Dear Coverage Pointers Subscribers:

This week's issue is attached. For our new subscribers, don't mistake our cover note for the real meaty issue which is always attached to this little missive. However, we do know that some of you just read the issue to catch up on centennial history, and you are forgiven.

We should have reminded you in our previous issue, as we do every July, that we are entering a rather quiet period of time for the New York courts. In the summer, through about mid-September, the number of appellate decisions dwindles to a trickle, as the those courts go into summer hiatus. Yes, you will still see a few, hither and yon, but the steady hoofbeat of judicial opinions will be tempered by judicial vacation schedules.

Whatever is out there, we'll report.

National Foundation for Judicial Excellence

One of the most important programs the defense community has developed and supported is the NFJE, the National Foundation for Judicial Excellence. The NFJE was incorporated in October 2004 and has 501(c) (3) charity status. Created by the DRI, NFJE joins bar associations, law schools, think tanks and other non-profit organizations that strive to strengthen and preserve the civil justice system. Its mission is to address important legal policy issues affecting the law and civil justice system by providing meaningful support and education to the judiciary, by publishing scholarly works and by engaging in other efforts to continually enhance and ensure judicial excellence and fairness for all engaged in the judicial process

To carry out that mission, NFJE hosts an Annual Judicial Symposium each summer. In addition, NFJE publishes scholarly works and engage in other activities to continually enhance the rule of law and the administration of justice.

As Vice-Chair of the Symposium program committee this year, I was delighted to spend two days in Chicago last week, as we helped educate some 130+ appellate judges from across 37 states on technology and law issues. I have accepted the designation as Program Chair for the 2012 Symposium, which will be held in Chicago in July.

A tip of the hat to one of our newest subscribers, Iowa Attorney Mike Weston of Lederer Weston Craig PLLC, for his superb leadership of the 2011 Symposium

A number of insurance companies and other corporate entities, as well as individuals, have joined in support of this important program. If your company is looking for a very worthy program to support, please visit www.nfje.net or contact me.

One Hundred Years Ago Today:

Population's Exact Center

Indiana University Finds Only a Rattlesnake There

New York Times

July 22, 1911

Page 1

Bloomington, Ind - In tangled underbrush on the farm of William L, Mosier, eight miles northeast of this city, the exact center of population of the United States was located today, but the only inhabitant of the immediate neighborhood found was a large rattlesnake, which slid out of the bushes and was killed by one of the party of Prof.W. A. Cogshall, of Indiana University, who discovered the spot It will be marked by a tablet.

Professor Cogshall located the hub of the country by finding the longitude by observation of the stars last night and the latitude by the sun today.

Editor's Note: The mean population center following the first census in 1790 was in Chestertown, Maryland. It has continued to move west since then and now is located 2/7 miles northeast of Plato, Missouri. For a picture of Professor Coghsall and his team of merry men, click here. For a picture of the marker, click here.

Audrey's Angles:

Do you recall what you were doing on July 14, 1977? One person who will recall that date immediately is Dan Kohane, Esq.

Why does this date stand out more so than any other in Dan's mind? It was the date, 34 years ago that Dan began his service at Hurwitz & Fine. In today's age where many are moving from employer to employer it says much about Dan's loyalty that he has been at the same firm for his entire legal career.

A person during 34 years grows personally and professionally. I have been fortunate to have Dan as my mentor and teacher at Hurwitz & Fine, but have only been exposed to Dan in the last 10 years. His anniversary makes me wonder what the world was like back in July 1977, when Dan was just starting out, since I was just in my (ahem) tender years. I researched it a bit and found some interesting facts. It would only have cost Dan $0.62 per gallon of gas to fill up the tank for his commute. Dan could have been listening on the radio while driving to the office and hearing news of the following events:

  • Carter grants unconditional amnesty to Vietnam draft dodgers;
  • "Son of Sam" killer is arrested in New York City;
  • Unemployment dropped to 7% but inflation was up to 11%;
  • Elvis Presley, Charles Chaplin, Bing Crosby and Groucho Marks die;
  • The Department of Energy was created;
  • The "Love Boat" premieres with Gavin MacLeod; and
  • The number of imported cars breaks a record of 1.5 million.

However, if Dan was seeking to listen to something less heavy he may have sang along to Boogie Nights, Car Wash, I'm Your Boogie Man, and Hotel California.

Now, an anonymous source within Hurwitz & Fine advised, that Dan would have a windowless room in which to conduct his legal work. He would be required to have that dreaded piece of cloth around his neck in the sweltering heat of July, which he so complains about now, to come to the office. Dan had no Blackberry, cell phone, fax machine, or voicemail to be connected to you at any time anywhere in the world. Rather, he had to carefully dictate so that his assistant would create his legal pleadings, client status reports, and appellate briefs, on an IBM Selectric typewriter. Dan had to take great care in dictating as changing one word on the page could mean that an assistant had to retype the document. There was no copy machine but carbon paper to provide copies of documents to the Court, counsel, and the client. The mailing of Dan's legal work was only cost $0.13 for the postage.

We all know that Dan is an avid reader. What could he be reading at that time? Some of the best sellers were The Silmarillion, The Thorn Birds, How to Save Your Own Life, Roots, and The Amityville Horror.*

My research also made me wonder if Dan ever participated in certain events that year. Was Dan one of those participants in the consumer boycott of coffee due to high prices? Did Dan ever participate in roller disco for fun? Was Dan into the health food fad that year?? Did Dan have a poster of Farah Fawcett that was so popular that year? However, my burning question is Dan - how were the Mets doing that year???

I don't know the answers to these questions but perhaps next year for Dan's 35th Anniversary I will take it upon myself to interview him. Happy Anniversary Dan! I am honored to work with you and thank you for your wisdom over the years.

* News, economic, and cultural facts taken from www.1970sflashback.com.

Audrey Seeley

[email protected]

Editor's response: That was very kind. Thank you, Audrey.

In response:

I was a fan of Farah Fawcett, I did read The Thorn Birds, Roots and The Amityville Horror, I did not participate in the coffee boycott, we did have a copy machine but used carbon paper all the time, particularly if the Monks were out to lunch and didn't have their quills handy. However, one thing I NEVER did was do ANYTHING to reflect any affection for Disco. I am one who believes that Disco had led to all bad things that have happened in the universe since its creation, along with the corresponding development of the "leisure suit". There can be no question that Travolta should have quit after his all-time best acting job, as Vinnie Barbarino.

For Kotter Fans, you can speak to Arnold Horshack (Ron Pallilo) or, if you prefer, The Incredible Hulk (Lou Ferigno), Mary Ann from Gilligan's Island (Dawn Wells) or Dobie Gillis (Dwayne Hickman) for a mere $19.95 http://www.hollywoodiscalling.com.

Dan

Doherty v. Merchants Resolved

In our June 25, 2010 issue (Volume XI, No. 26) we reported on the Dougherty v. Merchants case. In it, the Fourth Department affirmed the grant of summary judgment dismissing a bad faith case, on a 3-2 decision. That case was calendared for argument before the Court of Appeals in September. The parties to that case have now resolved the dispute and the appeal is being discontinued. For those who do not remember the details, we reprint our previous summary:

611/10 Doherty v. Merchants Mutual Insurance Company
Appellate Division, Fourth Department
In One of the Rare Bad Faith Cases Reaching an Appellate Court in New York a Split Court Dismisses a Bad Faith Case in an Excess Verdict Situation. Read the Majority Opinion and Dissent in This Case
It is rare that we get to report on a bad faith case in New York. In the last three years, not a single bad faith verdict against a carrier has been affirmed by a New York appellate court and few have been considered.

Doherty had sued Fitzpatrick in an auto accident case claiming that the car Fitzpatrick was operating rear-ended hers. There was a verdict in excess of the liability limits of the policy issued to Fitzpatrick by Merchants Mutual. Doherty took an assignment of Fitzpatrick's bad faith claim against Merchants and sued the carrier as assignee, seeking the amount of damages in excess of the Merchants' policy. In a 3-2 decision, the Fourth Department affirmed the judgment dismissing the bad faith claim, setting the stage for a review by the Court of Appeals.

To prevail in a bad faith case in New York, the plaintiff must establish that the insured lost an actual opportunity to settle the action at a time when all serious doubts about liability were removed and that the carrier acted with gross disregard for the insured's interests, i.e. that the insurer "engaged in a pattern of behavior evincing a conscious or knowing indifference to the probability that the insured would be held personally accountable for a large judgment if a settlement offer within the policy limits were not accepted."

In this case, the trial judge had denied Fitzpatrick's motion for summary judgment on the No Fault threshold and granted the Doherty's motion establishing liability for the rear-end collision.

The policy limits on the Fitzpatrick policy were $300,000 and during trial, Doherty's lawyers demanded the case be settled within the limits. The majority reminded the parties that "an insurer cannot be compelled to concede liability and settle a questionable claim simply because an opportunity to do so is presented" citing to the key Court of Appeals case in Pavia, 82 NY2d at 454).

The insurer demonstrated that it investigated the claim in the underlying action and arranged for a physical examination of plaintiff to determine the extent of her alleged injuries and whether they constituted a serious injury. The defense IME opined that the plaintiff had a "moderate, partial, temporary disability for recreational activities and activities of daily living in the home" and surveillance tapes were introduced which were favorable to the defense.

The insurer further demonstrated that it participated in settlement negotiations prior to and during the trial and that Supreme Court was actively engaged in the settlement negotiation process. Prior to trial, plaintiffs reduced their demand to $250,000 and, during the trial, they further reduced their demand to $240,000. Defendant thereafter increased its settlement offer from $25,000 to $55,000 and the defense proposed a high-low settlement offer as well which was rejected.

The majority concluded that Merchants established that it did not lose an actual opportunity to settle the claim when all serious doubts about his liability were removed and it was clear that the potential recovery far exceeded the insurance coverage and thus that it did not act with gross disregard for Fitzpatrick's interests.

Two justices dissented holding that there was a question of fact on whether the insurer's good faith obligation has been met. Proof of bad faith, the dissent argued, "requires the careful and collective evaluation of a confluence of factors and inferences uniquely within the province of a jury".

The dissenting justices note that the verdict against the defendant Fitzpatrick was $740,000 and defendant's highest settlement offer was $55,000.

On the issue of the likelihood that a verdict would exceed the policy limit, the defense had concluded, by early 2003, that it had no legal defenses to the negligence claim. The claims professional handling the file knew that a summary judgment motion on serious injury could not be granted because the IME doctor had found the plaintiff disabled over a year after the accident. Accordingly, the only issues for the jury would be the threshold question and the amount of damages to be awarded.

The only issues to be resolved were whether Doherty sustained a threshold serious injury and, if so, what was the quantum of the damages to be awarded?

The dissent pointed out that Doherty was 27 years old in December 2003 and had a life expectancy of 54.4 years so the potential exposure for future pain and suffering and disability was 54.4 years of future pain and suffering and disability. The jury awarded $500,000 for future pain and suffering.

The carrier's file did not establish that it had evaluated and actually assigned a potential jury verdict value, as compared to a settlement value, to Doherty's personal injury claim. Indeed, defendant's claim representative admitted that she never assigned a value or even a value range to the claim and could not recall how she arrived at the $10,000 settlement offer that remained in place until the first day of trial, when it was increased to $25,000. The record does not contain evidence of any analysis by defendant of the potential for high-end jury verdicts in the trial venue or any examination of jury verdict reports in cases with similar injuries in similar venues. Thus, in its view, on this record, Merchants failed to satisfy one of the most fundamental factors essential to a finding of good faith.

The dissent also opined that the defense did not undertake an IME with respect to the shoulder injury so it could not rebut the plaintiff's medical proof. There was also nothing in the claims file evaluating how the composition of the jury might play into the verdict. Interesting, the dissent indicated that "defendant made no evaluation of the jury composition, which included four women who might understand and sympathize with Doherty's lack of choice in engaging in those activities while Doherty's husband worked at two jobs."

Editor's note: I thought the jury wasn't supposed to consider sympathy. Ahh well.

Finally, on the first day of trial, defendant's counsel advised that he needed to revise his exposure opinion and that, if the jury believed that Doherty needed surgery, the potential exposure was above $250,000 but the highest offer was $55,000. The dissent argued that the low offers led to the termination of settlement negotiations and foreclosed the opportunity for settlement. The dissent further argued that the high-low offer made four days after the trial commenced does not eradicate the earlier potential bad faith.

Finally, the dissent rejected the defense argument that the trial justice's comments during settlement negotiations should be another deciding factor in its favor.

The dissent believed the complaint should not have been dismissed, but instead, the jury should have been given the opportunity to consider the evidence of bad faith.

Editor's Then Final Note: Both the majority and dissent agree on the standard. Bad faith, in New York, is not established by "guessing wrong" but by a pattern of conduct that evinces a pattern of behavior demonstrating a gross disregard. Here, it appears that the carrier investigated the case, hired competent IME doctors, conducted video surveillance and placed a value on it based on that investigation.

Editor's Now Final Note: With the resolution of the litigation, the majority opinion remains the law of the land.

News from the Albany Office:

Although the New York State Legislators are no longer in session, I do have a couple of items to report on from the Insurance Department. The Department recently published its Regulatory Agenda of items it expects to address in the second half of 2011. While perusing the website searching for interesting tidbits to discuss, I came across a section of the website I have often used to get a sense of what the Insurance Department was focusing on when reviewing carriers, the Disciplinary section under the Office of General Counsel link.

While this section is not nearly as comprehensive as you will find in other states (if you would like a great example check out Virginia's Insurance Department website), it does give you a general idea of the compliance issues the Department has found at other carriers. For example, you may see a quick summary that says the company did not pay settlement amounts within 5 business days of acceptance of offer. The summary also shows the penalty/fine given to the carrier. Although it doesn't detail the number of infractions it does give you a sense of severity of the infraction in the Department's eyes. While in-house I used this information to help myself narrow the focus of our own internal compliance audits and also in the drafting of claim handling guidelines.

Cassie Kazukenus
[email protected]

One Hundred Years Ago, a Baseball Investment Gone Sour:

The Pirates pay St. Paul of the American Association $22,500 for right-hander Marty O'Toole, the highest purchase price to date. With St. Paul that year, he had double-digit strikeouts in ten games, twice struck-out 13. In six consecutive complete-game wins from July 6 to July 30, he fanned ten, 17, 11, ten, 14, and 15. Despite pitching just three games after July, he won 15 games and led all American Association pitchers with 199 strikeouts. The 17-strikeout game stood as the American Association record until 1915.


After a quick and successful start for the Pirates, with three convincing victories, the tide turned and soon thereafter, his shoulder turned on him as well. His brothers, also major league pitchers, all suffered from "rheumatism of the shoulder.

The press was tough on him, when they reported on his first loss. On September 17, 1911, the New York Times reported: on page C5:

GIANTS DRIVE MARTY O'TOOLE TO BENCH;

Pittsburgh's $22,500 Pitcher Gets a Drubbing from New York,

Who Win, 6 to 2.

Marty O'Toole, the Pirates' $22,500 pitcher, tasted his first defeat since he ventured into select company at Forbes Field today, when the Giants pummeled him for extra base hits and won the first game of the Pittsburgh series by a score of 6 to 2. It was seething three-baggers by Fletcher, Meres and Merkle and a two-base smash by Doyle that took all the glitter from O'Toole's great reputation. . O'Toole has won three games in his short major league career, and the drubbing he got today put a big crimp in his reputation.

Due to the record price Pittsburgh paid for him, O'Toole became a media target and the instant fame was not something he was well suited for. In the fall of 1911, he was approached several times by vaudeville agents, and as a Pittsburgh mayoral candidate. Marty laughed off both suggestions, but his rookie season seemed jinxed from the start.

After miserable seasons with the Pirates, he was sent back to the minor leagues, abandoned his wife and children and then eventually left baseball. He never return to his family, operated a pool hall in Cosmopolis, Wash and his last job was as the night dispatcher for a taxi cab company in Aberdeen, Washington. Two local trash collectors, making their morning pickups February 18, 1949, found Marty O'Toole lying dead at the bottom of a flight of stairs.

Jen's Gem of the Day:

As the "dog days" of summer are officially here, it appears that the Appellate Division has left us parched for decisions. But no worries-the Supreme Courts (or the trials courts in New York) have provided sufficient sustenance upon which to whet our palates in the meantime. In New York County, the court in General Motors Acceptance Corp. v. New York Cent. Mut. Fire Ins. Co. resolved a discovery dispute in a bad faith case. As faithful readers of Peiper on Property are consistently reminded, courts permit very broad discovery in bad faith cases. Also, in Kings County, the court in Golebiewski v National Union Fire Ins. Co. of Pittsburgh, PA considered a defense attorney that, in the underlying action, did not disclose, or perhaps did not know about, the existence of an excess policy. As a result, no notice was provided to this insurer for over three years. The court has an interesting discussion of whether this misrepresentation was sufficient to excuse the late notice. If your curiosity is burning as to how these decisions turn out, check out this not-so-light beach reads.

Enjoy the heat and until next week.

Jen Ehman

[email protected]



One Hundred Years Ago Today: Fast Fast

On July 22, 1911, the Brooklyn Dodgers along with the Cincinnati Reds tied a National League record for the fewest official at-bats in a 9-inning game with 48. Each team had 24 at-bats.

The highlight of the game was an exciting pitching duel between Nap Rucker of the Brooklyn Dodgers and Frank Smith of the Cincinnati Reds. Nap Rucker pitched a one hitter. The only Cincinnati hit was a single with 2 out in the 9th inning. Frank Smith allowed the Dodgers only 2 hits; singles in the fourth and eighth innings. The Dodgers' winning run scored in the 7th inning on 2 errors and in infield out.

Steve's Stirrings:

Welcome back all you vacation goers. We're now deep in the heart of Summer, and no sign of a slow-down from the Appellate Division. This week's offering contains an interesting decision out of the Third Department regarding the obligations of a mortgagee that is holding, in escrow (hopefully), insurance proceeds paid after a fire. It is not really an insurance issue, but it's close enough that we decided to review it. The entire case is well worth a perusal after you review our write up, of course. In another decision from the Third Department, the Court shows how truly discouraging this profession can be when it, probably correctly, denied a life insurance company's motion to dismiss on documentary evidence. We sympathize for our friends at First Central.

That's it for this week. For those of you suffering through the unusually warm Summer (and from a look at the map that would be pretty much be all of you), today marks only five more months until the first day of Winter. It also means we are less than two months from football season. Huzzah!

Steve Peiper

[email protected]

Civil War History: One Hundred Fifty Year Ago Today:

Barnard Elliott Bee Jr. was a career United States Army officer and a Confederate States Army general during the American Civil War (as was his brother). He was mortally wounded at the First Battle of Bull Run, 150 on July 22, 1861, one of the first general officers to be killed in the war. During that battle, he tried to rally his troops by screaming out the famous words "rally around the Virginians, there stands Jackson like a stone wall". From that time on, General Thomas J. Jackson of Virginia would be better known as the famous General Stonewall Jackson of the Confederate armed forces. His father, namesake of Bee County Texas, Barnard Elliot Bee, Sr., was Secretary of State of the Republic of Texas and negotiated the treaty with Daniel Webster under which the independent republic was recognized.

Barnard, Sr., was the son of Thomas Bee, a delegate to the Continental Congress

In This Week's Coverage Pointers:

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

  • Question of Fact on Broker Malpractice Precludes Summary Judgment
  • Unsigned Contract Did Not Qualify as Contract for Which Additional Insurance Coverage Was Required

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

  • Heat Causes Mass Exodus from Highways

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

ARBITRATION

  • Applicant Determined to Be Driver of Vehicle One and Insurer First Notified Reminded of Rules When Believe Another Insurer Responsible for Payment
  • Undated Signature Does Not Invalidate Peer Review if Report Is Dated
  • Treating Physician's Opinion Afforded Greater Weight in Close Call Case
  • IME Supports Lost Wage Denial Since no Reports Submitted Supported Disability from Work

LITIGATION

  • Denial of SJ Motion but Indication That Plaintiff Established Prima Facie Case Does Not Equate to Order That Plaintiff Established Undisputed Facts to Demonstrate Prima Facie Case
  • Insurer's Cross-Motion for SJ Should Have Been Granted as Plaintiff Failed to Rebut Peer Review
  • Litigation Manager Hired Post Denial Insufficient to Establish Mailing Procedure for Denial
  • Insurer Established Failure to Appear for Scheduled EUOs Warranting SJ
  • Summary Judgment Denied as Issue of Fact on Policy Limits Exhausted and Claim Paid Prior to Suit
  • Summary Judgment Denied as Defendant Presented Evidence of Denial of Insurance

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

Property

  • Title Insurer's Failure to Establish Prejudice Leads to a Defense Obligation; Indemnity Obligations Were Terminated Where Plaintiff Voluntarily Settled the Claim Without Notice
  • Where Carrier Does Not Establish That Decedent Knew Alcoholism was an Alcohol Related Illness Its Motion to Dismiss Was Denied

And Potpourri

  • Plaintiff's Real Property Claim Fails, Breach of Contract Claim Survives Summary Judgment on the Basis of a Anticipatory Repudiation Argument

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

  • Proposed Regulation - Licensed Acupuncture Fees
  • Regulatory Agenda for the Second Half of 2011

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

  • Insurer May Retain Premiums Paid if Fraud Involved in Procurement
  • Trigger for Excess Insurer's Duty to Defend and/or Indemnify

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

  • Court Finds A Question of Fact as to the City of New York's Additional Insured Status Under Its Traffic Signal Maintenance Company's Policy
  • Policy Voided Where Insured Indicated that Building Was a Two-Family Dwelling, When in Fact, it Was a Three-Family Dwelling
  • 42 Days is Late as a Matter of Law
  • Insurer Given 30 days to Disclose Demanded Discovery in Bad Faith Case
  • Question of Fact as to Timeliness of Injured Party's Notice Where Defense Counsel Failed to Disclose the Existence of an Excess Policy Until Shortly Before Trial
  • Court Grants Motion to Renew Even Though Plaintiff Had Access to the Facts Omitted From its Prior Motion
  • Subcontractor's Insurer Owes Defense to General Contractor For Claim Made By Subcontractor's Employee

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

RED FLAGS OF FRAUD IN AUTOMOBILE

AND TRANSPORTATION CLAIMS

We love your feedback. Keep it coming.

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

Coverage Pointers

Volume XIII, No. 2
Friday, July 22, 2011

A Biweekly Electronic Newsletter

Hurwitz & Fine, P.C.
1300 Liberty Building
Buffalo, NY 14202

Phone: 716-849-8900

Fax: 716-855-0874
www.hurwitzfine.com

© Hurwitz & Fine, P. C. 2011
All rights reserved

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

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

You will find back issues of Coverage Pointers on the firm website listed above.

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

NEWSLETTER EDITOR
Dan D. Kohane
[email protected]

ASSOCIATE EDITOR
Audrey A. Seeley
[email protected]

ASSISTANT EDITOR
Margo M. Lagueras
[email protected]

 

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

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

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

Jody E. Briandi
Steven E. Peiper

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

Margo M. Lagueras
Cassandra Kazukenus
Jennifer A. Ehman

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

Scott M. Duquin
Diane F. Bosse

Index to Special Columns

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

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

07/21/11         Kvest LLC v. Cohen
Appellate Division, First Department
Question of Fact on Broker Malpractice Precludes Summary Judgment
Kvest claims that its insurance carrier disclaimed coverage because its broker failed to timely forward to the carrier a claim letter received from the injured party’s attorneys.  The broker claimed that the disclaimer was invalid and therefore the broker could not be sued for professional errors and omissions.  The court rejected the broker’s argument because the insurer could not have disclaimed earlier since it did not have notice of the claim.
The broker contends that it mailed a copy of the claim letter to the carrier on May 6, 2004, two days after they received it from plaintiff.  However, a notice of occurrence/claim form prepared by defendants on October 2, 2004 indicates that the claim had not previously been reported.  This raises a triable issue of fact as to whether defendants timely notified the carrier of the claim letter.
The damages recoverable in this action can include the insured’s reasonable attorneys' fees incurred in defending the carrier's declaratory judgment action in its effort to mitigate its damages.
07/14/11         Cusumano v. Extell Rock, LLC
Appellate Division, First Department
Unsigned Contract Did Not Qualify as Contract for Which Additional Insurance Coverage Was Required
Twin City issued a policy of liability insurance to Regions.  That policy provided coverage to additional insureds when "you have agreed, in writing, in a contract or agreement that another person or organization be added as an additional insured . . ." The Construction Agreement, which named Hard Rock as an additional insured, was not signed by either Regions or Hard Rock, and the Work Authorization was only signed by Regions.  Additionally, the signature page, which included a signature line for Hard Rock to sign, was not signed at the time of the accident, so Hard Rock was not entitled to additional insured status.

 

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

07/21/11         No Plaintiff v. No Defendant
Appellate Division, All Departments
Heat Causes Mass Exodus from Highways
We are overjoyed to report that there have been no serious injuries due to motor vehicle accidents during this past two-week period.  We can only speculate that the intense heat has caused an unprecedented avoidance of asphalt throughout the State of New York.  Stay in, stay cool, and, until the heat breaks!

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


ARBITRATION
07/14/11         Applicant v. Respondents
Arbitrator Mary Anne Theiss, Onondaga County
Applicant Determined to Be Driver of Vehicle One and Insurer First Notified Reminded of Rules When Believe Another Insurer Responsible for Payment

The issue in the arbitration was whether Erie Insurance Company (“Erie”) or Liberty Mutual Insurance Company (“Liberty Mutual”) should have provided No-Fault benefits.  The Applicant was involved in a March 17, 2010, accident and had a personal automobile insurance policy with Liberty Mutual.  The Applicant submitted a No-Fault claim to Liberty Mutual which was denied on the basis that the Applicant was not the operator of vehicle one in the vehicle accident report.  There appeared to be no issued that Applicant owned vehicle one.  Rather, Applicant was listed as a passenger in vehicle two of the vehicle accident report.  Vehicle two was insured by Erie.  The Applicant also sought No-Fault benefits from Erie which were apparently denied, leading to this arbitration against Liberty Mutual which joined Erie.

The Applicant testified that she operating vehicle one when she was rear ended by vehicle two occupied by some of her friends.  The Applicant was 18 years old at the time and sustained a fractured hand for which she did not receive full medical treatment due to the denials of No-Fault benefits.  After the accident occurred, Applicant testified that she left the accident scene with one her friends in vehicle 2 to go to the next exit to a McDonald’s to request help.  When she returned to the accident scene the police were there.  The police officer listed her as a passenger in vehicle two as she was in that vehicle upon her return to the accident scene.  However, Applicant maintained that she was the driver of her own vehicle, vehicle one, at the time of the accident. 

The assigned arbitrator determined that the Applicant’s testimony was credible.  The Applicant’s explanation when confronted with documents seeking No-Fault benefits that indicate she was a passenger in vehicle two was that her mother filled out the forms and followed the incorrect information on the police accident report.  The Applicant attempted to correct the misinformation when she became aware of it.

The assigned arbitrator determined that the Applicant was the driver of vehicle one and that Liberty Mutual was responsible for the No-Fault benefits.  The assigned arbitrator further reminded the insurer that the proper procedure is for the insurer on first notice of the claim to pay the claim and then seek intercompany arbitration against the other insurer to decide the issue of who owes No-Fault coverage to the Applicant.  This permits the Applicant to treat for her injuries while the insurers have recourse in ascertaining the responsible entity for payment of the benefits.

07/14/11         Proscan Radiology of Buffalo v. Respondent
Arbitrator Thomas J. McCorry, Erie County
Undated Signature Does Not Invalidate Peer Review if Report Is Dated

The Applicant sought reimbursement for an MRI conducted a little over one month post accident.  The diagnostic testing was denied upon the peer review of Dr. Warren Cohen.  Dr. Cohen opined that the diagnostic testing was not warranted based upon the medical records submitted for review.  The assigned arbitrator agreed and further noted that Dr. Cohen’s opinion was not rebutted by the limited records Applicant submitted.  Finally, Applicant did argue that the peer review report was invalid since the signature was undated.  The assigned arbitrator rejected this argument as the report itself was dated.

07/14/11         Proscan Radiology Buffalo v. Respondent
Arbitrator Thomas J. McCorry, Erie County
Treating Physician’s Opinion Afforded Greater Weight in Close Call Case

The Applicant sought reimbursement for MRIs conducted on the assignor a little over a month post-accident.  The insurer denied the testing upon the peer review of Robert Sohn, DC.  Mr. Sohn opined that the testing was not justified based upon acceptable chiropractic standards as the initial examination report did not indicate any significant neurological abnormality.  Mr. Sohn further cited to a medical journal which indicated that MRIs are only warranted with substantial pain four to six weeks after the initial treatment.  The follow up report from the treating chiropractor, around six weeks after the initial visit, indicated constant moderate to severe pain.

The assigned arbitrator determined that this case was a close case as the treating chiropractor’s note did fall within Mr. Sohn’s cited medical journal documenting substantial pain six weeks after the initial visit.  It is noted though that the MRI was conducted prior to this re-examination report relied upon.  Thus, the assigned arbitrator determined that in cases where it is a close call, the treating chiropractor’s opinion is afforded greater weight.  Thus, reimbursement for the testing was awarded.

07/08/11         Applicant v. Respondent
Arbitrator Thomas J. McCorry, Erie County
IME Supports Lost Wage Denial Since no Reports Submitted Supported Disability from Work

The Applicant sought reimbursement of lost wages from 9/4/07 to 10/8/09, and prescription expenses arising from a 10/8/06 motor vehicle accident.  The wages and prescription expenses were denied upon the IME of Dr. David Inslicht.  Dr. Inslicht opined that the Applicant had a lumbar strain and left wrist sprain.  He further concluded that the Applicant reached pre-accident status and was not disabled due to injuries from the accident.  The assigned arbitrator determined that the IME was persuasive to uphold the denial.  It was noted that while the Applicant’s testimony was that he was disabled there was no medical report to support the claim.  Furthermore, the medical reports’ findings submitted did not have much discrepancy when compared to the IME report.

LITIGATION

07/08/11         A.B. Med. Services, PLLC v. Utica Mut. Ins. Co.
Appellate Term, Second Department
Denial of SJ Motion but Indication That Plaintiff Established Prima Facie Case Does Not Equate to Order That Plaintiff Established Undisputed Facts to Demonstrate Prima Facie Case

The plaintiff’s summary judgment motion was denied as the court determined the plaintiff did not establish its prima facie case entitlement to summary judgment.  On appeal, the order was affirmed but the court held that the plaintiff established its prima facie case yet the defendant raised an issue of fact precluding summary judgment.

Thereafter, the plaintiff filed a second motion pursuant to CPLR §3212(g) seeking an order deeming the facts necessary to demonstrate plaintiff’s prima facie case was established in the action and the plaintiff was entitled to such relief based upon the decision on appeal of the summary judgment motion determining that plaintiff established its prima facie case.  The court granted the motion and the defendant appealed.

The court reversed on the ground that a summary judgment motion determined whether the evidence submitted entitled the moving party to summary judgment.  The order does not determine that the facts were incontrovertible thus deemed established for all purposes in the action.  The court reasoned that, “the very shifting of the burden of proof upon a finding that a plaintiff has demonstrated its prima facie entitlement to summary judgment presupposes that the defendant, in opposition, might be able to rebut any aspect of the plaintiff’s case.”  Therefore, the motion should have been denied.

07/08/11         MSSA Corp. a/a/o Alba Rosado v. American Transit Ins. Co.
Appellate Term, Second Department
Insurer’s Cross-Motion for SJ Should Have Been Granted as Plaintiff Failed to Rebut Peer Review

The defendant’s cross-motion for summary judgment should have been granted as it submitted, inter alia, an affirmed peer review setting forth the factual and medical rationale for the determination of lack of medical necessity.  The defendant’s showing was unrebutted by the plaintiff thus warranting summary judgment in the defendant’s favor.

07/07/11         South Nassau Orthopedic Surgery a/a/o Marie Georges v. Auto One Ins. Co.
Appellate Term, Second Department
Litigation Manager Hired Post Denial Insufficient to Establish Mailing Procedure for Denial

The defendant’s cross-motion for summary judgment was properly denied.  The defendant’s litigation manager’s affidavit did not establish actual mailing of the claims forms since she was hired after the claim form denial was generated and allegedly mailed. 

07/05/11         Corona Heights Med. PC a/a/o Rose Watson v. Lancer Ins. Co.
Appellate Term, Second Department
Insurer Established Failure to Appear for Scheduled EUOs Warranting SJ

The defendant’s motion for summary judgment based upon failure to attend scheduled EUOs should have been granted.  The defendant’s papers established that the EUO scheduling letters were timely mailed in accordance with standard office practice of the law firm retained to conduct the EUO.  The papers further established that the denial of claim forms were timely mailed in accordance with the defendant’s standard office procedure.

06/28/11         Mount Sinai Hosp. a/a/o Vanessa Ayala v. Country Wide Ins. Co.
Appellate Division, Second Department
Summary Judgment Denied as Issue of Fact on Policy Limits Exhausted and Claim Paid Prior to Suit

The plaintiff’s summary judgment motion was properly denied as the defendant raised issues of fact as to whether the policy limits were exhausted with the payment of claims for prior services while the claim at issue in the litigation was delayed pending additional verification as well as whether the defendant paid the second claim submitted with the appropriate interest before suit was commenced.  The defendant’s motion to renew its cross-motion for summary judgment was properly denied as it failed to offer a reasonable justification for failure to submit new facts at the time of the prior motion.

06/28/11         Mount Sinai Hosp. a/a/o Meilun Chun v. Government Employees Ins. Co.
Appellate Division, Second Department
Summary Judgment Denied as Defendant Presented Evidence of Denial of Insurance

The plaintiff’s summary judgment motion should have been denied as the plaintiff established its prima facie case entitled to judgment on one cause of action through the submission of the billing forms and that same were mailed to the insurer with no payment or denial within 30 days from mailing.  The defendant created a triable issue of fact by demonstrating that it issued a denial of claim form to the plaintiff.  We note that the decision mentions a date of the denial but no discussion on whether the denial was timely to preserve defenses.

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

07/07/11         Resmac 2 LLC v Madison Realty Capital, L.P.
Appellate Division, First Department
Title Insurer’s Failure to Establish Prejudice Leads to a Defense Obligation; Indemnity Obligations Were Terminated Where Plaintiff Voluntarily Settled the Claim Without Notice
Plaintiff failed to notify defendant Stewart Title Insurance Company (“Stewart”) that an adverse proceeding had been commenced against it.  However, because Stewart learned of the proceeding through another source, the Court held that Stewart was not prejudiced by the plaintiff’s lack of notice.  Where prejudice could not be established, per the terms of the policy there was no breach.  Accordingly, Stewart had an obligation to reimburse plaintiff for accrued defense fees. 

However, with regard to indemnity obligations, the Court noted that Stewart was not obligated to pay the difference between the coverage limit and the compromised settlement agreement because the plaintiff did not sustain a compensable loss (not sure why, but the Court doesn’t tell us either).  Further, the fact that plaintiff voluntarily executed the settlement agreement without notice to Stewart likewise persuaded the Court that plaintiff was not entitled to indemnity payments. 

07/21/11         Mason v First Cent. Natl. Life Ins. Co. of NY
Appellate Division, Third Department
Where Carrier Does Not Establish That Decedent Knew Alcoholism Was an Alcohol Related Illness, Its Motion to Dismiss Was Denied
Plaintiff is the executrix of the estate of Kevin Mason.  Upon his death, the instant claim was commenced seeking payment of certain life insurance benefits under a policy issued by defendant First Central.  First Central denied the claim on the basis that decedent has misrepresented his medical condition at the time coverage was bound. 

Upon receipt of the lawsuit, First Central moved to dismiss plaintiff’s claims.  In support of its claim, First Central introduced a copy of the insurance application wherein decedent denied being diagnosed with high blood pressure and also denied every being diagnosed with an alcohol related illness.  In addition, First Central produced documents which established that decedent had been treated for hypertension and alcoholism.

Faced with this seemingly irrefutable proof of a misrepresentation, the Appellate Division noted that First Central had failed to establish that the decedent knew hypertension meant high blood pressure.  Likewise, the Court noted that the decedent had not established that the insured knew that alcoholism was an alcohol related incident.  Accordingly, the motion was denied. 

In related news, First Century also did not establish that decedent was aware that water was wet or that the moon was not made of green cheese.  We’re just sayin’.

And Potpourri

07/07/11         Fonda v. First Pioneer Farm Credit
Appellate Division, Third Department
Plaintiff’s Real Property Claim Fails; Breach of Contract Claim Survives Summary Judgment on the Basis of an Anticipatory Repudiation Argument
Defendant First Pioneer was/is the mortgagee on a farm owned and operated by plaintiff Fonda.  After a 2004 fire destroyed several farm buildings and resulted in the death of several animals, plaintiff and First Pioneer were the recipients of an insurance settlement with Mr. Fonda’s property insurer. 

As mortgagee, the proceeds of such funds were held, initially, by First Pioneer.  First Pioneer was then required to release the funds, as they became due, to cover equipment expenses and rebuilding costs.   It appears that such payments were made, first in November of 2004 to cover the cost of winterizing damaged buildings, and thereafter as buildings were replaced. 

Plaintiff, apparently displeased over the speed in which proceeds were released, commenced the instant action under Real Property Law § 254.  Plaintiff also alleged a breach of contract between First Pioneer and plaintiff.

First Pioneer moved to dismiss the claim under the Real Property Law on the basis that, pursuant to the statute, it is only required to release funds as the repairs are actually made.  In turn, it argued that it is under no obligation to Release the funds prior to repairs being conducted.  The Trial Court agreed, and accordingly, the claim under the Real Property law was properly dismissed.

Plaintiff’s breach of contract survived summary judgment on the basis that plaintiff argued First Pioneer’s conduct resulted in an anticipatory repudiation of the agreement.  Where there is proof of an anticipatory repudiation (ie., an attempt to avoid the terms of a contract due to an untenable interpretation by one party), the injured party is permitted to claim damages as if the contract were already breached.

In support of its position, plaintiff argued that First Pioneer required that plaintiff maintain (or even pay down) its outstanding mortgage prior to releasing monies to make repairs at the damaged premises.  This, if true, was outside the terms of the agreement between plaintiff and First Pioneer which required First Pioneer to disgorge insurance proceeds as repairs were completed.  Accordingly, a question of fact was found, and summary judgment in favor of First Pioneer precluded. 

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

Proposed Regulation – Licensed Acupuncture Fees

            The Department has published its proposed changes to 11 NYCRR 68 wherein it describes when an acupuncturist is licensed as well as what the maximum permissible charge is for acupuncture treatments.  This change to the regulation states that an acupuncturist is licensed if he or she complies with the requirements set forth in Article 16 of the Education Law.  Importantly, the maximum permissible charge for a physician licensed to perform acupuncture is in accordance with the Workers’ Compensation Medical Fee Schedule referenced in 12 NYCRR 329.3. 

Regulatory Agenda for the Second Half of 2011

At this time the proposed regulations have either not been drafted or are not available for review, except the proposed changes to the no-fault regulations.  However, as the proposed regulations are published, we will be sure to report on the content and changes.  Of note for Property and Casualty Insurers, the Department plans to make amendments to the following areas:

  • Unfair Claims Settlement Practices and Claim Cost Control Measures (11 NYCRR 216.6)

 

The Department intends to update the regulation so that the regulation is consistent with the Department’s interpretation with regard to releases of liability.

  • Legal Defense Costs in Liability Policies (11 NYCRR 71)

 

The Department plans to permit the inclusion of a non-duty-to-defend provision in D&O liability policies in certain circumstances.

  • SUM (11 NYCRR 60-2)

 

The department plans to make various editorial revisions to the prescribed endorsement and otherwise clarify the intent and application of the coverage.

  • Regulations Implementing the Comprehensive Motor Vehicle Insurance Regulations Act (11 NYCRR 65-1, 65-2, 65-3, 65-4)

 

As has been discussed at length in previous issues of Coverage Pointers, the Department has proposed to amend the current no-fault regulation.  There have not been any new changes proposed since we last reported on this.

  • Unfair Claims Settlement Practices and Claim Cost Control Measures (11 NYCRR 216)

 

The Department plans to update the entire regulation to provide notice and time frame requirements for third party claims, as well as other unspecified items.

  • Adoption of a new Regulation Affecting Wrap-Up Policies

 

The purpose of the regulation will be to provide requirements regarding policies written to cover owner-controlled and contractor-controlled insurance programs.

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

07/14/11         PHL Variable Ins. Co. v. Lucille Morello 2007 Irrevocable Trust BNC National Bank
Eighth Circuit Court of Appeals – Minnesota
Insurer May Retain Premiums Paid if Fraud Involved in Procurement
This case involves an increasingly popular type of insurance fraud known as “
Stranger Originated Life Insurance (“STOLI”).  Plaintiff PHL Variable Insurance Company, a member of the Phoenix Companies [“Phoenix”] described this practice as “high face amount insurance policies insuring senior citizens obtained for the benefit of investors with no insurable interest in the life of the insured.”

In this case the insured was Lucille Morello, a 78 year old retired cosmetologist, who with her husband had a combined net worth of roughly $800,000 and a gross annual income of $30,000.  The insurer was Phoenix.

In 2006 Morello’s son, Jeffery Chiaro, was approached by Jason Mitan a disbarred lawyer with felony convictions for tax evasion and bankruptcy fraud, to consider the idea of fraudulently acquiring life insurance for Morello. Later, a business associate of Mitan, David Claus, contacted Morello and offered to provide her with free life insurance on the condition that any policies purchased on her behalf would eventually be sold to third parties.  Claus also promised Morello cash payments in exchange for her complicity in the scheme.  Morello agreed.

Claus, operating under the auspices of Cambridge Financial Group, Ltd. [“Cambridge”], where Claus was the President and Mitan the Chief Executive Officer, retained unsuspecting insurance broker, Wholesale Life Insurance Brokers [“WLIB”] to acquire as much standard rate insurance coverage on Morello’s life as possible.  To do this Claus provided WLIB with a phony financial statement allegedly prepared by an Illinois certified public accountant.  The financial statement set Morello’s net worth at $34 million and her annual income exceeding $800,000.  In addition, Claus and Chiaro misled unsuspecting financial companies to establish four trusts that would own the policies sought on Morello’s life.  Ultimately, Phoenix offered to provide Morello with a life insurance policy bearing a $10 million death benefit.

On March 6, 2007 one of the trusts Claus set up, the Lucille E. Morello 2007 Irrevocable Trust (“The Trust”), formally applied to Phoenix for life insurance.  Along with the application, the Trust submitted a Statement of Client Intent Form [“SOCI Form”], which acknowledged that some of the policy premiums would be borrowed from CFC of Delaware, LLC [“CFC”].  The SOCI Form also represented that The Trust had no intent to transfer any interest in the policy to a third party and that the policy was intended to serve estate conservation purposes.  Phoenix outsourced its due diligence exam to Examination Management Services, Inc. [“EMSI”].  EMSI contacted Morello who verified her inflated net worth and referred EMSI to her son, whom she claimed was also her financial adviser.  Her son confirmed her net worth to EMSI over the phone and referred the investigator to Claus who then seconded Chiaro’s confirmation.  Based on this information EMSI transmitted its approval to Phoenix.

Phoenix issued a life insurance policy to The Trust.  The Trust then paid insurance premiums totaling $518,562.00.  Phoenix then paid commissions to two insurance agents totaling $570,418.20.  The Trust borrowed the entire premium amount from CFC.  New Stream, through CFC, indirectly loaned The Trust money to pay the premiums.  New Stream claimed that CFC performed essentially no underwriting or due diligence prior to making this loan to the Trust, and apparently without any regard as to whether The Trust or those behind it would ever repay the loan. In making this loan New Stream admitted that it also failed to perform any underwriting or due diligence.  New Stream received a “utilization fee” of $52,606.00 for this loan from CFC.

On October 20, 2007, within the policy’s two year contestability period, Morello died.  On December 10, 2007, the Trust applied to Phoenix for coverage under the contract.  Phoenix investigated and uncovered the fraudulent STOLI scheme and in February, 2008, brought this action for rescission of the policy under Minnesota law.  Phoenix sought the rescission of the policy as void ab initio due to the fraudulent representations make in the policy application.  In July 2009, shortly after taking an assignment of CFC’s Financing Agreement with the Trust, New Stream intervened as a third-party plaintiff seeking declaratory judgment that Phoenix is not entitled to retain unearned policy premiums as set off against the commissions it paid in connection with the policy.

In September 2009, Phoenix, as well as defendants Claus and Chiaro, filed a “Joint Motion for Entry of Judgment (“Joint Motion”) based on a settlement agreement stipulating fraud in connection with the policy application.  The parties moved the district court to rescind the policy ab initio, and enter judgment in Phoenix’s favor with Phoenix retained all unearned premiums on the policy as set off against the commissions and other damages.  New Stream opposed the joint motion.  The district court rescinded the policy and authorized Phoenix to retain the premiums. New Stream appealed.

The Eighth Circuit Court of Appeals affirmed relying on well settled Minnesota law which recognizes an exception to the right to the return of the premium whereby the insurer is relieved from any duty to return the premium when it was induced to enter into the contract by the actual fraud of the insured.  Taylor v. Grand Lodge A. O.U.W. of Minnesota. 105 N.W. 411 (Minn. 1905).

New Stream argued that the underlying rationale of this rule is to prevent insurance fraud from becoming a zero sum game in which the insured bears no pecuniary risk in attempting to perpetrate fraud.  New Stream contends that this case is different because it is an innocent third-party lender which will immediately take possession of the returned premiums.  Since New Stream could not present any case law to support its position the court did not find its argument compelling.  The court stated that, although the Minnesota Supreme Court likely did not anticipate or account for the complexities of modern day structured finance when it crafted its procured-by-fraud exception that alone did not give the Eighth Circuit Court of Appeals license to ignore Minnesota’s interpretation of its own law.  Actual fraud renders the insurance contract void at its inception and relieves Phoenix of any duty it otherwise may have owed to return premiums already paid.

07/19/11         Estate of Mable Dean Bradley v. Royal Surplus Lines Ins. Co.
United States Court of Appeals, Fifth Circuit – Mississippi
Trigger for Excess Insurer’s Duty to Defend and/or Indemnify
This declaratory judgment action arose out of a lawsuit initiated by the Estate of Mable Dean Bradley in Mississippi State Court against the Indianola Health and Rehabilitation Center’s corporate parent, Mariner Health Care, Inc. and several other defendants.  The estate sought recovery based on claims of negligence, mistreatment, malice and/or gross negligence, fraud, breach of fiduciary duty, statutory survival, and wrongful death arising out of Bradley’s residences at the Indianola nursing home. A jury awarded $1.5 million in compensatory damages and $10.5 million in punitive damages to the Estate. 

The Mariner defendants wanted to pursue an appeal, and Mariner’s fist excess layer, Lexington Insurance Company [“Lexington”] agreed to post a portion of the appellate bond.  Mariner’s second and third layer excess insurers – Royal Surplus Lines Insurance Company [“Royal”] and Lumbermens Mutual Casualty Company [“Lumbermens”] would not agree.  Royal maintained that the applicable portion of its excess policy had not been triggered at that point and therefore, it did not owe a duty to participate in defending the Mariner action or in posting an appellate bond.

The Mariner defendants and Lexington then entered into a settlement agreement with the estate that extinguished “any and all claims related to” Bradley’s care and treatment at the Indianola nursing home, “including claims for damages, costs, or attorney’s fees in exchange for $10.5 million.”  Together, Lexington and Mariner paid a total of $2.3 million to the Estate as part of the settlement.  Mariner assigned its interest in any claims against Royal and Lumbermens to the Bradley estate.

The Estate then filed this declaratory judgment action against Royal and Lumbermens.  All parties filed motions for summary judgment.  The district court denied the Estate’s motion and granted summary judgment to both insurers finding as a matter of law that Royal’s and Lumbermens’ respective policies did not require them to defend or indemnify Mariner in the state lawsuit.  The Estate appealed.

On appeal the Estate argued that Royal’s excess policy unambiguously required Royal and Lumbermens to defend and indemnify Mariner for the state court judgment and resulting settlement.

In affirming the district court’s decision the Fifth Circuit agreed that the terms of the Royal excess policy triggered a duty to defend only after actual payment of judgments or settlements had exhausted any underlying insurance, and that condition precedent was never satisfied.

The Court pointed out that the gravamen of the Estate’s claim is that the Royal policy “followed form” to the Lexington policy in all respects.  This was incorrect because the only term in the Royal policy which contained a follow form provision was with respect to professional liability arising out of Mariner’s operations at the Indianola nursing home; and, a review of the Lexington policy’s corresponding Medical Professional Liability Coverage endorsement reveals no reference to a defense obligation. As a result, Royal’s defense obligation is determined by reference to the terms of Royal’s policy.  The duty to defend in the Royal policy only arose after “the applicable limits of the underlying insurance and other insurance have been used up in the payment of judgments or settlements.”

The Court pointed out that contrary to the Estate’s claim, the mere entry of a judgment that exceeded the limits of the underlying insurance was insufficient to triggers Royal’s defense duty.  Instead, Royal’s policy required actual payment that exhausted Mariner’s self-insured retention and Lexington’s policy limits. Since the condition never occurred prior to Mariner’s settlement with the Estate, Royal did not have a duty to post an appellate bond of otherwise defend in the underlying suit.

With respect to the duty to indemnify the Court held that because the actual facts giving rise to liability in the underlying suit occurred outside of Royal’s and Lumbermen’s policies, neither excess insurer had a duty to indemnity Mariner for the judgment or settlement in the underlying state suit.

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

07/06/11         City of New York v. Endurance Am. Ins. Co.
Supreme Court, New York County
Court Finds a Question of Fact as to the City of New York’s Additional Insured Status Under Its Traffic Signal Maintenance Company’s Policy
The City of New York, though its agency the Department of Transportation, contracted with Daidone Electric, Inc. (“Daidone”) for the performance of traffic signal maintenance in the city.  Specifically, the contract called for Daidone to repair traffic control signals and pedestrian signals on an as requested basis.  The contract also contained an insurance procurement requirement. 

Daidone fulfilled the insurance procurement requirement by obtaining a policy of insurance from defendant, Endurance Am. Ins. Co. (“Endurance”).  The policy contained a blanket additional insured provision that included “as an insured any person or organization for whom you are performing  operations when you and such person have agreed in writing in a contract or agreement that such person or organization be added as an additional insured on your policy.  Such person or organization is an additional insured only with respect to liability arising out of your ongoing operations performed for that insured…”

Thereafter, the City was placed on notice of two separate third-party actions commenced against it arising out of the same motor vehicle accident.  Both actions essentially alleged that the City and Daidone were responsible for the inspection, maintenance and service of the traffic control device at the corner where the accident occurred, that the traffic device was broken and that on account of the City and Daidone’s negligence in failing to inspect maintain and service the traffic light, the accident occurred. 

Upon receipt of these third-party actions, the City tendered its defense to Endurance.  Without waiting to receive a response to its tender, the City commenced this action.  It then moved for summary judgment. 

According to the court, to meet its burden the City was required to make a prima facie showing that the accident arose out of the ongoing operations being performed by Daidone at the time and place of the accident. 

In opposition to the motion, the insurer submitted an affidavit from Daidone’s superintendent which stated that although a maintenance call was made regarding a signal post at the subject site three days before the accident, the call related to a malfunctioning pedestrian signal as opposed to the traffic light.  In fact, no call was made concerning the traffic signal in the three months prior to the accident. Thus, after considering this evidence, the court held that there were clearly disputed issues of fact as to whether the liability in the underlying personal injury cases arose out of Daidone’s “ongoing operations”, especially in light of the fact that the contract between the City and Daidone only appeared to require Daidone to repair traffic control devices on an as requested basis. 

Note:  As I read this case, I cannot help but think about its application to snow plow cases.  In most, if not all, of these cases there is an issue as to whether the slip and fall arose out of the snow plow contractor’s “ongoing operations” for the property owner; thus, entitling the owner to additional insured status.  In this case, the court really took into consideration the fact that Daidone performed repair services as requested.  In addition, numerous months passed between Daidone’s last repair of the traffic light and the accident. 

07/06/11         Hermitage Ins. Co. v. LaFleur     
Supreme Court, New York County
Policy Voided Where Insured Indicated That Building Was a Two-Family Dwelling, When in Fact, It Was a Three-Family Dwelling
Hermitage Ins. Co. (“Hermitage”) issued a Commercial General Liability policy to Joe Kevin LeFleur and Rudy Naraine for one of their rental properties.  The declarations section of the policy stated that the building was classified as “DWELLINGS – TWO FAMILY (LESSOR’S RISK ONLY).”  In reality, the building actually contained three apartments.

Thereafter, an individual was injured when he fell at the premises.  When his lawsuit was tendered to Hermitage, it denied coverage based on LeFleur and Naraine’s material misrepresentation as to the number of apartments on the premises.  Specifically, it cited a condition in the policy, which stated that “[b]y accepting this policy, you agree…[t]he statements in the Declaration are accurate and complete…”

In deciding this motion for summary judgment, the court held that a misrepresentation is material “if, had it been revealed, the insurer or reinsurer would either not have issued the policy or would have only at a higher premium…”  Here, Hermitage submitted evidence that the premium for a two-family dwelling was $1,521, while a three-family dwelling was $1,862.  Accordingly, the court granted Hermitage’s motion and declared that it had no obligation to provide a defense or indemnity for the injured party’s lawsuit.

07/01/11         QBE Ins. Co. v. Illinois Union Ins. Co.
Supreme Court, New York County
42 Days Is Late as a Matter of Law
The injured party’s attorney placed the insured, Cook & Krupa, LLC (“Cook’s”), on notice of a loss by letter, date October 13, 2008.  Cook’s insurer, QBE, tendered Cook’s defense to Illinois Union Ins. Co., a subcontractor’s insurer, 42 days later.  Thereafter, Illinois Union disclaimed coverage based on late notice. 

In this decision, the court upheld the late notice denial.  It noted that plaintiff’s excuse that an investigation was required because the October 13th letter provided insufficient information to alert it of the existence of a possible claim was unsupported by the record.  Specifically, the letter indicated that the injured party was seriously hurt and it identified the location where the injury occurred.

06/30/11         General Motors Acceptance Corp. v. New York Cent. Mut. Fire Ins. Co.
Supreme Court, New York County
Insurer Given 30 Days to Disclose Demanded Discovery in Bad Faith Case
This decision arises out of a discovery dispute in a bad faith case.  New York Central Mutual Fire Insurance Company (“NYCM”) was the primary insurer for General Motors Acceptance Corp. (“GMAC”), with a $300,000 limit.  American Automobile Insurance Company was the excess insurer. 

Ultimately, a jury found GMAC liable for damages arising out of a motor vehicle accident and awarded the injured party 1.5 million dollars.  GMAC and its excess insurer then brought this action asserting that NYCM acted in bad faith by refusing to make any settlement offer or engage in settlement negotiations despite their requests that the matter be settled.         

As part of plaintiffs’ discovery, it sought disclosure of the following:

  • transcriptions of committee meeting audio recordings regarding the underlying personal injury case;
  • Lotus Notes, as testified to by a NYCM witness, maintained by claims personnel concerning the underlying personal injury case; and
  • All correspondence between NYCM and counsel (note, it is unclear from the decision whose counsel this refers to)

 

In response, NYCM provided an affidavit that indicated it did not have possession, custody or control of auto recordings of NYCM committee meetings, in which the underlying case was discussed.  Notably, this affidavit was in contrast to a former NYCM employee’s testimony provided that auto records and transcriptions of committee meetings were made. 

In considering this issue, the court refused to strike NYCM’s answer.  It did, however, order that the above-documents must be received by GMAC/American Automobile’s counsel within 30 days of service of order.  A failure to comply with the order would result in NYCM’s preclusion at trial as to those matters not disclosed as directed herein and an adverse inference at trial with respect to the missing documents. 

06/29/11         Golebiewski v National Union Fire Ins. Co. of Pittsburgh, PA
Supreme Court, Kings County
Question of Fact as to Timeliness of Injured Party’s Notice Where Defense Counsel Failed to Disclose the Existence of an Excess Policy Until Shortly Before Trial
This is an interesting case that addresses an injured party’s attempt to give notice of claim.  Kazimierz Golebiewski was injured in a fall at a construction site.  During the discovery phase of the underlying lawsuit, Mr. Golebiewski’s counsel requested full disclosure of insurance coverage, including primary and excess policies.  In response, the property owner’s defense counsel certified that the owner had a primary policy with Lloyds of London.  No disclose was made as to excess coverage. 

Thereafter, and shortly before the damages trial, the owner’s defense counsel notified Mr. Golebiewski of an excess policy issued by National Union.  At this point, approximately three years after the accident, the owner, for the first time, placed its excess insurer on notice.  Immediately thereafter, Mr. Golebiewski also put National Union on notice.  National Union then disclaimed coverage on the ground that its insured provided late notice.

Ultimately, the jury awarded Mr. Golebiewski over eight million dollars in damages. 

The injured party then brought this declaratory judgment action against National Union, and both parties moved for summary judgment.  First, Mr. Golebiewski objected to the disclaimer and asserted that it was ineffective against him.  Mr. Golebiewski argued that a carrier’s disclaimer based on late notice by its insured, but not based on late notice by the injured party, is ineffective against the injured party’s rights against the carrier.  However, the court dismissed this argument noting that the insured, not Mr. Golebiewski, provided first notice of claim.  Thus, any subsequent notice was superfluous.

Next, Mr. Golebiewski argued that he was diligent in attempting to discover the excess insurer and, once its identity was discovered, he promptly placed National Union on notice.  In response, National Union argued that in order to be diligent Mr. Golebiewski was required to continue to request insurance information after counsel had disclosed the carriers.  In finding a question of fact on this issue, the court reasoned that National Union’s position ignored the duty placed on members of the bar pursuant to the ethics rules and 22 NYCRR 130 to certify that information contained in papers bearing their signature did not contain material misrepresentations. 

06/28/11         QBE Ins. Corp. v. Hudson Specialty Ins. Co.
Supreme Court, Bronx County
Court Grants Motion to Renew Even Though Plaintiff Had Access to the Facts Omitted from Its Prior Motion
This decision comes on a motion to renew.  Non-party, Daryl Patterson, slipped and fell on a patch of ice on the sidewalk adjoining property owned by Bali 9 Building Associates (“Bali”).  Bali’s insurer tendered its defense to the property’s tenant.  The tenant’s insurer then denied the claim asserting that, pursuant to the lease, the tenant was only responsible for maintenance of the sidewalks adjacent to the property, and Mr. Patterson fell in the rear parking lot.  After Bali commenced this action, the court ultimately granted the tenant’s insurer’s motion for summary judgment denying Bali additional insured status. 

After the decision was rendered, Bali moved to renew.  While it is not clear how this was omitted from the initial motion, the basis of its motion to renew was evidence that the rear parking lot was in fact included in the lease.  In considering this evidence, the court held that “[a]lthough this information was available to plaintiffs at the time of the original motion, as the lease clearly described the leased property as including the rear parking lot, it would ‘defeat substantive fairness’ to deny plaintiff leave to renew on this basis.”  It then, upon renew, denied the tenant’s insurer’s motion.   

05/27/11         Tocci Bldg. Corp. of N.J., Inc. v. Delos Ins. Co.
Supreme Court, Nassau County
Subcontractor’s Insurer Owes Defense to General Contractor For Claim Made By Subcontractor’s Employee
Marco Yanza, an employee of Apro Construction, was injured on a job site when he slipped on sawdust and other debris while affixing a piece of exterior molding/siding to a second floor unit.  Mr. Yanza then brought an action against the owner and general contractor. 

Upon receipt of the action, they tendered to Apro’s insurer pursuant to a contract in which Apro was required to purchase general liability coverage and name both entities as additional insureds. 

In an attempt to deny coverage to the owner and general contractor, Apro’s insurer argued that the owner and CG’s one-year delay in tendering their defense was late.  Unfortunately, while this may have been a viable argument, the insurer waited over five months to deny on these grounds.  In reliance on 3420(d), the court determined that the insurer did not deny as soon as reasonably possible. 

Next, the insurer argued that it was unable to confirm that Mr. Yanza’s accident actually resulted from Apro’s operations performed for the GC.  Based on the well-known Court of Appeals decision in Regal, the court rejected this argument noting that an insurer has an “exceedingly broad” duty to defend.  Interestingly, it should be noted that in Regal the court granted defense and indemnity based on the motion for summary judgment.  In this case, however, the court ruled that at this point the insurer only owed a defense and that a determination as to indemnity was premature.   

Lastly, the court rejected the insurer’s argument that its policy was issued to Apro Construction, not Maximillard, Inc. d/b/a Apro Construction Group, the entity named in the underlying complaint. 

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

RED FLAGS OF FRAUD IN AUTOMOBILE
AND TRANSPORTATION CLAIMS

 

  • Minor accident with large estimate of damages.
  • Expensive damage claims, even though the vehicle remained drivable or did not require towing.
  • Photographs show only damaged areas (e.g., cannot identify make/model or its overall condition).
  • Claimant vehicle was struck by a rental vehicle shortly after rental commenced.
  • The damage estimate and description is inconsistent with description of the accident and impacts.
  • Several (all?) damaged vehicles are taken to the same repair shop.
  • Claimant vehicles are not readily available for inspection and appraisal.
  • There is no lienholder on an expensive, late model vehicle.
  • Vehicle is repaired before the loss is reported.
  • No police report (or an over-the-counter police report) for a serious accident.
  • Accident occurred shortly after the addition or increase in comprehensive or collision coverage.
  • Letter from attorney is dated only a day or two post-accident.
  • Delay in reporting accident.
  • False address – rate evasion.
  • Un-rated or non-disclosed driver in household.
  • Exceptionally high liability limits are requested for an older vehicle inconsistent with applicant’s employment, income or lifestyle.
  • Photos are submitted in lieu of vehicle inspection.
  • Vehicle is not appropriate for claimed address or income (e.g., a luxury vehicle in a low income neighborhood).
  • Vehicle has a large amount of alleged aftermarket equipment (e.g. wheels and rims, high priced stereo, GPS, car phone).
  • Vehicle inspection reveals discrepancy between VIN listed on title/bill of sale, VIN plate on dashboard, and/or manufacturer’s sticker on door.
  • Original vehicle title or authenticated bill of sale cannot be produced.
  • Loss payee is not a usual or legitimate lending institution (e.g. bank or finance company).

 

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

Nothing of moment on which to report.

REPORTED DECISIONS

Cusumano v. Extell Rock, LLC


Steven L. Levitt & Associates, P.C., Williston Park (James J.
Daw, Jr. of counsel), for Regions Facility Services, Inc.,
appellant.
Jones Hirsch Connors & Bull P.C., New York (Steven H.
Kaplan of counsel), for Hard Rock Café International (USA),
Inc., appellant.
Rivkin Radler LLP, Uniondale (Stuart M. Bodoff of counsel),
for respondent.
Judgment, Supreme Court, New York County (Carol R. Edmead, J.), entered May 3, 2010, dismissing the second fourth-party complaint, and bringing up for review an order, same court and Justice, entered April 9, 2010, which, inter alia, granted the motion of second fourth-party defendant Twin City Fire Insurance Company (Twin City) for summary judgment dismissing the second fourth-party complaint and denied the cross motion of second fourth-party plaintiff Hard Rock Café International, Inc. (Hard Rock) for summary judgment declaring that Twin City's disclaimer of coverage is invalid and that Hard Rock is an additional insured under the Twin City insurance policy, unanimously modified, on the law, to the extent of striking therefrom the decretal paragraph dismissing the complaint and substituting therefor a provision declaring that Twin City has no duty to defend and indemnify Hard Rock in the underlying action, and as so modified, affirmed, without costs. Appeal from aforesaid order unanimously dismissed, without costs, as subsumed in the appeal from the judgment.
The subject insurance policy issued by Twin City to defendant-appellant Regions Facility Services, Inc. (Regions) provided coverage to additional insureds when "you have agreed, in writing, in a contract or agreement that another person or organization be added as an additional insured . . ." As the Construction Agreement, which named Hard Rock as an additional insured was not signed by either Regions or Hard Rock, and the Work Authorization was only signed by Regions, and the signature page, which included a signature line for Hard Rock to sign, was not signed at the time of the accident, we agree with the court that Hard Rock was not entitled to additional insured status (see Nicotra Group, LLC v American Safety Indem. Co., 48 AD3d 253 [a legal document signed by one party is not considered to be executed as that term is used in an insurance policy]; see also National Abatement Corp. v National Union Fire Ins. Co. of Pittsburgh, Pa., 33 AD3d 570, 571 [2006]).
We further find that the policy was not ambiguous as to who was required to sign the agreement. As both the Work Authorization and the Construction Agreement contained signature lines meant for Hard Rock and Regions, we find no ambiguity exists as to who was required to sign an agreement naming Hard Rock as an additional insured (see Rodless Props., L.P., v Westchester Fire Ins. Co., 40 AD3d 253 [2007], lv denied 9 NY3d 815 [2007]).
The judgment is modified to the extent indicated because although the court properly determined that Twin City had no duty to defend and indemnify Hard Rock, dismissal of the second fourth-party complaint was not the appropriate procedural course. Rather, the court should have issued a declaration in favor of Twin City (see Maurizzio v Lumbermens Mut. Cas. Co., 73 NY2d 951, 954 [1989] ["when a court resolves the merits of a declaratory judgment action against the plaintiff, the proper course is not to dismiss the complaint, but rather to issue a declaration in favor of the defendants"]; Lanza v Wagner, 11 NY2d 317, 334 [1962], appeal dismissed 371 US 74 [1962], cert denied 374 US 901 [1962]).
Resmac 2 LLC v Madison Realty Capital, L.P.


Wachtel & Masyr, LLP, New York (Howard Kleinhendler of
counsel), for appellant.
Sanders, Gutman & Brodie, P.C., Brooklyn (D. Michael
Roberts of counsel), for respondent.
Order and judgment (one paper), Supreme Court, New York County (Charles E. Ramos, J.), entered November 1, 2010, granting defendant Stewart Title Insurance Company's motion for summary judgment and dismissing the complaint as against it, and bringing up for review an order, same court and Justice, entered on or about October 29, 2010, which denied plaintiff's motion for summary judgment on its claims for defense costs and indemnification as against defendant, unanimously modified, on the law, the order and judgment vacated, defendant's motion denied and plaintiff's motion granted to the extent of declaring that defendant is obligated to reimburse plaintiff for defense costs, and otherwise affirmed, without costs. Appeal from October 29, 2010, order unanimously dismissed, without costs, as subsumed in the appeal from the November 1, 2010 order and judgment.
Plaintiff's failure to notify defendant of the adversary proceeding commenced in the bankruptcy court is not excused by the fact that defendant received notice of the pending litigation from another source (see Travelers Ins. Co. v Volmar Constr. Co., 300 AD2d 40, 43 [2002]). However, defendant did not establish that it was prejudiced by plaintiff's failure, and thus, pursuant to the terms of the policy, plaintiff's failure "shall" not prejudice plaintiff's rights under the policy. Defendant received notice from plaintiff of its potential liability under the policy, as well as a copy of the complaint in the bankruptcy proceeding. Yet, instead of exercising its right under the policy to take action to prevent or reduce loss or damage to its insured, defendant "chose to stay on the sidelines and to allow [plaintiff] to defend the suit on its own" (see Deutsche Bank Trust Co. of Ams. v Tri-Links Inv. Trust, 74 AD3d 32, 42 [2010]; American Tr. Ins. Co. v Hashim, 68 AD3d 618 [2009], lv denied 14 NY3d 708 [2010]). Thus, defendant must reimburse plaintiff for the latter's defense costs.
Defendant is not, however, obligated to indemnify plaintiff for the difference between the face amount of the policy and the amount for which it compromised the value of the subject mortgage at the bankruptcy proceeding, because plaintiff sustained no loss or damage under the policy by taking title to the property (see Grunberger v Iseson, 75 AD2d 329 [1980]; Citibank v Chicago Tit. Ins. Co., 214 AD2d 212, 222 [1995], lv dismissed 87 NY2d 896 [1995]). Further, plaintiff voluntarily agreed to the settlement amount in the bankruptcy proceeding without notifying defendant, although it was not absolved from complying with its obligations under the policy by defendant's disclaimer of coverage (see Seward Park Hous. Corp. v Greater N.Y. Mut. Ins. Co., 43 AD3d 23, 30-31 [2007]).

Fonda v First Pioneer Farm Credit


Calendar Date: May 25, 2011
Before: Mercure, J.P., Rose, Lahtinen, Kavanagh and Garry, JJ.

Getnick, Livingston, Atkinson & Priore, L.L.P., Utica
(Patrick G. Radel of counsel), for appellant.
Melvin & Melvin, P.L.L.C., Syracuse (Elizabeth A.
Genung of counsel), for respondents.
MEMORANDUM AND ORDER
Garry, J.
Appeal from an order of the Supreme Court (Demarest, J.), entered July 29, 2010 in St. Lawrence County, which denied defendant's motion for summary judgment dismissing the complaint.
Defendant is a mortgagee for plaintiffs' dairy farm in the Town of Lisbon, St. Lawrence County. As required by the mortgage, plaintiffs carried fire insurance that named defendant as the insured. In August 2004, a fire on the property killed livestock and damaged or destroyed several farm buildings. The insurer issued payment jointly to defendant and plaintiff Phillip D. Fonda for insurance proceeds of $223,000. Plaintiffs requested that defendant release the funds to be used for repairs and equipment purchases, but the parties disagreed as to how the funds should be used, and defendant refused to release them.
In November 2004, plaintiffs commenced this action claiming, as pertinent here, breach of contract and violation of Real Property Law § 254, and seeking to compel defendant to tender the insurance proceeds to plaintiffs and to pay damages allegedly resulting from the delay. In December 2004, by agreement of the parties, the insurance check was cashed and deposited into a holding account, and defendant released approximately $80,000 to plaintiffs to be used for winterization of the damaged buildings. The remaining insurance proceeds were released to plaintiffs over the next year as the buildings were replaced. In February 2010, defendant moved for summary judgment dismissing the complaint. Supreme Court denied the motion, and defendant appeals.
Defendant first asserts that it did not violate Real Property Law § 254 (4) (a) by refusing to advance the insurance proceeds to plaintiffs. That statute provides, in pertinent part, that a mortgagee holding the proceeds of a fire insurance policy pursuant to a mortgage provision like the one at issue here must retain the funds in trust until, among other things, the mortgagor "make[s] good the damage by means of such repairs, restoration or rebuilding as may be necessary to restore the buildings to their condition prior to the damage," and submits proof to the mortgagee that "the damage has been fully made good" (Real Property Law § 254 [4] [a]). Only then is the mortgagee obliged to pay the proceeds to the mortgagor (see 4-37 Powell on Real Property § 37.24 [2011]). The mortgagee is not prohibited from paying insurance proceeds to the mortgagor before repairs have been carried out; the statute indicates that the mortgagee may elect to do so by providing that the previously-described trust arises "should the mortgagee retain such insurance money instead of paying it over to the mortgagor" (Real Property Law § 254 [4] [a]). However, the statute's plain language cannot be read to require the mortgagee to advance all or part of the insurance proceeds before repairs have been carried out. Here, plaintiffs allege that defendant failed to advance the insurance proceeds to them for proposed repairs and renovation, but they do not claim that defendant failed to reimburse them for expenses they had already incurred. Accordingly, the cause of action alleging that defendant violated Real Property Law § 254 should have been dismissed (compare Builders Affiliates v North Riv. Ins. Co., 91 AD2d 360, 366 [1983]; First Natl. Bank of Scotia v Sterling, 71 AD2d 723, 724 [1979]).
We agree, however, with Supreme Court's refusal to dismiss plaintiffs' breach of contract claim, finding triable issues of fact as to whether defendant committed anticipatory repudiation and breached the implied covenant of good faith and fair dealing [FN1]. Anticipatory repudiation occurs when a party "attempt[s] to avoid its obligations by advancing an untenable interpretation of the contract, or . . . communicate[s] its intent to perform only upon the satisfaction of extracontractual conditions" (SPI Communications v WTZA-TV Assoc. Ltd. Partnership, 229 AD2d 644, 645 [1996] [internal quotation marks omitted]; see IBM Credit Fin. Corp. v Mazda Motor Mfg. [USA] Corp., 92 NY2d 989, 993 [1998]). Such conduct excuses the non-repudiating party from further performance and entitles it to claim damages for total breach (see O'Connor v Sleasman, 14 AD3d 986, 987-988 [2005]; SPI Communications v WTZA-TV Assoc. Ltd. Partnership, 229 AD2d at 645). Whether such a repudiation took place is "a factual determination [and] heavily dependent upon a determination of whether 'a breaching party's words or deeds are unequivocal'" (O'Connor v Sleasman, 14 AD3d at 987-988, quoting Norcon Power Partners v Niagara Mohawk Power Corp., 92 NY2d 458, 463 [1998]).
Plaintiffs contend that defendant's representative improperly sought to require them to apply approximately $80,000 from the insurance proceeds to pay down principal on the mortgage debt and to "scale down" their reconstruction plans accordingly. Defendant asserts that it imposed no such requirement, but merely offered to release part of the insurance proceeds before repairs were completed if plaintiffs agreed to apply the remainder to reduce the principal. However, in support of their claim, plaintiffs submitted the deposition transcript of their former counsel, who represented them at the time of the negotiations in question. He testified that during the negotiations, defendant's representative advised him that, if plaintiffs did not agree to reduce the mortgage debt, defendant would neither release any proceeds in advance nor reimburse plaintiffs for completed repairs, and that the purpose of imposing this requirement was to enable defendant to maintain leverage and control over plaintiffs' activities [FN2] . Plaintiffs thereby established the existence of triable issues of fact barring summary judgment as to whether defendant unequivocally communicated its intent to require plaintiffs to comply with an extracontractual condition before it would reimburse them for repairs (see O'Connor v Sleasman, 14 AD3d at 987-988; see also Highbridge Dev. BR, LLC v Diamond Dev., LLC, 67 AD3d 1112, 1115 [2009]). Issues of fact arising out of the same alleged conduct also support plaintiffs' claim that defendants breached the implied covenant of good faith and fair dealing (see SPI Communications v WTZA-TV Assoc. Ltd. Partnership, 229 AD2d at 645).
We reject defendant's contention that, even if its conduct constituted a breach of contract, dismissal is proper because its conduct did not proximately cause plaintiffs' damages. Plaintiffs' submissions establish the existence of issues of fact as to whether defendant's imposition of the debt-reduction requirement caused delays in repairs to the farm buildings that exposed their livestock and facilities to damage during the harsh winter that followed the fire. Accordingly, Supreme Court properly refused to grant summary judgment dismissing plaintiffs' breach of contract claim.
Mercure, J.P., Rose, Lahtinen and Kavanagh, JJ., concur.
ORDERED that the order is modified, on the law, without costs, by reversing so much thereof as denied defendant's motion for summary judgment dismissing the cause of action alleging violation of Real Property Law § 254; motion granted to that extent and said cause of action dismissed; and, as so modified, affirmed.
Footnotes

Footnote 1:We reject defendant's contention that the anticipatory repudiation claim was unpreserved (see Bender v Peerless Ins. Co., 36 AD3d 1120, 1121 [2007]); the issue was fully raised by plaintiffs' factual assertions and correctly addressed by Supreme Court.

Footnote 2: Real Property Law § 254 (4) (a) provides that a mortgagee need not pay insurance proceeds over to a mortgagor who is in default, but plaintiffs were not in default.

Kvest LLC v. Cohen


Litman & Jacobs, New York (Betty Jane Jacobs of counsel),
for appellant.
Wilson, Elser, Moskowitz, Edelman & Dicker, LLP, White
Plains (Nancy Quinn Koba of counsel), for respondents.
Judgment, Supreme Court, New York County (Carol R. Edmead, J.), entered September 8, 2010, dismissing the complaint, and bringing up for review an order, same court and Justice, entered July 1, 2010, which granted defendants' motion for summary judgment dismissing the complaint, and denied plaintiff's cross motion for summary judgment as to liability, and an amended order, same court and Justice, entered August 23, 2010, which directed the Clerk to enter judgment accordingly, unanimously modified, on the law, to reinstate the first, second and third causes of action and, as so modified, affirmed, without costs. Appeal from the August 23, 2010 order, unanimously dismissed, without costs, as subsumed in the appeal from the judgment.
Plaintiff alleges that its insurance carrier disclaimed coverage because defendants, plaintiff's insurance brokers, failed to timely forward to the carrier an April 26, 2004 claim letter from an injured party's attorney. We reject defendants' contentions that the disclaimer was ineffective and that plaintiff's claims are moot. According to trial testimony in the carrier's declaratory judgment action, the carrier never received the claim letter from defendants. If this is true, the carrier would not have had any knowledge of the existence, let alone the late notification, of the claim letter when it disclaimed coverage. Therefore, its failure to assert that defense was not a waiver thereof (see Estee Lauder Inc. v OneBeacon Ins. Group, LLC, 62 AD3d 33, 35 [2009]).
Plaintiff is not barred by the doctrine of judicial estoppel from asserting that the disclaimer is valid because it did not prevail in the declaratory judgment action (see Rothstein & Hoffman Elec. Serv., Inc. v Gong Park Realty Corp., 37 AD3d 206, 207 [2007], lv denied 8 NY3d 812 [2007]; Jones Lang Wootton USA v LeBoeuf, Lamb, Greene & MacRae, 243 AD2d 168, 176 [1998], lv dismissed 92 NY2d 962 [1998]). However, contrary to plaintiff's argument, the doctrine of collateral estoppel does not bind defendants to the declaratory judgment court's determination that defendants did not timely notify the carrier of the claim letter. Defendants were not parties to that action. The doctrine of collateral estoppel is binding only upon parties or their privies who have had a full and fair opportunity to litigate issues determined in prior proceedings (see Gramatan Home Invs. Corp. v Lopez, 46 NY2d 481, 485-486 [1979]).
Defendants state in their affidavit that they mailed a copy of the claim letter to the carrier on May 6, 2004, two days after they received it from plaintiff. However, a notice of occurrence/claim form prepared by defendants on October 2, 2004 indicates that the claim had not previously been reported. This raises a triable issue of fact as to whether defendants timely notified the carrier of the claim letter.
Contrary to defendants' assertion, the damages recoverable in this action can include plaintiff's reasonable attorneys' fees incurred in defending the carrier's declaratory judgment action in its effort to mitigate its damages (see Martini v Lafayette Studio Corp., 273 AD2d 112, 114 [2000]). On the other hand, the breach of fiduciary duty cause of action was properly dismissed as the facts establish that the parties had nothing more than a typical insurance broker-customer relationship (see e.g. Murphy v Kuhn, 90 NY2d 266, 270-271 [1997]).

Mason v First Central National Life Insurance


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

Konstanty Law Office, Oneonta (James E. Konstanty
of counsel), for appellant.
Phillips Lytle, L.L.P., New York City (Andrew J.
Wells of counsel), for respondent.
MEMORANDUM AND ORDER

Kavanagh, J.
Appeal from an order of the Supreme Court (Reynolds Fitzgerald, J.), entered September 27, 2010 in Broome County, which granted defendant's motion to dismiss the complaint.
Plaintiff commenced this action against defendant alleging that it breached the terms of a life insurance policy by refusing to pay benefits under the policy it issued to decedent prior to his death, and also sought punitive damages. Defendant moved to dismiss the complaint claiming that documentary evidence existed that established a defense to the claim as a matter of law (see CPLR 3211 [a] [1]) and on the ground that plaintiff failed to state a cause of action (see CPLR 3211 [a] [7]). Supreme Court granted defendant's motion, prompting this appeal.
At the outset, plaintiff's second cause of action for punitive damages was properly dismissed, as "a demand for such damages does not constitute a separate cause of action in a complaint" (Cass v Broome County Coop. Ins. Co., 94 AD2d 822, 823 [1983]; see Rochester Linoleum & Carpet Ctr., Inc. v Cassin
61 AD3d 1201, 1240 [2009]; Martin v Columbia Greene Humane Socy., Inc., 17 AD3d 839, 841 [2005]). Turning to plaintiff's breach of contract claim, defendant refused to pay benefits under this policy because it claimed that when decedent had applied for it, he was not truthful about his medical history and had made material misrepresentations regarding his medical condition. Specifically, in the written application that decedent completed when seeking the policy, he denied that he had ever been "diagnosed by a member of the medical profession as having (1) high blood pressure . . . [or] (7) [a] drug or alcohol related condition." In support of its motion to dismiss, defendant submitted medical records establishing that, prior to applying for the policy, decedent had received medical treatment for hypertension and alleged alcoholism. Defendant argued that these records constituted documentary proof that conclusively established its defense to this action as a matter of law. Supreme Court agreed and granted its motion to dismiss (see CPLR 3211 [a] [1]).
A "motion to dismiss on the ground that the action is barred by documentary evidence . . . may be appropriately granted only where the documentary evidence utterly refutes [the] plaintiff's factual allegations, conclusively establishing a defense as a matter of law" (Goshen v Mutual Life Ins. Co. of N.Y., 98 NY2d 314, 326 [2002]; see Leon v Martinez, 84 NY2d 83, 88 [1994]). In our view, under these circumstances, the contents of decedent's medical records are not so "essentially undeniable" as to qualify as documentary evidence that conclusively refutes any claim that plaintiff might have to recover under this policy (see Siegel, Practice Commentaries, McKinney's Cons Laws of NY, Book 7B, CPLR C3211:10, at 22; Fontanetta v John Doe 1, 73 AD3d 78, 83-84 [2009]). Specifically, these medical records do not establish as a matter of law that decedent knew when he applied for this insurance policy that hypertension was synonymous with high blood pressure or that he had been diagnosed with a medical condition that was alcohol-related. Given the strict standard that such records must satisfy to qualify as documentary evidence (see Crepin v Fogarty, 59 AD3d 837, 838 [2009]; Unadilla Silo Co. v Ernst & Young, 234 AD2d 754, 755 [1996]; see also Fontanetta v John Doe 1, 73 AD3d at 86), defendant's motion to dismiss plaintiff's first cause of action on this ground should have been denied.
As to defendant's argument that this claim failed to state a cause of action (see CPLR 3211 [a] [7]), we disagree. The question to be resolved on such a motion is not whether plaintiff "can ultimately establish [her] allegations" and is likely to prevail, but whether, if believed, her complaint sets forth facts that constitute a viable cause of action (EBC I, Inc. v Goldman, Sachs & Co., 5 NY3d 11, 19 [2005]; see Crepin v Fogarty, 59 AD3d at 838)[FN1] . Here, the allegations in the complaint, if accepted as true and accorded the benefit of every favorable inference, state such a claim (see Skibinsky v State Farm Fire & Cas. Co., 6 AD3d 975, 976 [2004]). Accordingly, defendant's motion to dismiss plaintiff's first cause of action on this ground must be denied.
Mercure, J.P., Spain, Garry and Egan Jr., JJ., concur.
ORDERED that the order is modified, on the law, without costs, by reversing so much thereof as granted defendant's motion to dismiss the first cause of action; motion denied to that extent; and, as so modified, affirmed.
Footnotes

Footnote 1: While Supreme Court's order referenced CPLR 3211 (a) (7), the content of its order clearly suggests that the court based its dismissal of the complaint on CPLR 3211 (a) (1).