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Coverage Pointers - Volume XIII, No. 20

Dear Coverage Pointers Subscribers:
A word of advice – the attached issue is 80 pages and 34,373 words long.  Don’t hit the print button unless you’re sure you want to remove trees from a small forest.  If you just want to read the summaries, and not the cases, print out only the first 34 pages of the attached issue.
In front of my house, the magnolias were beautiful.   They burst open a full six weeks before they did last year.  I took pictures.  I posted them on Facebook.  Ahh, but then we had one night of 25 degrees temps – one hard freeze -- and they are gone.  They turned brown overnight.
A special thanks to my newest friends in the Capital District. Good visiting with you this week.
Audrey’s in Chicago, Steve’s in NYC, Cassie’s in Florida.  I’m home.  There’s something wrong with this picture.  Well, there’s Monday in Long Island, then comes the PLRB conference in Orlando (are you signed up for my presentation yet?), then the ADTA conference in New Orleans. 
For those of you who have been subscribers for some time, you should know that there is only one more issue coming to you this spring from New York State.  We’ll be heading to the cottage in Canada in mid-April.
PLRB – April 15 – 18:
For those of you who plan on being in Orlando for the PLRB Claims Conference, do let me know.  Along with April Elkovitch from the Century/Meadowbrook group, we’ll be presenting:
TENDER BENDERS: ADDITIONAL INSURED & CONTRACTUAL INDEMNITY PROVISIONS
Monday  1:30 - 3:00
Tuesday 3:30 - 5:00
The training points:

  • Distinguish between an insurers obligations to those who qualify as additional insureds and those who benefit from contractual indemnity obligations
  • Evaluate how tenders of defense and indemnity should be made under both policy and trade agreement
  • Describe the protocols to be considered when tenders are received under both insurance policy and contract
  • Identify the relevant factors when sending or receiving tenders

Hope to see you there.

This Week’s Edition:
Some issues are good, this one is really, really good.  It is chock full of interesting offerings, from courts at all levels. 

One Hundred Years Ago Today (a/k/a Dan and Mayor Skip Lee):
New York Times
March 30, 1912
Page One
JUDGE FINES HIS WIFE
Hearing One of His Decisions, She Exclaimed: “That’s an Outrage.”
Special to the New York Times

Chicago, Ill. – Judge Irving Beeman, of the Police Magistrates of Sterling, IL, fined his wife $25 today for contempt of court and ordered the bailiff to lock her up if the fine was not paid within one hour.  Mrs. Beeman paid.

Mrs. Beeman entered the courtroom and took a seat near the bar to wait for the Judge, who had promised to go shopping with her.  William Lawton, a young man of prepossessing appearance, was before the court and charged with disorderly conduct.  The Judge fined him $20 and costs. Lawton, having no money, was ordered locked up.
“That’s an outrage,” declared Mrs. Beeman, involuntarily.
“Silence!” thundered the court.

Mrs. Beeman, however, refused to be silent.  Judge Beeman was exasperated.  Furiously rapping for order, he told Mrs. Beeman to keep quiet, under threats of a contempt fine.  With a woman’s liking for the last word, she continued the argument with her husband until the courtroom was almost in an uproar.

In desperation, the Judge imposed a fine for $25 for contempt. Mrs. Beeman dared him to collect it.  Angered, the Judge instructed Bailiff Newman to take Mrs. Beeman in charge and to lock her up if the fine was not paid within one hour.  Mrs. Beeman was led from the court, sobbing hysterically.  She finally drew on her private bank account for the amount of the fine and was released from the custody of the Bailiff.

Editor’s Note:          For regular readers of Coverage Pointers, defined as those who think I do not have a life, you know this is my kind of story.  Of course, I tried to follow up, wondering what happened to the stars of this tale of woe

The Frederick (Maryland) Daily News added this to the story in its March 30th edition:

That Judge Beeman was at least bolder than Brutus will be admitted by most married men. A dead son may be a source of sorrow, but a live wife may be something worse than a sorrow. It is just as well that the account ended where it did, for when that judge got off the bench ….But let us draw the curtain.

These be parlous days for the judiciary. To distinguish it from the recall this should perhaps be termed the calldown of judges.

Editors Note: The word parlous is defined as: unsafe: very unsafe, uncertain, or difficult

The Waterloo (Iowa) Evening Courier reported:

This is all of the story disclosed in the dispatches. The rest — for there must have been a sequel — is shrouded in deep mystery. We know some men who would not have cared to greet their wife with a kiss at the supper table under such circumstances.

For whose imagination could do Justice to the deadly silence of the preliminaries of that meeting? Whose knees would not wobble with the horror of uncertainty as he leaned over with an infamously false smile to receive the greeting of a crouching lioness.

"Irving." she would begin, while the icicles pierced and tore one's helpless, thumping heart—"Irving." The sound of her own voice would give her confidence and restore her agility of lip. "Irving"—mercy, this is 'awful! - Irving, we cannot abide.  You are a reckless judge. We cannot help you, Irving. It is your own mess. May heaven be merciful to you, a sinner. We must depart.

Alas, we could find no more.

However, our search did lead us to the Hon. Skip Lee, current Mayor of Sterling, IL and Marilyn Anderson, the historian from the Sterling library.  The Mayor, a delightful individual (who is now working with me to trade each other’s disagreeable relatives) asked Ms. Anderson to use her facilities to see if we could uncover what happened to Judge Beeman and his zealous wife.  However, she could find nothing in the municipal records to shed any light on this mystery and our independent research has not been successful either.

Alas, they may still be at odds!

Audrey’s Angles:
Greetings from Chicago and the DRI Insurance Law Committee’s Insurance Coverage and Claims Institute.  There are two issues raised in this edition that I have received questions from by insurers and applicant’s counsel in the past year – what is the proper mileage reimbursement rate and can you delay a claim to obtain medical records on a pre-existing injury.  The decision from Arbitrator McCorry regarding the mileage reimbursement is that the Federal standard mileage rate applies and not the Federal medical travel rate.  Arbitrator Benziger issued a decision in the insurer’s favor that it had properly delayed a claim seeking verification to obtain pre-existing medical records when the eligible injured person disclosed multiple prior injuries to same body part as well as an award of Social Security disability benefits as a result of that prior injury.
Please note that the New York State Bar Association is holding in Buffalo, on June 13th, a program titled, Basic Tort and Insurance Practice.  This is a good primer for newly admitted attorneys as well as an experienced practitioner needing a refresher on premises liability, insurance coverage fundamentals and auto insurance.  Also, there will be a panel discussion with Mike Menard, Esq., Richard Weisbeck, Esq. and Tom Drury, Esq. providing practice tips from the plaintiff and defense perspective on evaluating and resolving a civil action.  I am the local chair for this program and if you need any information on how to register for this program please email me at [email protected].
Audrey

Insurance Coverage Mediation and Arbitration

Resolving the Complex without the Substantial Costs of Litigation or the Risk of Adverse Precedent

I call it, the "Fear of Success." How often is an insurer battling another over a coverage issue on a Monday and taking the opposite position on the same question in another case on a Tuesday? If the company wins on one case, that precedent can lead to a loss, perhaps even a more significant loss, in the next case. Be fearful of success because that victory can come back to hurt your company -- or the industry -- tomorrow, next week or next year.

There are times, more often recently than not, when insurers wish to resolve complex insurance coverage disputes without the expense and costs of trial and without the risk of potentially adverse judicial precedent. We have encouraged the mediation and/or arbitration of complex insurance coverage claims and our office can assist insurers and insureds in bringing reasoned resolution to coverage disputes.

Hurwitz & Fine, P.C. offers mediation services to the insurance industry. Why spend the money and the time to litigate these questions when resolution by mediation or arbitration can bring closure to hotly contested matters in relatively short order for substantially reduced costs?

I have been handling complex insurance coverage matters for over 30 years. For over 20 years, I have served as an Adjunct Professor of Insurance Law at the Buffalo Law School and am regularly retained as an expert witness in insurance coverage matters throughout the United States, Canada and in the London market. With mediation and arbitration training and certifications and years of practical experience, common sense and scholarship, I may be able to help mediate a dispute between and among insurers -- or insureds and insurers efficiently and, if successful, without the risk of harmful precedent.

For information, contact Dan Kohane at [email protected]  or 716.849.8942.

 

Notes from Mike Perley’s Liening Tower:

In November of 2001, shortly before I joined Hurwitz & Fine, P.C., I successfully defended an application by a plaintiff to obtain a fresh money payment from a Workers’ Compensation carrier, known as a Kelly payment since the jury award relieved the comp carrier of any obligation to pay future medical bills.  The case, Donaldson v. Ryder Truck Rentals was decided by Justice John P. Lane, now retired.  In the 539 weeks since his decision, Tiger Woods got married, had two children, drove his car into a fire hydrant, got divorced, won 40 golf tournaments, including eight major championships and had at least three knee surgeries.  Two days after his latest win, the Court of Appeals in Bissell v. Town of Amherst, finally got around to addressing the issue and agreed with Justice Lane’s analysis ten years earlier. In its decision the Court refused to reduce future medical expenses to present value for purposes of computing reimbursement by a Workers’ Compensation carrier.  All the details can be found in the Liening Tower of Perley.

After some down time, Medicare cases are heating up once again. In this issue we discuss whether or not a Medicare Set-Aside can be considered marital property subject to distribution in a divorce proceeding and note with interest a futile attempt to side step Medicare obligations and an insurance carrier that waited too long to bring Medicare into the settlement discussions.

New York Court of Appeals Refuses to Apply a Kelly Analysis to Future Medical Bills

On March 27, 2012, the Court of Appeals further restricted the ability of plaintiffs to obtain present value recovery from Workers’ Compensation carriers at the time of a verdict or settlement of a personal injury lawsuit.  For those who may not be familiar I offer a the following background.  The decision and summary are in the attached edition.

In 1983, the Court of Appeals in the Matter of Kelly (60 N.Y.2d 131) held that Workers’ Compensation Law § 29, which required the compensation carrier to reimburse the injured worker its equitable share of the “cost of litigation” for any benefit the compensation carrier received, either by way of a lien recovery or offset of future benefits (known as the holiday), could be adjudicated at the time of the verdict by quantifying the amount of the lien and holiday and reducing the future benefit to present value.  The cost of litigation, reimbursed by the carrier, would be deducted from its lien and, in the event there were additional monies owed, those would be paid directly to the plaintiff.  The money was the plaintiff’s alone since the plaintiff had incurred the cost of recovery by paying his attorney fee from the recovery.  The court in Kelly noted that, at least in the Kelly case itself, “The value of future compensation payments that a carrier has been relieved of paying due to a third-party recovery, is not so speculative that it would be improper to estimate and to assess litigation costs against this benefit to the carrier.”  For years thereafter, Workers’ Compensation carriers either negotiated or litigated the so called “Kelly calculations” with plaintiff’s counsel at the conclusion of personal injury cases.  In fact, a cottage industry of which I was a part, sprung up around the Kelly issues upon the settlement or verdict in personal injury cases.  These calculations would regularly involve future medical expenses, as well as payments for permanent total disability and permanent partial disability.  The benefit to the plaintiff was an immediate influx of cash or, at the very least, a reduction in the Workers’ Compensation lien.  There was also a benefit to the Compensation Carrier which could often close its file.

In 2007, however, the landscape changed considerably when the Court of Appeals considered whether or not Kelly would apply to a case involving the classification of a plaintiff as having a permanent partial disability.  In Burns , v. Varriale (9 N.Y.3d 207) the court held that it was impossible to reduce the permanent partial disability classification to present value since the level of disability could fluctuate.  Thus, the court in Burns held that where the benefit “cannot be quantified or reliably predicted” it was improper for the court to apportion the cost of the benefit at the time the case is disposed of.  (9 N.Y.3d at 215).

The Burns court preserved the injured worker’s right to recover this benefit but only as it would be incurred and, instructing the trial court to “fashion a means of apportioning litigation costs as they accrue and monitoring…how the carrier’s payments to the claimant are made.” (9 N.Y.3d 217). 

Against this backdrop, the Court of Appeals decided the Matter of Bissell v. Town of Amherst (2012 N.Y.Slip O.P. 2250), addressing the issue of future medical expenses.  In Bissell, a jury awarded the plaintiff Bissell $4,650,000 in future medical expenses at a trial as part of a $30,000,000 verdict.  At the time of the disposition, the Workers’ Compensation lien amounted to $219,760.  Also, at the time of the verdict, the plaintiff was classified with a permanent and total disability entitling him to $400 per week in Workers’ Compensation payments.  The plaintiff’s attorneys sought to obtain approximately $1.4 million in payments from the Workers’ Compensation carrier, in addition to the lien, based upon the jury’s award of the medical bills, which the trial court had reduced from its original award of $4,650,000 to $4,259,536.  The issue before the Court of Appeals was whether or not the jury’s verdict sufficiently quantified the medical bills for purposes of a calculation under Kelly and the Court determined that it did not.  In determining that, the plaintiff did not have an immediate right to the benefit obtained by the Workers’ Compensation carrier with regard to medical expenses.  It held that future medical expenses “cannot reliably be calculated in a manner similar to [benefits for death, total disability or scheduled loss of use].”  Once again, the Bissell court referred the matter back to the trial court to “fashion a means as outlined in the Burns case.”

On a personal note, it was heartening to see the court’s decision in Bissell as I had litigated the same issue in Niagara County Supreme Court before the Hon. John P. Lane in 2001.  The case, Donaldson v. Ryder Truck Rental (180 Misc. 2d 750, 737 N.Y. Sub 2d 783), involved an attempted application of Kelly to future medical expenses for the plaintiff.  In determining that Kelly did not apply to the medical expenses, Justice Lane held, “Moreover, there is no method by which the present value of plaintiff’s future medical benefits can be determined at this time with reasonable certainty.”  (189 Misc. 2d 754).  I am sure that Justice Lane is pleased that the Court of Appeals got it right, even if it took them 3,773 days to do so.

Michael F. Perley
[email protected]

 

A Century Ago:

The [Dunkirk] Evening Observer
March 30, 1912
Page 1

Burnett Not to Die in Chair
Governor Dix Has Commuted Sentence of Dunkirk Murderer to Life Imprisonment
Affidavits Were Very Convincing

Albany, Mar. 30.—Because he was able to convince Governor Dix that he shot in self-defense when he killed John Dougherty at Dunkirk in May, 1910, Edward L. Burnett under  sentence of death has secured a commutation. Today the Governor announced that a large number of affidavits had been filed with him to show that the dead man had administered a severe beating to Burnett and that he was being pursued when he turned and fired the fatal shot. Attorney Laird of Auburn acted as Burnett’s attorney.  The governor declined to make public the affidavits or the names of the makers.

Governor John A. Dix had come to the aid of Edward Burnett condemned murderer of Jack Dougherty, and deprived the electric chair of a victim.

 

Thanks for the Feedback:

A special thanks to the many subscribers who commented on the “I’ve got a situation” column in the last issue of Coverage Pointers.  You get it!

 

One Hundred Years Ago Today – Precursor to Internet Created (a/k/a We’ve Got You Beat, Al Gore):

Telephony
March 30, 1912
Page 391

The Telephone Newspaper -- New Experiment in America

Description of Operating Methods of Organization which Transmits to Its Subscribers, via Telephone, News of Day, Advertisements of Importance and Varied Entertainment--A Plan Transplanted from Budapest, Hungary, Where It Has Long Operated

While all the rest of the nation had to stop work and hang around the newspaper bulletin boards waiting in an agony of suspense for news from the Polo Grounds, in New York, last October, for half an hour, or perhaps thirty-three minutes, after the epoch-making innings there were ended, a privileged few in Newark, N. J., were able, while sitting in their own homes, to follow instantaneously, play by play, the demonstration of the fact that the Giants were next to the best baseball experts. These Newark folk who received news more promptly than that commodity had ever before been served in America were the first subscribers to the Telephone Herald, a newspaper which is independent of the Typographical Union and the Allied Printing Trades Council, for it is published over wires instead of upon paper. In other words, the subscriber does not read the Telephone Herald, but merely listens to it. He may listen to as much or as little of it as he likes; but whether he listens or not the Herald grinds on in one continuous edition from 8 o'clock in the morning until 10:30 o'clock in the evening. Its news is constantly on tap, like water or gas, for the small sum of $18 a year, or five cents a day. Additional news taps in one house are installed for $7 a year, or two cents a day. The Telephone Herald gets out a Sunday paper seven days a week with all the usual "magazine" features, fiction, fashions, children's stories and all the rest of it. Its one redeeming feature is that it has no comic supplement, thank Heaven!

 

Headlines From This Week’s Coverage Pointers (attached):

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

Court of Appeals

  • Anti-Trust Claims Fail Against Equitas in Reinsurance Market

 

Appellate Division

  • Carrier Successfully Denied Coverage on Homeowners Policy Misrepresentations
  • Words to Remember – “Incorporation Clauses” in Subcontracts Bind a Subcontractor Only to the Quality, Character and Manner of Work and NOT the Insurance and Indemnity Requirements
  • Another Claim Against an Insurance Broker Fails
  • Where OCIP Required Execution of Written Agreement as Part of Enrollment Process and Contractor Never Signed Written Agreement, It Did Not Qualify as OCIP Insured
  • Opening Up a “Can of Worms”: Under Supplementary Payments Portion of Policy, CGL Carrier May Be Required to Defend Party Who Did Not Qualify as Additional Insured; Departments Appear Split

 

THE “LIENING” TOWER OF PERLEY
Michael F. Perley
[email protected]

  • New York Court of Appeals Refuses to Apply a Kelly Analysis to Future Medical Bills
  • Medicare Set-Aside Determined to Be a Marital Asset by the State of Illinois
  • U.S. District Court in New Jersey Compels Reimbursement of Medicare
  • Georgia Court Refuses to Assist Settling Defendant on Medicare Issues

 

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

  • Report That Specifically Attributes Injuries to Accident Refutes Allegations That Conditions Are Degenerative
  • Summary Judgment Should Have Been Granted Where Injuries Not Serious and/or Not Caused by Accident
  • Summary Judgment Not Granted Where Prima Facie Burden Not Met
  • Failure to Explain Gap Between Resolution of Symptoms and New Onset Defeats Plaintiff’s Claim
  • Plaintiff’s Need to Deal With Other Health Issues Adequately Explains Gap in Treatment
  • Ignoring Effects of Four Prior Accidents and Failing to Distinguish Claimed Injuries From Prior Injuries Defeats Those Claims
  • “Reaching an Endpoint” Is Adequate Explanation for Gap in Treatment
  • Doctor Visit Two Days After Accident Establishes Causation
  • Citing Perl, Court Affirms Trial Court’s Denial of Defendants’ Motion
  • Neurologist’s Affidavit Discussing Combined Effect of 4 Accidents Fails to Raise Issue of Fact Regarding First 2 Accidents
  • Lack of Causation Not Rebutted Where Chiropractor’s Affidavit Fails to Specify How Conditions Were Exacerbated by 4th Accident
  • Affirmative Defense of Plaintiff’s Culpable Conduct of Carrying a Pan of Pot Roast on Her Lap Is Reinstated

 

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

ARBITRATION

  • Self-Insured Properly Delayed Claim Pending Pre-Existing Medical Records
  • Partial Wages Awarded Since Insurer Issued Denial But Continued to Pay Wages
  • Mileage Reimbursement Is Standard IRS Rate of $.55 Per Mile
  • Applicant’s Ability to Continue Working After Accident Belies Disability

 

LITIGATION

  • While Not No-Fault, Good Review of “Use and Operation” Standard

 

PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper

[email protected]

Property

  • Carrier’s Motion for Summary Judgment Fails Where no Admissible Evidence Was Submitted in Support

 

Potpourri

Court of Appeals

  • Broad Waiver of Subrogation Clause Acts as a Complete Bar of Contract and Negligence Claims

 

Appellate Division

  • Documentation Prepared by Consultants Prior to Litigation Still Exempt from Production Under Material Prepared in Anticipation of Litigation Doctrine
  • Default Judgment Establishes Liability AND Causation Against Non-Appearing Party
  • Late Disclosure of Surgery for Removal of Surgical Hardware Is Permitted as a Supplement to Plaintiff’s Earlier Bill of Particulars

 

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

  • Legislative Update

 

FIJAL’S FEDERAL FOCUS
Katherine A. Fijal

[email protected]

  • SIR – Does Dissolution of Insured Company Result in Breach of Policy Terms? 
  • Trademarks:  Tight Ruling in Favor of Insurer

 

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

  • Where Petitioner Never Obtained Consent from the Workers’ Compensation Carrier to Settle Tort Action for Less Than Its Lien, the Court Refused to Grant Retroactive Approval
  • Underlying Complaint Alleged Injured Party Was in the Process of Performing Work for Insureds at the Time of the Loss; By Defaulting in the Underlying Action, the Insureds Admitted the Allegations, and the Employer’s Liability Exclusion Applied
  • Insurer Continued to Owe a Defense to the Additional Insured Where the Underlying Action Against the Named Insured Was Dismissed

 

EARL’S PEARLS
Earl K. Cantwell

[email protected]

WHEN IS A DUMP A DUMP?

ENVIRONMENTAL LIABILITY POLICY HELD AMBIGUOUS

Well, that should do it.  Keep smiling and keep writing.  We do love hearing from you.

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
The “Liening” Tower of Perley
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
Earl’s Pearls
Across Borders

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

Court of Appeals

03/27/12         Global Re v. Equitas, Ltd.
New York State Court of Appeals
Anti-Trust Claims Fail Against Equitas in Reinsurance Market
 The New York Court of Appeals has quelled one of the last suits arising out of the creation of Equitas, holding that Global Re could not pursue anti-trust claims under New York law based on non-life claims, including those for environmental and mass tort claims that had been retroceded to Lloyd’s.  Despite Global Re’s argument that Lloyd’s had suppressed competition by concentrating claims authority through the creation of Equitas, the Court of Appeals ruled in Global Re v. Equitas, Ltd., No. 53 (N.Y. March 27, 2012) that the Appellate Division had erred in sustaining the plaintiff’s Donnelly Act claim, declaring Global Re had failed to show that any restraint of trade had occurred within an identified relevant product market.  The court held that “while the Lloyd’s syndicates were capable of insulating themselves from each other’s competitive behavior in the area of claims management and could by that device attempt to cap their liabilities under certainly previously issued coverage, there are no allegations from which it is possible to gather that they were capable of avoiding the business consequences of this approach in the global market.”
Editor’s Note:  This summary provided courtesy of my friend Michael Aylward, who is editor of Morrison Mahoney’s Insurance Law weekly electronic newsletter.

Appellate Division

03/29/12         Tower Insurance Company of New York v. Khan
Appellate Division, First Department
Carrier Successfully Denied Coverage on Homeowners Policy Misrepresentations
Tower was successful in establishing that it had no obligation to defend Khan under the terms of the policy based on her misrepresentation in the application process. The policy was for a one or two family primary residence.

The insured acknowledged that she did not use the covered premises as her primary residence. Moreover, plaintiff's underwriting guidelines make clear that it will not insure certain risks, such as where there is construction or renovation on the premises or a commercial use of the premises. Here, Khan was renovating the property to include one or two apartments on the top floor, and commercial space on the first floor and in the basement. The failure to disclose that the use of the premises was outside of the scope of the policy was a material misrepresentation in the application for the policy.

Moreover, plaintiff's disclaimer of coverage was not untimely as it came 17 days after it had obtained and confirmed all the facts warranting the disclaimer of coverage. While Tower understood the defense, it still had the right to seek a determination that it did not have coverage obligations.
Editor’s Note:  This was, in all practical sense, a rescission action, although not specifically pleaded as such.  The court blended a rescission action (“misrepresentations were made in the policy application”) with a declaratory judgment action (“the premises do not qualify as a ‘residence’ because it was, in reality, commercial premises”).  The lower court decision is worth a read.

03/27/12         Persaud v. Bovis Lend Lease, Inc.
Appellate Division, First Department
Words to Remember – “Incorporation Clauses” in Subcontracts Bind a Subcontractor Only to the Quality, Character and Manner of Work and NOT the Insurance and Indemnity Requirements
Persaud worked at Gessin Electrical Contractors, Inc. (“Gessin”).  Gessin was a sub-subcontractor to BTG.  When Persaud was injured, he sued Bovis and other defendants (collectively referred to as “Bovis”).  Bovis sued Gessin, alleging claims for contribution, common-law indemnification, and contractual indemnification, and to recover damages for breach of contract for failure to procure insurance.

A third-party action against an employer for contribution and indemnity can survive only if employee has sustained a grave injury as defined by the Workers' Compensation Law or when there is a written contract entered into prior to the accident or occurrence by which the employer had expressly agreed to contribution or indemnification of the claimant.  Gessin established that there was no grave injury so the common law claims for contribution and common-law indemnity must be dismissed.

As to the written contract for indemnity, the claims were based not on the sub-sub contract but on a promise found in the prime agreement between the subcontractor BTG, and Bovis to which Gessin was not a signatory. Even though the construction subcontract signed by Gessin incorporated the main agreement by reference, " [u]nder New York law, incorporation clauses in a construction subcontract, incorporating prime contract clauses by reference into a subcontract, bind a subcontractor only as to prime contract provisions relating to the scope, quality, character and manner of the work to be performed by the subcontractor'" and not to insurance or contractual indemnification.  Accordingly, the contract claim is dismissed, thus leading to the dismissal of the entire third-party claim.
Editor’s Note:  This subject comes up in decisions only once or twice a year but it is a very important concept to keep in mind.  Often, insurance requirements are placed only in the prime contract and not in the sub- or sub-sub-contracts.  Owners and contractors bring indemnity and insurance claims against subcontractors, who have not become signatories to the prime contracts that contain the requirements, based on clauses in the subcontracts that purport to “incorporate” the terms of the main contract.  This is another in a line of cases that hold that the “incorporation clauses,” cannot be used to impose insurance and indemnity requirements.

03/23/12         Radford v. Peerless Insurance Company
Appellate Division, Fourth Department
Another Claim Against an Insurance Broker Fails
The claim against Ladd was brought under theories of negligence, breach of contract, negligent misrepresentation and breach of fiduciary duty, arising from Ladd's alleged failure to procure certain insurance coverage on plaintiff's behalf.

The negligent misrepresentation claim failed because there was no proof that that Ladd possessed unique or specialized expertise. With regard to the negligent misrepresentation and breach of fiduciary duty claim, the court found that Ladd established it did not have a special relationship with plaintiff and that it did not owe a fiduciary duty to plaintiff.

Likewise, the remaining claims failed because the policyholder did not make a specific request for coverage beyond that which Ladd procured for her and the insured received the policy (and presumably had the opportunity to review it) prior to the loss.

03/20/12         Zurich American Ins. Co. v. Illinois National Ins. Co.
Appellate Division, First Department
Where OCIP Required Execution of Written Agreement as Part of Enrollment Process and Contractor Never Signed Written Agreement, It Did Not Qualify as OCIP Insured
The Illinois National provided an "owner controlled insurance policy" (OCIP).  It defined "contractors" as “contractors, who have executed a written agreement pertaining to said Contractors' performance of work at the Project Site, have been enrolled in this insurance program, and who perform operations at the Project Site in connection with the Project.” Since Moretrench, a subcontractor on the Project, did not receive the written agreement pertaining to its work on the Project or complete its application for enrollment in the insurance program until nearly four weeks after the damage alleged in the underlying complaint occurred, it does not meet the policy definition of "contractor" and is not covered under the policy.

Claims of equitable estoppel were unavailing.  No proof was offered that Illinois ever conceded coverage nor could estoppels be established by representations or promises made by others that Illinois.

03/16/12         Hunt v. Ciminelli-Cowper Co., Inc.
Appellate Division, Fourth Department
Opening Up a “Can of Worms”: Under Supplementary Payments Portion of Policy, CGL Carrier May Be Required to Defend Party Who Did Not Qualify as Additional Insured; Departments Appear Split
Ciminelli sought a declaration that Travelers and Merchants were obligated to defend it in a personal injury action.  Hunt was injured while working at a construction site on property owned by Jamestown Community College (“JCC”).  Ciminelli was construction manager; there was no general contractor.  JCC had contracts with prime contractors including Ogiony and Petit.  Each of the prime contractors was required by contract to provide coverage naming Ciminelli and JCC as additional insureds (“AI’s”) on a primary basis.  Ogiony was insured with Travelers, Petit with Merchants.

Travelers claimed that Ciminelli did not provide prompt notice of the accident and denied coverage; Merchants claimed that Ciminelli did not qualify as an insured under that policy.

With respect to the Travelers policy, the term “you” was defined to mean the named insured under the policy and any other organization qualifying as a “Named Insured”.  With respect to notice of claims, the policy provides that the insured must notify Travelers "as soon as practicable of an occurrence' or an offense which may result in a claim."  The policy further provides that Travelers "will not deny coverage based solely on your delay in reporting an occurrence' or offense unless we are prejudiced by your delay."

Travelers’ contention that it only had to demonstrate only when the named insured gave untimely notice was rejected.  While Ciminelli was an additional insured and not a named insured, an additional insured enjoys the same coverage as the named insured.  Accordingly, Travelers was required to demonstrate prejudice before disclaiming on the basis of late notice.

As to Merchants' the policy it issued to Pettit does not contain an additional insured endorsement. However, the "Supplementary Payments" section, requires Merchants to defend an insured against a suit if an indemnitee of the insured is also named as a party to the suit. Those conditions include that "the suit' against the indemnitee seeks damages for which the insured has assumed the liability of the indemnitee in a contract or agreement that is an insured contract' "; "[the] insurance applies to such liability assumed by the insured"; and "[t]he obligation to defend, or the cost of the defense of, that indemnitee, has also been assumed by the insured in the same insured contract . . . .'

The contract between JCC and Pettit, Merchants' insured, constituted an "insured contract."  Although Merchants contends that Ciminelli failed to comply with one or more of the conditions set forth in the "Supplementary Payments" section of the Merchants policy, Ciminelli's compliance with those conditions is a question of fact that precludes summary judgment. We further note that the record contains a certificate of liability insurance issued to Ciminelli, pursuant to which Ciminelli is an "[a]dditional [i]nsured[] on a primar[y] basis" under the Merchants policy issued to Pettit. Although "[i]t is well established that a certificate of insurance, by itself, does not confer insurance coverage," such a certificate is" evidence of a carrier's intent to provide coverage' ". Question of fact exists as to whether all the conditions of that coverage were satisfied.

Editor’s Note:  Your editor cannot recall another case that required a liability carrier to pick up the defense of a non-insured under the Supplementary Payments provision of the policy.   Will this start a trend?

If you haven’t read those provisions, lately, we would recommend you do:

2.  If we defend an insured against a "suit" and an indemnitee of the insured is also named as a party to the "suit", we will defend that indemnitee if all of the following conditions are met:

a.  The "suit" against the indemnitee seeks damages for which the insured has assumed the liability of the indemnitee in a contract or agreement that is an "insured contract";

b.  This insurance applies to such liability assumed by the insured;

c.  The obligation to defend, or the cost of the defense of, that indemnitee, has also been assumed by the insured in the same "insured contract";

d.  The allegations in the "suit" and the information we know about the "occurrence" are such that no conflict appears to exist between the interests of the insured and the interests of the indemnitee;

e.  The indemnitee and the insured ask us to conduct and control the defense of that indemnitee against such "suit" and agree that we can assign the same counsel to defend the insured and the indemnitee; and

f.  The indemnitee:

(1)  Agrees in writing to:

(a)  Cooperate with us in the investigation, settlement or defense of the "suit";

(b)  Immediately send us copies of any demands, notices, summonses or legal papers received in connection with the "suit";

(c)  Notify any other insurer whose coverage is available to the indemnitee; and

(d)  Cooperate with us with respect to coordinating other applicable insurance available to the indemnitee; and

(2)  Provides us with written authorization to:

(a)  Obtain records and other information related to the "suit"; and

(b)  Conduct and control the defense of the indemnitee in such "suit".

Compare to a Second Department case where the court specifically rejected the same argument:

5/11/10           Hargob Realty Assoc., Inc.,v. Fireman's Fund Ins. Co.
Appellate Division, Second Department
Where Contract Between Contractor and Owner Did Not Require Additional Insured Status, that Status Is Not Available Under Blanket AI Provisions. The Certificate of Insurance Does Not Change Result
Hargob entered into a construction contract with USA Interior (USAI) with USAI to perform certain demolition work at Hargobs premises. There was a one-page contract with a hold-harmless agreement running in Hargobs favor. The indemnity provisions required USAI to hold Hargob harmless, for any acts or omissions of USAI except for claims arising from Hargobs own negligence.

Firemans Fund Insurance Company (FFIC) issued a policy to USAI with a blanket additional insurance endorsement that required FFIC to insure any entity the Named insured was required in a written contract to name as an insured.

As there was no requirement in the agreement for USAI to insure Hargob, the FFIC AI endorsement is not triggered and coverage is not afforded to Hargob. The fact that a Certificate of Insurance suggests otherwise does not create coverage.

A late disclaimer does not create coverage here because Hargob is not included in the grant of coverage and a late disclaimer cannot create coverage where none exists

Further, the supplementary payments provision of the policy, which obligates the defendant insurer to defend an indemnitee of the named insured when certain specified conditions are met, does not also afford liability coverage. Contrary to the plaintiff's contention, the supplementary payments provision did not demonstrate an intent by the defendant insurer to afford the plaintiff coverage solely on the basis that it is an indemnitee of the named insured, in the absence of the plaintiff's addition as "an insured" under Section II of the subject policy pursuant to the additional insured endorsement (see Stainless, Inc. v Employers Fire Ins. Co., 69 AD2d at 33). Liability coverage under the policy is afforded by Section I, not the supplementary payments provision. Therefore, Hargob's status as an indemnitee does not operate to confer upon it status as an additional insured, and it is, thus, not entitled to liability coverage under the subject policy pursuant to the supplementary payments provision.

 

THE “LIENING” TOWER OF PERLEY

Michael F. Perley
[email protected]

03/27/12         Bissel v. Town of Amherst
New York State Court of Appeals
New York Court of Appeals Refuses to Apply a Kelly Analysis to Future Medical Bills
On March 27, 2012, the Court of Appeals further restricted the ability of plaintiffs to obtain present value recovery from Workers’ Compensation carriers at the time of a verdict or settlement of a personal injury lawsuit.  For those who may not be familiar, I offer the following background.

In 1983, the Court of Appeals in the Matter of Kelly (60 N.Y.2d 131) held that Workers’ Compensation Law § 29, which required the compensation carrier to reimburse the injured worker its equitable share of the “cost of litigation” for any benefit the compensation carrier received, either by way of a lien recovery or offset of future benefits (known as the holiday), could be adjudicated at the time of the verdict by quantifying the amount of the lien and holiday and reducing the future benefit to present value.  The cost of litigation, reimbursed by the carrier, would be deducted from its lien and, in the event there were additional monies owed, those would be paid directly to the plaintiff.  The money was the plaintiff’s alone since the plaintiff had incurred the cost of recovery by paying his attorney fee from the recovery.  The court in Kelly noted that, at least in the Kelly case itself, “The value of future compensation payments that a carrier has been relieved of paying due to a third-party recovery, is not so speculative that it would be improper to estimate and to assess litigation costs against this benefit to the carrier.”  For years thereafter, Workers’ Compensation carriers either negotiated or litigated the so called “Kelly calculations” with plaintiff’s counsel at the conclusion of personal injury cases.  In fact, a cottage industry of which I was a part, sprung up around the Kelly issues upon the settlement or verdict in personal injury cases.  These calculations would regularly involve future medical expenses, as well as payments for permanent total disability and permanent partial disability.  The benefit to the plaintiff was an immediate influx of cash or, at the very least, a reduction in the Workers’ Compensation lien.  There was also a benefit to the Compensation Carrier which could often close its file.

In 2007, however, the landscape changed considerably when the Court of Appeals considered whether or not Kelly would apply to a case involving the classification of a plaintiff as having a permanent partial disability.  In Burns v. Varriale (9 N.Y.3d 207) the court held that it was impossible to reduce the permanent partial disability classification to present value since the level of disability could fluctuate.  Thus, the court in Burns held that where the benefit “cannot be quantified or reliably predicted” it was improper for the court to apportion the cost of the benefit at the time the case is disposed of.  (9 N.Y.3d at 215).

The Burns court preserved the injured worker’s right to recover this benefit but only as it would be incurred and, instructing the trial court to “fashion a means of apportioning litigation costs as they accrue and monitoring…how the carrier’s payments to the claimant are made.” (9 N.Y.3d 217). 

Against this backdrop, the Court of Appeals decided the Matter of Bissell v. Town of Amherst (2012 N.Y.Slip O.P. 2250), addressing the issue of future medical expenses.  In Bissell, a jury awarded the plaintiff Bissell $4,650,000 in future medical expenses at a trial as part of a $30,000,000 verdict.  At the time of the disposition, the Workers’ Compensation lien amounted to $219,760.  Also, at the time of the verdict, the plaintiff was classified with a permanent and total disability entitling him to $400 per week in Workers’ Compensation payments.  The plaintiff’s attorneys sought to obtain approximately $1.4 million in payments from the Workers’ Compensation carrier, in addition to the lien, based upon the jury’s award of the medical bills, which the trial court had reduced from its original award of $4,650,000 to $4,259,536.  The issue before the Court of Appeals was whether or not the jury’s verdict sufficiently quantified the medical bills for purposes of a calculation under Kelly and the Court determined that it did not.  In determining that, the plaintiff did not have an immediate right to the benefit obtained by the Workers’ Compensation carrier with regard to medical expenses.  It held that future medical expenses “cannot reliably be calculated in a manner similar to [benefits for death, total disability or scheduled loss of use].”  Once again, the Bissell court referred the matter back to the trial court to “fashion a means as outlined in the Burns case.”

On a personal note, it was heartening to see the court’s decision in Bissell as I had litigated the same issue in Niagara County Supreme Court before the Hon. John P. Lane in 2001.  The case, Donaldson v. Ryder Truck Rental (180 Misc. 2d 750, 737 N.Y. Sub 2d 783), involved an attempted application of Kelly to future medical expenses for the plaintiff.  In determining that Kelly did not apply to the medical expenses, Justice Lane held, “Moreover, there is no method by which the present value of plaintiff’s future medical benefits can be determined at this time with reasonable certainty.”  (189 Misc. 2d 754).  I am sure that Justice Lane is pleased that the Court of Appeals got it right, even if it took them 3,773 days to do so.

03/07/12         In re Washkowiak
Illinois Appellate Court
Medicare Set-Aside Determined to Be a Marital Asset by the State of Illinois
The injured worker, Christopher Washkowiak, was married in 2004 and, in 2009, reached a divorce settlement with his wife.  In the interim, he sustained a work-related injury that resulted in a lump sum Worker’s Compensation settlement.  That lump sum settlement included a $70,000 Workers’ Compensation Medicare Set-Aside.  Pursuant to the divorce settlement, the question arose whether the set-aside was a marital asset subject to distribution.  The court divided the Medicare Set-Aside Account pursuant to the settlement agreement after determining that the Set-Aside was “net proceeds” of the Workers’ Compensation settlement.  This decision is especially disturbing for “primary payers” where Set-Asides are established for injured individuals.  In the event the Set-Aside is not adequately protected from a divorce settlement or decree, there is the possibility that the United States will seek to recover any deficiency from the defendant who had not “reasonably considered” Medicare’s interest in crafting the Medicare Set-Aside.  The recovery would be twice the amount of the deficiency.

This decision is has the potential to produce significant anxiety , however, parties involved in establishing Medicare Set-Asides can preemptively address this issue by incorporating appropriate language into a Set-Aside Agreement.  Note, however, that the plaintiff’s spouse will be required to agree that the Medicare Set-Aside would be exempt from any divorce settlement.  Once again, the Medicare Set-Aside issue continues to complicate the lives of litigants and their counsel.

03/23/12         In re Mason v. Sebelius
United State District Court, New Jersey
U.S. District Court in New Jersey Compels Reimbursement of Medicare
In a case that proves, once again, that Don Quixote is alive and well and now living in Cherry Hill, New Jersey, the plaintiff, Joseph Mason, by his attorneys (whose offices are located in Cherry Hill), attempted to bring a class action suit declaring that Medicare had no right of reimbursement on several grounds, namely, that the reimbursement procedure violated Mr. Mason’s due process rights, that reimbursement was precluded by the New Jersey Collateral Source Statute, that an alleged tortfeasor was not a “primary payer” under the Medicare Secondary Payer Act, that there was no demonstration of liability by the defendant and, finally, that the repayment contradicted the Medicare Manual.  Suffice it to say, Mr. Mason lost on all counts and the matter was dismissed. 

Mason was injured when he fell at the Showboat Casino in Atlantic City, New Jersey.  At the time, he received Medicare benefits and Medicare paid approximately $2,500 in medical expenses on account of his injuries.  Mason settled with the casino for $40,000 in an unallocated settlement.  He attempted to have the New Jersey State Court allocate the settlement precluding any recovery for medical expenses but that court declined to do so.  Medicare sought reimbursement of approximately $1,500, after a deduction for procurement costs, which prompted Mason to appeal through the Medicare appeal channels.  Mason was singularly unsuccessful there and, significantly, failed to raise any due process arguments during that entire process.  When the suit was brought in the United States District Court, the due process argument was deemed abandoned since it had not been raised during the administrative appeals. The court then turned its attention to the remaining arguments offered by Mason’s attorneys.  As to the Collateral Source Statute, the court had little difficulty in determining that it was inapplicable, drawing an analogy to similar court decisions in the state pertaining to Medicaid.  The court noted that Medicaid payments were reimbursable, as are Medicare payments, and therefore, would not be subject to the Collateral Source Statute.  With regard to the remaining issues, the court, in painstaking detail, outlined why all of the remaining positions taken by the plaintiff were not supported by the statute or the regulations.  Of particular note, is the comment by Judge Simandle on the plaintiff’s contention that the Manual precluded recovery from Mr. Mason in this instance, noting, “The court concludes that to read this section, in its entirety, as in any way inconsistent with…reimbursement in this matter would be a significant grammatical challenge.”
Editor’s Note: At this point, I expect that Mr. Mason and his attorneys have gotten the memo.

03/26/12         In re Hearn v. Dollar Rent A Car, Inc.
Court of Appeals of Georgia, First Division
Georgia Court Refuses to Assist Settling Defendant on Medicare Issues
Minnie Hearn was injured in an automobile accident and, through her attorney, brought a claim against the responsible parties, including Dollar Rent A Car, Inc.  The parties negotiated a $20,000 settlement, which was the last amicable conversation that was had between the attorney and the claims adjuster.  At the attorney’s request, the adjuster sent a general release that included indemnity language for any outstanding liens to plaintiff’s counsel, who promptly had his client sign and return it.  The claims representative’s supervisor reviewed the file and insisted that Medicare be placed on the check since there was evidence in the claim file that the plaintiff was a Medicare beneficiary and had received benefits.  A lawsuit arose out of the settlement and Dollar Rent A Car obtained an order permitting it to include Medicare on the check and received an award of attorney’s fees.  The Appellate Court reversed, holding that, since the parties had not negotiated Medicare into the terms of settlement and the release contained language that provided protection for Dollar Rent A Car, or its insurance company, that the Public Policy of the State of Georgia did not prevent the courts from enforcing the settlement, as agreed to, and compelling issuance of a check without Medicare being named as a payee.

This case highlights our oft mentioned advice that Medicare issues must be discussed early and often in the course of any settlement negotiations.

 

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

03/29/12         Pinzon v. Gonzalez
Appellate Division, First Department
Report That Specifically Attributes Injuries to Accident Refutes Allegations That Conditions Are Degenerative

Plaintiff alleged injuries to her left knee and cervical and lumbar spine.  In support of her motion, defendant submitted reports stating that plaintiff’s alleged injuries were degenerative. 

In opposition, plaintiff submitted the reports of her radiologists stating that the MRIs showed a medial meniscus tear and a tear of the medial collateral ligamentous complex, as well as cervical disc herniations and lumbar disc bulges.  Plaintiff also submitted a contemporaneous examination report from her treating physician showing range-of-motion limitations, and her neurologist’s report based on a recent examination, also showing the limitations, and thus establishing the permanency of the injuries.  This report also refuted defendant’s expert’s findings that the conditions were degenerative by specifically attributing them to the accident and specifically identifying and disagreeing with two of defendant’s experts.

03/27/12         Gerena v. Huiying Lin
                        Ramirez v. Maniscallo
Appellate Division, Second Department
Summary Judgment Should Have Been Granted Where Injuries Not Serious and/or Not Caused by Accident

In Gerena, defendants submitted competent medical evidence showing the alleged injuries to the lumbosacral spine were not serious and, in any event, not causally related, and that the alleged injuries to the cervical spine were not serious, and plaintiff failed to rebut.

In Ramirez, defendants similarly established that the alleged injuries to the cervical and lumbar spine were not serious and not causally related to the accident.  Defendants also submitted evidence showing plaintiff did not sustain an injury under the 90/180-day category.  Again, plaintiff failed to raise a triable issue of fact.

03/27/12         Newman v. Surf Glass Corp.
Appellate Division, Second Department
Summary Judgment Not Granted Where Prima Facie Burden Not Met

Plaintiff claimed serious injuries to her temporomandibular joints and brain and defendants did not even address these allegations.  As such, they failed to meet their prima facie burden and summary judgment was properly denied.

03/23/12         Paveljack v. Cirino
Appellate Division, Fourth Department
Failure to Explain Gap Between Resolution of Symptoms and New Onset Defeats Plaintiff’s Claim

Defendant ran a red light and struck the front driver’s side of plaintiff’s vehicle.  Plaintiff claimed injuries under the permanent loss of use, permanent consequential limitation, significant limitation of use and 90/180-day categories.  Defendant moved for summary judgment and plaintiff cross-moved on liability and serious injury to her spine.  The trial court dismissed the claims under the permanent loss of use and 90/180-day categories, found issues of fact with respect to the other two categories, and denied plaintiff’s cross- motion.  On appeal, the court modified, determining that the claims under the permanent consequential limitation of use and significant limitation of use should also have been dismissed. 

The cervical MRI showing a slight herniation was not performed until six months after the accident.  Although evidence of a herniation coupled with objective proof of range-of-motion limitations may raise an issue of fact, here plaintiff’s records did not indicate the tests used to determine the degree of limitation.  Furthermore, records of plaintiff’s treating physician and therapist established that her complaints had fully resolved within 1 ½ months after the accident.  No explanation was proffered for the cessation of symptoms and treatment during the interval between the full resolution of her symptoms and her renewed complaints and loss of range-of-motion four months after the accident.  Her complaint was thus dismissed in its entirety.

03/22/12         Lipscomb v. Cohen
Appellate Division, Third Department
Plaintiff’s Need to Deal With Other Health Issues Adequately Explains Gap in Treatment

In November 2006, plaintiff, then 62 and with no prior history of neck problems, was rear-ended by defendant and moved for summary judgment on the issue of liability, while defendants driver and car owner cross-moved on the issue of serious injury.  The trial court denied both motions and, on appeal, the court modified to grant defendants’ motion with respect to the categories of significant disfigurement, permanent loss of use, permanent consequential limitation and 90/180-day.

At the time of the accident, plaintiff was en route to see his physician for a diabetic checkup.  He later made another appointment regarding his neck and began a long and extensive course of treatment by many providers, including physical therapy, medication and steroid injections.  By December 2007, he was directed by his neurosurgeon to continue with exercises and see him as needed.  Although the neck pain continued, he did not treat again until December 2008 when the pain became unbearable.  He was then referred to an orthopedic surgeon and ultimately underwent an anterior cervical fusion at C3-4, C4-5. 

Although defendants disputed causation, arguing that the neurosurgeon who performed an IME related the cervical injuries to both the accident and degenerative conditions, plaintiff had no history of neck pain and his doctors related the injury to the accident and rejected the degenerative condition as the sole cause of injury.  This was sufficient to raise an issue of fact with regard to causation.

Plaintiff also adequately explained the gap in treatment during 2008.  His neurosurgeon had given him helpful home exercises to do and instructed him to return as needed.  Although he continued to have pain, he did not wish to have surgery and also had other health issues to deal with so he did not return until the pain became unbearable at the end of 2008.  This explanation was sufficient.  While a plaintiff claiming serious injury must provide a reasonable explanation for a gap or cessation of treatment, it is not necessary to “incur the additional expense of consultation, treatment or therapy, merely to establish the seriousness or causal relation of his injury.” 

With respect to plaintiff’s claim under the significant limitation of use category, the affirmations of his orthopedic and neurosurgeons raised a triable issue of fact but providing sufficient descriptions of the limitations on plaintiff’s activities and movements, including qualitative assessments.  Therefore, defendants’ motion should have been granted as to all the other alleged categories except significant limitation of use. 

03/22/12         McArthur v. Act Limo, Inc.
Appellate Division, First Department
Ignoring Effects of Four Prior Accidents and Failing to Distinguish Claimed Injuries From Prior Injuries Defeats Those Claims

Plaintiff was involved in four accidents prior to the subject one and claimed that, as a result of this latest accident, he sustained serious injuries to his cervical and lumbar spine, right shoulder and right hip.  The trial court denied defendants’ motion but on appeal, their motion is granted to the extent of dismissing plaintiff’s claims with respect to the cervical and lumbar spine, the permanent loss of use claim, and the claim under the 90/180-day category.

MRIs taken before the subject accident revealed cervical and lumbar herniations and bulges for which plaintiff received treatment.  Defendants also submitted reports from a radiologist and orthopedist asserting plaintiff’s neck and back injuries were pre-existing and degenerative, and that the shoulder injuries had resolved.  In opposition, plaintiff’s doctors ignored the effects of the prior accidents and failed to show how the claimed injuries were different from the previous injuries.  However, with respect to the right shoulder, the reports of plaintiff’s orthopedic surgeon, who performed arthroscopic surgery, related the injury to the subject accident and quantified the limitations continuing two years after the accident, thus raising an issue of fact.

03/22/12         Duran v. Kabir
Appellate Division, First Department
“Reaching an Endpoint” Is Adequate Explanation for Gap in Treatment

In support of his motion, defendant submitted a neurologist’s report stating plaintiff had normal range-of-motion, and the report of a radiologist who opined that the MRIs of 30-year old plaintiff’s lumbar spine showed degenerative changes and that of her cervical spine showed no injury.

In opposition, plaintiff raised issues of fact by submitting MRI reports noting disc bulges in both the cervical and lumbar spine, and reports of physicians who found cervical and lumbar range-of-motion limitations both immediately after the accident and two years later, supporting her claim under the permanent consequential and/or significant limitation of use categories.  Plaintiff explained the gap in treatment with a doctor’s report stating that she had “reached an endpoint” with physical therapy and there was no longer any evidence of improvement.  Her doctors also opined that her injuries were causally related to the accident and that the accident aggravated a previously asymptomatic degenerative condition. 

03/22/12         Biascochea v. Boves
Appellate Division, First Department
Doctor Visit Two Days After Accident Establishes Causation

Under Perl, plaintiff’s visit to her doctor, two days after the accident, established the requisite causation even though no range-of-motion measurements were taken.  Defendants’ radiologist opined that the MRI of plaintiff’s left knee revealed either a tear of prior surgery and was therefore too equivocal to support defendants’ allegations of degeneration and disprove causation.  In addition, plaintiff testified that she never suffered any knee injury and her physician found restrictions which conflicted with the reports of defendants’ physicians.  Attributing her injuries to a different but plausible cause was sufficient to counter the allegations of degeneration raised by defendants and raise a triable issue of fact.

03/20/12         Livia v. Atkins
Appellate Division, Second Department
Citing Perl, Court Affirms Trial Court’s Denial of Defendants’ Motion

In a decision without any details, on appeal the trial court’s denial of defendants’ motion is affirmed.  Plaintiff claimed serious injury to his right shoulder under the permanent consequential and/or significant limitation of use categories.  Citing Perl, the Court determined that plaintiff submitted sufficient competent medical evidence to raise an issue of fact to defeat defendants’ motion.

03/16/12         Hedgecock v. Pedro (Appeal No. 1)
Appellate Division, Fourth Department
Neurologist’s Affidavit Discussing Combined Effect of 4 Accidents Fails to Raise Issue of Fact Regarding First 2 Accidents

In the space of 2 years, plaintiff was involved in 4 rear-end accidents.  She claimed injuries under the permanent consequential and/or significant limitation of use and the 90/180-day categories.  Appeal No. 1 involved the defendant from the 1st accident (Pedro) and those from the 2nd accident (Sterman defendants).  Plaintiff claimed that as a result of the 1st accident her migraines increased in frequency and intensity and that she suffered a cervical sprain.  As a result of the 2nd accident just 2 months after the first, she claimed that she sustained a lumbar sprain and subluxation and exacerbation of the injuries from the 1st accident.

In support of their motions, Pedro and the Sterman defendants submitted the deposition testimony of plaintiff concerning her long-standing preexisting chronic migraine headache condition and 2 prior compression fractures to her back. 

In opposition, plaintiff submitted the affidavits of her chiropractor and neurologist.  However, the neurologist’s affidavit only discussed the combined effect of all four accidents so it failed to raise an issue of fact as to whether the 1st or 2nd accident caused a serious injury.  The chiropractor stated that, with respect to the 1st accident, plaintiff’s symptoms improved prior to the 2nd accident but did not return to baseline.  With respect to the 2nd accident, he stated that her symptoms did not improve prior to the 3rd accident, which occurred about a year later.  He provided quantitative range-of-motion limitations of both the cervical and lumbar spine and compared them with the norm.  It was also noted that plaintiff was granted a medical withdrawal from graduate studies immediately after the 2nd accident due to her migraines that prevented her from driving, attending class or doing household chores.

The Court concluded that plaintiff raised a triable issue with respect to her claims under the 90/180-day category sufficient to defeat that part of both motions, as well as to defeat the permanent consequential part of the Sterman defendants’ motion.  However, Pedro’s motion was granted with respect to the permanent consequential category because her symptoms improved between the 1st and 2nd accidents.

03/16/12         Hedgecock v. Pedro (Appeal No. 2)
Appellate Division, Fourth Department
Lack of Causation Not Rebutted Where Chiropractor’s Affidavit Fails to Specify How Conditions Were Exacerbated by 4th Accident

In this 2nd appeal in this matter, the permanent consequential and/or significant limitation of use categories are dismissed as against defendant Sajac, the defendant from the 4th accident. 

Sajac established that plaintiff had preexisting migraine headache and spinal injuries which were caused and/or exacerbated by one or more of the 3 prior accidents.  The affidavits submitted by plaintiff in opposition failed to raise an issue of fact because the chiropractor’s affidavit did not specify how her conditions were exacerbated specifically by the 4th accident, and the neurologist’s affidavit discussed the combined effect of all 4 accidents but not whether the 4th accident caused a serious injury.

03/16/12         Harrity v. Leone
Appellate Division, Fourth Department
Affirmative Defense of Plaintiff’s Culpable Conduct of Carrying a Pan of Pot Roast on Her Lap Is Reinstated

Plaintiff sued both the driver of the vehicle in which she was a passenger as well as the other vehicle’s driver.  She alleged injuries under the significant disfigurement (which she later abandoned), permanent consequential and/or significant limitation of use, and 90/180-day categories.  She cross-moved to dismiss the affirmative defenses in each of the answers that alleged her own culpable conduct, failure to wear a seatbelt and improper service. 

On appeal, the Court found the trial court properly dismissed the claims under the 90/180 day category as defendants submitted medical records establishing that there were no objective medical findings to support the claim.  The Court also found that the trial court properly denied dismissal of the claims under the permanent consequential and/or significant limitation of use categories.

The Court determined, however, that the trial court should not have granted that part of plaintiff’s cross-motion to dismiss the affirmative defense of culpable conduct.  The record indicated that plaintiff burned her hand at home with hot butter, while plaintiff asserted that she sustained the burn in the accident when hot meat juices spilled from the pan of pot roast she was carrying on her lap.  Therefore, defendants were entitled to explore this discrepancy as well as whether plaintiff’s own conduct in carrying the pan on her lap was culpable.

 

AUDREY’S ANGLES ON NO-FAULT
Audrey A. Seeley
aas@hurwitzfine.com

ARBITRATION
03/26/12         Elite Med. Supply of NY, LLC v. NFTA-Metro System, Inc.
Arbitrator Kent L. Benziger, Erie County
Self-Insured Properly Delayed Claim Pending Pre-Existing Medical Records

The Applicant sought reimbursement for durable medical equipment and the insurer argued that the claim was not ripe for arbitration as verification was outstanding.  On July 8, 2010, the eligible injured person (“EIP”) allegedly sustained a left wrist injury on a bus attempting to pick up her wallet when the bus suddenly accelerated.  The EIP disclosed to the self-insured that this was the fourth time she fractured her wrist.  She also disclosed that she underwent treatment for a neck injury, with six displaced discs, resulting in her approval for Social Security Disability.

The EIP treated with chiropractor Ward who prescribed the durable medical equipment for neck pain.  Mr. Ward documented the EIP’s prior neck injuries but noted that the neck injury resolved.  The self-insured, prior to the receipt of an August 23, 2010 bill for durable medical equipment, requested verification from the EIP in the form of authorizations for the EIP’s medical records for her prior neck injuries.  The self-insured also requested verification from Mr. Ward requesting a clarification as to how he could state the prior neck injury resolved when the EIP received Social Security Disability for a permanent neck disability.

The self-insured sent timely delay letters to the EIP’s counsel and the Applicant, as well as a second request letter.

The assigned arbitrator determined that the self-insured’s verification requests were reasonable.  Therefore, the arbitration was premature as verification was still outstanding.

03/22/12         Applicant v. State Farm Fire and Cas. Co.
Arbitrator Kent L. Benziger, Erie County
Partial Wages Awarded Since Insurer Issued Denial But Continued to Pay Wages

The Applicant sought one year of lost wages arising out of a February 18, 2010, motor vehicle accident.  The insurer demonstrated payment of two months of the wage period sought.  The Applicant sustained injury to his neck, head, left shoulder and low back as a result of the accident.  Dr. Tetro rendered the Applicant disabled due to his left shoulder injury.

The insurer denied the lost wages on September 21, 2010, upon the independent medical examination of Geoffrey Gerow, DC.  Mr. Gerow’s report indicated that the Applicant could return to his former employment with restrictions.  The insurer also denied orthopedic surgery benefits based upon the failure to appear for scheduled independent medical examinations.

The assigned arbitrator indicated that he was constrained to the denial’s language and the insurer could not rely upon the policy violation to deny lost wages when the denial only denied orthopedic benefits.

With regard to the denial based upon Mr. Gerow’s examination, the assigned arbitrator noted that despite the denial the insurer submitted evidence that it continued to reimburse the Applicant for lost wages post denial until December 16, 2010.  The assigned arbitrator awarded lost wages for 60 days, since from an equitable standpoint the insurer had issued the denial but disregarded it.  Yet, the assigned arbitrator determined that lost wages would not be awarded for the remainder of period sought as the examination report was persuasive.  In addition, the Applicant was not need disabled by Social Security Disability and submitted no records contemporaneous to the examination report to rebut the findings.  Also, there was no credible evidence that the Applicant’s employer could not abide by the work restrictions.

03/20/12         Applicant v. Erie Ins. Co.
Arbitrator Thomas J. McCorry, Erie County
Mileage Reimbursement Is Standard IRS Rate of $.55 Per Mile

The Applicant sought reimbursement of mileage at the standard IRS rate of $.55 per mile and not at $.19 per mile for medical or moving purposes.  While the no-fault regulations afford no guidance on this issue, the assigned arbitrator indicated that it would be reasonable to accept the standard rate for operating a car.  The fact that the IRS has a medical rate did not mean that it applied to no-fault claims.

03/16/12         Applicant v. Main Street America Group
Arbitrator Thomas J. McCorry, Erie County
Applicant’s Ability to Continue Working After Accident Belies Disability

The Applicant sought $8,000.00 in lost wages arising out of a November 20, 2010, motor vehicle accident.  The insurer denied the lost wage claim upon the independent medical examination conducted by Dr. George Boucher.  Dr. Boucher’s report documented the Applicant continuing to work but required help lifting and was not disabled from working.  The Applicant did not dispute at the hearing that he was working from his home since this accident.  The assigned arbitrator determined Dr. Boucher’s opinion was persuasive on lack of disability and upheld the insurer’ denial.

LITIGATION

3/22/12           Kendra Cividanes v. City of New York, et. al.
Appellate Division, First Department
While Not No-Fault, Good Review of “Use and Operation” Standard

The plaintiff, while exiting the defendant’s bus, stepped into a hole and fell.  The evidence presented demonstrated that the hole was far from the curb and the bus had pulled about a foot from the curb. The plaintiff commenced an action to recover damages for personal injuries.  The plaintiff’s negligence theory was that the defendant had a duty to provide a safe place to exit the bus.  The defendant argued that the plaintiff had not sustained a serious injury under any of the enumerated categories on summary judgment. 

In opposition, the plaintiff’s argument was two-fold, that the she was injured after exiting the bus thus not a covered person under Insurance Law §5104 and that the defendant’s liability did not arise out of use and operation of vehicle.

The Court upheld the trial court’s decision that the plaintiff was not a covered person therefore not required to demonstrate that she sustained a serious injury under the statute.  Further, the Court, relying upon Walton v. Lumbermans, held that the plaintiff’s injuries did not arise out of the use and operation of a motor vehicle.  Under Walton and its progeny, the motor vehicle itself must be the instrumentality that produces the injury.  The analysis turns to examples of what qualifies as use and operation.  The Court, citing to Sochinski v. Bankers & Shippers Ins. Co., reasoned that if the motor vehicle is merely incidental to the injury then the injury does not arise out of the use and operation of a motor vehicle.  In Sochinski, the plaintiff was driving through a construction zone with his window down and sandblasting particles lodged in his eye causing injury.  The injury did not arise out of the use and operation as the motor vehicle was not the instrumentality that caused the accident.   Rather, the vehicle was merely incidental to the event that caused plaintiff’s injury.

On the other hand, in Matter of Farm Family Cas. Ins. Co. v. Trapani, the pedestrian plaintiff’s injuries arose from the use and operation of a motor vehicle after she attempted to flee a downed power line hit by a vehicle.  The vehicle was the proximate cause of the plaintiff’s knee and head injuries as her fall was a result of the car hitting the pole damaging the power line.

The Court continued to reason that the plaintiff’s injury after exiting the bus was not inherent in the bus’ use or operation.  Rather, the plaintiff’s injury was sustained when she stepped into a hole.

The Court further stated that to extent that its decision is contrary to Manuel v. New York City Transit Auth., it declined to follow Manuel since Manuel is inconsistent with Walton.

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

Property

03/27/12         Currie v Wilhouski
Appellate Division, Second Department
Carrier’s Motion for Summary Judgment Fails Where no Admissible Evidence Was Submitted in Support
Plaintiff commenced the instant action against Amica after the insurer refused to cover certain damages to plaintiff’s retaining wall.  Amica’s subsequent summary judgment motion was denied by the trial court, and the instant appeal ensued. 

In affirming the trial court, the Second Department noted that Amica failed to properly support its motion with admissible evidence.  Specifically, the attorney affidavit submitted in support of the motion asserted facts that were not personally known to the attorney.  Moreover, the affidavit of Amica’s claims manager was likewise inadmissible where it asserted facts that were likewise not personally known to him.

Finally, Amica’s attempt to rely upon a letter authored by plaintiff’s expert was also unsuccessful. This is because the letter was unsworn, and did not identify the purported expert’s qualifications.  Accordingly, just like a threshold motion, unsworn, unsupported expert affidavits have no probative value.

Potpourri

Court of Appeals

03/22/12         Abacus Federal Savings Bank v ADT Security Services, Inc.
Court of Appeals
Broad Waiver of Subrogation Clause Acts as a Complete Bar of Contract and Negligence Claims
In March of 2004, Abacus Savings Bank was the victim of a sophisticated burglary.  The loss was occasioned as part of a weekend break-in where the thieves literally used large torches to cut a hole in the side of the bank’s vault.  Upon learning of the loss the following Monday morning, the bank understandably contacted its security providers to determine why the burglary was not detected earlier. 

ADT and Diebold had both entered into contracts with Abacus which required 24/7 monitoring.  When it was later revealed that the security system was woefully underperforming for months prior to the burglary, Abacus commenced the instant action seeking to recover its losses under both negligence and breach of contract theories. 

ADT and Diebold moved to dismiss the negligence claims under clauses in both contracts which exculpated both defendants for losses caused by their own respective negligence.  The trial court denied the motions.  In so holding, the trial court acknowledged that parties may contractually protect themselves from losses caused by their own negligence.  However, a party cannot exonerate itself from losses occasioned by gross negligence.  The trial court held that the ongoing problems with the security systems may have constituted gross negligence, and accordingly permitted discovery to proceed. 

Upon appeal to the First Department, the court noted that there was no evidence of gross negligence.  Accordingly, it overturned the trial court and granted both parties’ motions.  That decision resulted in the instant decision from the Court of Appeals. 

Initially, the Court of Appeals confirmed the Appellate Division’s hold that there was no evidence of gross negligence.  In light of the clauses in the respective contracts, any claims for negligence were dismissed accordingly. 

In addition, Diebold’s contract with Abacus provided the following waiver of subrogation clause “Abacus shall look solely to its insurer for recovery of its loss and hereby waives any and all claims for such loss against Diebold.”  In light of the breadth of this language, the Court of Appeals ruled that Abacus had no direct claim against Diebold for losses occasioned out of Diebold’s breach of contract and/or its negligence. 

ADT, however, had no such waiver of subrogation clause.  Accordingly, the court permitted the contractual claims against it to proceed.  In so holding, however, the court noted that Abacus could only recover for losses it (not its insurer) actually sustained. 

Appellate Division

03/20/12         MBIA Ins. Corp. v Countrywide Home Loans, Inc.
Appellate Division, First Department
Documentation Prepared by Consultants Prior to Litigation Still Exempt from Production Under Material Prepared in Anticipation of Litigation Doctrine
This is an interesting discovery decision arising out of two motions to compel.  The first motion, filed by defendant, sought production of documents relating to plaintiff’s remediation efforts.  The second motion, filed by plaintiff, sought production of documents related to defendant’s “repurchase review.”

In affirming the trial court, the First Department ruled that plaintiff met its burden of establishing the material prepared in anticipation of litigation doctrine.  Essentially, plaintiff was able to establish the privilege by the introduction of records, including its retainer agreements with outside consultants, which demonstrated a review and assessment of a potential claim prior to litigation.  The fact that plaintiff later used information obtained by the consultants to support its claim did not, in the Appellate Division’s opinion, render the documentation “mixed purpose” which would have destroyed any privilege. 

In addition, the Appellate Division also ruled that the documents were also exempt from disclosure by application of the attorney/client privilege.  In so holding, the court noted that plaintiff established the documents were used to
assist counsel’s analysis and preparation of the upcoming litigation. 

With regard to plaintiff’s motion to compel production of the defendant’s repurchase review, the Court found that defendant had not met its burden.  Unlike plaintiff, which established its repurchase analysis was not part of its ordinary business, defendant maintained a distinct protocol for assessing repurchase requests.  Under such circumstances, the documents sought by plaintiff were kept in the ordinary course of business and not subject to any discovery protection.

03/20/12         Kouho v Trump Village Section 4, Inc.
Appellate Division, Second Department
Default Judgment Establishes Liability AND Causation Against Non-Appearing Party
At the close of the underlying trial, plaintiff was awarded $450,000 in damages against defendant.  At the same time, defendant obtained a default judgment over non-appearing third-party defendant Fazio-Trina.  Unfortunately for defendant, at the subsequent inquest, the trial court, sua sponte, determined that Fazio-Trina had not caused the damages sustained by plaintiff.  Accordingly, the trial court directed defendant to enter a judgment against Fazio-Trina of $0.00. 

Defendant appealed, and the Second Department reversed.  In so holding, the Appellate Division noted that the default judgment established that Fazio-Trina was liable for the losses sustained by plaintiff.  The default, in part, likewise established causation against Fazio-Trina as well.  Accordingly, an award of $0.00 was impossible, and the matter was remanded to the trial court for a second inquest hearing.

03/20/12         Anderson v Ariel Services, Inc.,
Appellate Division, First Department
Late Disclosure of Surgery for Removal of Surgical Hardware Is Permitted as a Supplement to Plaintiff’s Earlier Bill of Particulars
Defendant moved for sanctions due to plaintiff’s failure to comply with a previously issued court scheduling order.  In addition, defendant also moved for preclusion of plaintiff’s third Bill of Particulars. 

In affirming the trial court’s refusal to grant the motion, the First Department noted that plaintiff had presented a meritorious claim and a reasonable excuse for the delayed discovery.  In so holding, the court also noted that defendant had failed to comply with the same scheduling order.  Finally, the Appellate Division noted that plaintiff’s so-called third Bill of Particulars was nothing more than a supplement to its earlier disclosures.  The items disclosed in the “third Bill of Particulars” were related to a subsequent surgery (removal of hardware) that was related to previously disclosed injuries.
 
CASSIE’S CAPITAL CONNECTION
Cassandra A. Kazukenus
[email protected]

Good morning!  We have a budget (mostly), and I am enjoying the lovely Florida sun especially since winter has returned to New York.  The Senate is touting their passage of three bills that creates stiffer penalties for those guilty of car insurance fraud.  The bills are currently before either the Insurance or Codes committees in the Assembly.

Legislative Update

S4507B
Currently insurers are not allowed to retroactively cancel an automobile insurance policy even if the insured commits fraud.  Per the sponsor’s memorandum, this legislation will reduce an insured’s incentive to be involved in fraud such as staged accidents.  This legislation would allow insurers to retroactively cancel the policy if, within the first sixty days, the initial premium payment is not honored by the bank due to:

  • insufficient funds;
  • non-existent account; or
  • transaction involving the unauthorized use of a bank account.

S1685
This legislation would create the felony of staging a motor vehicle accident.  If a non-involved person is injured, a conviction would result in a Class B felony.  Generally, if a person operates a car and intentionally causes a collision with intent to commit a fraud, that will be a class D felony punishable by up to seven years in prison.

S2004
This would make the use of “runners” illegal.  A runner is a person who receives money for obtaining clients or patients to participate in the insurance fraud scheme.  The use of a runner would be a class E felony punishable by up to four years in prison.

 

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

03/27/12         Gulf Underwriters Insurance Co. v. Burris
Eighth Circuit Court of Appeals – Wisconsin Law Applied
SIR – Does Dissolution of Insured Company Result in Breach of Policy Terms?      
Lowell Burris was seriously injured in August 2001 when he fell from a ladder manufactured in Wisconsin by Versa Products, Inc. [“Versa”], and purchased from Menard, Inc. [“Menard”].  Versa and an affiliate were named insureds and Menard was an additional insured under a “claims made” Commercial General Liability insurance policy issued in Wisconsin by Gulf Underwriters Insurance Company [“Gulf”].  The policy included a $50,000 Self Insured Retention [“SIR”] endorsement.

In August 2007, Burris and his wife commenced a product liability action against Menard, Versa and Versa’s affiliate in Minnesota state court.  Menard removed the action to federal court, which has diversity jurisdiction.  Gulf then commenced the present action seeking a judgment declaring that the policy issued by Gulf to its named insured does not afford coverage to them or Menard, for any claim made by Burris under the terms of the Gulf policy.

The district court granted Gulf’s motion for summary declaratory judgment on the ground that Versa’s dissolution after the expiration of the policy meant that the insured cannot meet its obligations under the SIR, a material breach that terminates Gulf’s obligations under the policy.  Burris appealed, and for the following reasons the Eight Circuit [“Court”] reversed.

Initially the Court cited to the entire SIR endorsement because it found that the excerpts from the endorsement cited by Gulf in its brief were insufficient to properly analyze coverage.

In its motion before the district court Gulf argued, and the district court agreed, that the policy provides no coverage for the claim asserted by Burris solely because the SIR expressly provides that Versa’s inability to comply with its SIR obligations “is a material breach as to the entire contract” that terminates Gulf’s obligations under the policy.  However, the Court disagreed pointing to another term of the SIR, which provides:  “All the terms of this policy . . . apply irrespective of the application of the Self-Insured Retention.”  Therefore, while the amount of coverage set forth in the policy declarations is affected by the mount of Self-Insured Retention, the coverage of third-party liability claims continues to be defined exclusively by the provisions of the policy’s Commercial General Liability Coverage Form.  The Court noted that this language indicated that the policy’s drafters did not intend the self-insured endorsement to affect Gulf’s obligations under the policy to third-party claimants.  The Court cited to Wisconsin law which holds that, “Where the endorsement expressly provides that it is subject to all terms, limitations, and conditions of the policy, it does not abrogate or nullify any provision of the policy unless it is so stated in the endorsements.  Inter-Ins. Exch. Of Chi. Motor Club v. Westchester Fire Ins. Co., 25 Wis.2d 100 (Wis. 1964).

The Court also pointed to another error the district court made in granting summary judgment, i.e., that Gulf submitted no admissible evidence supporting its assertion that Versa had breached the SIR; no evidence that Versa failed to make an SIR payment Gulf demanded; no evidence the $250,000 aggregate SIR limit had not been exceeded; no evidence Versa had no assets; no evidence Wisconsin law does not require dissolving corporations to preserve assets to satisfy the claims of creditors, cf., Minn. Stat. §302A.7291; and no evidence that Versa and its principals will refuse to make any post dissolution SIR payments that may be required to preserve the policy’s coverage protections.  The Court stated that on this record, summary judgment for Gulf was factually unwarranted.

As to the final question regarding what happens to this lawsuit, the Court cited to Wisconsin’s direct action statutes.  Under these direct action statutes, an injured party may join the liability insurer in a negligence actin and recover for a covered loss even if the insured is insolvent or has been given an absolute release.  Alternatively, the injured party may sue the insurer after recovering a judgment against the insured, if execution against the insured is returned unsatisfied for any reason.  The statutes are intended to facilitate recovery by injured parties; however, they do not expand the insurance contract by overruling the principle that any defense under the policy that relieves the insurer from liability as against the insured also relieves it from liability against injured persons.  The Court stated that the proper procedure for an insurance company to follow when coverage is disputed is to request a bifurcated trial on the issues of coverage and liability.

Overall the Court found that there were a number of deceptive statement and non-disclosures made in Gulf’s presentation of the SIR issue and the existence of a preferred procedure to determine insurance coverage under Wisconsin law.  As a result the Court concluded that it should exercise its discretion to “deny Gulf a declaratory judgment resolving other coverage issues that might have been suitable for declaratory relief in other circumstances.”  Instead, the Court determined that the underlying action should proceed and if Gulf does not intervene and if Burris recovers a liability judgment against Versa, and if judgment is returned unsatisfied, Burris may sue Gulf directly under Wis. Stat. §§632.22 and 632.24.  Gulf may then assert its coverage defenses (other than Versa’s non-compliance with the SIR).  If there is coverage, Gulf will be liable to Burris for any amount above $50,000 SIR within the policy limits, but Gulf may not be ordered to drop down to pay Versa’s self-insured portion of the judgment.

03/21/12         James River Ins. Co. v. Bodywell Nutrition
18 No. 24 Westlaw Journal Intellectual Property 12, Westlaw Journal Intellectual Property March 21, 2012
Trademarks:  Tight Ruling in Favor of Insurer
An insurer had no duty to defend its policyholder against allegations that the nutrition company’s “Tight Curves” product infringed another dietary supplement corporation’s trademarks, a Florida federal judge has ruled.  U.S. District Judge Adalberto J. Jordan of the Southern District of Florida agreed with James River Insurance Co. that the underlying action against Bodywell Nutrition LLC alleged unfair competition and trademark infringement, which were no covered under the policy.
Editor’s Note:   We thank Steven Fox, Esq., Legal Director, Center for Inquiry, for this submission.  For inquiries, Mr. Fox can be reached at: [email protected].

 

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

03/14/12         Kouadio v. Hereford Ins. Co.
Supreme Court, New York County
Where Petitioner Never Obtained Consent from the Workers’ Compensation Carrier to Settle Tort Action for Less Than Its Lien, the Court Refused to Grant Retroactive Approval
This decision arises out of a request for retroactive approval of a tort settlement where the settlement amount was less than the Workers’ Compensation lien.  Petitioner was injured while driving a taxicab in the course of his employment.  As a result, he submitted a workers’ compensation claim.  After receiving benefits from the respondent, the workers’ compensation carrier, in excess of $7,000, he settled his separate tort action for $2,000 without respondent’s consent. 

When notice of the settlement was received, the Workers’ Compensation Board closed petitioner’s case.  Approximately, two years later, petitioner filed a Request for Further Action with the Workers’ Compensation Board seeking a hearing to litigate the issue of whether his alleged injuries were permanent.  The request was denies since petitioner’s claim was closed on the basis that the tort action was settled without consent.  Thereafter, this motion seeking retroactive approval of the settlement was brought.

A court is permitted to order retroactive approval of such a settlement after more than three months passed if the petitioner can establish that “(1) the amount of the settlement is reasonable, (2) the delay in applying for a judicial order of approval was not caused by the petitioner’s fault or neglect, and (3) the carrier was not prejudiced by the delay.” 

Based on these facts, the court refused to approve the settlement.  Initially, it noted that petitioner provided no excuse for its 2 year delay in seeking approval after the Workers’ Compensation Board closed his case.  Also, petitioner could not establish that the $2,000 settlement was reasonable in light of his current claim that he cannot use his right and left legs and, in turn, is partially disabled. 

03/06/12         23 Grouse Drive, LLC v. Hermitage Ins. Co.
Supreme Court, Nassau County
Underlying Complaint Alleged Injured Party Was in the Process of Performing Work for Insureds at the Time of the Loss; By Defaulting in the Underlying Action, the Insureds Admitted the Allegations, and the Employer’s Liability Exclusion Applied
This is an interesting decision.  23 Grouse Drive, LLC (“23 Grouse”) is the owner of a premises located at, shockingly enough, 23 Grouse Drive.  Fedele Pasculli (“Pasculli”) is the company’s President and sole shareholder. 

In the underlying action, 23 Grouse and Pasculli failed to respond to the complaint and a default judgment was entered against them.  In the complaint, which they failed to respond to, it was alleged that the injured party “fell while working under the instruction of [23 Grouse] at the aforesaid premises.”  Further, in an affidavit in support of the default, the injured party stated that “he was hired by [23 Grouse] to replace windows on the side of their house.”  He further asserted that Pasculli provided him a ladder and was holding the ladder when he walked away causing the injured party to fall. 

The court considered the facts and held that Hermitage Ins. Co. (“Hermitage”), the insurer for 23 Grouse and Pasculli, was not obligated to pay the judgment that had been entered against them.  Initially, the court noted that, upon being provided with notice of the loss, Hermitage denied coverage citing the Employer’s Liability Exclusion and the Independent Contractor’s Exclusion.  The then court reasoned that by defaulting 23 Grouse and Pasculli admitted all allegations in the underlying complaint, including the basic liability.  Thus, they could not at this juncture deny that the injured party was hired to perform work for them. 

03/05/12         City of New York v. Arch Ins. Co.
Supreme Court, New York County
Insurer Continued to Owe a Defense to the Additional Insured Where the Underlying Action Against the Named Insured Was Dismissed
An employee of the Department of Sanitation allegedly suffered an electrical shock from an improperly installed, maintained and repaired electrical pole.  As a result of the injury, he brought an action against the City of New York (“the City”) and Petrocelli Electric Co, Inc. (“Petrocelli”). 

Upon receipt of the claim, the City tendered its defense to Petrocelli and its insurer, Arch Ins. Co. (“Arch”).  The tender was based on a contract Petrocelli entered into with the City to perform street lighting maintenance in the borough of Manhattan.  Among other things, this contract obligated Petrocelli to keep in good repair City-owned street lights.  The contract also obligated Petrocelli to name the City as an additional insured on a commercial general liability policy.

Petrocelli complied with the insurance procurement provision by obtaining a policy from Arch.  Pursuant to the blanket additional insured endorsement, an “insured” included “any person or organization for whom you [Petrocelli] are performing operations when you and such person or organization have agreed in writing in a contract or agreement that such person or organization is an additional insured on your policy.  Such person or organization is an additional insured only with respect to liability arising out of…’your work’ at the location designated…”

Arch agreed to defend the City under a reservation of rights letter.  As the underlying action progressed, both the City and Petrocelli moved for summary judgment dismissing the complaint against them.  The court, in the underlying action, granted Petrocelli’s motion, but denied the City’s motion.  Thereafter, Arch revoked its commitment to provide the City a defense stating that the cause of the accident was not related to Petrocelli’s work.  This decision led the City to bring this action.   

In considering the City’s motion for summary judgment on defense, the court began by analyzing the decision in the underlying action.  In the law of tort, a contract service provider has limited obligations to third-parties.  Specifically, a duty third person not a party to a contract are limited to certain circumstances, which include, but are not limited to, when the contracting party, in failing to exercise reasonable care in the performance of its duties, launches a force or instrument of harm.  The underlying court found that this was the only possible theory under which the injured party could hold Petrocelli liable.  As there was no evidence, that Petrocelli launched an instrument of harm, it was dismissed from the case.  However, the court found a question of fact as to whether the City was liable and whether it was entitled to contractual indemnity from Petrocelli. 

Accordingly, the court in this action granted the City’s motion seeking a defense.  It held that a question remained as to whether Petrocelli was negligent in fulfilling its contractual obligations to the City and whether this failure resulted in damage to the injured party.  It noted that the term “arising out of,” as used in the Arch policy, required only a causal relationship between the injury and the risk covered. 

 

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

WHEN IS A DUMP A DUMP?
ENVIRONMENTAL LIABILITY POLICY HELD AMBIGUOUS

            A recent case in the Eastern District of California concerned coverage for dumping contaminated debris at a recycling center.  Sierra Recycling & Demolition Inc. v. Chartis Specialty Insurance Co., 2011 WL 5307842 (E.D. California, November 3, 2011).   The net result was a holding that the insurer had to cover clean-up of contaminated waste left at a recycling processing center by a debris removal company, despite a “non-owned site disposal exclusion” in the policy. 

The dispute concerned clean up at the Metropolitan Recycling Facility in Bakersfield, California.  The suit alleged that Sierra Recycling caused contamination due to construction debris that it deposited at the site from a demolition job.  Sierra had an insurance policy with Chartis that covered losses stemming from “environmental damage”.  However, the policy contained an exclusion excepting coverage for damages “…arising from the final disposal of material and/or substances of any type (including but not limited to any waste) at any site or location that is not owned, leased or rented by you” [Sierra]. 

            Metropolitan’s insurer alleged it paid for clean-up at the waste facility for elevated levels of lead and zinc, and the insurer demanded that Sierra reimburse it for the clean-up costs.  Sierra, in turn, demanded that Chartis pay the claim, but the insurer refused.  

Sierra sued Chartis in District Court on claims for breach of contract and bad faith.  Both parties moved for summary judgment.  The Court rejected the insurer’s argument that the exclusion unambiguously barred coverage for claims stemming from the Sierra’s final relinquishment of waste at any site it did not own or operate. 

            Sierra argued the exclusion was “ambiguous” because Metropolitan was not a landfill site that served as the final destination for the construction debris.  The issue was whether placement of the material in the Metropolitan landfill was “the final disposal of [the] material”.  Sierra argued that the exclusion was ambiguous because Metropolitan was not “final destination” for the debris, but a processing facility which then sold, recycled, or otherwise transferred material elsewhere. 

            Chartis argued that the exclusion precluded coverage because, regardless of whether Metropolitan was a landfill, processing facility, storage facility, etc., it was, in fact, Sierra’s final disposal place or relinquishment of the debris. 

            Significantly, the Court ruled that both Sierra and Chartis held reasonable interpretations of the exclusion which rendered it legally ambiguous.  It was not clear whether the provision pertained to Sierra’s final disposal of material, or pertained to the final disposal or “resting place” of the material at a site or location not owned, leased or rented by Sierra.  Therefore, the Court denied Chartis’ motion for summary judgment and granted summary judgment to Sierra in effect overruling the exclusion and thereby finding coverage. 

            The three lessons of Sierra Recycling are:

  • With respect to policy exclusions, the insurer will likely bear the burden of proof, at times a relatively heavy burden, to establish the validity, existence and relevance of an exclusion from coverage. 
  • Even though an insurer’s policy language interpretation may be cogent and reasonable, if the insured or a third party can promote an equally reasonable or plausible meaning or interpretation of policy language, they may prevail.

 

  • Following typical contract and insurance interpretation rules, any “ambiguity” in a policy, particularly the covering provisions and any exclusions, is likely to be construed against the insurance company with the result of including and not excluding coverage.  Even though Chartis here had its own reasonable “interpretation” of the policy exclusion, the Court argued that the insured’s argument was plausible and perhaps equally reasonable, with the result that in the event of ambiguity, the insured will generally prevail and the insurance company will generally lose. 

 

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

03/16/12         Arrowood Indemnity Co. v. King
Supreme Court of Connecticut
For Coverage to Apply, Vehicle Must Be Located Within “Insured Location” at the Time of Accident Rather Than at the Time of the Entrustment of the Vehicle; Dead-end of Private Road Within Private Residential Development Is Not ““an Insured Location”
The King family held an Arrowood homeowners’ policy. Pendleton King, Jr., was operating an ATV off of the Kings’ property, near the dead-end of a road within the private residential development where the King’s resided. The development was managed by an incorporated homeowners’ association. Conor McEntee was injured by the ATV. McEntee’s family filed a personal injury claim more than one year later. Arrowood filed a declaratory judgment action claiming that it had no duty to defend or indemnify the Kings under the policy. One portion of the policy excluded coverage for any damage arising out of the entrustment by an insured of a motor vehicle owned by an insured. An exception to this exclusion applied to vehicles “designed for recreational use off public roads, not subjected to motor vehicle registration and…[o]wned by an Insured or on an Insured location.”

Another portion of the policy defined “Insured location” as “Any premises used by you in connection with [the residence premises].” The policy also required notice of any potential claim “as soon as is practical.” The appellate court certified three questions: whether the vehicle must be located on “an Insured location” at the time of the accident or at the time of the entrustment; whether a private road owned by a homeowners association of which the insured are members constitutes “an Insured location”; and whether social interaction provides justification for failure to comply with a provision requiring that an insured notify the insurer of a potential claim “as soon as is practical.” The Supreme Court of Connecticut held that for coverage to apply, the vehicle must be located on “an Insured location” at the time the accident occurred. The court further held that a road located within a private residential development does not constitute “an Insured location” where the Insured does not have “a cognizable interest” in the portion of the road where the accident occurred. Lastly, the court held that social interactions with the McEntee’s, during which the McEntee’s did not mention the possibility of a lawsuit, did not excuse the Kings from complying with the notice provision, but that Arrowood had to prove it was prejudiced by the failure to comply.
Submitted by: John Cooney, Kevin Myers, Chris Vanderbeek, Danna McKitrick, P.C.

Reported Decisions

Hunt v. Ciminelli-Cowper Co., Inc


Appeal from an order and judgment (one paper) of the Supreme Court, Erie County (Frank A. Sedita, Jr., J.), entered December 15, 2010. The order and judgment, insofar as appealed from, granted the motions of third-party defendants Travelers Property Casualty Company of America, incorrectly sued as The Phoenix Insurance Company, and Merchants Mutual Insurance Company for summary judgment and declared that those third-party defendants have no duty to defend and indemnify in the underlying action.

Trevett Cristo Salzer & Andolina P.C., Rochester (Eric M. Dolan of Counsel), for Third-Party Plaintiff-Appellant.
Lazare Potter & Giacovas LLP, New York City (Yale Glazer of Counsel), for Third-Party Defendant-Respondent The Phoenix Insurance Company.
Smith, Murphy & Schoepperle, LLP, Buffalo (Frank G. Godson of Counsel), for Third-Party Defendant-Respondent Merchants Mutual Insurance Company.

It is hereby ORDERED that the order and judgment insofar as appealed from is unanimously reversed on the law without costs, the motions of third-party defendants Travelers Property Casualty Company of America, incorrectly sued as The Phoenix Insurance Company, and Merchants Mutual Insurance Company are denied, the first through sixth decretal paragraphs are vacated and the third-party complaint against those third-party defendants is reinstated.

Memorandum: Third-party plaintiff, Ciminelli-Cowper Co., Inc. (Ciminelli), commenced this third-party action seeking a declaration that, inter alia, third-party defendants Travelers Property Casualty Company of America, incorrectly sued as The Phoenix Insurance Company (Travelers), and Merchants Mutual Insurance Company (Merchants) are obligated to defend and indemnify it in the underlying personal injury action. Plaintiff commenced the underlying action seeking damages for injuries he sustained when he slipped and fell while performing construction work on property owned by Jamestown Community College (JCC). Ciminelli served as the construction manager on the project. There was no general contractor, and JCC contracted directly with various prime contractors, including David Ogiony Development Co., Inc. (Ogiony) and Pettit & Pettit, Inc. (Pettit).

JCC's contracts with Ogiony and Pettit required the contractors to indemnify JCC and Ciminelli against claims for personal injury arising from the construction work. The contracts also required Ogiony and Pettit to procure insurance coverage for claims arising out of their obligations under the contracts and to obtain endorsements to their general liability policies naming Ciminelli and JCC as additional insureds on a primary basis. At the time of plaintiff's accident, Ogiony was insured under a commercial general liability policy issued by Travelers (hereafter, Travelers policy), and Pettit was insured under a commercial insurance policy issued by Merchants (hereafter, Merchants policy).

Travelers moved for summary judgment dismissing the third-party complaint and any cross claims against it and declaring that it had "no obligation to defend, indemnify and/or reimburse [Ciminelli] or any other entity for any settlement payments made or defense costs incurred in the underlying . . . action." Travelers contended that it had no obligation to provide coverage to Ciminelli because Ciminelli failed to notify it of the claim in a timely manner, in accordance with the terms of the Travelers policy. Merchants also moved for summary judgment dismissing the third-party complaint against it and declaring that it was not obligated to defend or indemnify Ciminelli in the underlying action. Merchants contended that its policy afforded no coverage to Ciminelli.

We agree with Ciminelli that Supreme Court erred in granting the motions of Travelers and Merchants, dismissing the third-party complaint against them and declaring that they had "no obligation to defend, indemnify or reimburse [Ciminelli] for any settlement payments made or defense costs incurred" in the underlying action. We therefore reverse the order and judgment insofar as appealed from, deny the motions of Travelers and Merchants, vacate the first through sixth decretal paragraphs and reinstate the third-party complaint against Travelers and Merchants. "In determining a dispute over insurance coverage, we first look to the language of the policy" (Consolidated Edison Co. of N.Y. v Allstate Ins. Co., 98 NY2d 208, 221). "As with any contract, unambiguous provisions of an insurance contract must be given their plain and ordinary meaning . . ., and the interpretation of such provisions is a question of law for the court" (White v Continental Cas. Co., 9 NY3d 264, 267; see Vigilant Ins. Co. v Bear Stearns Cos., Inc., 10 NY3d 170, 177). "If the terms of a policy are ambiguous, however, any ambiguity must be construed in favor of the insured and against the insurer" (White, 9 NY3d at 267; see United States Fid. & Guar. Co. v Annunziata, 67 NY2d 229, 232; Breed v Insurance Co. of N. Am., 46 NY2d 351, 353, rearg denied 46 NY2d 940).

With respect to the motion of Travelers, we note that the Travelers policy states that its terms "can be amended or waived only by endorsement issued by [Travelers] as part of this policy." The "Commercial General Liability - Contractors Coverage Form" provides that, "[t]hroughout this policy[,] the words you' and your' refer to the Named Insured shown in the Declarations, and any other person or organization qualifying as a Named Insured under this policy"(emphasis added). With respect to notice of claims, the policy provides that the insured must notify Travelers "as soon as practicable of an occurrence' or an offense which may result in a claim." The policy further provides that Travelers "will not deny coverage based solely on your delay in reporting an occurrence' or offense unless we are prejudiced by your delay."

Travelers contends that the policy provision requiring it to demonstrate prejudice before disclaiming on the basis of late notice applies only to Ogiony as the "Named Insured." We reject that contention. It is undisputed that Ciminelli qualifies as an additional insured under the Travelers policy. The term additional insured "is a recognized term in insurance contracts, and the well-understood meaning of the term is an entity enjoying the same protection as the named insured" (Kassis v Ohio Cas. Ins. Co., 12 NY3d 595, 599-600 [internal quotation marks omitted]; see Pecker Iron Works of N.Y. v Traveler's Ins. Co., 99 NY2d 391, 393; David Christa Constr., Inc. v American Home Assur. Co., 59 AD3d 1136, 1138, lv denied 12 NY3d 713). Thus, "[i]n the absence of unambiguous contractual language to the contrary, an additional insured enjoy[s] the same protection as the named insured' " (William Floyd School Dist. v Maxner, 68 AD3d 982, 986 [emphasis added]). It is well settled that, "in construing an endorsement to an insurance policy, the endorsement and the policy must be read together, and the words of the policy remain in full force and effect except as altered by the words of the endorsement" (County of Columbia v Continental Ins. Co., 83 NY2d 618, 628 [emphasis added]). Here, the additional insured endorsement modified the coverage provided under the "Commercial General Liability — Contractors Coverage Part." Specifically, the endorsement provided that the section identifying who is an insured under the policy "is amended to include any person or organization you are required to include as an additional insured on this policy by a written contract or written agreement in effect during this policy period and executed prior to the occurrence of any loss." Although Travelers correctly notes that the endorsement contains no provision requiring it to demonstrate prejudice in order to disclaim on the basis of late notice, we note that the endorsement likewise does not specifically eliminate the prejudice requirement set forth in the policy (see William Floyd School Dist., 68 AD3d at 987; see also Continental Ins. Co., 83 NY2d at 628). Thus, at a minimum, the policy creates an ambiguity, which must be resolved against Travelers as the insurer (see Del Bello v General Acc. Ins. Co. of Am., 185 AD2d 691, 692; see generally Breed, 46 NY2d at 353; Tomco Painting & Contr., Inc. v Transcontinental Ins. Co., 21 AD3d 950, 951) and, here, Travelers failed to allege or establish that it was prejudiced by Ciminelli's late notice of the claim.

With respect to Merchants' motion, Merchants correctly notes that the policy it issued to Pettit does not contain an additional insured endorsement. The "Coverages" section of the "Commercial General Liability Coverage Form," however, contains a "Supplementary Payments" section, which states that, "[i]f [Merchants] defend[s] an insured against a suit' and an indemnitee of the insured is also named as a party to the suit[,]' [Merchants] will defend the indemnitee" in the event that certain conditions are met. Those conditions include that "[t]he suit' against the indemnitee seeks damages for which the insured has assumed the liability of the indemnitee in a contract or agreement that is an insured contract' "; "[the] insurance applies to such liability assumed by the insured"; and "[t]he obligation to defend, or the cost of the defense of, that indemnitee, has also been assumed by the insured in the same insured contract . . . .' " The Merchants policy defines " insured contract' " in relevant part as "[t]hat part of any other contract or agreement pertaining to [the insured's] business (including an indemnification of a municipality in connection with work performed for a municipality) under which [the insured] assume[s] the tort liability of another party to pay for bodily injury' or property damage' to a third person or organization. Tort liability means a liability that would be imposed by law in the absence of any contract or agreement."

We agree with Ciminelli that the contract between JCC and Pettit, Merchants' insured, constitutes an "insured contract." Specifically, the contract provides that, "[t]o the fullest extent permitted by law, [Pettit] shall indemnify and hold harmless [JCC and its agents] . . . from and against claims, damages, losses and expenses, including but not limited to attorneys' fees, arising out of or resulting from performance of the [w]ork, provided that such claim, damage, loss or expense is attributable to bodily injury . . . ." Although Merchants contends that Ciminelli failed to comply with one or more of the conditions set forth in the "Supplementary Payments" section of the Merchants policy, Ciminelli's compliance with those conditions is a question of fact that precludes summary judgment. We further note that the record contains a certificate of liability insurance issued to Ciminelli, pursuant to which Ciminelli is an "[a]dditional [i]nsured[] on a primar[y] basis" under the Merchants policy issued to Pettit. Although "[i]t is well established that a certificate of insurance, by itself, does not confer insurance coverage," such a certificate is" evidence of a carrier's intent to provide coverage' " (Sevenson Envtl. Servs., Inc. v Sirius Am. Ins. Co., 74 AD3d 1751, 1753).

Hedgecock v. Pedro (Appeal No. 1)


Appeals from an order of the Supreme Court, Erie County (Gerald J. Whalen, J.), entered July 29, 2010 in a personal injury action. The order denied the motions of defendants Laura Pedro, Ellen B. Sterman and Craig Chertack for summary judgment dismissing the amended complaint.

Bouvier Partnership, LLP, Buffalo (Norman E.S. Greene of Counsel), for Defendant-Appellant Laura Pedro.
Law Office of Laurie G. Ogden, Buffalo (Pamela S. Schaller of Counsel), for Defendants-Appellants Ellen B. Sterman and Craig Chertack.
Hogan Willig, Getzville (Steven M. Cohen of Counsel), for Plaintiff-Respondent.

It is hereby ORDERED that the order so appealed from is unanimously modified on the law by granting that part of the motion of defendant Laura Pedro for summary judgment dismissing the amended complaint against her insofar as it alleges, as amplified by the bill of particulars, that plaintiff sustained a serious injury under the permanent consequential limitation of use category of serious injury within the meaning of Insurance Law § 5102 (d) and dismissing the amended complaint to that extent and as modified the order is affirmed without costs.

Memorandum: Plaintiff commenced this action seeking damages for injuries she sustained in four separate motor vehicle accidents that occurred between September 2004 and November 2006. In each of the accidents, plaintiff's vehicle was rear-ended. Supreme Court denied the motion of Laura Pedro, the defendant involved in the first accident, and the motion of Ellen B. Sterman and Craig Chertack (collectively, Sterman defendants), the defendants involved in the second accident, both of which sought summary judgment dismissing the amended complaint on the ground that plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102 (d).

We conclude that Pedro and the Sterman defendants each established their entitlement to judgment as a matter of law with respect to the categories of serious injury alleged by plaintiff, i.e., permanent consequential limitation of use, significant limitation of use and 90/180-day category. In support of their motions, Pedro and the Sterman defendants submitted plaintiff's deposition testimony concerning her long-term preexisting condition of chronic migraine headaches. With respect to the first accident, plaintiff alleged that her migraine headaches increased in frequency and intensity and that she suffered, inter alia, cervical sprain as a result of the accident. With respect to the second accident, which occurred less than two months later, plaintiff alleged that the injuries she sustained in the first accident were exacerbated and that she sustained lumbar sprain and subluxation. At her deposition, plaintiff described her preexisting migraine headache condition and two previous injuries to her back, i.e., compression fractures. We therefore conclude that Pedro and the Sterman defendants each submitted "persuasive evidence that plaintiff's alleged pain and injuries were related to . . . preexisting condition[s, and thus] plaintiff had the burden to come forward with evidence addressing [their] claimed lack of causation" (Carrasco v Mendez, 4 NY3d 566, 580; see D'Angelo v Litterer, 87 AD3d 1357).

In opposition to the motions, plaintiff submitted her entire deposition testimony, the affidavit of her treating chiropractor and the affidavit of her treating neurologist. Inasmuch as the treating neurologist discussed the combined effect of all four accidents on plaintiff's symptoms, his affidavit fails to raise a triable issue of fact whether the first or second accident caused a serious injury (see generally Zuckerman v City of New York, 49 NY2d 557, 562). With respect to the first accident, the affidavit of the treating chiropractor detailed plaintiff's worsening migraine symptoms following that accident and noted that there were muscle tension and trigger points upon palpation following that accident. The treating chiropractor also stated that plaintiff's symptoms improved prior to the second accident, but that her medical condition had not returned to the state it had been in immediately prior to the first accident. With respect to the second accident, the treating chiropractor stated that plaintiff's symptoms had not improved with treatment prior to the third accident, which occurred nearly one year after the second accident, and he outlined the quantitative restrictions of the range of motion of her cervical and lumbar spine, comparing those restrictions to the normal range of motion (see Burke v Moran, 85 AD3d 1710, 1711; cf. Houston v Geerlings, 83 AD3d 1448, 1449-1450). Further, plaintiff was granted a medical withdrawal from her graduate studies immediately following the second accident based upon the frequency and intensity of her migraine headaches, each of which lasted up to 24 hours and prevented her from driving, attending classes or doing household chores. Thus, we conclude that plaintiff raised a triable issue of fact sufficient to defeat those parts of each motion with respect to the significant limitation of use category (see generally Roll v Gavitt, 77 AD3d 1412), as well as the 90/180-day category (see generally Houston, 83 AD3d at 1450). Because plaintiff's treating chiropractor stated that plaintiff's symptoms had not improved in the nearly one-year period between the second and third accidents, we conclude that plaintiff also raised a triable issue of fact sufficient to defeat that part of the Sterman defendants' motion with respect to the permanent consequential limitation of use category (see generally Roll, 77 AD3d 1412). We further conclude, however, that plaintiff failed to raise a triable issue of fact sufficient to defeat that part of Pedro's motion with respect to the permanent consequential limitation of use category, inasmuch as plaintiff's treating chiropractor stated that her symptoms improved prior to the second accident, and thus that the court erred in denying the motion in its entirety. We therefore modify the order accordingly.

Hedgecock v. Pedro (Appeal No. 2)


Appeal from an order of the Supreme Court, Erie County (Gerald J. Whalen, J.), entered March 18, 2011 in a personal injury action. The order denied the motion of defendant Melissa Sajac for summary judgment dismissing the amended complaint.

Adams, Hanson, Finder, Hughes, Rego, Kaplan & Fish, Williamsville (Bethany A. Rubin of Counsel), for Defendant-Appellant.
Steven M. Cohen, Amherst, for Plaintiff-Respondent.

It is hereby ORDERED that the order so appealed from is modified on the law by granting the motion of defendant Melissa Sajac in part and dismissing the amended complaint against her insofar as it alleges, as amplified by the bill of particulars, that plaintiff sustained a serious injury under the permanent consequential limitation of use and significant limitation of use categories of serious injury within the meaning of Insurance Law § 5102 (d) and as modified the order is affirmed without costs.

Memorandum: Plaintiff commenced this action seeking damages for injuries she sustained in four separate motor vehicle accidents that occurred between September 2004 and November 2006. In each of the accidents, the vehicle driven by plaintiff was rear-ended. Supreme Court denied the motion of Melissa Sajac (defendant), who was involved in the fourth accident, seeking summary judgment dismissing the amended complaint against her on the ground that plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102 (d).

We conclude that the court properly determined that defendant failed to meet her initial burden of establishing her entitlement to judgment with respect to the 90/180-day category (see generally Alvarez v Prospect Hosp., 68 NY2d 320, 324). We further conclude, however, that the court erred in determining that plaintiff raised an issue of fact sufficient to defeat the motion with respect to the remaining categories of serious injury allegedly sustained by plaintiff, i.e., the permanent consequential limitation of use and significant limitation of use categories. We therefore modify the order accordingly. Defendant established that plaintiff had preexisting conditions of migraine headaches and spinal injuries, which were allegedly exacerbated and/or caused by one or more of the three previous accidents, and thus "plaintiff had the burden to come forward with evidence addressing defendant's claimed lack of causation" with respect to the fourth accident (Carrasco v Mendez, 4 NY3d 566, 580; see Webb v Bock, 77 AD3d 1414, 1415). Although plaintiff submitted the affidavit of her treating chiropractor, that affidavit failed to specify how plaintiff's conditions were caused or further exacerbated by the fourth accident (see Webb, 77 AD3d at 1415; cf. Hedgecock v Pedro [appeal No. 1], ___ AD3d ___ [Mar. 16, 2012]; see generally Carrasco, 4 NY3d at 579-580; Anania v Verdgeline, 45 AD3d 1473). Plaintiff's treating neurologist discussed the combined effect of all four accidents on her symptoms, and thus his affirmation fails to raise a triable issue of fact whether the fourth accident caused a serious injury (see Hedgecock, ___ AD3d at ___; see generally Zuckerman v City of New York, 49 NY2d 557, 562).

Harrity v. Leone


Appeals and cross appeal from an order of the Supreme Court, Monroe County (Harold L. Galloway, J.), entered February 8, 2011 in a personal injury action. The order granted in part and denied in part the respective motion and cross motions of the parties for summary judgment.

Rupp, Baase, Pfalzgraf, Cunningham & Coppola Llc, Rochester (Alison M.K. Lee of Counsel), for Defendant-Appellant-Respondent Jared M. Leone.
Law Offices Of Karen Lawrence, Dewitt (Barney F. Bilello of Counsel), for Defendant-Appellant-Respondent Martin Peterson.
Cellino & Barnes, P.C., Rochester (Sareer A. Fazili ff Counsel), for Plaintiff-Respondent-Appellant.

It is hereby ORDERED that the order so appealed from is unanimously modified on the law by denying that part of plaintiff's cross motion seeking dismissal of the first affirmative defense in each answer and reinstating that affirmative defense and by transposing defendants' surnames in the last ordering paragraph, and as modified the order is affirmed without costs.

Memorandum: Plaintiff commenced this action to recover damages for injuries she sustained when the vehicle in which she was a passenger, driven by defendant Jared M. Leone, collided with a vehicle driven by defendant Martin Peterson. Supreme Court granted those parts of defendants' respective motion and cross motion for summary judgment dismissing plaintiff's claims under the significant disfigurement and the 90/180-day categories of serious injury within the meaning of Insurance Law § 5102 (d), but denied those parts of their motions on the issue of negligence and on plaintiff's claims under the permanent consequential limitation of use and the significant limitation of use categories of serious injury. In addition, the court granted that part of plaintiff's cross motion seeking dismissal of the affirmative defenses alleging plaintiff's culpable conduct, failure to wear a seatbelt, and improper service, but denied that part of plaintiff's cross motion for partial summary judgment on the issue of serious injury. This appeal by defendants and cross appeal by plaintiff ensued. We note at the outset that plaintiff has abandoned any contention with respect to the serious disfigurement category of serious injury and we therefore do not address it (see Ciesinski v Town of Aurora, 202 AD2d 984, 984).

Contrary to plaintiff's contention, the court properly granted those parts of defendants' respective motion and cross motion with respect to the 90/180-day category of serious injury. Defendants submitted plaintiff's medical records establishing that there are no "objective medical findings of a medically determined injury or impairment of a nonpermanent nature which caused the alleged limitations on [her] daily activities" within 90 of the 180 days immediately following the occurrence of the injury or impairment (Dabiere v Yager, 297 AD2d 831, 832, lv denied 99 NY2d 503; see Insurance Law § 5102 [d]; O'Brien v Bainbridge, 89 AD3d 1511, 1512-1513). Based on the record before us we agree with the court's reasoning in its decision that plaintiff failed to raise an issue of fact with respect thereto (see generally Linton v Nawaz, 62 AD3d 434, 443, affd 14 NY3d 821). Contrary to the contentions of defendants, however, the court properly denied those parts of their motion and cross motion with respect to the permanent consequential limitation of use and significant limitation of use categories of serious injury. Defendants met their initial burden with respect to those categories by submitting the affirmation of a physician, who concluded that plaintiff had only degenerative changes in her spine and had suffered only a strain injury, and that her subjective complaints were not based on objective medical findings (see generally Eteng v Dajos Transp., 89 AD3d 506, 507; Herbst v Marshall [appeal No. 2], 49 AD3d 1194, 1195). Plaintiff, however, raised an issue of fact with respect to those two categories by submitting the affidavit of her treating physician, who outlined the objective medical evidence of plaintiff's injury in those two categories, including a positive EMG test indicating acute bilateral radiculopathy at the L5 nerve root (see Frizzell v Giannetti, 34 AD3d 1202, 1203), positive straight leg tests (see id.; see also Lavali v Lavali, 89 AD3d 574, 575), positive Patrick tests (see Parczewski v Leone, 14 Misc 3d 1218 [A], 2003 NY Slip Op 50065[U], *2 [Sup Ct, Queens County]; see also Navedo v Jaime, 32 AD3d 788, 788), and notations of muscle spasms and trigger points (see Pagels v P.V.S. Chems., Inc., 266 AD2d 819, 819). Plaintiff's treating physician further raised an issue of fact by opining that the accident was the cause of plaintiff's lumbar spine injuries and continued disability, and by quantifying plaintiff's resulting limitations. Plaintiff's treating physician thus controverted the opinion offered by the physician in defendants' submissions that the worsening of plaintiff's physical problems were not caused by the trauma sustained in the accident (see Brown v Dunlap, 4 NY3d 566, 577-578; cf. Pommells v Perez, 4 NY3d 566, 575).

Contrary to the contention of the parties, the court did not dismiss the affirmative defense in Leone's answer that plaintiff failed to mitigate her damages. The order on appeal specifies that the court dismissed a total of three affirmative defenses, i.e., plaintiff's culpable conduct, plaintiff's failure to wear a seat belt, and improper service. Leone alleged the first two, in his first and third affirmative defenses, while Peterson alleged all three, in his first through third affirmative defenses. It is clear from the record that the court merely transposed the names of those defendants in the second ordering paragraph, and we therefore modify the order accordingly. We conclude, however, that the court erred in granting that part of plaintiff's cross motion seeking dismissal of the affirmative defense of plaintiff's culpable conduct in each answer. There are records indicating that the source of plaintiff's burn to her hand was hot butter, an injury sustained at plaintiff's residence, while by plaintiff's own account her hand was burned during the accident, when meat juices spilled from a pan of pot roast that she was carrying on her lap in the vehicle. We conclude that defendants are entitled to explore that discrepancy as well as whether plaintiff's conduct in carrying a pan of pot roast on her lap was culpable. "If there is any doubt as to the availability of a defense, it should not be dismissed" (Warwick v Cruz, 270 AD2d 255). Likewise, although we would agree with the court that carrying the pan of pot roast was not a causative factor of the accident or of plaintiff's spinal injuries, it could have been a causative factor of the burn on her hand. We thus further modify the order by reinstating that affirmative defense in each answer.

Zurich American Ins. Co. v. Illinois National Ins. Co.


Melito & Adolfsen P.C., New York (Ignatius John Melito of counsel), for appellant.
Bevan, Mosca, Giuditta & Zarillo, P.C., New York (Anthony J. Zarillo, Jr. of counsel), for respondent.

Order, Supreme Court, New York County (Bernard J. Fried, J.), entered January 5, 2011, which granted defendant Illinois National Insurance Company's motion for summary judgment dismissing the complaint as against it and declaring that it has no obligation to defend plaintiff Moretrench American Corporation in the underlying property damage action, and so declared, and denied plaintiffs' cross motion for summary judgment declaring in their favor, unanimously modified, on the law, to deny the part of Illinois National's motion that sought dismissal of the complaint, and otherwise affirmed, without costs.

The Illinois National "owner controlled insurance policy" (OCIP) at issue defines "contractors" as "contractors who have executed a written agreement pertaining to said Contractors['] performance of work at the Project Site, have been enrolled in this insurance program, and who performs [sic] operations at the Project Site in connection with the Project" (emphasis added). Since plaintiff Moretrench, a subcontractor on the Project, did not receive the written agreement pertaining to its work on the Project or complete its application for enrollment in the insurance program until nearly four weeks after the damage alleged in the underlying complaint occurred, it does not meet the policy definition of "contractor" and is not covered under the policy (see Hartford Underwriters Ins. Co. v American Intl. Group, 300 AD2d 24, 26 [2002]).

Plaintiffs' argument that Illinois National is equitably estopped to deny coverage to Moretrench is unsupported by the record (see River Seafoods, Inc. v JPMorgan Chase Bank, 19 AD3d 120, 122 [2005]). The documentary evidence does not establish that Illinois National (through its agents) ever conceded that Moretrench was covered during the relevant period (2006). Nor could Moretrench have relied on any such concession years after the underlying complaint was filed and Illinois National disclaimed coverage. Moreover, Moretrench cannot invoke equitable estoppel against Illinois National on the basis of promises made by defendant Urban Foundation Engineering, LLC (the contractor that subcontracted with Moretrench). We have considered plaintiffs' remaining arguments and find
them unavailing.

Livia v. Atkins

Law Office of R. J. Adams, Jr., PLLC, Garden City, N.Y. (Maryellen David of counsel), for appellants.
Malone, Tauber & Sohn, P.C., Freeport, N.Y. (Stuart T. Spitzer of counsel), for respondent.

DECISION & ORDER
In an action to recover damages for personal injuries, the defendants appeal from an order of the Supreme Court, Nassau County (Sher, J.), dated June 29, 2011, which denied the motion of the defendant Beach & Bay Leasing Corp. for summary judgment dismissing the complaint insofar as asserted against it on the ground that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d).

ORDERED that the appeal by the defendant David Atkins is dismissed, as he is not aggrieved by the order appealed from (see CPLR 5511); and it is further,

ORDERED that the order is affirmed; and it is further,

ORDERED that one bill of costs is awarded to the plaintiff, payable by the defendant Beach & Bay Leasing Corp.

The defendant Beach & Bay Leasing Corp. (hereinafter Beach & Bay) met its prima facie burden of showing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident (see Toure v Avis Rent A Car Sys., 98 NY2d 345; Gaddy v Eyler, 79 NY2d 955, 956-957). The plaintiff alleged, inter alia, that as a result of the subject accident, his right shoulder sustained certain injuries. Beach & Bay submitted competent medical evidence establishing, prima facie, that the alleged injuries to the shoulder did not constitute a serious injury within the meaning of Insurance Law § 5102(d) (see Ciancio v Nolan, 65 AD3d 1273).

However, in opposition, the plaintiff submitted competent medical evidence raising a triable issue of fact as to whether the alleged injuries to his right shoulder constituted a serious injury under the permanent consequential limitation of use and/or significant limitation of use categories of Insurance Law § 5102(d) (see Perl v Meher, 18 NY3d 208, 215-218). Accordingly, the Supreme Court properly denied the motion of Beach & Bay for summary judgment dismissing the complaint insofar as asserted against it.

Biascochea v. Boves

Annette G. Hasapidis, South Salem, for appellant.
Hardin, Kundla, McKeon & Poletto, P.A., New York (Stephen P. Murray of counsel), for Grisel Boves, D-J Ambulette Service, Inc., and D & J Service, Inc., respondents.
Law Offices of Composto & Composto, Brooklyn (Andrea F. Composto of counsel), for David W. Ramsey, respondent.

Order, Supreme Court, Bronx County (Mark Friedlander, J.), entered August 26, 2010, which, to the extent appealed from as limited by the briefs, granted the motion of defendants D & J Service, Inc., D-J Ambulette Service, Inc., and Grisel Boves, and the cross motion of defendant David W. Ramsey, for summary judgment dismissing the complaint based on the failure to establish a serious injury within the meaning of Insurance Law § 5102(d), unanimously reversed, on the law, without costs, the motion and cross motion denied, and the complaint reinstated with respect to plaintiff's allegations of permanent consequential limitation of use of a body organ or member and/or significant limitation of use of a body function or system.

Defendants met their burden on summary judgment by tendering the affirmed reports of their orthopedist and neurologist (see Spencer v Golden Eagle, Inc., 82 AD3d 589, 590 [2011]). Defendants' radiologist's opinions, however, were too equivocal to satisfy defendants' burden with respect to showing degeneration in an effort to disprove causation (see Reyes v Diaz, 82 AD3d 484 [2011]).

In opposition, plaintiff raised a triable issue of fact with respect to her knee injuries. Defendant's radiologist, after reviewing an MRI of plaintiff's knee, made findings which she described as due to either "a tear or prior surgery." However, plaintiff testified that prior to this accident, she never suffered injuries to her left knee. In addition, her treating physician found limitations of motion in her left knee, findings which conflicted with the reports from defendant's physicians, and raised a triable issue of fact (see Jacobs v Rolon, 76 AD3d 905 [2010]).

While plaintiff did not undergo contemporaneous range of motion measurements, they are not necessary, in light of her visit to Dr. Eliav, two days after her accident, which established the requisite causation (see Perl v Meher, 18 NY3d 208 [2011]). Although Dr. Rose did not expressly address defendants' expert's conclusion that the injuries were degenerative in origin, he relied on the same MRI report as Dr. Berkowitz, and attributed plaintiff's injuries to a "different, yet altogether equally plausible, cause" (see Yuen v Arka Memory Cab Corp., 80 AD3d 481, 482 [2011]), thus raising a triable issue of fact with regard to her left knee injuries (see Linton v Nawaz, 62 AD3d 434, 439-440 [2009], affd 14 NY3d 821 [2010]).

Duran v. Kabir


The Sullivan Law Firm, New York (James A. Domini of
counsel), for appellant.
The Noll Law Firm, P.C., Syosset (Richard E. Noll of counsel),
for respondent.

Order, Supreme Court, Bronx County (Diane A. Lebedeff, J.), entered August 26, 2011, which, in this action for personal injuries sustained in a motor vehicle accident, denied defendant's motion for summary judgment dismissing the complaint, unanimously affirmed, without costs.

Defendant made a prima facie showing of his entitlement to judgment as a matter of law. Defendant submitted expert medical reports of a neurologist, who found normal ranges of motion, and of a radiologist who opined that changes shown in MRIs of the lumbar spine of the then 30-year-old plaintiff were degenerative, and that the MRI of the cervical spine showed no injury (see Spencer v Golden Eagle, Inc., 82 AD3d 589, 590-591 [2011]).

In opposition, plaintiff submitted the affirmed reports of her physicians, who found limitations in the range of motion of plaintiff's cervical and lumbar spine shortly after the accident and approximately two years later. Plaintiff also submitted the MRI reports of a radiologist, who noted disc bulges in both the cervical and lumbar spine. This evidence raises triable issues of fact as to whether plaintiff sustained a "significant limitation of use" and "permanent consequential limitation of use" of the cervical and lumbar spine (Insurance Law § 5102[d]; see Fuentes v Sanchez, 91 AD3d 418 [2012]). While the MRI reports are unsworn, they are admissible, as the reports and MRI films were reviewed by one of plaintiff's physicians and were incorporated into the findings of plaintiff's doctors (see Peluso v Janice Taxi Co., Inc., 77 AD3d 491, 492 [2010]). Plaintiff adequately explained the gap in treatment by submitting the affirmed report of a doctor, who opined that plaintiff had "reached an endpoint" in her physical therapy, and that there was no evidence that she was actively improving therefrom (see Mitchell v Calle, 90 AD3d 584, 585 [2011]).

Plaintiff's physicians also addressed defendant's findings of degeneration by opining that the injuries were causally related to the accident and that the accident aggravated a previously asymptomatic condition (see Yuen v Arka Memory Cab Corp., 80 AD3d 481, 482 [2011]).

Factual issues as to liability are raised by the parties' conflicting deposition testimony. Such issues include whether plaintiff had a green arrow in her favor; whether defendant had the green light in his favor; and whether defendant's taxicab was stopped or moving prior to plaintiff's vehicle turn into the
intersection (see e.g. Shepperson v Salas, 216 AD2d 199 [1995]).

McArthur v. Act Limo, Inc.


Marjorie E. Bornes, New York, for appellants.
Silbowitz, Garafola, Silbowitz, Schatz & Frederick, L.L.P., New York (Howard E. Frederick of counsel), for respondent.

Order, Supreme Court, Bronx County (Ben R. Barbato, J.), entered August 29, 2011, which, insofar as appealed from, denied defendants' motion for summary judgment dismissing the claims asserted by plaintiff Everett McArthur, unanimously modified, on the law, to the extent of granting the motion as to plaintiff McArthur's claims for injuries to his cervical and lumbar spine, 90/180-day injury, and permanent loss of use claim, and otherwise affirmed, without costs.

Plaintiff McArthur, who was involved in four accidents prior to the accident that is the subject of this litigation, asserts that he sustained a serious injury pursuant to Insurance Law § 5102(d). He claims that as a result of this most recent accident, he suffered injuries to, inter alia, his cervical and lumbar spine, right shoulder, neck and right hip. MRIs taken before this accident showed cervical and lumbar herniations and bulges for which plaintiff was treated.

Defendants met their initial burden with respect to plaintiff's claims of injury to his neck, back and shoulder by submitting affirmed reports of a radiologist and orthopedist, which asserted that plaintiff's neck and back injuries pre-existed the accident and were degenerative in nature. The reports further asserted that any injury to plaintiff's shoulder had resolved (see Toure v Avis Rent A Car Systems, Inc., 98 NY2d 345, 350-352 [2002]; Grant v United Pavers Co., Inc., 91 AD3d 499 [2012]).

In opposition, plaintiff failed to raise an issue of fact as to his claimed cervical and lumbar spine injuries, since his doctors ignored the effect of his prior accidents, and did not present any evidence that those claimed injuries were different from the injuries that predated the subject accident (see Mitrotti v Elia, 91 AD3d 449 [2012]; compare, Fuentes v Sanchez, 91 AD3d 418 [2012]). However, plaintiff raised an issue of fact as to his right shoulder injury by relying on the sworn reports of the orthopedic surgeon who performed arthroscopic surgery to repair a tear. The reports explained how the injury was caused by the accident and quantified continuing limitations in the right shoulder, some two years after the surgery (see Perl v Meher, 18 NY3d 208, 219 [2011]; Jang Hwan An v Parra, 90 AD3d 574 [2011]).

Plaintiff does not dispute that he did not meet the requirements for establishing a 90/180-day claim and that he has not suffered a permanent loss of use of any body organ or function.

Lipscomb v. Cohen


Calendar Date: November 22, 2011

Before: Mercure, Acting P.J., Peters, Rose, Lahtinen and Garry, JJ.

Costello, Cooney & Fearon, P.L.L.C., Camillus (Nicole M. Marlow-Jones of counsel), for appellants.
Nicholas, Perot, Smith, Bernhardt & Zosh, Akron (Craig H. Bernhardt of counsel), for respondents.

MEMORANDUM AND ORDER

Lahtinen, J.

Appeal from an order of the Supreme Court (Sherman, J.), entered November 19, 2010 in Tompkins County, which, among other things, denied defendants' cross motion for summary judgment dismissing the complaint.

Plaintiff Royal Lipscomb (hereinafter plaintiff) and his wife, derivatively, commenced this action seeking damages for injuries allegedly sustained when plaintiff's car was struck from behind by a vehicle operated by defendant Stephen J. Cohen and owned by defendant Claude Cohen. Following discovery, plaintiffs moved for summary judgment on the issue of liability and defendants cross-moved for summary judgment dismissing the action on the ground that plaintiff had not sustained a serious injury (see Insurance Law § 5102 [d]). Supreme Court denied both motions, and defendants appeal.

The accident occurred while plaintiff was en route to his November 14, 2006 appointment with his family physician, John-Paul Mead, for a diabetic checkup. At the time of the accident, plaintiff was 62 years old and, importantly, had no prior medical history of problems with his neck. After the accident, he continued to his appointment and, at some point thereafter, he scheduled an appointment to return to Mead regarding his neck, which he testified started bothering him following the accident. Thereafter, plaintiff received extensive treatment by many healthcare providers. In January 2007, he returned to Mead, received pain medication and started a regimen of physical therapy. In June 2007, he was referred to a neurosurgeon, Gerald Zupruk, whose treatment included, among other things, muscle relaxants and a referral for several steroid injections. At the end of December 2007, Zupruk suggested that plaintiff continue exercises and return on an "as-needed basis only." Plaintiff's neck pain continued throughout 2008, but he had other unrelated health issues and did not seek further treatment for his neck until the pain became unbearable at the end of 2008. In early December 2008, Mead referred him to orthopedic surgeon Seth Zeidman, who he saw in January 2009. Following further tests and visits, Zeidman recommended an anterior cervical disc fusion at C3-4, C4-5, which was performed in September 2009 by John Fahrbach, a neurosurgeon.

Disputed issues on appeal include whether plaintiffs produced sufficient proof regarding causation, adequately explained the gap in treatment in 2008, and set forth ample evidence of a significant limitation of use of body function or system. At this procedural point, the evidence on such issues is considered in the light most favorable to plaintiffs (see Gronski v County of Monroe, 18 NY3d 374, 381 [2011]).

On the causation issue, Mead and Zupruk broadly related plaintiff's neck problems to the accident, and the neurosurgeon who conducted an independent medical examination opined that the injuries were related to both the accident and plaintiff's degenerative condition. More detailed opinions were offered by treating physicians Zeidman and Fahrbach, who had reviewed plaintiff's medical history, including the pertinent X ray and MRIs. Citing the lack of a preaccident history of cervical dysfunction or pain, the doctors unequivocally opined that the accident destabilized plaintiff's cervical spine causing his acute and chronic injuries to the neck, and such injuries resulted in the required surgical intervention. Given that several doctors rejected plaintiff's degenerative condition as the sole cause of his injury, and with no preaccident medical history of neck pain, there is sufficient evidence to raise a factual question regarding causation (see Perl v Meher, 18 NY3d 208, 218-219 [2011]).

Regarding the gap in plaintiff's treatment during 2008, "a cessation of treatment is not dispositive" on a summary judgment motion, although "a plaintiff who terminates therapeutic measures following the accident, while claiming 'serious injury,' must offer some reasonable explanation for having done so" (Pommells v Perez, 4 NY3d 566, 574 [2005]). Here, plaintiff explained that, as of the end of December 2007, Zupruk gave him tips on helpful exercises and only sought to see him on an "as-needed" basis in the future; he continued to have constant neck pain, but had no desire to undergo surgery, and needed to deal with other health issues in 2008; and he sought further treatment when the pain became unbearable towards the end of 2008. He provided a reasonable explanation for the gap and he was not required to "incur the additional expense of consultation, treatment or therapy, merely to establish the seriousness or causal relation of his injury" (id. at 577).

The affirmations of Fahrbach and Zeidman were adequate to raise a factual issue regarding a significant limitation. In addition to opining that the accident caused the injuries that necessitated plaintiff's surgery, they set forth a sufficient description of the various resulting limitations on plaintiff's activities and movements to survive summary dismissal (see Toure v Avis Rent A Car Sys., 98 NY2d 345, 350-351 [2002]). The doctors' opinions included: "[plaintiff] suffered a qualitative limitation which restricted his ability to perform repetitive pushing, pulling, and reaching overhead"; "he has a qualitative limitation to his ability to perform any overhead work, any lifting for an extended period of time"; and "[h]e should not lift more than 20 pounds at any one given time, or repetitively lift any weight of more than 10 pounds with absolutely no overhead work whatsoever."

Finally, although Supreme Court denied defendants' cross motion in its entirety upon finding ample proof of a serious injury, we note that plaintiffs alleged in their pleadings a serious injury under other categories of Insurance Law § 5102 (d), including significant disfigurement, permanent loss of use of a body organ, member, function or system, permanent consequential limitation of use of a body organ or member and the 90/180-day category. Defendants' cross motion should have been granted as to these categories since plaintiffs failed to raise a triable issue with respect thereto.

Mercure, Acting P.J., Peters, Rose and Garry, JJ., concur.

ORDERED that the order is modified, on the law, without costs, by reversing so much thereof as denied defendants' cross motion for summary judgment dismissing that part of the complaint alleging that plaintiff Royal Lipscomb suffered a serious injury in the significant disfigurement, permanent loss of use, permanent consequential limitation and 90/180-day categories; cross motion granted to that extent, partial summary judgment awarded to defendants and said claims dismissed; and, as so modified, affirmed.

Radford v. Peerless Insurance Company


Appeal from an order of the Supreme Court, Oneida County (Anthony F. Shaheen, J.), entered June 6, 2011. The order granted the motion of defendant Ladd's Agency, Inc. for summary judgment dismissing the amended complaint against it.

Gustave J. Detraglia, Jr., Utica, for Plaintiff-Appellant.
Keidel, Weldon & Cunningham, LLP, Syracuse (Lori A. Eaton of Counsel), for Defendant-Respondent.

It is hereby ORDERED that the order so appealed from is unanimously affirmed without costs.

Memorandum: In this action seeking damages for, inter alia, breach of contract, plaintiff contends that Supreme Court erred in granting the motion of defendant Ladd's Agency, Inc. (Ladd) for summary judgment dismissing the amended complaint against it. We reject that contention.

The amended complaint contains claims against Ladd under theories of negligence, breach of contract, negligent misrepresentation and breach of fiduciary duty, arising from Ladd's alleged failure to procure certain insurance coverage on plaintiff's behalf. Addressing first the negligent misrepresentation claim, it is well settled that "liability for negligent misrepresentation has been imposed only on those persons who possess unique or specialized expertise, or who are in a special position of confidence and trust with the injured party such that reliance on the negligent misrepresentation is justified" (Kimmell v Schaefer, 89 NY2d 257, 263; see Greenberg, Trager & Herbst, LLP v HSBC Bank USA, 17 NY3d 565, 578; Murphy v Kuhn, 90 NY2d 266, 270). Here, plaintiff does not contend that Ladd possessed unique or specialized expertise. We conclude that the court properly granted Ladd's motion with respect to the negligent misrepresentation and breach of fiduciary duty claims because Ladd met its initial burden by establishing that it did not have a special relationship with plaintiff and that it did not owe a fiduciary duty to plaintiff (see Murphy, 90 NY2d at 270-272; Sawyer v Rutecki, 92 AD3d 1237, ___; see generally Zuckerman v City of New York, 49 NY2d 557, 562), and plaintiff failed to raise a triable issue of fact in opposition (see Obomsawin v Bailey, Haskell & Lalonde Agency, Inc., 85 AD3d 1566, 1567, lv denied 17 NY3d 710; see generally Zuckerman, 49 NY2d at 562).

The court also properly granted those parts of the motion with respect to the negligence and breach of contract claims against Ladd because there was no special relationship between plaintiff and Ladd (see Hoffend & Sons, Inc. v Rose & Kiernan, Inc., 7 NY3d 152, 158, affg 19 AD3d 1056; Sawyer, 92 AD3d at ___; Obomsawin, 85 AD3d at 1567). Furthermore, plaintiff did not make a specific request for coverage beyond that which Ladd procured for her (see Obomsawin, 85 AD3d at 1567). Contrary to plaintiff's contention, her "general request for [additional] coverage will not satisfy the requirement of a specific request for a certain type of coverage" (Hoffend & Sons, Inc., 7 NY3d at 158). Finally, those claims are barred by plaintiff's receipt of the amended insurance policy prior to the loss (see Gui's Lbr. & Home Ctr., Inc. v Pennsylvania Lumbermens Mut. Ins. Co., 55 AD3d 1389, 1390; Hoffend & Sons, Inc., 19 AD3d at 1057-1058; cf. Page One Auto Sales, Inc. v Brown & Brown of N.Y., 83 AD3d 1482, 1483).

Paveljack v. Cirino

Appeal and cross appeal from an order of the Supreme Court, Niagara County (Richard C. Kloch, Sr., A.J.), entered March 23, 2011 in a personal injury action. The order granted in part and denied in part the motion of defendant for summary judgment and denied the cross motion of plaintiff for partial summary judgment.

Burgio, Kita & Curvin, Buffalo (William J. Kita of Counsel), for Defendant-Appellant-Respondent.
Hogan Willig, Getzville (John B. Licata of Counsel), for Plaintiff-Respondent-Appellant.


It is hereby ORDERED that the order so appealed from is unanimously modified on the law by granting the motion in its entirety and dismissing the complaint and as modified the order is affirmed without costs.

Memorandum: Plaintiff commenced this action seeking damages for injuries she allegedly sustained when a vehicle driven by defendant ran a red light and struck the front driver's side of a vehicle driven by plaintiff. According to plaintiff, she sustained a serious injury under four categories set forth in Insurance Law § 5102 (d), i.e., permanent loss of use, permanent consequential limitation of use, significant limitation of use and the 90/180-day category. Defendant moved for summary judgment dismissing the complaint on the ground that plaintiff did not sustain a serious injury under any of those categories, and plaintiff cross-moved for partial summary judgment on liability and on the ground that she sustained a serious injury to her cervical spine. Supreme Court granted that part of defendant's motion for summary judgment with respect to the permanent loss of use and 90/180-day categories, but determined that there were triable issues of fact with respect to the permanent consequential limitation of use and significant limitation of use categories. The court denied plaintiff's cross motion in its entirety. Defendant appeals, and plaintiff cross-appeals.

We agree with the court that defendant met his initial burden of demonstrating that plaintiff did not sustain a serious physical injury under the four categories set forth in Insurance Law § 5102 (d) and that plaintiff failed to raise an issue of fact with respect to the permanent loss of use and 90/180-day categories. We further conclude, however, that plaintiff also failed to submit the requisite objective proof of injury to raise an issue of fact with respect to the two remaining categories, and we therefore modify the order by granting defendant's motion in its entirety.

The records of plaintiff's own treating physician and physical therapist establish that any complaints that plaintiff had immediately following the accident had fully resolved within approximately 1½ months. Although an MRI later showed a slight disc herniation in plaintiff's neck, that MRI was not performed until six months after the accident.

Similarly, while plaintiff had renewed complaints of pain with accompanying loss of range of motion in her cervical spine approximately four months after the accident, she offered no explanation for the cessation of her symptoms and absence of treatment therefor with respect to the gap of approximately 2½ months following the initial full resolution of her complaints (see generally Pommells v Perez, 4 NY3d 566, 572; McCarthy v Bellamy, 39 AD3d 1166, 1166-1167). Moreover, although evidence of a disc herniation combined with objective proof of limitation of range of motion may be sufficient to raise an issue of fact with respect to serious injury (see e.g. Ellithorpe v Marion [appeal No. 2], 34 AD3d 1195, 1196-1197; Ejzerman v Cruz, 309 AD2d 893), the records upon which plaintiff relies fail to "recite the tests used to ascertain the degree of plaintiff's loss of range of motion" (Weaver v Town of Penfield, 68 AD3d 1782, 1785).

Gerena v. Huiying Lin


Marjorie E. Bornes, New York, N.Y., for appellants.
The Bongiorno Law Firm, PLLC, Mineola, N.Y. (Aaron C. Gross of counsel), for respondent.

DECISION & ORDER

In an action to recover damages for personal injuries, the defendants appeal from an order of the Supreme Court, Kings County (Rothenberg, J.), dated September 22, 2011, which denied their motion for summary judgment dismissing the complaint on the ground that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident.

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

The defendants met their prima facie burden of showing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident (see Toure v Avis Rent A Car Sys., 98 NY2d 345; Gaddy v Eyler, 79 NY2d 955, 956-957). The defendants submitted competent medical evidence establishing, prima facie, that the alleged injuries to the lumbosacral region of the plaintiff's spine did not constitute a serious injury within the meaning of Insurance Law § 5102(d) (see Rodriguez v Huerfano, 46 AD3d 794, 795), and, in any event, were not caused by the accident (cf. Jilani v Palmer, 83 AD3d 786, 787). The defendants also submitted competent medical evidence establishing, prima facie, that the alleged injuries to the cervical region of the plaintiff's spine did not constitute a serious injury within the meaning of Insurance Law § 5102(d) (see Rodriguez v Huerfano, 46 AD3d at 795).

In opposition, the plaintiff failed to raise a triable issue of fact. Accordingly, the Supreme Court should have granted the defendants' motion for summary judgment dismissing the complaint.

Newman v. Surf Glass Corp.


Elovich & Adell, Long Beach, N.Y. (A. Trudy Adell, Mitchel Sommer, and Darryn Solotoff of counsel), for appellants.
Glenn J. Ingoglia, Island Park, N.Y., for respondent.

DECISION & ORDER

In an action to recover damages for personal injuries, the defendants Surf Glass Corp. and Adam T. Hill appeal from so much of an order of the Supreme Court, Nassau County (DeStefano, J.), dated September 12, 2011, as denied that branch of their motion, made jointly with the defendant Harold Michelman, which was for summary judgment dismissing the complaint insofar as asserted against them, on the ground that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident.

ORDERED that the order is affirmed insofar as appealed from, with costs.

The appellants, Surf Glass Corp. and Adam T. Hill, failed to meet their prima facie burden of showing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident (see Toure v Avis Rent A Car Sys., 98 NY2d 345; Gaddy v Eyler, 79 NY2d 955, 956-957). The appellants failed to address, much less satisfy their burden with respect to, the plaintiff's allegations that her temporomandibular joints, and brain, sustained serious injuries within the meaning of Insurance Law § 5102(d) as a result of the subject accident (see Safer v Silbersweig, 70 AD3d 921, 922; Hughes v Cai, 31 AD3d 385, 385-386).

Since the appellants failed to meet their prima facie burden, it is unnecessary to consider whether the plaintiff's opposition papers were sufficient to raise a triable issue of fact (see Safer v Silbersweig, 70 AD3d at 922; Hughes v Cai, 31 AD3d at 385-386).

Accordingly, the Supreme Court properly denied that branch of the appellants' motion which was for summary judgment dismissing the complaint insosfar as asserted against them.
Ramirez v. Maniscallo


Richard T. Lau, Jericho, N.Y. (Joseph G. Gallo of counsel), for appellant.

DECISION & ORDER

In an action to recover damages for personal injuries, the defendant appeals from an order of the Supreme Court, Suffolk County (Spinner, J.), dated September 27, 2011, which denied his motion for summary judgment dismissing the complaint on the ground that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident.

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

The defendant met his prima facie burden of showing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident (see Toure v Avis Rent A Car Sys., 98 NY2d 345; Gaddy v Eyler, 79 NY2d 955, 956-957). The defendant submitted competent medical evidence establishing, prima facie, that the alleged injuries to the cervical and lumbar regions of the plaintiff's spine did not constitute serious injuries within the meaning of Insurance Law § 5102(d) (see Rodriguez v Huerfano, 46 AD3d 794, 795), and, in any event, were not caused by the accident (see Jilani v Palmer, 83 AD3d 786, 787). The defendant also submitted evidence establishing, prima facie, that the plaintiff did not sustain a medically-determined injury of a nonpermanent nature which prevented her, for 90 of the 180 days following the subject accident, from performing her usual and customary activities (see McIntosh v O'Brien, 69 AD3d 585, 587).

The plaintiff, who defaulted in opposing the defendant's motion for summary judgment dismissing the complaint, necessarily failed to raise a triable issue of fact in opposition. Accordingly, the Supreme Court should have granted the defendant's motion.


Persaud v. Bovis Lend Lease, Inc.


Hardin, Kundla, McKeon & Poletto, P.A., New York, N.Y. (Stephen J. Donahue of counsel), for third-party defendant-appellant.
Wilson Elser Moskowitz Edelman & Dicker, LLP, New York, N.Y. (Aviva Stein of counsel), for defendants third-party plaintiffs-respondents.

DECISION & ORDER

In an action to recover damages for personal injuries, etc., the third-party defendant appeals from (1) a decision of the Supreme Court, Rockland County (Weiner, J.), dated April 19, 2011, and (2) an order of the same court entered May 25, 2011, which, upon the decision, denied its motion for summary judgment dismissing the third-party complaint and granted that branch of the cross motion of the defendants third-party plaintiffs which was for summary judgment on their third-party cause of action for contractual indemnification.

ORDERED that the appeal from the decision is dismissed, as no appeal lies from a decision (see Schicchi v J.A. Green Constr. Corp., 100 AD2d 509, 509-510); and it is further,

ORDERED that the order is reversed, on the law, that branch of the cross motion of the defendants third-party plaintiffs which was for summary judgment on their third-party cause of action for contractual indemnification is denied, and the third-party defendant's motion for summary judgment dismissing the third-party complaint is granted; and it is further,

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

The plaintiff Lawrence Persaud (hereinafter the injured plaintiff) was employed as an electrician by Gessin Electrical Contractors, Inc. (hereinafter Gessin). Gessin was a sub-subcontractor on a construction project pursuant to a subcontract it entered into with Building Technologies Group, Inc. (hereinafter BTG). After the injured plaintiff was injured on the job, he and his wife, suing derivatively, commenced the instant action against the defendants Bovis Lend Lease, Inc., Hunt Construction Group, Inc., Queens Ballpark Company, LLC, Sterling Equities, Inc., and Hunt/Bovis Lend Lease Alliance II, a Joint Venture (hereinafter collectively the defendants). The defendants commenced a third-party action against Gessin alleging causes of action for contribution, common-law indemnification, and contractual indemnification, and to recover damages for breach of contract for failure to procure insurance. Gessin moved for summary judgment dismissing the third-party complaint, and the defendants cross-moved for summary judgment against Gessin on the third-party causes of action. In an order entered May 25, 2010, the Supreme Court denied Gessin's motion and granted that branch of the defendants' cross motion which was for summary judgment on the third-party cause of action for contractual indemnification. Gessin appeals, and we reverse.

An employer may be held liable for contribution or indemnification only if the employee has sustained a grave injury as defined by the Workers' Compensation Law or when there is a "written contract entered into prior to the accident or occurrence by which the employer had expressly agreed to contribution or indemnification of the claimant" (Workers' Compensation Law § 11; see Majewski v Broadalbin-Perth Cent. School Dist., 91 NY2d 577, 582; Mikulski v Adam R. West, Inc., 78 AD3d 910, 911; Blackburn v Wysong & Miles Co., 11 AD3d 421). Grave injuries are those injuries that are listed in the statute and are determined to be permanent (see Blackburn v Wysong & Miles Co., 11 AD3d at 422; Ibarra v Equipment Control, 268 AD2d 13, 17-18). Gessin established, prima facie, that the injured plaintiff did not sustain a grave injury as defined by the statute, and the defendants failed to raise a triable issue of fact in opposition. Therefore, the Supreme Court erred in denying those branches of Gessin's motion which were for summary judgment dismissing the defendants' third-party causes of action for common-law indemnification and contribution.

Further, the defendants were not entitled to contractual indemnification from Gessin, and Gessin was not required to procure insurance on behalf of the defendants. Although, even in the absence of grave injury, an employer may be subject to an indemnification claim " based upon a provision in a written contract'" (Rodrigues v N & S Bldg. Contrs., Inc., 5 NY3d 427, 429-430, quoting Workers' Compensation Law § 11), the causes of action for contractual indemnification and to recover damages for breach of contract for failure to procure insurance were based upon a promise found in the prime agreement between the subcontractor BTG, and the defendant general contractor Hunt Bovis/Lend Lease Alliance II, to which Gessin was not a signatory. Despite the fact that the construction subcontract signed by Gessin incorporated the main agreement by reference, " [u]nder New York law, incorporation clauses in a construction subcontract, incorporating prime contract clauses by reference into a subcontract, bind a subcontractor only as to prime contract provisions relating to the scope, quality, character and manner of the work to be performed by the subcontractor'" (Waitkus v Metropolitan Hous. Partners, 50 AD3d 260, 261, quoting Bussanich v 310 E. 55th St. Tenants, 282 AD2d 243, 244; see Navillus Tile, Inc. v Bovis Lend Lease LMB, Inc., 74 AD3d 1299, 1302). Accordingly, the provisions in the prime agreement related to contractual indemnification for an employee's injuries and insurance procurement were not incorporated by reference into the subcontract between Gessin and BTG and, thus, the defendants failed to establish, prima facie, the existence of a written indemnification or insurance procurement agreement. Consequently, the Supreme Court should have denied that branch of the defendants' cross motion which was for summary judgment on the third-party cause of action for contractual indemnification, regardless of the sufficiency of Gessin's opposition. Gessin, however, established, prima facie, that no such written agreement existed, and the defendants failed to raise a triable issue of fact in opposition. Accordingly, the Supreme Court should have granted that branch of Gessin's motion which was for summary judgment dismissing the third-party causes of action for contractual indemnification and to recover damages for breach of contract for failure to procure insurance.

Gessin's remaining contentions are without merit.

Global Reinsurance Corporation v. Equitas Ltd.


Kevin J. Arquit, for appellants.
Edward P. Krugman, for respondent.
Society of Lloyd's, amicus curiae.

LIPPMAN, Chief Judge:
At issue is the sufficiency and extra-territorial reach of plaintiff's claim under New York State's antitrust statute, commonly known as the Donnelly Act (General Business Law § 340 et seq.).

Plaintiff is a New York branch of a German reinsurance corporation. Defendants (hereinafter collectively referred to as "Equitas") are London, England based entities engaged in the business of providing retrocessionary reinsurance. Retrocessionary reinsurers, or retrocessionaires as they are known, write coverage for risks ceded to them by reinsurers, in this transactional context referred to as "cedents."

According to the complaint, this action arises from practices employed in connection with the handling of claims made under retrocessional reinsurance treaties providing what is known as "non-life" coverage. Among the risks insured under this heading are those of environmental, catastrophic and asbestos related origin. Liabilities under policies insuring such risks typically are of the "long tail" variety; they may surface long after the policy period and it is clear in retrospect that underwriters did not accurately appreciate the magnitude of "non-life" risks or the unusual persistence of the liability they would engender.

Over the years, Lloyd's of London, an insurance marketplace composed of numerous competing insurance syndicates, themselves composed of individual underwriting participants (natural persons referred to as "Names"), issued, through its syndicates substantial non-life retrocessional coverage. By the early 1990s, it became evident that the liabilities arising under this coverage were mounting at an alarming rate and would soon outstrip the syndicates' reserves.

The syndicates individually proved unable to respond to this impending crisis, in significant part because in competing with each other for prospective business it was their practice to pay retrocessionary claims without haggling and without imposing onerous administrative burdens on their cedents. It was thus proposed that, since individual action by the syndicates to limit liability by more closely scrutinizing claims would be commercially unviable, the Names should agree to repose decision making with respect to the handling of certain liabilities arising under pre-1993 Lloyd's non-life retrocessionary coverage, in a newly created entity — a reinsurer that would, because it would be in perpetual "run-off" (i.e., merely concluding obligations under existing coverage and not soliciting new business), be free to adopt a more aggressive approach to the handling of claims. This proposal, as set forth by the governing body of Lloyd's in a "Reconstruction and Renewal (R & R) Plan" was approved by the Names and subsequently reviewed and found unobjectionable by United Kingdom and EU antitrust regulatory authorities, i.e., the United Kingdom Department of Trade and Industry and the European Commission.[FN1]

It was pursuant to the R & R plan that Equitas was created in 1996 to reinsure the otherwise uninsurable non-life retrocessionary obligations of the Lloyd's syndicates. And, in accordance with a Reinsurance and Runoff Contract (RROC), the Names reinsured with Equitas their risks under the Lloyd's syndicates' pre-1993 non-life retrocessionary treaties. The consideration for this coverage was comprised of some $14.7 billion in assets (premiums paid for the subject coverage) held by the syndicates and significant additional contributions by the Names individually, and by Lloyd's and its functionaries. Although subsequent to these transfers and until 2009 [FN2] the Names remained severally liable under the coverage extended by the syndicates, pursuant to the RROC Equitas was given plenary power to manage claims arising under the subject pre-1993 coverage [FN3] . The Names were concomitantly barred from reaching the funds transferred in exchange for the reinsurance provided by Equitas.

Plaintiff reinsurer purchased coverage for some of its non-life risks from Lloyd's retrocessionaires. The risks ceded by it to Lloyd's syndicates underwritten by pre-1993 retrocessionary coverage were, subsequent to the adoption of the R & R plan, in turn ceded by the Lloyd's retrocessionaires to Equitas under the RROC. According to plaintiff, Equitas adopted a "hard-nosed" approach to the handling of its claims, involving among other practices, holding payments due hostage to concessions by plaintiff and imposing extraordinarily onerous documentation requirements. In addition to commencing arbitration proceedings against the underwriters in which it sought damages for these alleged abuses under the governing insurance treaties, plaintiff filed this action in March 2007, asserting in its original complaint a Donnelly Act claim as well as one sounding in tortious interference with contractual relations.

On a CPLR 3211 motion preceding the one now before us, the tortious interference claim was dismissed, upon the ground then urged by Equitas that the wrongful conduct attributed by plaintiff to it had not been performed by it as a stranger to the contracts said to have been interfered with, but in its capacity as the claims handling agent of the contractually bound Names (20 Misc 3d 1115[A], 2008 NY Slip Op 51362[U], *8 [2008]). The motion court, however, sustained plaintiff's Donnelly Act claim finding, as is here relevant, that plaintiff had adequately alleged in the claim's support a geographical market for retrocessional non-life insurance limited to the Lloyd's marketplace. The court nonetheless granted plaintiff's request to amend its complaint to allege that the relevant market was global.[FN4]

The resulting Second Amended Complaint, the pleading now at issue, alleges in support of the Donnelly Act claim that prior to the R & R plan and the consequent creation of Equitas, retrocessional non-life claims handling with respect to pre-1993 Lloyd's coverage was performed by the individual Lloyd's syndicates which, because they competed with each other for new business and were thus anxious to curry favor with potential cedents, were disposed to settle claims expeditiously and fairly. Following the R & R plan and the centralizing of all decision making respecting the handling of the subject category of claims in Equitas pursuant to the RROC, there ceased to be any competitive disincentive to the adoption of sharp claims management practices — Equitas had no interest in attracting prospective business; its sole mission was to marshal its fund with the considerable amount of parsimony necessary to cover the avalanche of liabilities that had led to its existence. The complaint further alleged that Lloyd's concentration of claims management decision making power in Equitas would operate to suppress competition in the delivery of a crucial component of the retrocessional non-life coverage product, namely, claims management, and that it would do so not only within the Lloyd's marketplace, but in the world [FN5] .

After the filing of the second amended complaint, Equitas again moved to dismiss pursuant to CPLR 3211. In deciding this motion, Supreme Court focused upon the circumstance that the complaint, while nominally alleging that the pertinent geographical market for the particular species of coverage at issue was global, actually seemed to continue to rely upon the existence of a cognizable submarket confined to the Lloyd's marketplace. Given the new allegations that there was a worldwide market for retrocessional non-life coverage, and the absence of any allegation that the coverage available in the Lloyd's marketplace could not be acquired elsewhere on competitive terms, the court concluded that Lloyd's was not a viable submarket and on that ground dismissed the Donnelly Act claim, since an assertion of market power adequate to sustain a claim for restraint of trade may only be demonstrated within the context of an identified relevant market or submarket (24 Misc 3d 264, 273-274 [Sup Ct, NY County 2009]).[FN6]

On plaintiff's appeal from the subsequently entered judgment dismissing the complaint,[FN7] the Appellate Division, with one justice dissenting, reversed and reinstated the Donnelly Act claim. The Court found that the complaint adequately pled a worldwide market. And, while acknowledging that the crucial allegations contained in paragraph 36 of the amended pleading (n 5, supra), did not separately allege market power — i.e., that Lloyd's was capable of unilaterally raising prices for retrocessional non-life coverage in the relevant market significantly without losing any business (see CDC Techs., Inc. v IDEXX Labs., Inc., 186 F3d 74, 81 [2d Cir 1999]) — the allegations read together and liberally construed were, in the Court's view, adequate to that purpose (82 AD3d 26, 35 [1st Dept 2011]). The Court rejected, either expressly or impliedly defendants' remaining contentions, among them that there was no actionable conspiracy because Equitas had at all relevant times acted unilaterally and pursuant to agreements (the R & R plan and the RROC) approved by the United Kingdom and European regulatory authorities; and that, even if a London-based conspiracy to restrain trade was adequately alleged, it could not be reached under a New York State antitrust statute presumptively without extra-territorial effect.

The Appellate Division granted Equitas leave to appeal, certifying to this Court the question of whether its order reversing the order of Supreme Court was properly made. We now reverse.

An antitrust claim under the Donnelly Act, or under its essentially similar federal progenitor, Section 1 of the Sherman Act (15 USC § 1 et seq.) (see Anheuser-Busch, Inc. v Abrams, 71 NY2d 327, 335 [1988]; Mobil Oil Corp., 38 at 463), must allege both concerted action by two or more entities and a consequent restraint of trade within an identified relevant product market (see e.g. Home Town Muffler v Cole Muffler, 202 AD2d 764, 765 [3d Dept 1994]; Creative Trading, 136 AD2d at 462; Capital Imaging Assocs., P.C. v Mohawk Valley Med. Assocs., 996 F2d 537, 542-543 [2d Cir 1993], cert denied 510 US 947 [1993]). Equitas argues that the Second Amended Complaint fails sufficiently to allege either element.

For present purposes, we assume, without deciding, that a conspiracy is alleged. In favor of that assumption we note that, although the complaint contains allegations that Equitas acted independently of the syndicates in discharging its claims management function and was a legally and financially autonomous entity, it also alleges in substance that the collective assumption of the claims management function previously performed by the syndicates individually was Equitas's raison d'etre under the RROC and that Equitas from its inception and at all relevant subsequent times acted, if not as an agent in the traditional sense, at least as a pre-programmed instrumentality of the Names. Indeed, it will be recalled that in obtaining the dismissal of plaintiff's tortious interference claim Equitas itself represented that it was the claims agent of the Names, and, according to the complaint the allegations of which we must at this juncture accept as true, Equitas had no other purpose but that of fixing and capping the Names' liability under the subject pre-1993 coverage. Although there are situations in which a fully integrated entity that takes over and consolidates economic functions formerly performed competitively will be deemed sufficiently autonomous in its subsequent operations to preclude their characterization as conspiratorial within the meaning of the antitrust laws (see e.g. Texaco Inc. v Dagher, 547 US 1 [2006]), the pertinent inquiry in determining whether there is concerted or unilateral activity is one of substance and not form (American Needle, Inc. v National Football League, 560 US __, 130 S Ct 2201, 2211-2012 [2010]); what is important is how the parties to the alleged anticompetitive conduct actually operate (id. at 2209). Here, there is discernible from the pleading a perhaps colorable claim that Equitas was engaged in concerted activity when it exercised in place of and on behalf of the co-existing Lloyd's syndicates consolidated decision making authority over the management of the syndicates' pre-1993 retrocessional non-life liabilities.

The substantive problem with this action is rather that although a worldwide market is nominally alleged, as is evidently essential since it is clear that the retrocessional non-life product is available globally and that there is no distinct legally cognizable submarket,[FN8] there is no allegation of any anticompetitive effect attributable to the posited conspiracy beyond the Lloyd's marketplace.

Ordinarily, a Donnelly or Sherman Act plaintiff, to survive a motion to dismiss in a rule of reason case, such as this one,[FN9] must minimally allege that conspirators possessed power within the relevant market to produce a market-wide anticompetitive effect (see Capital Imaging, 996 F2d at 546). Defined in the context of sales, market power is the ability to raise prices significantly without losing business (see CDC Techs., 186 F3d at 81), but more generally may be understood as the capacity to impose onerous economic terms without suffering competitive detriment. Here, there is no allegation of any such power in the relevant worldwide market. While the Lloyd's syndicates were capable of insulating themselves from each other's competitive behavior in the area of claims management and could by that device attempt to cap their liabilities under certain previously issued coverage, there are no allegations from which it is possible to gather that they were capable of avoiding the business consequences of this approach in the global market. Recognizing that on a CPLR 3211 motion to dismiss the allegations of the complaint must be accepted as true and construed liberally in the plaintiff's favor (Cron v Hargro Fabrics, 91 NY2d 362, 366 [1998]), and that in the antitrust context courts are "hesitant" to dismiss complaints on the pleadings based on the sufficiency of product market allegations (Todd, 275 F3d at 200), it is nonetheless the case that there is no per se rule barring dismissal where the complaint simply does not allege a conspirator's basic capacity to inflict market-wide anticompetitive injury (see id.). Here, there is no dispute as to the relevant market and, accordingly, no need for factual development on that point. The pertinent analytic focus is instead upon whether the complaint alleges the requisite power within the relevant worldwide market on the part of the claimed conspirators. We cannot conclude that it does.

The allegations in paragraph 36 of the complaint do not singly or in combination allege market power as that term of art is defined in the antitrust lexicon. Lloyd's may, as plaintiff alleges, be the single most significant vendor of retrocessional non-life coverage; it may set the benchmark for the terms of such coverage and its quotes may be viewed as essential by reinsurers and reinsurance brokers; there may in addition be lines of retrocessional coverage with respect to which price competition with Lloyd's is considered more significant than competition in the world market. None of this, however, would justify the inference that Lloyd's could at will generally engage in "run-off" type claims management behavior and retain its business in a global market. Plaintiff was perhaps injured by an anticompetitive restraint in the Lloyd's market, but that is not a circumstance from which it is possible to conclude that there was some broader anticompetitive effect, or even a capacity to produce such an effect, in the relevant world market. It is market-wide effect that is crucial to an antitrust claim under the Sherman or Donnelly Act (see CDC Techs. Inc., 186 F3d at 80-81), not the existence of otherwise compensable individual injury. Plaintiff is evidently pursuing contract claims against Lloyd's underwriters in arbitration based on the same claims handling practices presently alleged. The question here is whether plaintiff may, premised on such allegations of localized individual harm, seek an award of treble damages for an antitrust violation. Inasmuch as it is the market-wide nature of the harm that would justify any such an award, the answer, we believe, must be no.

Even if this pleading deficiency could be cured — and we perceive no reason to suppose that the formidable hurdle of alleging market power could be surmounted by plaintiff — there would remain as an immovable obstacle to the action's maintenance, the circumstance that the Donnelly Act cannot be understood to extend to the foreign conspiracy plaintiff purports to describe.

The complaint alleges, essentially, that a German reinsurer through its New York branch purchased retrocessional coverage in a London marketplace and consequently sustained economic injury when retrocessional claims management services were by agreement within that London marketplace consolidated so as to eliminate competition over their delivery. Injury so inflicted, attributable primarily to foreign, government approved transactions having no particular New York orientation and occasioning injury here only by reason of the circumstance that plaintiff's purchasing branch happens to be situated here, is not redressable under New York State's antitrust statute. That this is so, is demonstrable when the Donnelly Act is considered in the context of federal antitrust law.

Assuming that the extraterritorial reach of the Donnelly Act is as extensive as that of its federal counterpart, the Sherman Act — an assumption that we do not ultimately embrace — it seems fairly clear that the Sherman Act would not reach a competitive restraint, imposed by participants in a British marketplace, that only incidently affected commerce in this country.

The Sherman Act's extraterritorial reach is limited under the Foreign Trade Antitrust Improvements Act (FTAIA) of 1982 (15 USC § 6a), which provides that the Sherman Act "shall not apply to conduct involving [non-import] trade or commerce . . . with foreign nations." The only ground for excepting to this general rule of inapplicability where imports are not involved [FN10] is where the conduct has a "direct, substantial, and reasonably foreseeable effect" on domestic commerce, and "such effect gives rise to a [Sherman Act] claim" (15 USC § 6a [1][A], [2]; F. Hoffmann-La Roche Ltd v Empagran S.A., 542 US 155, 162 [2004]). The London conspiracy here alleged was, according to the complaint, worldwide in its orientation; there is nothing in the pleadings to justify an inference that it targeted United States commerce specially or that its effect upon commerce in this country was substantial. Even if there were, however, the viability of a Sherman Act claim would still finally depend upon whether the domestic effect of the foreign conspiracy would itself "give rise" to a claim under the Sherman Act (id.). Plaintiff, although alleging individual injury in New York, has not alleged harm to competition in this country (see E & L Consulting, Ltd. v Doman Indus., 472 F3d 23, 28 n 3 [2d Cir 2006], cert denied 552 US 816 [2007] ["It should go without saying . . . that a party cannot establish antitrust injury without establishing a violation of the antitrust laws, which, under Section 1 [of the Sherman Act], must involve an injury to competition"]). The only harm to competition alleged is within a particular London reinsurance marketplace. It seems clear that even if plaintiff had an otherwise viable Sherman Act claim based on harm to competition in the relevant global market, which it does not, it still would not, premised on its allegations of domestic harm, have a jurisdictional predicate for that claim. It is not necessary to know precisely the extent of the Donnelly Act's extra-territorial reach to understand that it cannot reach foreign conduct deliberately placed by Congress beyond the Sherman Act's jurisdiction. The federal limitation upon the reach of the Sherman Act, predicated upon and an expression of the essentially federal power to regulate foreign commerce, would be undone if states remained free to authorize "little Sherman Act" claims that went beyond it. The established presumption is, of course, against the extra-territorial operation of New York law (see McKinney's Consolidated Laws of NY, Book 1, Statutes § 149), and we do not see how it could be overcome in a situation where the analogue federal claim would be barred by congressional enactment.

It is not an answer to this analysis to observe, as plaintiff does, that under the McCarran-Ferguson Act (15 USC § 1011 et seq.) regulation of the "business of insurance" is committed to the states (15 USC § 1012 [b]). What is at issue here is not in the main the regulation of the "business of insurance," a matter within the special competence and jurisdictional reach of domestic state regulators, but the address of a purported foreign conspiracy to restrain trade, a matter to be dealt with, if at all, under the significantly distinct antitrust rubric (see Group Life & Health Ins. Co. v Royal Drug Co., 440 US 205, 210-211 [1979]). The question now before us — as to the extra-territorial reach of our state antitrust law — is, then, not one as to which the McCarran-Ferguson Act commitment is relevant. What is instead highly relevant is that the Donnelly Act's reach must be understood as part of a jurisdictional continuum whose outermost extension is defined by federal antitrust law. While it is true that the scope of federal subject matter jurisdiction under the Sherman Act, as limited by the FTAIA and federal decisions following Empagran (542 US 155 [2004], supra) is frequently far from obvious, we think it sufficiently evident that the Sherman Act would not reach the purely foreign conspiracy here claimed, the anticompetitive effect of which beyond the Lloyd's marketplace is not made out.

Nonetheless, we do not ultimately ground our determination that the Donnelly Act does not reach the presently claimed conspiracy upon the FTAIA. Even if the Sherman Act could reach the purported conspiracy, it would not follow that the Donnelly Act should be viewed as coextensive. For a Donnelly Act claim to reach a purely extra-territorial conspiracy, there would, we think, have to be a very close nexus between the conspiracy and injury to competition in this State. That additional element is not discernible from the pleadings before us. It would be a very great, and we think unwarranted, supposition that the authors of the Donnelly Act intended to allow, on a predicate such as the one here alleged, the sort of highly intrusive international projection of state regulatory power now proposed.

Having said this, it should be emphasized that our decision should not be understood as placing some new limitation on the reach of the Donnelly Act. This is simply a rare instance in which a state antitrust action has tested the outer jurisdictional limits not only of state but federal antitrust law.

Accordingly, the order of the Appellate Division should be reversed, with costs, the judgment of Supreme Court reinstated and the certified question answered in the negative.

SMITH, J. (concurring):

I agree with the result reached by the majority, and with most of the reasoning in the majority opinion. My only reservation is about the majority's analysis (which, as it acknowledges, is not essential to its decision) of whether the allegations in the complaint would state a claim under the federal antitrust laws. The implications of the Foreign Trade Antitrust Improvements Act of 1982 (15 USC § 6a) for this case (and for many other cases) are, to me at least, far less than clear. I would prefer to express no opinion about them, and simply to rely on the state law grounds explained at pages 19-20 of the majority opinion (and on the similar reasoning contained in the Appellate Division dissent, 82 AD3d at 40-41), which sufficiently support the conclusion that the extraterritorial reach of the Donnelly Act does not extend to the transactions at issue here.
* * * * * * * * * * * * * * * * *
Order reversed, with costs, judgment of Supreme Court, New York County, reinstated and certified question answered in the negative. Opinion by Chief Judge Lippman. Judges Ciparick, Graffeo, Read and Jones concur. Judge Smith concurs in the opinion of Chief Judge Lippman, except insofar as it discusses whether the allegations of the complaint would state a claim under the federal antitrust laws, in an opinion in which Judge Pigott concurs.
Decided March 27, 2012
Footnotes

Footnote 1: The R & R plan was also submitted for comment to various US government agencies for comment, among them the New York State Department of Insurance, which registered no objection.

Footnote 2: In 2009, Equitas, with the approval of the British High Court undertook finally to relieve the Names of their obligations under the retrocessional treaties at issue (see In the Matter of the Names at Lloyd's for the 1992 & Prior Years of Account, Represented by Equitas Ltd. [2009] EWHC 1595, 2009 WL 1949482 [Ch. July 7, 2009]).

Footnote 3: Under § 9.2 (a) of the RROC, Equitas was authorized "to adjust, handle, agree, settle, pay, compromise or repudiate any Claim, return premium, reinsurance premium or any other insurance or reinsurance liability on behalf of the Syndicate, or Closed Year Syndicate."

Footnote 4: This amendment, as the parties then understood, would be essential to the action's survival, since there was no factually plausible contention that the Lloyd's marketplace was the relevant market in assessing whether Equitas's claims handling practices had an anticompetitive effect upon the retrocessional non-life insurance market.

Footnote 5: The relevant allegations are contained in paragraph 36 of the complaint: "36. In 1993, in 1996, at the time this action was commenced, and currently, the Lloyd's syndicates collective1y had market power in the worldwide market for retrocessional coverage. "(a) In 1993, in 1996, at the time this action was commenced, and currently, the Lloyd's marketplace was the single most significant seller of most forms of non-life retrocessional coverage to reinsurers worldwide. "(b) In 1993, in 1996, at the time this action was commenced, and currently, the Lloyd's marketplace provides the benchmark for prices, terms, and conditions for most forms of non-life retrocessional coverage. "(c) In 1993, in 1996, at the time this action was commenced, and currently, any reinsurer, and any reinsurance broker, wishing to purchase retrocessional coverage would have to at least consider approaching Lloyd's for quotes and would have to take into account the terms and conditions offered by various Lloyd's syndicates in determining what to purchase, and on what terms. "(d) For many lines of retrocessional business, and in many years, competition within the Lloyd's marketplace is more significant to prospective purchasers of retrocessional coverage than is competition between Lloyd's as a whole and other sellers, because Lloyd's is expected to, and does, set the lead in establishing coverage."

Footnote 6: Although there are Appellate Division decisions recognizing this basic requirement of a Donnelly Act claim (see e.g. Creative Trading Co. v Larkin-Pluznick-Larkin, Inc., 136 AD2d 461, 462 [1st Dept 1988]), there do not appear to be any cases from our Court. It does not seem, however, that there would be much room for doubt as to the requirement. It is logically necessary to a coherent allegation of a trade restraint and has been recognized by federal courts in assessing the adequacy of pleadings alleging violations under the Sherman Act (15 USC § 1 et seq.) (see e.g. Newcal Indus. v Ikon Office Solution, 513 F3d 1038, 1045 [9th Cir 2008] cert denied 129 S Ct 2788 [2011]), after which the Donnelly Act is modeled (see State of New York v Mobil Oil Corp., 38 NY2d 460, 463 [1976]).

Footnote 7: The Donnelly Act claim and the pendent claim for injunctive relief were all that remained of the complaint following the motion court's earlier dismissal of plaintiff's tortious interference claim.

Footnote 8: Although, as noted (see supra at 8), the Second Amended Complaint, while alleging a worldwide product market, retained its claim of a distinct submarket confined to Lloyd's, the latter is not a legally viable allegation. Product markets are defined for antitrust purposes by the applying the rule of "reasonable interchangeability" (see Todd v Exxon Corp., 275 F3d 191, 201 [2d Cir 2001]) and, particularly in light of the Second Amended Complaint's allegation that the relevant market is global, i.e., that the subject Lloyd's product is interchangeable with retrocessional reinsurance products available worldwide, there is no plausible explanation for the persisting submarket allegation (see id. at 200). Global, accordingly, appears to have abandoned its submarket claim.

Footnote 9: There is no contention in this case of a per se violation; whether any restraint on trade for which defendants are shown to have been responsible was unreasonable is a bona fide issue in this litigation. There is no dispute that the purported conspiracy arose as a response to the impending ruin of the Lloyd's marketplace, an event that defendant contends would have significantly reduced competition in the world market for retrocessional non-life coverage.

Footnote 10: There is no contention that the reinsurance product purchased by plaintiff at the Lloyd's marketplace was an import. Nor are there allegations that the alleged conspiracy was directed at any defined import market in this country (see Animal Sci. Prods. v China Minmetals Corp., 654 F3d 462, 471 n 11 [3d Cir 2011]).

Bissell v. Town of Amherst


Alan D. Voos, for appellant.
Hal Friedman, for respondent.

PIGOTT, J.:

In Matter of Kelly v State Insurance Fund, we held that when a workers' compensation claimant recovers damages in a third-party action, "the compensation carrier's equitable share of litigation costs incurred by the claimant may be apportioned on the basis of the total benefit that the carrier derives from the claimant's recovery" (60 NY2d 131, 135 [1983]). The carrier's "total benefit" is the recoupment of its lien (the sum of past benefits paid the claimant) and relief from future obligations to make benefit payments to the claimant (id.). Where a carrier's future benefit "cannot be quantified or reliably predicted", i.e., the future benefit is speculative, it is improper for a court to apportion litigation costs based on that benefit (Burns v Varriale, 9 NY3d 207, 215 [2007]).

On this appeal, we are asked to determine whether the future medical benefits that a compensation carrier has been relieved of paying due to a claimant's successful prosecution of a third-party action are "so speculative that it would be improper to estimate and assess litigation costs against [that] benefit to the carrier" (Matter of Kelly, 60 NY2d at 139). We conclude that they are, and hold that the carrier need only pay its equitable share of attorneys' fees and costs incurred by a claimant once the claimant incurs and pays each medical expense.
I.
Peter Bissell sustained injuries in a work-related accident that rendered him a paraplegic. The Workers' Compensation Board concluded that Bissell sustained a permanent total disability and ordered the New York State Insurance Fund ("the Fund"), the compensation carrier for Bissell's employer, to pay Bissell $400 a month for the duration of his life. Pursuant to Workers' Compensation Law § 29 (1), Bissell commenced a third-party action against the Town of Amherst. As relevant here, the jury awarded Bissell $4,650,000 in damages over 32.7 years to cover future medical expenses [FN1]. The trial court reduced that award to its present value of $4,259,536.

The Fund asserted a lien against Bissell's judgment in the amount of $219,760, representing $154,880 in past workers' compensation benefits and $64,880 for past medical expenses. It acknowledged its Kelly obligation to contribute towards attorneys' fees relative to the present value of the lost wages compensation benefit given Bissell's permanent total disability designation; however, the Fund refused Bissell's request that it pay that share of attorneys' fees relative to the recovery of the future medical expenses awarded him, offering to pay its share of the cost when Bissell actually incurred each medical expense.

Bissell commenced a proceeding pursuant to section 29 (1) of the Workers' Compensation Law to extinguish the Fund's $219,760 lien against the third-party recovery and demanded $1,399,734 in "fresh money" representing, in part, the Fund's equitable share of the cost of recovery of the $4,259,536 in future medical expenses that the Fund had been relieved of expending for Bissell's future medical care. The Fund countered that it was not bound by a jury's future medical expenses award, and that because it was impossible to reasonably ascertain the "total benefit" the Fund received by virtue of that award, it would reimburse Bissell the agreed-upon 33.5% reimbursement of those expenses only when Bissell actually incurred them.

Supreme Court entered a judgment granting Bissell's petition in its entirety.

The Appellate Division "modif[ied] the judgment by denying those parts of the petition seeking to extinguish [the Fund's] lien and seeking to recover from [the Fund] its share of litigation costs insofar as the benefit received by [the Fund] with respect to the foregone future medical payments is included in the calculation of its share of litigation costs," and remitted the proceeding to Supreme Court for a recalculation of the Fund's share of litigation costs (79 AD3d 1638, 1641 [4th Dept 2010]). This Court granted leave to appeal and we now affirm.
II.
There is no question that the Fund received a benefit from the third-party action, i.e., it will be relieved of paying a substantial sum of Bissell's future medical expenses and lost wages (see Workers' Compensation Law § 29 [4] [setting forth the carrier's right to credit the claimant's recovery in the third-party action against its obligation to pay additional workers' compensation indemnity and/or medical benefits]). As a result, the Fund must pay its equitable share of the litigation costs expended in obtaining that recovery (see Workers' Compensation Law § 29 [1]). At issue, however, is whether the Fund is bound by the jury's future medical expenses award, such that the Fund's 33.5% share of litigation costs can be "quantified or reliably predicted" and, therefore, should be included as part of the Kelly calculation. We conclude that the jury verdict for future medical expenses is not the proper barometer by which the Fund's share of litigation costs may be measured.

Relying on our holdings in Burns and Kelly, Bissell contends that the amount of future medical expenses — having been decided by a jury and upheld by the Appellate Division as being supported by the trial evidence — cannot be deemed speculative since the benefit to the Fund can be "quantified by actuarial or other reliable means" (Burns, 9 NY3d at 146; Matter of Kelly, 60 NY2d at 139). Therefore, according to Bissell, the present value of the future medical expenses should be included as part of the Kelly calculation, entitling him to an immediate payment of the attorneys' fees expended in obtaining that portion of the award. We disagree.

We held in Burns that "if a claimant does not receive benefits for death, total disability or schedule loss of use, the carrier's future benefit cannot be quantified by actuarial or other means" (Burns, 9 NY3d at 146 citing Matter of McKee v Sithe Independence Power Partners, 281 AD2d 891 [4th Dept 2001] and Matter of Briggs v Kansas City Fire & Mar. Ins. Co., 121 AD2d 810, 812 [3d Dept 1986]). Similarly, future medical expenses — when considered in light of the benefit to the carrier, which is the focus of the Kelly analysis — cannot reliably be calculated in a manner similar to any of the three aforementioned classifications because it is impossible to reliably predict the future medical care the claimant will need, when the expenses from such care will accrue and how much it will cost when it does. While some of those items may reasonably be ascertained by a jury in a third-party action, there is a distinction between a non-speculative future medical expenses award made by a jury and the benefit that the carrier receives under the Workers' Compensation Law as a by-product of that award.

In a third-party action, the injured employee will have only one opportunity to obtain a recovery for future medical expenses, and the jury assessing the medical evidence will have the chance to make but one award for such expenses, if any. By contrast, in the workers' compensation context it is possible to wait and see what happens, and to require the carrier to pay its share of litigation costs when that share can be accurately calculated - i.e., when the actual medical expenses that the carrier has been relieved from paying are known. Moreover, whether the claimant is entitled to medical treatment pursuant to the Workers' Compensation Law is a determination that must be made by the workers' compensation board, and such determination is not dependent upon the jury's verdict in the third-party action.

Although the claimant cannot include future medical expenses as part of the Kelly calculation, that does not mean that the carrier is relieved of paying its equitable share of the benefit. The trial court has the discretion to "fashion a means of apportioning litigation costs as they accrue and monitoring (e.g., by court order or stipulation of the parties) how the carrier's payments to the claimant are made," thereby ensuring that the carrier's equitable share of litigation costs is based on concrete, realized benefit, while concomitantly ensuring that the claimant will not wait indefinitely for the carrier's payment of its share (Burns, 9 NY3d at 217).
Accordingly, the order of the Appellate Division should be affirmed, with costs.
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Order affirmed, with costs. Opinion by Judge Pigott. Chief Judge Lippman and Judges Ciparick, Graffeo, Read, Smith and Jones concur.
Decided March 27, 2012
Footnotes

Footnote 1: The jury returned a verdict of $30 million against the Town, but the Appellate Division reduced that amount to $23.4 million, finding that certain of the awards were excessive. It did not alter the jury's award for future medical expenses, holding that the jury's verdict in that respect was supported by the trial evidence (56 AD3d 1144, 1148 [4th Dept 2008]).

Tower Insurance Company of New York v. Khan


Stephen David Fink, Forest Hills, for Camille Khan, appellant.
Shayne, Dachs, Corker, Sauer & Dachs, Mineola (Norman H. Dachs of counsel), for Jose Reyes, appellant.
Law Office of Max W. Gershweir, New York (Max W. Gershweir of counsel), for respondent.

Order and judgment (one paper), Supreme Court, New York County (Joan M. Kenney, J.), entered September 9, 2011, which granted plaintiff's motion for summary judgment declaring that it was not obligated to defend or provide coverage to its insured, defendant Camille Khan, in the underlying personal injury against her brought by defendant Jose Reyes, and denied the cross motion of Reyes for summary judgment declaring that plaintiff has a duty to defend and indemnify Khan in the underlying action, unanimously affirmed, without costs.

Plaintiff established its entitlement to summary judgment declaring that it had no obligation to defend Khan under the terms of the policy based on her misrepresentation in the application process. The policy was for a one or two family primary residence. However, Khan acknowledged that she did not use the covered premises as her primary residence. Moreover, plaintiff's underwriting guidelines make clear that it will not insure certain risks, such as where there is construction or renovation on the premises or a commercial use of the premises. Here, Khan was renovating the property to include one or two apartments on the top floor, and commercial space on the first floor and in the basement. The failure to disclose that the use of the premises was outside of the scope of the policy was a material misrepresentation in the application for the policy, warranting a disclaimer of coverage for the injuries sustained by Reyes while working on the renovation. The fact that Khan's admission was contained in an unsigned deposition transcript does not preclude its use as an admission against her interest (see Morchik v Trinity School, 257 AD2d 534, 536 [1999]).

Moreover, plaintiff's disclaimer of coverage was not untimely as it came 17 days after it had obtained and confirmed all the facts warranting the disclaimer of coverage (see Wausau Bus. Ins. Co. v 3280 Broadway Realty Co. LLC, 47 AD3d 549 [2008]). Nor should plaintiff be estopped from disclaiming coverage based on its undertaking to defend Khan, while preserving its defense under the policy, until the facts warranting disclaimer became clear. The question of the propriety of plaintiff providing coverage is separate and distinct from the question of the insured's liability in the underlying action (see Public Serv. Mut. Ins. Co. v Goldfarb, 53 NY2d 392, 401 n [1981]).

We have considered defendants' remaining arguments, including that plaintiff's motion was premature and that further discovery was necessary, and find them unavailing.

 

Pinzon v. Gonzalez


Law Office of Alexander Dranov, LLC, New York (Alexander Dranov of counsel), for appellant.
Cheven, Keely & Hatzis, New York (William B. Stock of counsel), for respondent.

Order, Supreme Court, Bronx County (Norma Ruiz, J.), entered on or about March 1, 2011, which granted defendant's motion for summary judgment seeking to dismiss the complaint on the ground that plaintiff did not raise an issue of fact as to whether she suffered a serious injury within the meaning of Insurance Law § 5102(d), unanimously reversed, on the law, without costs, and the motion denied.

Defendant met her prima facie burden on summary judgment with the submission of the affirmed reports of experts that established that plaintiff did not suffer a serious injury as a result of the accident at issue and found instead that she suffered from pre-existing degenerative conditions.

However, plaintiff raised an issue of fact as to whether she sustained serious injuries to her left knee, cervical spine, and lumbar spine by submitting the affirmed reports of radiologists stating that the MRIs of those body parts showed a tear of the medial meniscus and tear of the medial collateral ligamentous complex, disc herniations of the cervical spine, and lumbar disc bulging, along with a contemporaneous examination by plaintiff's treating physician showing limited ranges of motion in each of those body parts (Insurance Law § 5102[d]; see Toure v Avis Rent a Car Sys., 98 NY2d 345, 350 [2002]).

Plaintiff raised an issue of fact as to the permanence of those injuries by submitting the affirmed report of a neurologist who conducted a recent examination showing limited ranges of motion in all of those body parts (see Antonio v Gear Trans Corp., 65 AD3d 869 [2009]; Thompson v Abbasi, 15 AD3d 95, 97 [2005]). Contrary to defendant's argument, this report does refute the findings of defendant's experts as to the degenerative nature of plaintiff's condition by specifically attributing the injuries to the accident (see Williams v Perez, __ AD3d __, 2012 NY Slip Op 01176 [2012]), and specifically identifying and disagreeing with two of defendant's experts (see Perl v Meher, 18 NY3d 208 [2011]; Fuentes v Sanchez, 91 AD3d 418 [2012]).

 

Abacus Federal Savings Bank v ADT Security Services, Inc.


George S. Sava, for appellant.
Charles Eblen, for respondent ADT Security Services, Inc.
Dennis M. Rothman, for respondent Diebold Incorporated, Inc.

CIPARICK, J.:
Plaintiff Abacus Federal Savings Bank (Abacus) commenced this action against defendants ADT Security Services, Inc. (ADT) and Diebold, Incorporated (Diebold) to recover damages under tort and contract theories for losses incurred during a burglary of the bank. We affirm the dismissal of the complaint with one exception. We conclude that Abacus has adequately stated a cause of action for breach of contract as against ADT for its alleged losses other than losses allegedly sustained by its safe deposit box customers.

Abacus is a federally chartered savings and loan association with a branch located in lower Manhattan (the Branch). It provides a variety of deposit services, including the leasing of safe deposit boxes to its customers. Following the close of business on Saturday, March 20, 2004, burglars forced their way into the Branch through a back entrance door and a second interior door. According to security camera images taken during the course of the incident, the burglars located the vault inside and, during a several hour period, used large acetylene gas tanks as blow torches to break down one of the vault's concrete and metal walls. Once in the vault, the burglars gained access to a safe storing the Branch's overnight cash and over 20 safe deposit boxes belonging to Abacus' customers.

The amended complaint alleges that the burglars stole $589,749.55 in cash from the safe and property valued at $926,512 from the safe deposit boxes. The police were not notified during the course of the burglary. Rather, an Abacus employee discovered what had occurred when the Branch opened for business on Monday morning, March 22, 2004.

Prior to the burglary, each defendant had separately contracted with Abacus to supply security services for the Branch. Specifically, ADT's contract with Abacus obligated ADT to install and maintain a 24-hour industry-certified central station security system to protect the Branch premises and the vault. Within the vault, ADT purported to utilize certain detectors that would identify intruder movement and the presence of smoke. ADT's security system was supposedly designed to transmit any alarm signals triggered in the vault to ADT's central monitoring system. Diebold's contract with Abacus required Diebold to provide a back-up alarm system that included additional central station monitoring, another form of telephone line security and "signal monitoring," which would activate an alarm if ADT's alarm system failed to operate properly.

The gravamen of Abacus' amended complaint is that defendants violated their contractual obligations by installing woefully inadequate security systems, which they failed to inspect. Abacus further alleges that defendants knew for weeks, if not months, that the security systems in place were not working in that they were generating a series of flaws, malfunctions and false alarms. For example, in the three months preceding the burglary there were, according to an expert's affidavit Abacus submitted in opposition to defendants' motions, 17 phone line failures and a number of other occurrences that were "consistent with an intruder cutting the phone line" and "should have triggered an alarm event." Abacus asserts that not only did defendants fail to investigate these malfunctions, but they failed to notify anyone at the Branch of the problem.

Both contracts contained clauses that exculpated defendants from liability for their own negligence and limited their liability, under all circumstances, to $250. Diebold's contract contained a clause entitled "Property Insurance and Waiver of Subrogation" where Abacus agreed to obtain insurance coverage to cover its losses in the event of a theft. The agreement between Diebold and Abacus provided that Abacus "shall look solely to its insurer for recovery of its loss and hereby waives any and all claims for such loss against Diebold" and that Abacus' insurance policy would contain a clause providing that such waiver would not invalidate the coverage. There was no similar waiver-of-subrogation clause in the contract between Abacus and ADT. Instead, their contract merely provided "that insurance, if any, covering personal injury or property loss damage" was Abacus' responsibility to obtain.

In addition to the losses incurred during the weekend of the burglary, Abacus seeks money damages for not less than $5 million for lost business as a result of the burglary, not less than $5 million for a loss of reputation in the community and not less than $1 million in punitive damages. Abacus also seeks $85,436 in costs to repair the vault and $30,000 in added security costs it absorbed. Defendants moved to dismiss the complaint, 10 causes of action in all, in its entirety.

Supreme Court denied defendants' motion to dismiss the breach of contract cause of action and the gross negligence cause of action, but dismissed the remainder of the amended complaint.

Addressing the breach of contract claim, Supreme Court observed that while New York courts regularly enforce contractual provisions absolving a party from acts of its own ordinary negligence, public policy prohibits waivers of liability for gross negligence. The court concluded that since the pleadings adequately alleged that defendants were grossly negligent in their failure to respond to the burglary, Abacus could proceed to discovery on the breach of contract cause of action. Supreme Court likewise denied the motion to dismiss the tort cause of action. It further opined that Abacus has standing to assert claims based upon losses suffered by its safe deposit box customers. Defendants appealed [FN1].

The Appellate Division reversed the order of Supreme Court and granted defendants' motions to dismiss the amended complaint in its entirety (see Abacus Fed. Sav. Bank v ADT Sec. Servs., Inc., 77 AD3d 431, 432 [1st Dept 2010]). In dismissing the breach of contract cause of action, the court held that the allegations in the amended complaint "amount to nothing more than claims of ordinary negligence as opposed to gross negligence" (id. at 433). The court similarly found no basis for tort liability in the complaint (see id.). Furthermore, the court concluded that, in any event, the waiver-of-subrogation provision contained in the contract between Abacus and Diebold serves as "a defense to all of plaintiff's claims" against Diebold (id. at 434). We granted Abacus leave to appeal (16 NY3d 712 [2011]) and now modify.

As a general rule, parties are free to enter into contracts that absolve a party from its own negligence (see Melodee Lane Lingerie Co. v American Dist. Tel. Co., 18 NY2d 57, 69 [1966]) or that limit liability to a nominal sum (see Florence v Merchants Cent. Alarm Co., 51 NY2d 793, 795 [1980]). However, it is New York's public policy that a party cannot "insulate itself from damages caused by grossly negligent conduct" (Sommer v Federal Signal Corp., 79 NY2d 540, 554 [1992]).

Therefore, exculpatory clauses and liquidated damages clauses in contracts are not enforceable against allegations of gross negligence (see id.). We have observed that "[g]ross negligence, when invoked to pierce an agreed-upon limitation of liability in a commercial contract must 'smack[] of intentional wrongdoing'" (id., quoting Kalisch-Jarcho, Inc. v City of New York, 58 NY2d 377, 385 [1983]). "It is conduct that evinces a reckless indifference to the rights of others" (id.).

We applied this standard in David Gutter Furs v Jewelers Protection Servs. (79 NY2d 1027 [1992]). In that case, the "plaintiff, a fur dealer, contracted with [the] defendant to design, install and monitor a burglar alarm system" (id. at 1028). Several weeks later, the plaintiff commenced an action against the defendant for breach of contract and further claimed that the exculpatory and limitation of liability clauses in their contract were unenforceable because the defendant was grossly negligent (see id. at 1028-1029). We concluded that the plaintiff's allegations — "that there should have been two motion detectors, instead of one, on each level; a shock sensor should have been installed; defendant should have ascertained how the inventory would be arranged; and a post-occupancy inspection should have been undertaken" — only amounted to ordinary negligence as there was no issue of fact that the "defendant performed its duties with reckless indifference to [the] plaintiff's rights" (id. at 1029).

Here, in contrast, we conclude that the allegations in the amended complaint sufficiently allege conduct on the part of the defendants that, if true, constitutes gross negligence. Indeed, unlike the plaintiff in David Gutter Furs, Abacus has alleged much more than mere failure to install a proper working alarm system and inspect it. Abacus alleges that both defendants had knowledge — for weeks, if not months — that the equipment had been malfunctioning. Moreover, Abacus asserts that defendants not only failed to investigate the source of their equipment malfunction, but they failed to put anyone at the Branch on notice of the potential security breach. Of course, these allegations may not be proved, or may be shown by defendants' evidence to be less significant than they seem; but on this record, plaintiffs have alleged the type of conduct that smacks of intentional wrongdoing and evinces a reckless indifference to the rights of others (see Federal Ins. Co. v Automatic Burglar Alarm Corp., 208 AD2d 495, 496 [2d Dept 1994]).

Nevertheless, Diebold argues that the waiver-of-subrogation clause in its contract with Abacus acts as a total defense to the claims asserted by Abacus in its complaint. We agree. In Board of Educ., Union Free School Dist. No. 3, Town of Brookhaven v Valden Assoc., 46 NY2d 653 [1979]), we upheld a similar waiver-of-subrogation clause. There, we observed that the contract between the plaintiffs and the defendants required the plaintiffs to obtain insurance to cover 100% of any losses incurred on the plaintiff's property (see id. at 656). Further, the plaintiffs expressly "waive[d] all rights" to seek damages as against the defendants covered by such insurance (id.). In upholding the validity of this contract, we recognized that "[a] distinction must be drawn between contractual provisions which seek to exempt a party from liability . . . and contractual provisions . . . which in effect simply require one of the parties to the contract to provide insurance for all of the parties" (id. at 657; see also Austro v Niagara Mohawk Power Corp., 66 NY2d 674, 676 [1985]; Great Am. Ins. Co. of N.Y. v Simplexgrinnell LP, 60 AD3d 456, 456-457 [1st Dept 2009]). We discern no basis to depart from this rule here. Thus, we affirm the dismissal of the complaint as against Diebold.

ADT's contract with Abacus does not contain a similar waiver-of-subrogation clause that would act as a total defense to Abacus' claim. We note that the contract between Abacus and ADT did not require Abacus to obtain insurance to cover losses stemming from ADT's gross negligence. The decision to obtain insurance, "if any," was discretionary as to Abacus. Moreover, the contract did not contain an express waiver by Abacus to waive all rights for damages covered by insurance it may have obtained as against ADT. Thus, we reinstate the breach of contract cause of action as against ADT. In so doing, we note that the complaint only adequately states a basis upon which Abacus can recover for its own losses. As pleaded, Abacus fails to allege sufficient facts to confer standing to pursue the losses allegedly sustained by its safe deposit box customers.

Finally, we conclude that the complaint did not allege conduct that would give rise to separate liability in tort. Here, the allegations that a breach of contract occurred as a result of gross negligence does not give rise to a duty independent of the contractual relationship (see Clark-Fitzpatrick, Inc. v Long Is. R.R. Co., 70 NY2d 382, 389 [1987]; cf. Sommer, 79 NY2d at 551-552 [the plaintiff's breach of contract claim against the defendant fire alarm company may also sound in tort where the defendant's alleged failure to act with due care affected a significant public interest independent of its contractual obligations]).

Accordingly, the order of the Appellate Division should be modified, without costs, by reinstating so much of plaintiff's cause of action for breach of contract as against ADT Security Services, Inc. that does not assert claims on behalf of plaintiff's safe deposit box customers and, as so modified, affirmed.
* * * * * * * * * * * * * * * * *
Order modified, without costs, by reinstating so much of plaintiff's cause of action for breach of contract as against ADT Security Services, Inc. that does not assert claims on behalf of plaintiff's safe deposit box customers and, as so modified, affirmed. Opinion by Judge Ciparick. Chief Judge Lippman and Judges Graffeo, Read, Smith, Pigott and Jones concur. 
Decided March 22, 2012
Footnotes

Footnote 1: Abacus did not cross-appeal Supreme Court's decision to dismiss the remaining eight causes of action in the complaint.

Kouho v Trump Village Section 4, Inc.


Ingber Law Firm, PLLC (Lewis Johs Avallone Aviles, LLP, Melville, N.Y. [Seth M. Weinberg], of counsel), for defendants third-party plaintiffs-appellants.
Rosato & Lucciola, P.C., New York, N.Y. (Joseph Rosato and Paul Marber of counsel), for plaintiff-respondent.

DECISION & ORDER
In an action to recover damages for personal injuries, the defendants third-party plaintiffs appeal (1), as limited by their brief, from so much of a judgment of the Supreme Court, Kings County (Schack, J.), entered December 28, 2010, as, upon a jury verdict, is in favor of the plaintiff and against them in the principal sum of $450,000 for past pain and suffering, and (2) from a judgment of the same court entered February 17, 2011, which, upon an order of the same court dated April 29, 2009, granting their motion for leave to enter a default judgment against the third-party defendant upon the third-party defendant's failure to appear or answer the third-party complaint, and after an inquest on the issue of damages, awarded them $0 in damages on the third-party complaint.

ORDERED that the judgment entered December 28, 2010, is affirmed insofar as appealed from; and it is further,

ORDERED that the judgment entered February 17, 2011, is reversed, on the law and the facts, and the matter is remitted to the Supreme Court, Kings County, for the entry of an appropriate amended judgment in accordance herewith; and it is further,

ORDERED that one bill of costs is awarded to the plaintiff, payable by the defendants third-party plaintiffs.

The plaintiff suffered a ruptured Achilles tendon as a result of tripping on the lawn in front of a building owned and operated by the defendants, Trump Village Section 4, Inc., and Trump Village West, Inc. (hereinafter together Trump). The plaintiff subsequently commenced an action against Trump, and Trump commenced a third-party action against Fazio-Trina, a company that had installed and maintained a sprinkler system on the lawn, seeking contribution and contractual and common-law indemnification.

After Fazio-Trina failed to answer or otherwise respond to the third-party complaint, the Supreme Court granted Trump's motion for leave to enter a default judgment against Fazio-Trina on the third-party complaint. After the trial in the main action, the jury found Trump liable and awarded the plaintiff, inter alia, the sum of $450,000 for past pain and suffering. A judgment dated December 28, 2010, was entered in favor of the plaintiff and against Trump.

Meanwhile, an inquest on damages in the third-party action was held, at which Fazio-Trina failed to appear. Although the Supreme Court acknowledged at the inquest that Fazio-Trina had defaulted, the court found that there was no proof that the plaintiff's injuries were caused by the actions of Fazio-Trina. As such, the court found the damages to be "zero." A judgment was then entered in favor of Trump and against Fazio-Trina for "the principle [sic] sum of $0.00."
Contrary to Trump's contention, the jury's award of $450,000 to the plaintiff for past pain and suffering did not deviate materially from what would be reasonable compensation (see CPLR 5501[c]). Accordingly, we affirm so much of the judgment entered December 28, 2010, as was in favor of the plaintiff and against Trump in the principal sum of $450,000 for past pain and suffering.

With regard to the third-party action, Fazio-Trina, by defaulting, admitted "all traversable allegations in the [third-party] complaint, including the basic allegation of liability" (Rokina Opt. Co. v Camera King, 63 NY2d 728, 730; see Suburban Graphics Supply Corp. v Nagle, 5 AD3d 663, 663). As such, the sole issue to be determined at the inquest was the extent of the damages sustained by Trump, and the Supreme Court erred in considering the question of whether the plaintiff's accident was caused by Fazio-Trina (see Rokina Opt. Co. v Camera King, 63 NY2d at 730; Rich-Haven Motor Sales v National Bank of N.Y. City, 163 AD2d 288, 290). Since Fazio-Trina is deemed to have admitted liability, and the plaintiff was successful in his action to recover damages against Trump, Fazio-Trina is required, under the circumstances, to indemnify Trump for the losses it incurred.

Accordingly, we reverse the judgment entered February 17, 2011, and remit the matter to the Supreme Court, Kings County, for the entry of an appropriate amended judgment.

 

Anderson v Ariel Services, Inc.,

Leahey & Johnson P.C., New York (James P. Tenney of counsel), for appellants.
Dale Lionel Smith, New York, for respondent.

Order, Supreme Court, New York County (George J. Silver, J.), entered July 19, 2010, which denied defendants' motion to dismiss the complaint and/or to preclude plaintiff from submitting evidence at trial for failure to comply with discovery orders, unanimously affirmed, without costs. Order, same court and Justice, entered December 28, 2010, which, insofar as appealed from, denied defendants' motion to strike the complaint, to strike plaintiff's third verified bill of particulars and/or to preclude plaintiff from submitting evidence at trial, unanimously affirmed, without costs.

The motion court did not improvidently exercise its discretion in denying defendants' motions to the extent that they sought dismissal and/or preclusion (see CPLR 3126; see also Gross v Edmer Sanitary Supply Co., 201 AD2d 390, 391 [1994]). Preclusion is not warranted since the record reflects that defendants themselves did not comply timely with the first preclusion order (see e.g. DaimlerChrysler Ins. Co. v Seck, 82 AD3d 581, 582 [2011]). Moreover, plaintiff proffered a reasonable excuse for the delay, including defendants' consent thereto, and the verified complaint, which alleged that plaintiff was injured when she was struck by defendants' vehicle while crossing the street in a crosswalk, with the right of way, evidenced the existence of a meritorious claim (see Gibbs v St. Barnabas Hosp., 16 NY3d 74, 80 [2010]).
Plaintiff's third verified bill of particulars, which, inter alia, alleges that she had a third surgery, to remove hardware from her left tibia, the insertion of which hardware had been disclosed in an earlier bill of particulars, was a supplemental bill of particulars which concerned the "continuing consequences" of her previously identified injury, and thus, did not require prior leave of the court (Shahid v New York City Health & Hosps. Corp., 47 AD3d 798, 800 [2008]; see CPLR 3043[b]). Since discovery relating to the third surgery had not previously been ordered, the court's direction of related disclosure, rather than sanctions, was appropriate.

Anderson v Ariel Services, Inc., et al.
Motion to take judicial notice denied.

Currie v Wilhouski


Keller, O'Reilly & Watson, P.C., Woodbury, N.Y. (Patrick J. Engle of counsel), for appellant.
Kaye & Lenchner, Mineola, N.Y. (Mitchell J. Lenchner of counsel), for respondents.

DECISION & ORDER

In an action, inter alia, for a judgment declaring that the defendant Amica Mutual Insurance Company is obligated to provide coverage for certain damage to the plaintiffs' property, the defendant Amica Mutual Insurance Company appeals, as limited by its brief, from so much of an order of the Supreme Court, Nassau County (Brown, J.), dated January 27, 2011, as denied its motion for summary judgment, in effect, declaring that it is not obligated to provide such coverage.

ORDERED that the order is affirmed insofar as appealed from, with costs.

The Supreme Court properly denied the motion of the defendant Amica Mutual Insurance Company (hereinafter Amica) for summary judgment, in effect, declaring that it is not obligated to provide coverage for certain damage to a retaining wall on the plaintiffs' property. Amica failed to establish its prima facie entitlement to judgment as a matter of law. The affirmation of Amica's attorney was not based upon personal knowledge and thus was of no probative or evidentiary significance (see US Natl. Bank Assn. v Melton, 90 AD3d 742, 743; Warrington v Ryder Truck Rental, Inc., 35 AD3d 455, 456). Likewise, the affidavit of Robert Waldner, Amica's branch claims manager, was not based upon personal knowledge regarding the subject loss and, thus, had no probative or evidentiary value (see e.g. Beal Bank v Melville Magnetic Resonance Imaging, Inc., 294 AD2d 320, 321).

While the plaintiffs acknowledged in their bill of particulars that the section of the subject policy pertaining to "Collapse" was inapplicable, they also stated in their bill of particulars that the loss was a peril insured against, and that none of the exclusions to coverage cited in Amica's disclaimer letter was applicable.

Therefore, contrary to Amica's contention, the statements contained in the plaintiffs' bill of particulars did not constitute a written admission by the plaintiffs that the subject loss was not covered, or was excluded from coverage, under the policy.

In addition, Amica's contention that the letter from the plaintiffs' expert engineer, Steven McEvoy, to the plaintiffs provided support for its motion is erroneous. McEvoy's letter was unsworn and failed to specify his qualifications. Therefore, the letter from McEvoy submitted by Amica was not evidentiary material in admissible form and was also without probative value (see Hagan v General Motors Corp., 194 AD2d 766; Abrahamsen v Brockway Glass Co., 156 AD2d 615).

Since Amica failed to submit admissible proof, such as depositions or written admissions, or an affidavit by a person having knowledge of the facts, it failed to establish its prima facie entitlement to judgment as a matter of law (see CPLR 3212[b]).

In light of Amica's failure to meet its prima facie burden, we need not review the sufficiency of the plaintiffs' opposition papers (see JMD Holding Corp. v Congress Fin. Corp., 4 NY3d 373, 384; Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853; County of Nassau v Velasquez, 44 AD3d 987).
Accordingly, the Supreme Court properly denied Amica's motion for summary judgment, in effect, declaring that it is not obligated to provide coverage for certain damage to the plaintiffs' property.

 

MBIA Insurance Corporation v Countrywide Home Loans, Inc.


Goodwin Procter LLP, New York (Mark Holland of counsel), for appellants.
Quinn Emanuel Urquhart & Sullivan, LLP, New York (Philippe Z. Selendy of counsel), for respondent.

Order, Supreme Court, New York County (Eileen Bransten, J.), entered on or about January 28, 2011, which denied defendants' motion to, among other things, compel disclosure of documents and information concerning plaintiff's "remediation efforts," unanimously affirmed, without costs. Order, same court and Justice, entered July 1, 2011, which, to the extent appealed from, granted plaintiff's motion to, among other things, compel disclosure of documents and information concerning defendants' repurchase review, and denied defendants' cross motion for a protective order preventing such disclosure, unanimously affirmed, without costs.

Plaintiff met its burden of establishing that the documents concerning its remediation efforts were primarily prepared in anticipation of litigation and are, thus, privileged matter (see JP Foodservice Distribs. v Sorrento, Inc., 305 AD2d 266, 266 [2003]; CPLR 3101[d][2]). Indeed, plaintiff submitted evidence, including retainer agreements, showing that its counsel retained consultants to help provide legal advice to plaintiff with respect to potential legal claims against defendants. That plaintiff used the facts revealed by the consultants' work to avail itself of its contractual right to demand repurchases does not render the consultants' materials of "mixed purpose," especially since plaintiff had already paid, and was continuing to pay, the claims that were being investigated by the consultants (compare Landmark Ins. Co. v Beau Rivage Rest., 121 AD2d 98, 102 [1986], and Chemical Bank v National Union Fire Ins. Co. of Pittsburgh, Pa., 70 AD2d 837, 838 [1979]).

Plaintiff also established that the materials are protected by the attorney-client privilege and the attorney work product privilege (see CPLR 4503; 3101[c]), both of which extend to documents generated by consultants retained by counsel "to assist in analyzing or preparing" for anticipated litigation (Hudson Ins. Co. v Oppenheim, 72 AD3d 489, 489-490 [2010]).
Plaintiff has not waived any privilege by referencing its repurchase review in its amended complaint. Indeed, plaintiff does not need the privileged materials concerning the review to sustain its causes of action (Manufacturers & Traders Trust Co. v Servotronics, Inc., 132 AD2d 392, 397 [1987]; see Deutsche Bank Trust Co. of Ams. v Tri-Links Inv. Trust, 43 AD3d 56, 64 [2007]).

The motion court properly held that documents and information concerning defendants' repurchase review, generated in response to plaintiff's repurchase requests, are discoverable. Plaintiff proved that its repurchase analysis was not a part of its ordinary business. By contrast, the record shows that processing repurchase requests was an inherent and long-standing part of defendants' business (see Brooklyn Union Gas Co. v American Home Assur. Co., 23 AD3d 190, 191 [2005]). That a new division was created to respond to plaintiff's repurchase requests, or that litigation appeared imminent, is of no moment; defendants were, and always had been, contractually obligated to conduct repurchase reviews and such reviews were, and always had been, conducted by defendants' own staff of underwriters and auditors (see e.g. 148 Magnolia, LLC v Merrimack Mut. Fire Ins. Co., 62 AD3d 486, 487 [2009]; Rosario v North Gen. Hosp., 40 AD3d 323 [2007]).

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