Felsberg and John J. Felsberg, and the defendants Selma Stewart and Phillip C. Stewart, for summary judgment dismissing the complaint insofar as asserted against each of them on the ground that Theresa D'Amico did not sustain a serious injury within the meaning of Insurance Law § 5102(d), and denied, as academic, his cross motion, in effect, to compel those defendants to accept a supplemental bill of particulars.

ORDERED that the order is reversed insofar as appealed from, on the law, with one bill of costs, the separate motions of the defendants John W. Felsberg and John J. Felsberg, and the defendants Selma Stewart and Phillip C. Stewart, for summary judgment dismissing the complaint insofar as asserted against each of them are denied, and the plaintiff's cross motion, in effect, to compel those defendants to accept a supplemental bill of particulars is granted.

The defendants John W. Felsberg and John J. Felsberg, and the defendants Selma Stewart and Phillip C. Stewart (hereinafter collectively the defendants), failed to meet their prima facie burdens of showing that Theresa D'Amico 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, 350; Gaddy v Eyler, 79 NY2d 955, 956-957). The plaintiff, who was the trustee of D'Amico's bankruptcy estate, essentially alleged, inter alia, that as a result of the subject accident, the cervicothoracic region of D'Amico's spine sustained certain injuries. On their motions for summary judgment, the defendants addressed those alleged injuries by arguing that they were not caused by the subject accident (see Pommells v Perez, 4 NY3d 566, 579). However, the defendants' evidentiary submissions revealed the existence of a triable issue of fact as to whether those alleged injuries were caused by the subject accident (see Alvarez v Prospect Hosp., 68 NY2d 320, 324; Rose v City of New Rochelle, 57 AD3d 506). Since the defendants failed to meet their prima facie burdens, we need not consider the sufficiency of the plaintiff's opposition papers (see Rose v City of New Rochelle, 57 AD3d at 506; Litz v F.J. Gray & Co., 39 AD3d 490, 491).

Under the circumstances, it is clear that the plaintiff did not need leave of court to serve a supplemental bill of particulars (see CPLR 3043[b]; see Zenteno v Geils, 17 AD3d 457, 458). Accordingly, the Supreme Court should have granted the plaintiff's cross motion, in effect, to compel the defendants to accept a supplemental bill of particulars.

GREENHOMES AMERICA, LLC v. FARM FAMILY CASUALTY INSURANCE COMPANY




Appeal from an order of the Supreme Court, Erie County (Shirley Troutman, J.), entered May 10, 2011. The order denied the motion of plaintiff for partial summary judgment on its first cause of action.


DUKE, HOLZMAN, PHOTIADIS & GRESENS LLP, BUFFALO (HOWARD E. BERGER OF COUNSEL), FOR PLAINTIFF-APPELLANT.
HURWITZ & FINE, P.C., BUFFALO (DAN D. KOHANE OF COUNSEL), FOR DEFENDANT-RESPONDENT

. It is hereby ORDERED that the order so appealed from is unanimously modified on the law by granting judgment in favor of defendant on the first cause of action as follows: It is ADJUDGED and DECLARED that defendant is not obligated to defend and indemnify plaintiff in the underlying action and is not obligated to pay the attorney's fees and costs incurred by plaintiff in the defense of that action,  and as modified the order is affirmed without costs.

Memorandum: Plaintiff appeals from an order denying its motion for partial summary judgment on the first cause of action seeking, inter alia, a declaration that defendant is obligated to defend and indemnify it in the underlying subrogation action. It is undisputed that there was a de facto merger of plaintiff and HughesCo, Inc. (HughesCo) in September 2005 and that the operations formerly performed by HughesCo remained unchanged following the merger. In November 2005, there was a fire in a residence allegedly caused by plaintiff's negligence in connection with the installation of insulation. In the underlying action, the homeowners' insurer seeks reimbursement for the losses incurred as a result of the alleged negligence of plaintiff and HughesCo, which was sued as a separate entity. Plaintiff commenced the instant action seeking, inter alia, a declaration that defendant is obligated to defend and indemnify it in the underlying action. We conclude that Supreme Court properly determined that the anti-transfer clause contained in the liability policy issued by defendant to HughesCo prohibited HughesCo from transferring its rights under the policy to plaintiff. That clause unequivocally provides that "[y]our rights and duties under this policy may not be transferred without our written consent except in the case of death of an individual Named Insured."

"As a general matter, New York follows the majority rule that [a no-transfer clause] is valid with respect to transfers that were made prior to, but not after, the loss has occurred . . . The idea behind the majority rule is that, once the insured-against loss has occurred, the policy-holder essentially is transferring a cause of action [or its liability] rather than a particular risk profile" (Globecon Group, LLC v Hartford Fire Ins. Co., 434 F3d 165, 170-171; see Kittner v Eastern Mut. Ins. Co., 80 AD3d 843, 846 n 3, lv dismissed 16 NY3d 890; Cremo Light Co. v Parker, 118 App Div 845, 847).

We have considered plaintiff's remaining contentions and conclude that they are without merit. Inasmuch as the court failed to declare the rights of the parties in connection with plaintiff's motion for partial summary judgment on the first cause of action, we modify the order accordingly by making the requisite declaration.

Briody v. Melecio


Appeal from an order of the Supreme Court, Monroe County (Matthew A. Rosenbaum, J.), entered April 5, 2011 in a personal injury action. The order, insofar as appealed from, denied in part the motion of defendant for summary judgment.

Rupp, Baase, Pfalzgraf, Cunningham & Coppola LLC, Rochester (Alison M.K. Lee Of Counsel), For Defendant-Appellant.
Cellino & Barnes, P.C., Rochester (Timothy R. Hedges Of Counsel), For Plaintiff-Respondent.

It is hereby ORDERED that the order insofar as appealed from is unanimously reversed on the law without costs, the motion is granted in its entirety and the complaint is dismissed.

Memorandum: Plaintiff commenced this action seeking damages for injuries she sustained when the vehicle she was driving was rear-ended by a vehicle driven by defendant. We conclude that Supreme Court erred in denying in part defendant's motion seeking summary judgment dismissing the complaint on the ground that plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102 (d). Defendant met her initial burden of establishing that plaintiff did not sustain a serious injury under the permanent consequential limitation of use and significant limitation of use categories, and plaintiff failed to raise a triable issue of fact in opposition (see generally Zuckerman v City of New York, 49 NY2d 557, 562). We therefore reverse the order insofar as appealed from, grant defendant's motion in its entirety and dismiss the complaint.

Contrary to plaintiff's contention, defendant may establish her entitlement to judgment as a matter of law by submitting the medical records provided by counsel for plaintiff (see Wiegand v Schunck, 294 AD2d 839). In support of her motion, defendant also submitted the affidavit of an orthopedic surgeon who reviewed plaintiff's medical records at the request of defendant. That expert concluded that the only objective medical findings with respect to any alleged injury related to a preexisting degenerative condition of the spine. "[W]ith persuasive evidence that plaintiff's alleged pain and injuries were related to a preexisting condition, plaintiff had the burden to come forward with evidence addressing defendant's claimed lack of causation" and, here, plaintiff failed to meet that burden (Carrasco v Mendez, 4 NY3d 566, 580; see Hartman-Jweid v Overbaugh, 70 AD3d 1399, 1400). Although plaintiff submitted the affirmation of her treating neurosurgeon in opposition to the motion, his affirmation did not address the conclusion of defendant's expert that the changes in the spine of plaintiff were degenerative in nature (see Marsh v City of New York, 61 AD3d 552; Valentin v Pomilla, 59 AD3d 184, 186). Plaintiff's expert asserted that a central disc protrusion in the cervical spine at C5-6 and C6-C7 was a "new" injury resulting from the motor vehicle accident in question. Defendant's expert, however, established that such injury was revealed on a CT scan taken of plaintiff's cervical spine several years prior to the accident, after plaintiff had fallen down a flight of stairs and fractured a cervical vertebrae at C6. The affirmation of plaintiff's expert did not discuss that CT scan but, rather, it compared plaintiff's condition following the subject accident to an MRI report dated the year prior to the CT scan. In addition, the reports of an orthopedic surgeon submitted by plaintiff failed to address defendant's evidence of a preexisting degenerative condition and the results of the CT scan. We therefore conclude that plaintiff's "submissions in opposition to the motion did not adequately address how [her] current medical problems, in light of [her] past medical history, are causally related to the subject accident' " (Anania v Verdgeline, 45 AD3d 1473, 1474; see D'Angelo v Litterer, 87 AD3d 1357).

In light of our determination, we need not address defendant's remaining contentions.

Ashkenazi v AXA Equitable Life Insurance Company


Schindel, Farman, Lipsius, Gardner & Rabinovich LLP, New
York (Phillip M. Manela of counsel), for appellant.
Krantz & Berman LLP, New York (Larry H. Krantz of
counsel), for respondent.
Order, Supreme Court, New York County (Carol R. Edmead, J.), entered January 21, 2010, which, inter alia, granted defendant AXA Equitable Life Insurance Company's (AXA) motion for summary judgment dismissing plaintiff's breach of contract claim and granted defendant summary judgment on its second counterclaim for rescission, unanimously modified, on the law, to the extent of denying defendant's motion as premature without prejudice to renew at the completion of discovery, remanding for further discovery in accordance with this decision, and otherwise affirmed, without costs. Order, same court and Justice, entered May 14, 2010, adhering to the prior decision upon a partial grant of reargument, unanimously dismissed, without costs, as academic.
In this stranger owned life insurance case, plaintiff Alexander Ashkenazi, as Trustee of the Zablidowsky Life Insurance Trust (the Trust), sued defendant AXA, alleging breach of contract and seeking payment on two life insurance policies, for $5 million and $3 million, respectively. The Trust was the owner and beneficiary of both policies, each of which insured the life of Estelle Zablidowsky, an elderly woman of modest means. AXA moved for summary judgment prior to the completion of discovery, seeking dismissal of the complaint and rescission of the policy.
Summary judgment is premature at this juncture since there are issues of fact as to whether the decedent's net worth and the existence of another life insurance policy were material to AXA's decision to issue the policy (Alaz Sportswear v Public Serv. Mut. Ins. Co., 195 AD2d 357, 358 [1993]). Based on the submitted excerpts of the trial transcripts in Settlement Funding, LLC v AXA Equitable Life Ins. (2010 WL 3825735, 2010 US Dist LEXIS 104451 [SD NY 2010]), and other submissions, plaintiff demonstrated that further discovery is warranted on the issues of whether AXA's submitted underwriting guidelines are complete, whether AXA routinely ignored its own requirement to confirm an insured's financial net worth via an inspection report, and whether the financial information or any additional existing policies was material to AXA's underwriting decisions regarding similarly situated applicants. Thus, proof of defendant's underwriting practices with respect to applicants with similar histories is required.
Plaintiff's request for a premium refund, submitted for the first time in his motion to renew and reargue, however, was properly denied (CPLR 2221[e]; William P. Pahl Equip. Crop. v Kassis, 182 AD2d 22, 27 [1992], lv denied 80 NY2d 1005 [1992]). In any event, a request for return of the premiums paid is premature in light of our determination that the propriety of the rescission cannot be resolved without further discovery.

ALGHEIN v UTICA FIRST INSURANCE COMPANY



Appeal from an order of the Supreme Court, Oneida County (Bernadette T. Clark, J.), entered December 3, 2010 in a breach of contract action. The order, insofar as appealed from, granted the motion of defendant for summary judgment and dismissed the complaint.


GUSTAVE J. DETRAGLIA, JR., UTICA (MICHELLE E. DETRAGLIA OF COUNSEL), FOR PLAINTIFF-APPELLANT.
FARBER BROCKS & ZANE L.L.P., MINEOLA (SHERRI N. PAVLOFF OF COUNSEL), FOR DEFENDANT-RESPONDENT.


It is hereby ORDERED that the order insofar as appealed from is unanimously reversed on the law without costs, defendant's motion is denied and the complaint is reinstated.
Memorandum: Plaintiff commenced this breach of contract action, alleging that defendant breached its insurance contract with plaintiff by failing to provide coverage for losses from a fire at plaintiff's place of business. Defendant moved for summary judgment dismissing the complaint, and plaintiff cross-moved for summary judgment and an inquest on damages. Supreme Court granted the motion and denied the cross motion, but on appeal plaintiff contends only that the court erred in granting the motion and does not contend that his cross motion should have been granted. We agree with plaintiff that the court erred in granting defendant's motion.
In order to meet its initial burden on the motion, defendant was required to "establish[ ] as a matter of law that the exclusion . . . upon which defendant relied unambiguously applied to plaintiff's loss" (Gravino v Allstate Ins. Co., 73 AD3d 1447, 1448, lv denied 15 NY3d 705). Here, although defendant relied upon an exclusion that permitted it to deny coverage in the event that plaintiff failed to maintain a central station fire alarm, defendant failed to submit evidence establishing that plaintiff did not have such an alarm at the time of the loss. Defendant's contention that the deposition testimony of plaintiff established that there was no such alarm is without merit, inasmuch as plaintiff was not questioned with respect to the existence of such an alarm, nor did he otherwise testify about one. We thus conclude that defendant failed to meet its initial burden of establishing its entitlement to judgment as a matter of law (see generally Zuckerman v City of New York, 49 NY2d 557, 562). "Failure [of the moving party] to make [a] prima facie showing requires a denial of the motion, regardless of the sufficiency of the opposing papers" (Alvarez v Prospect Hosp., 68 NY2d 320, 324).
In light of our determination, we need not address plaintiff's remaining contentions.
MAGIE v PREFERRED MUTUAL INSURANCE COMPANY



Calendar Date: November 14, 2011
Before: Mercure, Acting P.J., Rose, Lahtinen, Kavanagh and McCarthy, JJ.


Petrocelli & Christy, New York City (Carol R.
Finocchio, New York City, of counsel), for appellant.
Basch & Keegan, L.L.P., Kingston (Eli B. Basch of
counsel), for respondents.
MEMORANDUM AND ORDER


Lahtinen, J.
Appeal from a judgment of the Supreme Court (Ledina, J.), entered July 2, 2010 in Sullivan County, upon a decision of the court in favor of plaintiffs.
In August 2005, plaintiffs' house in the Town of Fallsburg, Sullivan County was destroyed by fire. Plaintiffs had a homeowner's insurance policy with defendant that included coverage of, among other things, $487,000 for the dwelling and $340,900 for personal property. Their losses allegedly exceeded these amounts and they elected not to rebuild the house.
At the time of the fire, plaintiffs were not staying at the premises, but instead were at a recently completed "retirement home" a short distance away. Defendant made two partial advance payments totaling $15,000 and, after considerable delay, paid the outstanding mortgage balance of $284,655.89. Defendant informed plaintiffs in March 2006 that it considered the policy void based upon its conclusion that plaintiffs had misrepresented material facts and engaged in fraudulent conduct regarding some of their claims including, among other things, misrepresenting the value of their personal property.
Plaintiffs commenced this action seeking to be indemnified for their covered losses. Following a bench trial, Supreme Court rendered a written decision finding that defendant failed to prove material misrepresentation or fraud by plaintiffs and rejecting defendant's alternative contention that a coinsurance penalty was implicated. The court determined that plaintiffs had established that they were entitled to $593,098.13, comprised of $252,198.13 under coverage for the dwelling [FN1] and $340,900 for personal property coverage. Defendant appeals.
Defendant argues that plaintiffs' complaint should have been dismissed as a matter of law since the proof at trial allegedly demonstrated fraud and misrepresentation by plaintiffs and their adjuster, thus providing the ground for defendant to void the policy. A policy may be voided if the insured "'willfully and fraudulently placed in the proofs of loss a statement of property lost which [the insured] did not possess, or has placed a false and fraudulent value upon the articles which [the insured] did own'" (Saks & Co. v Continental Ins. Co., 23 NY2d 161, 165 [1968], quoting Domagalski v Springfield Fire & Mar. Ins. Co., 218 App Div 187, 190 [1926]). Incorrect information is not necessarily tantamount to fraud or material misrepresentation as the insurer must tender "proof of intent to defraud — a necessary element to the defense" (Deitsch Textiles v New York Prop. Ins. Underwriting Assn., 62 NY2d 999, 1001 [1984]; see Kittner v Eastern Mut. Ins. Co., 80 AD3d 843, 847 [2011], lv dismissed 16 NY3d 890 [2011]). Whether a misrepresentation reaches the level of being material is typically for the factfinder "unless the insurer proffers clear and substantially uncontradicted evidence concerning materality" (Carpinone v Mutual of Omaha Ins. Co., 265 AD2d 752, 754 [1999]; see Lenhard v Genesee Patrons Co-op. Ins. Co., 31 AD3d 831, 833 [2006]). Where a defendant seeks dismissal as a matter of law, a plaintiff is afforded every favorable inference from the proof presented at trial (see Crawford v Village of Millbrook, 61 AD3d 918, 920 [2009]; Martin v Fitzpatrick, 19 AD3d 954, 955-956 [2005]).
The proof presented revealed that a significant fire occurred which destroyed or damaged virtually everything at the location. Plaintiffs hired a public adjustment company, and the adjuster who aided in quantifying plaintiffs' loss indicated that, of the thousands of items he listed, less than one tenth of one percent were not damaged. And, those reported non-damaged items had been exposed to the fire so as to affect their value. Out of these thousands of damaged items, defendant points to a small number as purportedly reflecting incorrect information. However, plaintiffs offered explanations as to some of these items, and the proof at trial simply did not compel the conclusion as a matter of law that plaintiffs intended to defraud defendant or that the incorrect information constituted material misrepresentation. The fact that plaintiffs did not have documentation for some losses was explained by documentation being lost in the fire. The estimate of damages to plaintiffs' large firearms collection was based in part on plaintiff James Magie's extensive experience as an owner and collector. One adjuster's recollection that he thought Magie might have indicated that the firearms were separately insured is insufficient to clearly prove plaintiffs had additional insurance that they failed to disclose. Similarly, the fact that plaintiffs had very recently started sleeping in their new home and still were in the process of moving does not establish that plaintiffs made a material misrepresentation about whether the premises were owner occupied. Viewing the evidence under the standard applicable for dismissal as a matter of law, we find ample proof to support plaintiffs' asserted losses and reject defendant's affirmative defense.
Next, defendant contends that we should set aside the verdict as not supported by a fair interpretation of the evidence. "On our review of a verdict after a bench trial, we independently review the weight of the evidence and may grant the judgment warranted by the record, while according due deference to the trial judge's factual findings particularly where . . . they rest largely upon credibility assessments" (Martin v Fitzpatrick, 19 AD3d at 957; see Cotton v Beames, 74 AD3d 1620, 1621-1622 [2010]). This was a fire that even defendant's agent characterized as "devastating." Plaintiffs submitted a comprehensive inventory as well as numerous photographs revealing the virtual total destruction of their home and property. The proof reveals that they cooperated with defendant and, to the extent that plaintiffs made errors when attempting to assess the significant losses, the errors were not intentional and were minor when considered in the context of the overall nature of the losses sustained. We are unpersuaded to disregard Supreme Court's credibility determinations. Accepting those determinations, and upon reviewing and weighing the proof in the extensive record, we agree with Supreme Court that plaintiffs adequately established their losses and defendant's affirmative defenses of fraud and material misrepresentation are unavailing.
Finally, we consider defendant's alternative argument that a coinsurance penalty should be applied to reduce the recovery for the real property part of plaintiffs' loss. Initially, the applicability of a coinsurance clause is an affirmative defense that must be pleaded (see Rosenbaum Plus Two Print. v Allstate Ins. Co., 59 AD2d 939, 939 [1977]; 2 NY PJI2d 4:49, Comment, at 976 [2011]), and defendant did not specifically assert such defense in its answer. In any event, in New York, a coinsurance clause "results in reducing the recovery in case of a partial loss, though in case of total loss, the insurer is liable for the amount named in the policy" (New York Life Ins. Co. v Glens Falls Ins. Co., 184 Misc 846, 849 [1945], affd 274 App Div 1045 [1949], affd 301 NY 506 [1950]; see Quaker Hills, LLC v Pacific Indem. Co., 2011 WL 4343368, *5, 2011 US Dist LEXIS 92633, *16-17 [SD NY 2011]; 70A NY Jur 2d, Insurance Law § 2201; Appleman, Insurance Law & Practice § 3866). Here, it is undisputed that plaintiffs sustained a total loss.
Defendant's remaining arguments have been considered and are unavailing.
Mercure, Acting P.J., Rose, Kavanagh and McCarthy, JJ., concur.
ORDERED that the judgment is affirmed, with costs.
Footnotes


Footnote 1:Supreme Court found that plaintiffs were entitled to the full $487,000 dwelling coverage; plus $18,316.75 for actual debris removal costs that were permitted up to 5% of the coverage amount; less $15,000 already paid and the $500 deductible; less $284,655.89 paid on the mortgage; plus $47,037.27 late payment interest resulting from defendant's delay in paying the mortgage.

Katanov v.  County of Nassau


The Orlow Firm, Flushing, N.Y. (Adam M. Orlow and Louis A.
Badolato of counsel), for appellant.
John Ciampoli, County Attorney, Mineola, N.Y. (Jackie L.
Gross and Nazneen Malik 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 (Brandveen, J.), entered December 15, 2010, which granted the defendants' motion for summary judgment dismissing the complaint.
ORDERED that the order is reversed, on the law, with costs, and the defendants' motion for summary judgment dismissing the complaint is denied.
On the morning of October 21, 2008, the plaintiff, a pedestrian, was struck by a police car in the parking lot of an assisted living facility in the Town of North Hempstead. The police car was being operated by the defendant Scott Blanshan, a Nassau County Police Officer (hereinafter the police officer), while he was responding to a 911 call originating from the facility. The plaintiff commenced this action against the police officer and the defendants County of Nassau and Nassau County Police Department. The defendants moved for summary judgment dismissing the complaint on the grounds that the police officer's conduct could not form the basis of liability and that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the accident. The Supreme Court granted the motion, and the plaintiff appeals. We reverse.
The Supreme Court erred in granting that branch of the defendants' motion which was for summary judgment dismissing the complaint on the ground that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the accident (see Toure v Avis Rent A Car Sys., 98 NY2d 345; Gaddy v Eyler, 79 NY2d 955, 956-957). In support of that branch of their motion, the defendants relied upon, inter alia, the affirmed medical report of Dr. Jerrold M. Gorski, their examining orthopedic surgeon. Dr. Gorski examined the plaintiff on March 22, 2010, and, during that examination, he noted significant limitations in her shoulders and neck (see Grisales v City of New York, 85 AD3d 964, 965; Torres v Torrano, 79 AD3d 1124; Mondevil v Kumar, 74 AD3d 1295, 1296; Smith v Hartman, 73 AD3d 736; Quiceno v Mendoza, 72 AD3d 669). Since the defendants failed to meet their prima facie burden with respect to the issue of serious injury, it is unnecessary to determine whether the plaintiff's opposition papers were sufficient to raise a triable issue of fact in this regard (see Grisales v City of New York, 85 AD3d at 965; Coscia v 938 Trading Corp., 283 AD2d 538).
The Supreme Court also erred in granting that branch of the defendants' motion which was for summary judgment dismissing the complaint on the ground that the police officer's conduct could not form the basis of liability. In concluding that the actions of the police officer, in the emergency operation of his vehicle, were subject to the reckless disregard standard under Vehicle and Traffic Law § 1104(e), the Supreme Court failed to apply the correct standard. "[T]he reckless disregard standard of care in Vehicle and Traffic Law § 1104(e) only applies when a driver of an authorized emergency vehicle involved in an emergency operation engages in the specific conduct exempted from the rules of the road by Vehicle and Traffic Law § 1104(b)" (Kabir v County of Monroe, 16 NY3d 217, 220). "Any other injury-causing conduct of such a driver is governed by the principles of ordinary negligence" (id.). Here, the injury-causing conduct of the police officer, i.e., making a turn into a parking space located within the parking lot while traveling at approximately two miles per hour, did not fall within any of the categories of privileged conduct set forth in Vehicle and Traffic Law § 1104(b) (see Kabir v County of Monroe, 16 NY3d 217; Tatishev v City of New York, 84 AD3d 656, 657). Thus, the plaintiff's claim was governed by principles of ordinary negligence.
A driver is negligent when an accident occurs because he or she failed to see that which through the proper use of his or her senses he or she should have seen (see Heath v Liberato, 82 AD3d 841; Kucar v Town of Huntington, 81 AD3d 784, 785; Dominguez v CCM Computers, Inc., 74 AD3d 728, 729; Mohammad v Ning, 72 AD3d 913, 915). Here, the police officer admitted during his deposition testimony, which the defendants submitted in support of their motion, that he never saw the plaintiff until after he struck her with his car as he was trying to park.
Accordingly, because the defendants failed to make a prima facie showing that the police officer's conduct could not form the basis of liability, the Supreme Court should have denied that branch of their motion which was for summary judgment dismissing the complaint on that ground, regardless of the sufficiency of the plaintiff's opposition papers as to the issue of liability (see Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853).
We decline the plaintiff's request to search the record and award her summary judgment on the issue of liability.
RIVERA, J.P., LEVENTHAL, ROMAN and SGROI, JJ., concur.
CAPITAL BANK & TRUST COMPANY v GULF INSURANCE COMPANY



Calendar Date: November 17, 2011
Before: Peters, J.P., Malone Jr., Stein, Garry and Egan Jr., JJ.


Hiscock & Barclay, L.L.P., Syracuse (Robert A.
Barrer of counsel), for appellant.
Frenkel, Lambert, Weiss, Weisman & Gordon,
L.L.P., New York City (Arthur N. Lambert of counsel), for
respondent.
MEMORANDUM AND ORDER


Peters, J.P.
Appeal from an order of the Supreme Court (McNamara, J.), entered February 10, 2011 in Albany County, which, among other things, granted defendant's motion for summary judgment dismissing the complaint.
In 2002, defendant issued a financial institution bond to plaintiff for the period of December 12, 2002 to December 12, 2003, which provided fidelity coverage insuring plaintiff against "[l]oss resulting directly from dishonest or fraudulent acts" committed by its employees. According to plaintiff, in October 2003 it discovered that James White, a senior vice-president and loan officer, had forged the signatures of two of plaintiff's presidents in a number of loan transactions over a span of several years, which led to losses in excess of $1.7 million [FN1]. Those forged signatures allowed White to process the loans without obtaining the required prior approval of the bank president. Plaintiff notified defendant of the discovery of the forgeries and its losses and, in June 2004, submitted a claim under the bond. After defendant failed to pay the claim, plaintiff commenced this action for breach of contract.
During the course of discovery, John Brunner, who had served as plaintiff's president from February 2001 to June 2003, was deposed. He stated that in 2001 he discovered that White had been forging his (Brunner's) signature on loan documents, particularly credit extensions and renewals for certain "non-performing loans" that White did not have the authority to approve. According to Brunner, he then confronted White, who admitted to the forgeries. Brunner advised him that his actions were a violation of bank policy and should not be repeated. While Brunner also brought the issue to the attention of plaintiff's chairman of the board, no further action was taken because, according to Brunner, White was plaintiff's top performing loan officer and his forgeries involved problem loans and did not exacerbate loan performance. Interestingly, Brunner did not document any of the information he discovered regarding the forgeries, including the particular loans that were involved.
Following the completion of discovery, defendant moved for summary judgment dismissing the complaint on the ground that the claim was excluded from coverage. Specifically, defendant relied on the provision of the bond excluding coverage for "loss arising out of or in connection with any circumstances or occurrences known to [plaintiff] prior to the inception [of the bond]." Defendant also argued that the claim was barred under the termination provision of the bond, which provided that coverage "terminates as to any [e]mployee . . . as soon as [plaintiff], or any director or officer not in collusion with such [employee], learns of any dishonest or fraudulent act committed [by] any such [employee] while employed by [plaintiff]." Plaintiff opposed the motion and cross-moved for summary judgment on its claim. Supreme Court denied plaintiff's cross motion and granted defendant's motion, prompting this appeal by plaintiff.
Summary judgment was properly awarded to defendant. Under the termination provision of the bond, coverage terminated as to any employee as soon as any officer or director of plaintiff learned of any "dishonest or fraudulent act" committed by such employee. The ambit of this provision is broad, covering acts committed against plaintiff or any other person or entity "whether or not of the type covered [under the bond]." While "dishonest or fraudulent acts" are not defined in the bond, those words, when used in the context of a fidelity bond, must be given their ordinary meaning and broadly include acts that demonstrate a want of integrity, breach of trust or moral turpitude affecting the official fidelity or character of the employee (see First Natl. Bank Co. of Clinton v Insurance Co. of N. Am., 606 F2d 760, 769 [7th Cir 1979]; C. Douglas Wilson & Co. v Insurance Co. of N. Am., 590 F2d 1275, 1278-1279 [4th Cir 1979], cert denied 444 US 831 [1979]; Federal Deposit Ins. Corp. v Aetna Cas. & Sur. Co., 426 F2d 729, 737 [5th Cir 1970]; Arlington Trust Co. v Hawkeye-Security Ins. Co., 301 F Supp 854, 857-858 [ED Va 1969]; Schreiber Travel Bur., Inc. v Standard Sur. & Cas. Co. of N.Y., 240 App Div 279, 282 [1934])[FN2]. Furthermore, the conduct need not amount to a crime to constitute dishonesty (see World Exch. Bank v Commercial Cas. Ins. Co., 255 NY 1, 5 [1930]; Schreiber Travel Bur., Inc. v Standard Sur. & Cas. Co. of N.Y., 240 App Div at 282). Here, under any construction, the act of forging another's name without consent in order to approve transactions which he or she does not have authority to approve, and with the admitted purpose of avoiding detection, constitutes a dishonest act.
Nevertheless, plaintiff argues that the conduct discovered in 2001 was not dishonest or fraudulent within the meaning of the bond because the particular forgeries did not result in any monetary loss to plaintiff. According to plaintiff, since Brunner's signature was only forged on credit renewals and extensions, which did not advance new funds to customers but rather extended the time for repayment, no loss occurred and, therefore, use of the signature does not constitute a fraudulent or dishonest act triggering the termination provision. Even if no loss occurred as a result of the 2001 forgeries, the language of the bond contains no requirement that a loss occur in order for conduct to be considered dishonest or fraudulent. The express terms of the bond provide that dishonest or fraudulent acts plus loss presents the basis for a claim; hence, loss is not an element of a dishonest or fraudulent act. Thus, because the forgeries committed by White constitute dishonest acts and plaintiff was aware of this conduct in 2001, prior to the issuance of the bond, coverage as to White terminated immediately upon inception of the bond.
Moreover, the bond also excluded from coverage any "loss arising out of or in connection with any circumstances or occurrences known to [plaintiff] prior to the inception [of the bond]." As previously noted, it is unclear whether the forgeries discovered in 2001 are related to any of the loans forming the basis of plaintiff's claim and, therefore, an issue of fact exists as to whether the loss "aris[es]" out of circumstances known to plaintiff prior to the inception of the bond. However, the forgeries surely establish a pattern of behavior by White in which he used Brunner's signature to approve actions for which White himself lacked authority. Clearly then, the loss for which plaintiff claimed coverage under the bond "aros[e] . . . in connection with" White's earlier pattern of forging the signatures of plaintiff's presidents on loan documents, which was undisputedly known by plaintiff prior to the inception of the bond. Accordingly, Supreme Court properly concluded that coverage was also excluded under this provision of the bond.
The parties' remaining contentions, to the extent not specifically addressed herein, either are rendered academic in light of our determination or are without merit.
Malone Jr., Stein, Garry and Egan Jr., JJ., concur.
ORDERED that the order is affirmed, with costs.
Footnotes


Footnote 1:White ultimately pleaded guilty in the United States District Court to misapplication of bank funds in violation of 18 USC § 656.

Footnote 2:We note that inasmuch as there is no factual dispute as to the acts committed by White in 2001, the determination of whether or not such acts constitute "dishonest or fraudulent act[s]" within the meaning of the bond presents a question of law for the Court (see First Natl. Bank of Clinton v Insurance Co. of N. Am., 606 F2d at 768; compare Rock Is. Bank v Aetna Cas. & Sur. Co., 706 F2d 219, 222 [7th Cir 1983]).

In re Al-Amin Johnson v MVAIC


Edelman, Krasin & Jaye, PLLC, Carle Place (Jarad Lewis
Siegel of counsel), for appellant.
Connors & Connors, P.C., Staten Island (Robert J. Pfuhler of
counsel), for respondent.
Judgment, Supreme Court, New York County (Cynthia S. Kern, J.), entered November 23, 2010, which, in an action for personal injuries sustained by petitioner in a hit-and-run accident, denied his petition, brought pursuant to Insurance Law § 5218, to commence an action against the Motor Vehicle Accident Indemnification Corporation (MVAIC), unanimously affirmed, without costs.
The court properly denied the petition as time-barred. A petition for leave to sue MVAIC "is timely if made within the applicable statute of limitations" (Steele v Motor Veh. Acc. Indem. Corp., 39 AD3d 78, 81 [2007], appeal dismissed 9 NY3d 989 [2007]). Here, petitioner's accident occurred on January 20, 2003, when he was 14 years old. The applicable three-year statute of limitations for a personal injury action (CPLR 214[5]) was tolled until petitioner turned 18, and expired on April 27, 2009, when he turned 21 (see CPLR 105[j]; 208). Petitioner brought the petition for leave to sue on June 14, 2010, rendering it untimely (cf. Steele, 39 AD3d at 82).
The court properly rejected petitioner's argument that he was not a "qualified person" under article 52 of the Insurance Law (see §§ 5202[b], 5218), and thus did not have standing to bring the petition, until after November 10, 2009, when an arbitration regarding whether he was insured under his stepfather's policy was resolved. As the court stated, petitioner could have filed his petition before the resolution of the arbitration and determination as to whether he was a "qualified person" (see e.g. Cardona v Martinez, 61 AD3d 462 [2009]).
We have considered petitioner's remaining contentions and find them unavailing.
THIS CONSTITUTES THE DECISION AND ORDER
OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.
VOOM HD Holdings LLC v EchoStar Satellite L.L.C.

Defendant appeals from an order of the Supreme Court, New York County (Richard B. Lowe III, J.), entered November 9, 2010, which, insofar as appealed from, granted plaintiff's motion to impose sanctions against defendant for the spoilation of evidence and to bar defendant from calling nonparty Avram Tucker as an expert witness at trial and from introducing his expert report.


Simpson Thacher & Bartlett LLP, New York (Roy L.
Reardon, Blake A. Bell and
Ryan A. Kane of counsel),
and Morrison & Foerster
LLP, New York (Charles L.
Kerr, Ronald G. White and J.
Alexander Lawrence of
counsel), for appellant.
Gibson, Dunn & Crutcher LLP, New York (Orin
Snyder and Alma Asay of
counsel), for respondent.
Goldberg Segalla LLP, Buffalo (John J. Jablonski of
counsel), for amicus curiae.




MANZANET-DANIELS, J.
This case requires us to determine the scope of a party's duties in the electronic discovery context, and the appropriate sanction for failure to preserve electronically stored information (ESI). We hold that in deciding these questions, the motion court properly invoked the standard for preservation set forth in Zubulake v UBS Warburg LLC (220 FRD 212 [SD NY 2003]; Pension Comm. of the Univ. of Montreal Pension Plan v Banc of Am. Sec., LLC., 685 F Supp 2d 456, 473 [SD NY 2010]), which has been widely adopted by federal and state courts. In Zubulake, the federal district court stated, "Once a party reasonably anticipates litigation, it must suspend its routine document retention/destruction policy and put in place a litigation hold' to ensure the preservation of relevant documents" (Zubulake, 220 FRD at 218). The Zubulake standard is harmonious with New York precedent in the traditional discovery context, and provides li tigants with sufficient certainty as to the nature of their obligations in the electronic discovery context and when those obligations are triggered.
VOOM HD is a Delaware limited liability company owned by Rainbow Media Holdings LLC, which, in turn, is owned by the public company Cablevision Systems Corporation. EchoStar is a provider of direct broadcast satellite television services through its "DISH Network," using a satellite distribution system to deliver to subscribers digital television programming licensed from owners of programming services.
On November 17, 2005, Voom and EchoStar entered into an "affiliation agreement," a 15-year contract whereby EchoStar agreed to distribute Voom's television programming. The agreement required EchoStar to include the Voom channels "as part of its most widely distributed package of HD programming services" — i.e., EchoStar could not "tier" the channels and charge its customers more for Voom than the standard fee charged to customers for HD. EchoStar had the right to terminate the agreement if Voom failed to spend $100 million on the "service" in any calendar year, and retained the right to audit Voom's expenses and investments.
Voom contends that in mid-2007 EchoStar determined that the
deal was disadvantageous, and therefore decided to falsely claim that Voom had fallen short of its financial commitment in 2006 or had failed to meet its programming content obligations. EchoStar allegedly sought to terminate the contract or to "tier" Voom's channels; under either scenario, Voom insists it stood to lose billions of dollars. Voom also charges that EchoStar made the related decision in mid-2007 to remove Voom's channels from its most widely distributed HD channel package.
At a meeting in June 2007, Carl Vogel, EchoStar's vice chairman, purportedly stated that the high cost of Voom "did not fit Echostar's market position as the low-cost video provider," and that the deal was a "mistake" by prior senior management. Eric Sahl, senior vice-president of programming called the agreement a "lead balloon," noting that Voom's cost was outweighing  its value because Voom was not driving enough HD subscribers to justify Voom's high price.
On June 19, 2007, Carl Vogel, EchoStar's Vice Chairman, told his subordinates: "If [Voom doesn't] give us the free programming can we tier them? What are the breach remedies? I need a full summary of what we can do today." "Trigger the audit now. Given their balance sheet there is no way they've met the commitment
. . . Prepare the breach notice."
On June 19, 2007, Kevin Cross, EchoStar's senior corporate counsel, sent a letter advising Voom of its intent "to avail itself of its audit right[s]."
The following day, June 20, 2007, Cross sent a second letter to Voom, expressing EchoStar's "belie[f] that Voom failed to spend $100 million on the Service in calendar year 2006," and that "EchoStar is thus entitled to terminate the Agreement," and reserving EchoStar's "rights and remedies."
On July 10, 2007, Vogel directed an EchoStar executive to "[d]raft the breach letter."
On July 11, 2007, Voom sent EchoStar an "Analysis," showing its expenditure of $102,959,000 in 2006. On July 12, 2007, Carolyn Crawford, EchoStar's vice president for programming, forwarded Voom's breakdown of its spending to Vogel and Sahl, describing it as "indicat[ing] a $102.9 m spend for 2006," and reported that EchoStar "will likely need to lean on the audit lever to accomplish either termination rights . . . or tiering rights."
On July 13, 2007, Cross sent letters to Voom claiming "material breaches" of contractual programming content requirements, and reserving EchoStar's "rights and remedies in equity or at law."
On July 23, 2007, according to EchoStar's own privilege log, EchoStar's executives began consulting with in-house litigation counsel, Jeffrey Blum, regarding the agreement and the dispute with Voom.
On July 27, 2007, Cross sent another letter rejecting Voom's compliance with content provisions, accusing Voom of "material breaches" of the agreement, and reserving EchoStar's "rights and remedies in equity or at law."
By July 31, 2007, Voom became "extremely concerned" that the matter was going to be litigated and implemented a litigation hold, including automatically preserving e-mails.
On September 27, 2007, Vogel reminded his executives of the "need to declare [Voom] in default on the content covenants as well [as the $100 million investment]." Crawford responded by advising Vogel that "[w]e are using both the content covenant breach and the concern about the $100m investment requirement as leverage to get a tiering deal done."
During October 2007, EchoStar conducted an audit of Voom's 2006 investment in the service. On October 26, 2007 EchoStar's own auditor concluded, in an e-mail sent to Crawford, that "[e]verything at Voom looks fine . . . these guys are clean . . . very organized, forthcoming, and from an accounting perspective run a good shop."
On October 23, 2007, days earlier, EchoStar executives began discussing "potential litigation" with Blum. According to EchoStar's privilege log, these conversations continued through the date that Voom filed suit.
Undeterred by the findings of its own auditor, EchoStar, on November 16, 2007, sent another breach letter, threatening "to terminate the Agreement, effective immediately" if Voom did not agree that, "beginning February 1, 2008, . . . ongoing carriage would be on a tiered' basis, as determined by EchoStar in its discretion." On December 4, 2007, Voom responded, "[W]e don't agree with your claims/assertions of breach/proposed actions" and suggested a meeting to resolve the issue. Voom maintained that the contemplated re-tiering, without its consent, was a plain violation of the parties' agreement.
On January 23, 2008, Crawford sent an e-mail to Sahl stating that EchoStar was proceeding with "the plan for a full termination."
By letter dated January 28, 2008, Voom protested that EchoStar had no right to terminate the affiliation agreement and rejected EchoStar's proposed re-tiering.
On January 30, 2008, EchoStar formally "terminate[d] the Agreement effective February 1, 2008." Voom commenced this action the next day. EchoStar did not implement a litigation hold until after Voom filed suit. Yet this purported "hold" did not suspend EchoStar's automatic deletion of e-mails. Thus, any e-mails sent and any e-mails deleted by an employee were automatically and permanently purged after seven days. It was not until June 1, 2008 — four months after the commencement of the lawsuit, and nearly one year after EchoStar was on notice of anticipated litigation — that EchoStar suspended the automatic deletion of relevant e-mails.
The e-mails described above, from September 27, 2007 and January 23, 2008 - reflecting EchoStar's intention to terminate the agreement unless Voom agreed to be tiered - were only produced due to the fortunate circumstance that they were captured in unrelated "snapshots" of certain executives' e-mail accounts taken in connection with other litigations. Voom moved for spoliation sanctions, arguing that EchoStar's actions and correspondence demonstrated that it should have reasonably anticipated litigation prior to Voom's commencement of this action.
The motion court granted Voom's motion for spoliation sanctions. The court found that "EchoStar's concession that termination would lead to litigation, together with the evidence establishing EchoStar's intent to terminate, its various breach notices sent to VOOM HD, its demands and express reservation of rights, all support the conclusion that EchoStar must have reasonably anticipated litigation prior to the commencement of this action." The court, citing Zubulake, concluded that EchoStar should have reasonably anticipated litigation no later than June 20, 2007, the date Kevin Cross, its corporate counsel, sent Voom a written letter containing EchoStar's express notice of breach, a demand, and an explicit reservation of rights. The court found that EchoStar's subsequent conduct also demonstrated that it should have reasonably anticipated litigation prior to the filing of the complaint, citing correspondence during the summer and fall of 2007, and EchoStar's own privilege log, which showed that EchoStar designated documents as "work product" relating to "potential litigation" with Voom as early as November 16, 2007, the date of the EchoStar breach letter to Voom.
The court observed that in addition to failing to preserve electronic data upon reasonable anticipation of litigation, no steps whatsoever had been taken to prevent the purging of e-mails by employees during the four-month period after commencement of the action. EchoStar continued to permanently delete employee e-mails for up to four months after the commencement of the action, relying on employees to determine which documents were relevant in response to litigation, and to preserve those e-mails by moving them to separate folders. As the court put it: "EchoStar's purported litigation hold failed to turn off the automatic delete function and merely asked its employees — many of whom, presumably were not attorneys — to determine whether documents were potentially responsive to litigation, and to then remove each one from EchoStar's pre-set path of destruction."
Since some of the e-mail exchanges had surfaced in other, unrelated EchoStar litigation, but were otherwise unrecoverable in this action, the court concluded that relevant documents had been destroyed by EchoStar.
The court noted that even if the duty to preserve arose only upon the filing of the complaint, EchoStar still violated the duty since it had lost, at a minimum, e-mails from January 24 through January 28, 2008 as the result of the seven-day automatic purge policy.
The court rejected EchoStar's argument that since the parties were seeking an "amicable business solution," no reasonable anticipation of litigation existed, stating "EchoStar's argument ignores the practical reality that parties often engage in settlement discussions before and during litigation, but this does not vitiate the duty to preserve. EchoStar's argument would allow parties to freely shred documents and purge e-mails, simply by faking a willingness to engage in settlement negotiations."
The motion court found that EchoStar's failure to preserve electronic data was more than negligent; indeed, it was the same bad faith conduct for which EchoStar had previously been sanctioned (see Broccoli v EchoStar Communications Corp., 229 FRD 506 [D Md 2005]). EchoStar had been on notice of its "substandard document practices" at least since the Broccoli decision, yet continued those very same practices. The court determined that EchoStar's conduct, at a minimum, constituted gross negligence. The court found that Voom had demonstrated that the destroyed evidence was relevant to its claims; in any event, relevance is presumed when a party demonstrated gross negligence in the destruction of evidence. The court ruled that a negative, or adverse inference against EchoStar at trial was an appropriate sanction, rather than striking EchoStar's answer, since other evidence remained available to Voom, including the business records of EchoStar and the testimony of its employees, to prove Voom's claims.[FN1]
We agree with the motion court that an adverse inference was warranted because EchoStar's spoliation of electronic evidence was the result of gross negligence at the very least, and now affirm.
In Zubulake, the court stated that "[o]nce a party reasonably anticipates litigation, it must suspend its routine document retention/destruction policy and put in place a litigation hold' to ensure the preservation of relevant documents" (220 FRD at 218). As has been stated, "[I]n the world of electronic data, the preservation obligation is not limited simply to avoiding affirmative acts of destruction. Since computer systems generally have automatic deletion features that periodically purge electronic documents such as e-mail, it is necessary for a party facing litigation to take active steps to halt that process" (Convolve, Inc. v Compaq Computer Corp., 223 FRD 162, 175-76 [SD NY 2004]). Once a party reasonably anticipates litigation, it must, at a minimum, institute an appropriate litigation hold to prevent the routine destruction of electronic data [FN2] (see Pension Comm. of the Univ. of Montreal Pension Plan, 685 F Supp 2d at 473). Regardless of its nature, a hold must direct appropriate employees to preserve all relevant records, electronic or otherwise, and create a mechanism for collecting the preserved records so they might be searched by someone other than the employee. The hold should, with as much specificity as possible, describe the ESI at issue,[FN3] direct that routine destruction policies such as auto-delete functions and rewriting over e-mails cease, and describe the consequences for failure to so preserve electronically stored evidence. In certain circumstances, like those here, where a party is a large company, it is insufficient, in implementing such a litigation hold, to vest total discretion in the employee to search and select what the employee deems relevant without the guidance and supervision of counsel (id.).[FN4]
Zubulake's reasonable anticipation trigger for preservation has been widely followed. It has been adopted by courts in all four federal districts of the State (see Piccone v Town of Webster, 2010 WL 3516581, *5, 2010 US Dist LEXIS 92409, *13 [WD NY]; Field Day, LLC v Cnty. of Suffolk, 2010 WL 1286622, *3, 2010 US Dist LEXIS 28476, *10 [ED NY]; Burgess v Goord, 2005 WL 1458236, *4 [ND NY]), and by courts throughout the country (see e.g. Victor Stanley, Inc. v Creative Pipe, Inc., 269 FRD 497, 521 [D Md 2010]). Significantly, the Delaware Court of Chancery has adopted the "reasonably anticipated" standard: "Counsel are reminded, however, that the duty to preserve potentially relevant ESI is triggered when litigation is commenced or when litigation is reasonably anticipated,' which could occur before litigation is filed" (Court of Chancery Guidelines for Preservation of Electronically Stored Information).
Just recently in Ahroner v Israel Discount Bank of New York (79 AD3d 481 [2010]), this Court adopted the Zubulake standard when reviewing a motion for spoliation sanctions involving the destruction of electronic evidence. While in Ahroner we did not have occasion to address the issue of when a party reasonably anticipates litigation, we cited Zubulake favorably in affirming the motion court's determination that a party's destruction of a hard drive was the result of either intentional conduct or gross negligence, warranting an adverse inference.
EchoStar and amicus urge this court to reject the Zubulake standard requiring a litigation hold "[o]nce a party reasonably anticipates litigation." EchoStar and amicus insist this standard is vague and unworkable because it provides no guideline for what "reasonably anticipated" means. Instead, EchoStar and amicus believe that "in the absence of pending litigation' or notice of a specific claim,' defendant should not be sanctioned for discarding items in good faith and pursuant to normal business practices." We disagree. To adopt a rule requiring actual litigation or notice of a specific claim ignores the reality of how business relationships disintegrate. Sides to a business dispute may appear, on the surface, to be attempting to work things out, while preparing frantically for litigation behind the scenes. EchoStar and amicus's approach would encourage parties who actually anticipate litigation, but do not yet have notice of a "specific claim" to destroy their documents with impunity.
EchoStar's arguments that the Zubulake standard represents a departure from settled law or that the standard is unworkable are manifestly without merit. The "reasonable anticipation of litigation," as discussed by Zubulake and its progeny, is such time when a party is on notice of a credible probability that it will become involved in litigation.
The Sedona Conference has issued guidelines concerning preservation obligations and legal holds (see The Sedona Conference, Commentary on Legal Holds: The Trigger and The Process, 11 Sedona Conf. J. 265 (Fall 2010) (the Sedona Legal Hold Guidelines). These guidelines expressly state that preservation obligations arise "at the point in time when litigation is reasonably anticipated whether the organization is the initiator or the target of the litigation" (id. at 267). Guideline 1 of the Sedona Legal Hold Guidelines further elaborates:
"[A] reasonable anticipation of litigation arises when an organization is on notice of a credible probability that it will become involved in litigation, seriously contemplates initiating litigation, or when it takes specific actions to commence litigation."
(Id. at 269).
Under any variant of the standard, EchoStar should have reasonably anticipated litigation as of June 20, 2007, the date it sent a letter to Voom demanding an audit and threatening termination of the contract based on allegations that Voom failed to spend $100 million on the service in 2006. This was especially so given Blum's testimony that EchoStar knew that Voom would sue if EchoStar terminated the agreement.
Further, commencing in June 2007 and continuing through late January 2008, EchoStar repeatedly threatened to terminate the agreement unless Voom tiered its channels. Accordingly, EchoStar should have reasonably anticipated litigation in June 2007, when it advised Voom that it was entitled to terminate the agreement; in November 2007 when EchoStar sent another breach letter, threatening "to terminate the Agreement, effective immediately" if Voom did not tier its channels; on January 28, 2008 when Voom rejected the demand and disputed that EchoStar had a right to terminate the agreement; and, at a minimum, on January 30, 2008, when it formally terminated the agreement.
However, EchoStar did not issue a litigation hold on electronic evidence until after this action was commenced. Further, it did not take a snapshot of the relevant e-mail accounts until four days after this action was commenced, and did not cease the automatic destruction of e-mails until four months after this action was commenced.
It is well settled that a party must suspend its automatic-deletion function or otherwise preserve e-mails as part of a litigation hold (see e.g. Convolve, Inc. v Compaq Computer Corp., 223 FRD 162, 176 [SD NY 2004]). Indeed, as noted by the motion court, EchoStar was found guilty of "gross spoliation" of evidence for failing to do so in a prior case (see Broccoli, 229 FRD 506). It is notable that even after EchoStar had been sanctioned for similar conduct in Broccoli, EchoStar, in this case, continued on the same "pre-set path of destruction." It is further notable that the e-mail retention policy in Broccoli was three times longer in duration than in this case. Thus, incredibly, EchoStar reduced the duration of its automatic deletion function in the years following Broccoli, deleting e-mails after only 7 days instead of after 21 days.
EchoStar points out that it took a snapshot of e-mail accounts four days after the complaint was filed. However, e-mails sent between January 24, 2008 and January 28, 2008 were destroyed without being captured. Moreover, e-mails continued to be automatically deleted for four months after the action was commenced.
In this case, EchoStar's reliance on its employees to preserve evidence "does not meet the standard for a litigation hold" (see Pension Comm. of the Univ. of Montreal Pension Plan, 685 F Supp 2d at 473; see also Einstein v 357 LLC, 2009 NY Slip Op 32784[U] [Sup Ct, NY County 2009] [finding that the failure to suspend deletion policy or to investigate the basic ways in which e-mail was stored constituted a "serious discovery default" rising to the level of gross negligence or willfulness entitling party to an adverse inference; "[Director of IT's] testimony incredibly demonstrates that when litigation commences, the Corcoran IT department takes no steps to prevent users, even those named as parties to such litigation, from deleting potentially relevant emails, relying instead solely upon the discretion of such users to select which emails to save and which to delete"]).
A party seeking sanctions based on the spoliation of evidence must demonstrate: (1) that the party with control over the evidence had an obligation to preserve it at the time it was destroyed; (2) that the records were destroyed with a "culpable state of mind"; and finally, (3) that the destroyed evidence was relevant to the party's claim or defense such that the trier of fact could find that the evidence would support that claim or defense (see Zubulake, 220 FRD at 220). A "culpable state of mind" for purposes of a spoliation sanction includes ordinary negligence (id.; see also Treppel v Biovail Corp., 249 FRD 111, 121 [SD NY 2008]). In evaluating a party's state of mind, Zubulake and its progeny provide guidance. Failures which support a finding of gross negligence, when the duty to preserve electronic data has been triggered, include: (1) the failure to issue a written litigation hold, when appropriate; (2) the failure to identify all of the key players and to ensure that their electronic and other records are preserved; and (3) the failure to cease the deletion of e-mail (see Pension Comm. of the Univ. of Montreal Pension Plan v Banc of Am. Sec., LLC., 685 F Supp 2d at 471).
The intentional or willful destruction of evidence is sufficient to presume relevance, as is destruction that is the result of gross negligence; when the destruction of evidence is merely negligent, however, relevance must be proven by the party seeking spoliation sanctions (id.).
However, a presumption of relevance is rebuttable:
"When the spoliating party's conduct is sufficiently egregious to justify a court's imposition of a presumption of relevance and prejudice, or when the spoliating party's conduct warrants permitting the jury to make such a presumption, the burden then shifts to the spoliating party to rebut that presumption. The spoliating party can do so, for example, by demonstrating that the innocent party had access to the evidence alleged to have been destroyed or that the evidence would not support the innocent party's claims or defenses. If the spoliating party demonstrates to a court's satisfaction that there could not have been any prejudice to the innocent party, then no jury instruction will be warranted, although a lesser sanction might still be required."
(Pension Comm. at 468-469).
An adverse inference was a reasonable sanction in light of EchoStar's culpability and the prejudice to Voom. The record shows that EchoStar acted in bad faith in destroying electronically stored evidence. The motion court appropriately considered the Broccoli case in determining whether EchoStar was grossly negligent (see Thibeault v Square D Co., 960 F2d 239, 245-246 [1st Cir 1992] [in the course of ordering preclusion, a court should consider all the circumstances surrounding the alleged violation, "includ[ing] events which did not occur in the case proper but occurred in other cases and are, by their nature, relevant to the pending controversy"; to ignore a "pattern of misbehavior . . . would be blinking reality"]). The Broccoli case demonstrates that EchoStar was well aware of its preservation obligations and of the problems associated with its automatic deletion of e-mails that could be relevant to litigation to which it was a party. The destruction of e-mails during the critical time when the parties' business relationship was unquestionably deteriorating reflects, at best, gross negligence. Further, the destruction of e-mails after litigation had been commenced, when EchoStar was unquestionably on notice of its duty to preserve, was grossly negligent, if not intentional (see Zubulake, 220 FRD at 221).
Since EchoStar acted in bad faith or with gross negligence in destroying the evidence, the relevance of the evidence is presumed and need not have been demonstrated by Voom (see Sage Realty Corp. v Proskauer Rose LLP, 275 AD2d 11, 16-17 [2000]), lv dismissed 96 NY2d 937 [2001] [dismissal of complaint pursuant to CPLR 3126 warranted where party willfully destroyed evidence; noting "it is the peculiarity of many spoliation cases that the very destruction of the evidence diminishes the ability of the deprived party to prove relevance directly"]; see also Einstein, 2009 Slip Op. 32784[U] ["when a party establishes gross negligence in the destruction of evidence, that fact alone suffices to support a finding that the evidence was unfavorable to the grossly negligent party"] [citations omitted]).
In any event, the record shows that the destroyed evidence was relevant. The "snapshot" e-mails reviewed by the motion court "demonstrat[ed] EchoStar's intention to declare various breaches by Voom" as an excuse for terminating the agreement. These e-mails — a handful only fortuitously recovered, and highly relevant — certainly permitted the inference that the unrecoverable e-mails, of which the snapshots were but a representative sampling, would have also been relevant.
Moreover, the missing evidence prejudiced Voom. EchoStar argues that the missing e-mails were merely cumulative of other evidence, asserting that since Voom had other means to prove its case, it could not have suffered prejudice from the destruction of e-mails that occurred. This is insufficient to rebut the presumption. Although Voom may have other evidence to point to, the missing evidence is from a crucial time period during which EchoStar appears to have been searching for a way out of its contract. EchoStar's internal communications undoubtedly concerned issues about what it understood the contract to mean, a contract that the motion court has now found to be ambiguous. Evidence from this vital time period is not entirely duplicative of other evidence. The court's imposition of an adverse inference, a lesser sanction than striking of the answer, factored this overlap into account, and reflects an appropriate balancing under the circumstances (see Ahroner v 79 AD3d at 482; see also E.W. Howell Co. v S.A.F. La Sala Corp., 36 AD3d 653, 654 [2007] [negative inference charge was appropriate sanction "where loss does not deprive the opposing party of the means of establishing a claim or a defense"]; Melendez v City of New York, 2 AD3d 170 [2003] [abuse of discretion to strike defendant's answer where the absence of documents was not fatal to plaintiff's case; more appropriate sanction would have been a missing document charge, permitting jurors to draw an inference against defendants on the issue of notice]).
In sum, the motion court's spoliation sanction was appropriate and proportionate. While the court appropriately inferred that the destroyed e-mails would have been relevant to Voom's claims, and that EchoStar's conduct merited a presumption of prejudice, it also recognized that Voom had other available evidence to prove its case.
To the extent that EchoStar was actually negotiating in good faith, which the evidence suggests is doubtful, that does not vitiate the duty to preserve evidence. As the motion court stated, "the practical reality" is that "parties often engage in settlement discussions before and during litigation" and accepting EchoStar's argument "would allow parties to freely shred documents and purge e-mails, simply by faking a willingness to engage in settlement negotiations" (see also Rutgerswerke AG v Abex Corp., 2002 WL 1203836, *13, 2002 US Dist LEXIS 9965, *44 [SD NY 2002][duty to preserve documents exists at time of pre-litigation settlement discussions]).
Accordingly, the motion court properly determined that EchoStar should have reasonably anticipated litigation as early as June 2007 and certainly no later than February 1, 2008, the date the complaint was filed; that EchoStar was grossly negligent in failing to implement a litigation hold until after litigation had already been commenced; that EchoStar did not implement an appropriate litigation hold until June 2008, approximately four months after litigation had been commenced; that such failures entitle a finder of fact to presume the relevancy of the destroyed electronic data; and that an adverse inference charge was an appropriate spoliation sanction in light of the above.
No discrete appeal lies from the part of the order that granted Voom's motion to preclude Avram Tucker from testifying as an expert at trial and from introducing his expert report (Santos v Nicolas, 65 AD3d 941 [2009]). In any event, it is clear from Tucker's initial report and deposition testimony that he was not going to offer any opinions that he was qualified to offer that were entirely independent of the opinion of Roger Williams, an expert withdrawn by EchoStar on the eve of his deposition.
We have considered EchoStar's remaining contentions and find them unavailing.
Accordingly, the order of the Supreme Court, New York County (Richard B. Lowe III, J.), entered November 9, 2010, which, insofar as appealed from, granted plaintiff's motions to impose sanctions against defendant for the spoliation of evidence and to bar defendant from calling nonparty Avram Tucker as an expert witness at trial and from introducing his expert report, should be affirmed, with costs.
Voom HD Holdings LLC v EchoStar Satellite LLC.
M-1748 - Motion for leave to file amicus
curiae brief granted.
M-1833 - Motion for leave to respond to
amicus curiae brief granted.
All concur.
Order, Supreme Court, New York County (Richard B. Lowe III, J.), entered November 9, 2010, affirmed, with costs.
M-1748 - Motion for leave to file amicus
curiae brief granted.
M-1833 - Motion for leave to respond to
amicus curiae brief granted.
Opinion by Manzanet-Daniels, J. All concur.
Tom, J.P., Saxe, Catterson, Moskowitz, Manzanet-Daniels, JJ.
THIS CONSTITUTES THE DECISION AND ORDER
OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.
ENTERED: JANUARY 31, 2012
CLERK
Footnotes



Footnote 1:The court noted that had this other evidence not been available, it would have imposed the harsher standard of striking the answer, based on the egregiousness of EchoStar's conduct.

Footnote 2:While it is the best practice that this litigation hold be writing, we recognize that there might be certain circumstances, for example, a small company with only a few employees, in which an oral hold would suffice.

Footnote 3:For example, ESI may exist on employees' home computers, on flash drives or Blackberries, in a cloud computing infrastructure or off-site on a remote server or back-up tapes.

Footnote 4:See Shira A. Scheindlin & Daniel J. Capra, The Sedona Conference, Electronic Discovery and Digital Evidence: Cases and Materials 147-49 (West 2009).