Coverage Pointers - Volume XIII, No. 26

Dear Coverage Pointers Subscribers:

With this banner issue attached (87 pages in length) we close Volume 13 of Coverage Pointers, this being our 26th issue in this volume.  While Volume 14, Issue 1 is only two weeks away, we take a moment to thank our subscribers for years of loyal readership.  We have some subscribers who have been with us from the beginning, back in July 1999, when we started with 25 curious subscribers.  As far as we know, we are the oldest continuously published and electronically-distributed insurance coverage newsletter anywhere. 

We send greetings from Lake Tahoe, California, a beautiful venue for a meeting, for sure.  Pardon the brevity of this cover letter but sometimes real work interferes with CP.  I hate when that happens.  However, we make it up in the attached issue.

What a bonanza of insurance coverage decisions in this issue.  There are lots of opinions worthy of a few minutes of consideration.  In the Crane Collapse opinion from the Court of Appeals, the high court has said something new about the impact of misrepresentations made by an insured in securing policies.  The Court held that a material misrepresentation made by the named insured in securing the policy that may lead to rescission would also lead to the loss of coverage by additional insureds that made no misrepresentations.  Previously, because of “separation of insured” provisions in policies, some courts had taken a different tact.

You’ll find a well-reasoned decision on “good faith” claims handling rendered by the Fourth Department.  In State Farm v. Ricci, the court tossed out a bad faith claim in light of conduct that exemplified the proper method to resolve coverage issues.  We represented State Farm in that appeal.

We were successful in the Second Department as well, in Miraglia v. Essex, where a plaintiff with only a partially satisfied judgment tried to pry from a defendant’s carrier the monies the carrier received from a third-party defendant employer.  A failed bucket brigade.

 

One Hundred Years Ago Today:

Middletown Times Press
June 22, 1912
Page 1

TEDDY'S TIRADE AT TAFT
Severs His “Connection" With the Convention

Theodore Roosevelt issued a stinging statement this afternoon, calling upon the Roosevelt delegates not to vote on any matter before the convention.  He calls the convention a successful fraud.

He declared that the National Committee, under President Taft’s encouragement, had stolen the Roosevelt delegates.

Theodore Roosevelt definitely severs his connection with the convention.

Editor’s Note: The United States presidential election of 1912 was a rare four-way contest. Incumbent President William Howard Taft was renominated by the Republican Party with the support of its conservative wing. After former President Theodore Roosevelt failed to receive the Republican nomination, he called his own convention and created the Progressive Party (nicknamed the "Bull Moose Party"). It nominated Roosevelt and ran candidates for other offices in major states. Democrat Woodrow Wilson was finally nominated on the 46th ballot of a contentious convention, thanks to the support of William Jennings Bryan, the three-time Democratic presidential candidate who still had a large and loyal following in 1912. Eugene V. Debs was the nominee of the Socialist Party of America and won 6% of the popular vote, getting second place in several states.

Wilson defeated Taft, Roosevelt, and Debs in the general election, winning a big majority in the Electoral College and 42% of the popular vote, while his nearest rival, Roosevelt, won only 27%. Wilson became the only elected president from the Democratic Party between 1892 and 1932. He was the second of only two Democrats to be elected president between 1860 and 1932. This was the last election in which a candidate who was not a Republican or Democrat came second in either the popular vote or the Electoral College, and the first election in which all 48 states of the contiguous United States participated.

Cassie’s Connections:

In Cassandra’s column, you will see reference to legislation that would allow plaintiffs to satisfy judgments by seeking assets (e.g. insurance) from parties against whom they did not have a direct claim.  That bill was being pressed hard in the New York State Senate today and as of this writing, we’re not sure its status.  We are sure that it popped out of Committee without time to allow for a solid lobbying effort against it.

There seems to be an exception carved out for claims against employers.

 

One Hundred Years Ago:

Nik Wallenda’s walk surely impressed many of us, with him safely crossing Niagara Falls last Friday night. 

New York Times
June 23, 1912
Page 1
250 IN RIVER AS PIER FALLS

Collapses Under Weight of a Foresters Party on Niagara River

BUFFALO, N.Y., June 23. -- Of some 1,000 men, women and children who departed from here early this morning for an excursion to Eagle Park, Grand Island, in the Niagara River, near this city, more than 250 were thrown into the river when the pier at Eagle Rock collapsed under their weight this evening, and between fifteen and twenty were drowned. Many were hurt.
Editor’s Note:  Some 39 were drowned or were hurled over the Falls.

Liening Tower of Perley

Today our travels take us to the Western District of Louisiana where the United States District Court provided judicial approval for a Medicare Set-Aside, which, in our opinion, is binding on the government since CMS refused to participate in the proceeding.  That leads us to what could well be a major development in the entire Medicare Secondary Payer Universe; HHS has issued an Advanced Notice of Proposed Rule Making that suggests seven options for either obtaining approval of a set-aside, allowing the plaintiff to certify that no future medical treatment is required, or making an upfront payment to Medicare to satisfy their interest.  Comments on the proposed rule-making are due no later than August 14, 2012.  The government should order a big mailbox. 

Michael F. Perley
[email protected]

 

Here are the headlines for this week’s issue, attached:

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

Court of Appeals

• Misrepresentations by the Named Insured That May Lead to Rescission Would Equally Impact Coverage for Additional Insureds, Despite “Separation of Insured” Provisions

 

Appellate Division

• Even if an Employer Is Not Negligent, an Accident Involving Its Employee Arises Out of Its Operations
• Leak Springs in Attempt to Create Bucket Brigade.  Plaintiff Has No Interest in Monies Defendant’s Insurer Obtains in Third Party Action Against Employer’s Carrier
• Good Faith Triumphs Over Claims of Bad Faith
• It Took Too Long for Insurer to Seek to Amend Its Complaint to Raise a Second Ground for Disclaimer
• Excess Carrier Only Responsible for Paying Proportional Share of Pre-Judgment Interest and None of the Post-Judgment Interest
• While a Good Faith Belief in Non-Liability May Be a Defense to Late Notice, the Insured Must Demonstrate That It Conducted an Investigation to Determine the Potential for a Claim
• Insurer Who Defends Because of Allegations of Accident Within Its Policy Is Not Estopped from Later Denying Coverage if Real Date of Accident Was Outside of Policy Period:  Carrier Whose Policy Period Was in Play Wins on Late Notice Defense
• Waiver of Subrogation Provisions in Policy Preclude Enforcement of Indemnity Agreement
• Settlement by Insured with Lower Layer Excess Carriers Led to Loss of Upper Layer Policy Coverages Where Condition of Upper Layer Policies Required Exhaustion
• Contract Executed After Loss is Not an “Insured Contract”; Nonetheless, Timely Disclaimer is Still Needed to Avoid Coverage

 

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

• The Department of Health and Human Services (HHS) Issues Notice of Proposed Rule Making

 

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

• Affidavit That Parrots Statutory Language Fails to Raise Issue of Fact
• Failure to Commence Treatment for 10 Months Is Not a “Gap in Treatment”
• Defendant Need Not Address Injuries That Do Not Appear in the Complaint or Bill of Particulars
• Expert’s Equivocal Opinion Fails to Support Causation Argument
• Plaintiff Fails to Show That Default Should Be Vacated
• Plaintiff Successfully Defeats Defendants’ Motion
• Plaintiff’s Reliance on Examination Performed Three Years Before IME Is Insufficient to Defeat Defendants’ Motion
• Plaintiff’s Failure to Differentiate Injuries Between Prior and Subject Accident Results in Summary Judgment to Defendants
• Issue of Fact Not Raised Where Treating Chiropractor Fails to Account for Why Preexisting Conditions Are Not Source of Injuries Claimed Resulted from Accident

 

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

• On vacation this week.

 

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

• Injury Arising from Weight Lifting Deemed an Accident for Disability Coverage
• Laundry Equipment Is Personal Property, Not Equipment or Fixtures
• No Sworn Proof of Loss – No Coverage

 

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

• S3761 – Last Minute Legislation Expanding Plaintiff’s Rights Against Parties They Haven’t Sued
• Regulatory Agenda

 

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

• Contractual Liability Exclusion – Duty to Defend and/or Indemnify

 

MARC’S REMARKS
Marc A. Schulz
[email protected]

• Agency-type Relationship May Impose Liability to Insurer Under Respondeat Superior
• Appearance at EUO or Written Objections to EUO Condition Precedent to Coverage  

 

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

• Mold Cases Grow Back (Maybe)

 

Best wishes to all and see you in Volume 13.

Remember, if you have a situation, we LOVE situations.

 

Dan

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

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

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

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

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

NEWSLETTER EDITOR
Dan D. Kohane
[email protected]

ASSOCIATE EDITOR
Audrey A. Seeley
[email protected]

ASSISTANT EDITOR
Margo M. Lagueras
[email protected]

 

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

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

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

Jody E. Briandi
Steven E. Peiper

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

Margo M. Lagueras
Cassandra Kazukenus
Jennifer A. Ehman

APPELLATE TEAM
Jody E. Briandi, Team Leader
[email protected]
 
Scott M. Duquin
Diane F. Bosse

Index to Special Columns

Kohane’s Coverage Corner
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
Marc’s Remarks
Earl’s Pearls
Across Borders

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

Court of Appeals

06/12/12       Admiral Ins. Co. v. Joy Contractors, Inc.
Court of Appeals
Misrepresentations by the Named Insured That May Lead to Rescission Would Equally Impact Coverage for Additional Insureds, Despite “Separation of Insured” Provisions
Yet another decision in the on-going mega-litigation known as the “Crane Collapse.” 

By way of a brief background:  On March 15, 2008, a tower crane collapse during the construction of a high-rise condominium building in Manhattan.  Seven people were killed, dozens were injured and major property damage resulted.

Admiral insured Joy (the crane operator and a subcontractor of RCG, the general contractor) under a follow-form excess policy with limits of $9 million for each loss and in the aggregate. 

Admiral received notice of the March 15, 2008 crane collapse on March 17, 2008, and issued a reservation of rights letter to Joy on March 27, 2008, and requested additional information.  Admiral sent similar letters to RCG, New York Crane (the crane lessor) and East 51st Street (the building owner/developer) on April 25, 2008.

In its letter to Joy, Admiral reserved its right to deny coverage based on the “residential construction activities” exclusion in the excess policy.  “Residential construction activities” are defined as “any work or operations related to the construction of single-family dwellings, multi-family dwellings, condominiums, townhomes, townhouses, cooperatives and/or apartments.”

Admiral also stated that it might deny coverage based on inaccuracies identified in Joy’s underwriting submission wherein Joy allegedly represented that it specialized in drywall installation and that it did not perform exterior work.  Joy also allegedly represented that it did not perform work at a level above two stories in height other than interior drywall.  Admiral alleged that Joy actually was the structural concrete contractor and performed work on the entire building’s exterior with the tower crane.

On May 30, 2008, Admiral denied coverage to Joy, RCG, New York Crane and East 51st Street, all of which claimed to be additional insureds, and on June 8, 2008, Admiral commenced this action against all these entities as well as against Lincoln, Joy’s primary CGL carrier.

Supreme Court (Judge Edmead) denied Admiral’s cause of action based on the “residential construction activities” but also denied defendants’ motion to dismiss that cause of action, finding that there was an issue of fact as to whether the building was a “mixed use” building or strictly residential.

Justice Edmead also dismissed Admiral’s cause of action against the additional insureds finding that any alleged misrepresentations made by Joy in its underwriting submission did not affect the additional insureds’ coverage.

Supreme Court additionally:

Dismissed Admiral’s cause of action based on an exclusion for LLCs;
Decided that New York Crane was not an additional insured;

Held that Ins. Law § 3420(d)(2) was not a defense to Admiral’s lawsuit;

Denied motions and cross-motions to dismiss Admiral’s cause of action seeking a declaration of no coverage based on the grounds that the injuries to not arise out of Joy’s acts or omissions;

Denied motions and cross-motions to dismiss Admiral’s cause of action seeking a declaration of no coverage as to Joy for claims by its employees based on Lincoln’s employer liability exclusion; and

Denied motions and cross-motions dismissing Admiral cause of action for a declaration of no coverage based on its own and Lincoln’s exclusions for injury arising out of the rendering or failure to render professional services.

On February 17, 2011, the Appellate Division modified the trial court declaring that the “residential construction activities” exclusion was inapplicable and otherwise affirmed.  It found that the evidence established that the building was intended to be a “mixed use” structure.  In reaching that conclusion, it accepted evidence from the defendants that referenced “storefronts” but rejected the evidence of Admiral’s engineering expert because he did not have personal knowledge of the project. 

On appeal, the Court found that this was error as an expert is not required to have personal knowledge to render his conclusions and the Appellate Division should not have made credibility determinations as between the conflicting affidavits as to whether “storefront” meant entrances to commercial establishments, or merely a construction style as asserted by Admiral’s expert. 

Contrary to defendants’ assertions of what East 51st Street’s intentions were, the Court noted that intent does not control whether the excess policy afforded coverage.  The Court indicated that Joy purchased a policy that did not provide coverage for residential construction activities.  Therefore, if Joy engaged in such activities, there would clearly be no coverage.  However, there would be coverage, pursuant to the endorsement’s definition of “residential construction activities”, if the residential building was a “mixed use” building.  Therefore, there were material issues of fact as to whether the building under construction was residential or “mixed use” which could only be resolved with reference to what was defendants were actually building.

With respect to Admiral’s four causes of action against the additional insured, seeking:

Rescission of the excess policy; or alternatively;

Reformation to conform retroactively with such terms as might have been offered to Joy had it responded accurately to the underwriting questions;

A declaration that the excess policy was void for fraud and/or misrepresentation; and

A declaration that claims arising out of the accident were not within the scope of coverage afforded by the CGL and excess policies.

The trial court had dismissed these causes of action as against RCG and East 51st Street based on case law that the Court found to be distinguishable.  Instead, the Court, accepting Admiral’s allegations regarding Joy’s misrepresentations as true, found that the risk in exterior construction much was greater than the risk paid for by Joy and assumed by Admiral.  As such, the only additional insureds Admiral could have contemplated when it issued the excess policy would have been those entities associated with Joy’s work performing interior drywall. 

The Court agreed with Admiral that if the policy is void ab initio due to the named insured’s misrepresentations in the application process, the fact that parties demonstrate that they are additional insured under the policy is unavailing.  The Court noted with approval that

“As Admiral points out, the lower courts’ decisions dismissing its sixth cause of action seeking rescission as against all defendants except Joy illogically ‘leaves in place [the excess policy] to be enforced by other parties even if [this policy] ultimately is rescinded.  In effect, these other parties [would be] permitted to rely on the terms of a policy that . . . may be deemed never to have existed to create coverage’ in the first place.  In short, ‘additional’ insureds, by definition, must exist in addition to something; namely, the named insured in a valid existing policy.”

The Court additionally determined that the authority cited by the lower courts did not preclude, or even address, claims such as those asserted by Admiral for reformation or for declarations based on an express policy condition regarding fraud or misrepresentations, or the scope of coverage afforded under a policy.  As such, the Court found that Admiral’s claims relating to Joy’s alleged misrepresentations in the underwriting submission were properly interposed against RCG and East 51st Street.

Finally, the Court agreed with the trial court that the LLC exclusion was ambiguous as to whether it precluded coverage to any LLC not named in the CGL policy’s declarations, or only with respect to newly acquired LLCs or those newly formed during the policy period (defendants’ position).  Because the exclusion was ambiguous, the Court construed it in favor of the defendants and determined that the exclusion does not preclude coverage for those defendants that are LLCs.
Editor’s Note:  With thanks to Margo Lagueras for this summary

Appellate Division

06/21/12       Admiral Ins. Co. v. American Empire Surp. Lines Ins. Co.
Appellate Division, First Department
Even if an Employer Is Not Negligent, an Accident Involving Its Employee Arises Out of Its Operations
Cross Country, the concrete superstructure contractor on a Manhattan construction project, subcontracted the steel reinforcing work to nonparty B & R.  On October 19, 2005, a B & R employee, Yang, was working on the project, following the B & R foreman's instructions, and was injured by falling plywood.  Yang sued Cross Country and others.  B&R was not in the lawsuit.  The jury held that Cross Country was solely liable for Yang's injuries.  Thereafter, AEI, B&R’s and Cross Country’s primary carrier, and Admiral, Cross Country’s excess carrier, settled the case for $2.3 million.  AEI contributed $1,433,333 to the settlement, and Admiral, while reserving all of its rights, contributed the remaining $866,667.

Admiral claimed that AEI and B&R’s excess carrier, Scottsdale, should have paid the full $2 million of aggregate primary coverage under both the policy AEI issued to Cross Country and the policy AEI issued to B&R, under which Cross Country was an additional insured.  Admiral further argued that, because Cross Country was an additional insured under the excess policy Scottsdale issued to B&R, Scottsdale should bear all or half (depending on the effect of the relevant policies' "Other Insurance" clauses) of the $300,000 of the settlement remaining after exhaustion of AEI's primary coverage.

The primary issue on this appeal is whether Cross Country's liability for the injuries at issue in the underlying action constitutes "liability arising out of [B&R's] operations" under the B&R policies.  Since B&R was not responsible for the accident, according to the jury verdict, could the accident still arise out of its operations?

The Court found that under the Court of Appeals decision in Regal, the claim arose out of the employer’s operations, even if it was not negligent.

Cross Country’s liability having been established, it follows that AEI should have contributed to the $2.3 million settlement (to which AEI was a party) $2 million, the sum of the applicable limits under the primary policies AEI issued to B&R and Cross Country.  Hence, Admiral, as an excess insurer, is entitled to equitable contribution from AEI in the amount of the difference between $2 million and $1,433,333 (the amount AEI actually contributed), which is $566,667.  In addition, Admiral is entitled to recover half of the remaining $300,000 of its contribution to the settlement from Scottsdale pursuant to Cross Country's additional insured coverage under the excess policy Scottsdale issued to B&R.

06/20/12       Matter of Miraglia v. Essex Insurance Company
Appellate Division, Second Department
Leak Springs in Attempt to Create Bucket Brigade.  Plaintiff Has No Interest in Monies Defendant’s Insurer Obtains in Third Party Action Against Employer’s Carrier
Miraglia obtained a judgment in a Labor Law §240(a ) case against a property owner (H&L) that was eventually reduced to about $30 million with interest.  The owner’s insurer, Essex, unequivocally offered its $1,000,000 policy limits, with interest (which included post-judgment interest on the entire verdict) which the court determined to be $6.1 million.  Plaintiff acknowledged that payment of the $6.1 million would exhaust the Essex policy.

H&L had obtained common law and contractual indemnity from the plaintiff’s employer (Lane) in the underlying lawsuit.  So, the same day that Essex paid the $6.1 million to the plaintiff, the State Insurance Fund, using its funds and those from Lane’s contractual liability (CGL) carrier, reimbursed Essex the $6.1 million.

So essentially, Essex was fully reimbursed for all of its indemnity expenses.

The plaintiff brought a “turnover” proceeding, arguing that he had a judgment of $30 million, he only received $6.1 million from H&L and its carrier, Essex, and therefore, he was still owned $23.9 million by the defendant.  Miraglia argued that he had a greater interest in the $6.1 million that Essex received from the State Insurance Fund than Essex did and wanted THAT $6.1 million.  He argued that when Essex made that payment and then was subsequently reimbursed by the Fund, Miraglia would want THAT $6.1 million also and this process – this “bucket brigade” -- should continue until the entire judgment was satisfied.

Essex argued that the $6.1 million that it received from the State Insurance Fund was not the property of the owner-insured and that the owner-insured had no interest whatsoever in those monies.  The Second Department agreed.

Pursuant to the terms of an insurance agreement between H&L and Essex, any right of indemnification that H&L possessed was "transferred" to Essex once Essex paid out the policy limits on behalf of H&L to the [Miraglia], and H&L no longer possessed an interest in that right.  The obligation of Essex ran only to H&L as its insured, and only to the extent of the policy limits.
Editor’s Note:  Kohane and Fijal on this one for Essex.  We waited eight months after oral argument for the decision.

06/15/12       State Farm Fire & Casualty v. Ricci
Appellate Division, Fourth Department
Good Faith Triumphs Over Claims of Bad Faith
State Farm did it right.  When the suit came in arising out of a fight that broke out at a hockey game, State Farm promptly advised its insured and others that the claim might not constitute an occurrence and gave the insured the right to select counsel because of a partial denial of coverage, an option the insured declined.  Two years later, it commenced a declaratory judgment action seeking a clarification of its rights under the policy.

“Bad faith,” cried the insured.  “Bad faith,” insisted the underlying plaintiff’s counsel.  “You waited too long to commence the DJ action.”  “You had no basis to deny coverage on assault when you did.”  “We want attorney fees for bad faith.”

The lower court tossed out two of the three bad faith claims and the Fourth Department dismissed the remaining claim.  To establish bad faith in New York
based on a disclaimer of coverage, a party must establish that the insurer's conduct constituted a gross disregard of the insured's interests:  “a pattern of behavior evincing a conscious or knowing indifference to the interests of the insured".

Here, State Farm engaged in good faith conduct, a prompt denial and an offer of Cumis counsel because of the partial disclaimer/reservation of rights.  There is nothing wrong with waiting two years to commence a declaratory judgment action to clarify one’s rights.

As to attorney fees, the law is well established that the insured would be entitled to the fees in defending a DJ action if the carrier is unsuccessful.  That point was conceded by State Farm because it is well-established law.

The conduct by State Farm evidenced only good faith.
Editor’s Note:  We were delighted to represent State Farm on the underlying motion and this appeal.

06/14/12       Vermont Mutual Ins. Co. v. Mowery Construction, Inc.
Appellate Division, Third Department
It Took Too Long for Insurer to Seek to Amend Its Complaint to Raise a Second Ground for Disclaimer
Odd little case.

Vermont Mutual commenced this action in February 2008, seeking a declaration that it was not obliged to indemnify or defend Mowery due to the lack of timely notice. We trust that the letter previously sent to the insured said so.

Following joinder of issue and discovery, Vermont moved in January 2010 for leave to serve an amended complaint asserting a new basis for disclaiming coverage, namely, that the injured worker was an employee of Mowery rather than an independent contractor as Mowery claimed and, therefore, a policy provision excluding coverage for injuries to employees was applicable.

While the court determined that the amendment had merit, there being proof that the injured worker was under the control of Mowery, the court found that the amendment would unduly prejudice and surprise the insured.

The insured waited two years after the action was commenced to raise the employment issue and could not explain the delay. The court found that the record demonstrated that plaintiff had evidence suggesting that the worker was Mowery's employee before it sent its coverage letter and commenced this lawsuit, but failed to raise the issue in its complaint or promptly seek leave to amend.
Editor’s Note:  Was the employment issue raised in the original coverage letter? If not, wouldn’t the exclusion be waived anyway?

06/13/12       Ragins v. Hospitals Insurance Company, Inc.
Appellate Division, Second Department
Excess Carrier Only Responsible for Paying Proportional Share of Pre-Judgment Interest and None of the Post-Judgment Interest
In 1999, the defendants, Hospitals Insurance Company, Inc.(“HIC”) issued an Excess E&O Policy to Ragins.  The underlying policy limit was $1,000,000 per claimant and was issued by Group Council Mutual Insurance Company (“Group Council”).  Ragins was sued by Villanueva.  Group Council became insolvent and the State Liquidation Bureau took over the adjustment of the primary claim.

A verdict of $1,100,000 was rendered in 2006 and the Liquidation Bureau paid $1,000,000 and HIC paid $100,000.  A judgment for accumulated post-judgment interest was entered against Ragins.  HIC paid its proportional share of the pre-judgment interest, based on that portion of the underlying judgment which it had been obligated to pay under the excess policy.

The plaintiff commenced this action against HIC, alleging, among other things, that HIC breached the excess policy by failing to indemnify him for costs and the remaining amount of unpaid interest.

The documentary evidence submitted by HIC established that HIC paid the right amount – its proportional share of the costs and interest set forth in the amended judgment.  HIC was only responsible for prejudgment interest on that portion of the underlying judgment which it was obligated to pay under its and the excess policy conclusively established that HIC had no obligation to pay post-judgment interest or costs.

06/13/12       Lancer Insurance Company v. Super Value, Inc.
Appellate Division, First Department
While a Good Faith Belief in Non-Liability May Be a Defense to Late Notice, the Insured Must Demonstrate That It Conducted an Investigation to Determine the Potential for a Claim
This was a late notice disclaimer case.  Once again, the policyholder argued that it has a good faith belief in non-liability but failed to demonstrate that it conducted any kind of investigation to determine the potential for liability. Accordingly, coverage was lost.

06/12/12       25 Avenue C New Realty, LLC v. Alea North America Ins. Co.
Appellate Division, First Department
Insurer Who Defends Because of Allegations of Accident Within Its Policy Is Not Estopped from Later Denying Coverage if Real Date of Accident Was Outside of Policy Period:  Carrier Whose Policy Period Was in Play Wins on Late Notice Defense
25 Avenue C (“Owner”) owns property located at 25 Avenue C in New York County.  Merrimack insured this property under a liability policy that was in effect on June 27, 2003.  Alea insured this property under a liability policy that was in effect on June 27, 2005.

On June 27, 2005, Grimes commenced an action against Owner to recover for injuries sustained on the property.  The complaint alleged that the date of the accident was June 27, 2005.  Plaintiffs gave timely notice of the summons and complaint to Alea (the same day as the suit was filed) and CAC, Alea's third-party claims administrator, assigned the defense of this action to Samel.

Two years later, in May 2007, CAC discovered, after speaking with Grimes, that the accident actually occurred on June 27, 2003, not June 27, 2005 as stated in the complaint.  That date was reaffirmed in August 2007, when Samel received the bill of particulars and hospital records.

It was not until May 15, 2008, that CAC contacted Owner to determine the name of the insurance carrier that insured the premises during 2003 and learned it was Merrimack.  CAC promptly notified Merrimack.  Merrimack denied coverage based on late notice and Alea denied coverage based on the accident occurring outside of its policy period.

Owners brought this action seeking coverage from one or the other or both. .

The appellate court held that Alea is relieved from any coverage obligations as its policy was not in force on the date of the accident. 

As to Merrimack, this was a pre-prejudice case so Merrimack was not required to demonstrate that it was prejudiced by the late report.  Surely, it was not notified timely of the incident.  Merrimack was first put on notice of this accident by Alea's assigned defense counsel on May 23, 2008, almost five years after the accident occurred, a delay unreasonable as a matter of law.  Alea could have given notice earlier on behalf of its insured.

Two concurring justices agreed that the insured’s notice was late but argued that Alea’s notice, through defense counsel, was not notice by the insured.
Editor’s Note:  There is a third position (the one we endorse).  We agree that that the notice was late but disagree with the majority and the concurring judges as to who actually gave notice.  The majority indicates that notice came from Alea, and the concurring judges say notice from Alea is not notice from the insured.  We would contend that the defense counsel, by whomever appointed, was acting on behalf of the insured and his notice is the insured’s notice.

In any event, notice was late.

Didn’t anyone get suspicious that there was something fundamentally wrong with an allegation of a June 27, 2005 accident in a lawsuit commenced on June 27, 2005?

06/12/12       Tishman Construction Corp. v. Great American Ins. Co.
Appellate Division, First Department
Waiver of Subrogation Provisions in Policy Preclude Enforcement of Indemnity Agreement
This is the third appeal that has been perfected in this case: Tishman Constr. Corp. et al. v. Great American. Ins. Co., 53 AD3d 416, 861 NYS.2d 38 [1st Dept 2008](determining priority of coverage between primary and excess policies); Tishman Construction et al. v. Hon. Jane Solomon, et al. 2009 NY Slip Op 02664, 61 AD3d 432 [1st Dept 2009].

This action arose out of two personal injury lawsuits brought by Richard Maikowski and Robert Massie for injuries as a result of an accident that occurred on August 22, 2000.  Messrs. Maikowski and Massie were employees of defendant-respondent Schiavone Construction Corp (“Schiavone”).  Both employees filed suit naming plaintiffs, Tishman Construction Corporation of New York (“Tishman”) and Carnegie Hall Corporation (“Carnegie”), as defendants.  Schiavone was not a party to the workers’ personal injury suits.  Carnegie hired Tishman as Construction Manager for the construction of a new music hall. Schiavone was hired to perform excavation, foundation, structural demolition, structural steel and concrete work at the site.  Schiavone’s trade contract required a determination of its negligence, if any, prior to indemnification.  In the underlying actions, Tishman and Carnegie did not bring a third-party action for contractual indemnification against Schiavone.  As a result, Schiavone’s negligence was not determined.

National Union provided Tishman with primary general liability insurance with liability limits of $1,000,000.  National Union also afforded primary general liability insurance coverage with limits of $1,000,000 to named insured Schiavone.  Great American Insurance Company issued an excess policy to Schiavone with limits of liability of $25,000,000 per occurrence and in the aggregate.  Tishman and Carnegie qualified as additional insureds under the primary policy National Union issued to Schiavone.  Plaintiffs argued that after exhaustion of the primary policy issued to Schiavone, Great American was obligated to indemnify them for any judgment or settlement.

Plaintiffs unsuccessfully moved for summary judgment in the motion court seeking indemnification from Schiavone.  The motion court and the appellate division found that the National Union polices contained reciprocal waivers of subrogation that barred plaintiffs’ claim.  The Great American policy contained a cross suits exclusion. The Appellate Division held that the cross suits exclusion must be read in conjunction with the contractual liability exclusion in plaintiff National Union’s policy and, thus, it contained a waiver of subrogation.  
Editor’s Note:  We thank Attorney Stephen P. Murray of Hardin, Kundla, McKeon & Poletto, the successful appellate lawyer in this case for preparing this summary on behalf of our readership.

06/12/12       JP Morgan Chase & Co. v. Indian Harbor Insurance Company
Appellate Division, First Department
Settlement by Insured with Lower Layer Excess Carriers Led to Loss of Upper Layer Policy Coverages Where Condition of Upper Layer Policies Required Exhaustion
Plaintiff alleges that several insurers breached their contractual obligations to provide indemnification under excess insurance policies they issued.  Its predecessor, Bank One, purchased $175 million in "claims made" bankers professional liability insurance and securities action claim coverage for the period October 1, 2002 to October 1, 2003.  Bank One's insurance program was structured as a tower of follow-the-form coverage in excess of a self-insured retention. Indian Harbor was the primary carrier others provided excess coverage at seven different trigger points.

In November 2002, actions were brought against Bank One in regard to certain notes. Between February 2006 and March 2008, plaintiff settled six actions for an aggregate of $718 million.  Bank One Merged with JP Morgan in the meantime. 
The theory of recovery by Bank One was that its portion of the settlement for its pre-merger conduct exceeded the combined limits of the tower of coverage.

Some of the claims against carriers in the tower were settled for less than the amount of their respective shares in the tower.

While the terms differed for each excess carrier in the layers, the court generally held that conditions in a higher level excess policy that required that coverage from policies below it be exhausted before that higher level excess carrier’s coverage triggers mean what they say.  If the insured settled with a lower-level excess carrier for an amount less that the limits of that layer, conditions that would trigger a higher layer excess policy to contribute would not be satisfied. 

Accordingly, the complaints against the upper layer carrier were dismissed.
Editor’s Note:  Wow. Now that hurts.

06/08/12       RLI Insurance Company v Smiedala
Appellate Division, Fourth Department
Contract Executed After Loss is Not an “Insured Contract”; Nonetheless, Timely Disclaimer is Still Needed to Avoid Coverage

This case has a long and tortured history.  The matter stems, initially, from an automobile accident wherein a vehicle driven by Mr. Smiedala was struck by a vehicle operated by Mr. Hale. At the time of the incident, Hale was acting in the course of his employment with Regional. 

RLI commenced the instant action seeking a declaration that it did not owe coverage to either Hale or Regional.  Upon appeal to the Fourth Department, it was determined that RLI’s denial to Regional was untimely.  As such, coverage was confirmed insofar as Regional’s claim was concerned.  Hale, on the other hand, was determined not have qualified as an insured.   Accordingly, where Hale did not qualify, it followed that RLI had no obligation to even issue a denial letter. 

In recognition that Hale was now left without coverage, Hale and Regional (both of whom were represented by the same counsel) crafted an “agreement” wherein Regional agreed to indemnify Hale for any loss resulting from the claim presented by Mr. Smiedala.  Under such a circumstance, Regional’s exposure would be covered as an named insured under the RLI policy.  In addition, Mr. Hale’s exposure would likewise ultimately fall to the RLI policy through Hale’s indemnity claim, if enforceable, against RLI’s named insured Regional. 

RLI opposed Regional/Hale’s argument by arguing that the claim did not trigger the insuring agreement of the policy.  In addition, RLI argued that even if the policy had been triggered, the contractual liability exclusion and/or the condition prohibiting an insured from agreeing to liability without the carrier’s consent precluded coverage.  In opposition, Regional/Hale argued that RLI had not asserted either coverage defense in a formal denial letter, and as such it was now time barred at this stage. 

Initially, the Appellate Division ruled that the Regional/Hale Contract was not an “insured contract” because it was executed AFTER the loss (indeed, it was executed BECAUSE of the loss).  As such, the Court ruled that the contractual liability exclusion would have been applicable.  However, where, as here, there was never a formal declination letter issued on such grounds, the Court ruled that Insurance Law 3420(d)(2) prohibited RLI from denying coverage at this stage.  Accordingly, the court ruled that if there was an enforceable indemnity agreement between Regional and Hale, any exposure accepted by Regional would fall within the scope of the policy issued by RLI.

It didn’t seem to concern the court that there was never a tender of defense because there was no claim between the parties to the indemnity agreement.  How can an obligation to defend or indemnify exist if there is no claim?

 

LIENING TOWER OF PERLEY

Michael F. Perley
[email protected]

THE DEPARTMENT OF HEALTH AND HUMAN SERVICES (HHS)
 ISSUES NOTICE OF PROPOSED RULE MAKING

Federal Register, Vol. 77, No. 116 (77 FR 35917)

HHS has issued an Advance Notice of Proposed Rule-making that proposes to provide a series of options for individuals reaching a liability settlement where future medical payments are the subject of consideration.  Options 1 through 4 are available to Medicare beneficiaries as well as non-beneficiaries.  Options 5 through 7 are available to beneficiaries only.  These options are:

                    Option 1: The individual/beneficiary pays for all related future medical care until his/her settlement is exhausted and documents it accordingly.

                    Option 2: Medicare would not pursue reimbursement for future medical payments if a case is settled for a “defined amount” (expected to be a small settlement) and various other conditions are met, including the unavailability of Workers’ Compensation or No-Fault.

                    Option 3: The individual/beneficiary provides an attestation from his or her doctor confirming that no future medical treatment is required.

                    Option 4: The individual/beneficiary submits a proposed Medicare Set-Aside arrangement (MSA) amount for CMS’ review and obtains approval.

                    Option 5: The beneficiary participates in the current Medicare Recovery Option System for small settlements.

                    Option 6: The beneficiary makes an upfront payment to Medicare to prefund Medicare’s obligation subject to Medicare approval.

                    Option 7: The beneficiary obtains a compromise or waiver of recovery.

We will consult with our partners in the insurance industry on these options and determine whether or not comments are appropriate at this time.  Although it appears that a solution may be on the horizon, none of these options appear calculated to streamline the process.  We can look forward to more uncertainty in the foreseeable future.

 

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

06/21/12       Larrabee v. Bradshaw
Appellate Division, Third Department
Affidavit That Parrots Statutory Language Fails to Raise Issue of Fact
Plaintiff claimed injuries to her neck, back and arms under the 90/180-day category as well as a permanent loss of use of her cervical spine, permanent consequential and/or significant limitation of use of her neck and cervical. 

In support of their motion, defendants submitted plaintiff’s deposition testimony in which she testified that, at the time of the November 2008 accident, plaintiff was disabled from her prior employment as a waitress due to arthritis in her spine and receiving Social Security benefits.  She also testified that she developed carpal tunnel from waitressing although she stated that it had subsided but became symptomatic again following the accident.  She began treatment with a chiropractor six days after the accident with complaints of pain in her spine, numbness in her hands and aching in her arms.  She stated that she continued to have neck pain and headaches brought on by muscle spasms in her neck.  She did not, however, receive any treatment for the carpal tunnel symptoms after the accident. 

Defendants also submitted an IME by an orthopedic surgeon performed in April 2010, in which he diagnosed resolved cervical strain and right shoulder strain.  He found minimal range-of-motion limitations and attributed the numbness in plaintiff’s hands to her carpal tunnel syndrome.  Defendants also showed that there was no objective medical evidence with regard to the 90/180-day claim.  Defendants thus met their prima facie burden and showed a lack of causal relationship to the accident.

In opposition, plaintiff submitted her own affidavit claiming that she could not do anything for herself, and that prior to the accident, she had no problems with her neck, arms or back and that her carpal tunnel syndrome and arthritis were asymptomatic.  She also submitted the affidavit of her chiropractor which set forth objective findings based on his initial examination in November 2008.  However, no other evidence was provided beyond October 2009 so there was no evidence of plaintiff present limitations and nothing to support a permanent loss of use.  Similarly, no medical records supported her claim under the 90/180-day category and the chiropractor’s conclusory affidavit, which merely parroted the statutory language, was insufficient to raise a triable issue of fact to defeat defendants’ motion.

06/15/12       Smith v. Reeves
Appellate Division, Fourth Department
Failure to Commence Treatment for 10 Months Is Not a “Gap in Treatment”
On appeal, plaintiff limited her claims to the permanent consequential and/or significant limitation of use categories.  She alleged that, as a result of the accident, she sustained a traumatic brain injury that resulted in symptoms of post-concussion syndrome and a “chorea-like” movement disorder of her distal extremities.  Although noting that it has long recognized the subjective nature of complaints associated with post-concussion syndrome, in this case, the Court reversed the lower court and granted defendants’ motion and cross-motion dismissing the complaint.

Here, defendants contended that the fact that plaintiff did not seek or receive any treatment for 10 months rendered causation speculative.  The Court agreed and rejected plaintiff’s assertion that the void in medical treatment was a “gap in treatment.”  Plaintiff received no treatment that was contemporaneous with the accident.  In addition, none of the objective imaging studies and scans performed on her head and brain revealed any medically determined injury.

The affirmations submitted by plaintiff in opposition did not address the absence of objective findings on the objective imaging studies and scans, nor did they adequately assess how the alleged “chorea-like” injuries were related to the accident.  In light of the complete absence of any contemporaneous or objective findings, defendants’ motion and cross-motion should have been granted.

06/13/12       Moran v. Kollar
Appellate Division, Second Department
Defendant Need Not Address Injuries That Do Not Appear in the Complaint or Bill of Particulars
Defendant submitted competent medical evidence establishing that plaintiff’s alleged injuries to his left eye and cervical spine were not serious injuries.  Defendant also submitted sufficient evidence showing that plaintiff did not sustain a serious injury under the 90/180-day category.  In opposition, plaintiff failed to raise a triable issue of fact.  In addition, and contrary to plaintiff’s assertion, defendant was not required to address plaintiff’s alleged shoulder injuries because plaintiff did not claim such injuries either in the complaint or in his bill of particulars and he did not move to amend the bill of particulars to include additional injuries.  As such, the trial court properly dismissed the complaint.

06/13/2012   Luigi v. Avis Cab Co., Inc.
Appellate Division, Second Department
Expert’s Equivocal Opinion Fails to Support Causation Argument
Defendants failed to meet their prima facie burden because their examining orthopedic surgeon reported significant range-of-motion limitations in plaintiff’s left shoulder.  Although his opinion was that the injuries were degenerative and not causally related to the accident, he was too equivocal to establish that the injuries were not traumatic.  The trial court properly denied defendants’ motion.

06/12/12       Armand v. Raman
Appellate Division, First Department
Plaintiff Fails to Show That Default Should Be Vacated
Defendants served their motion for summary judgment on plaintiff’s former counsel which, because plaintiff failed to file the substitution, continued as her attorney of record.  Defendants took a default and plaintiff, even if she provided a reasonable excuse, failed to show that she had a meritorious case because her affidavit asserting that she had bulging or herniated discs, without any competent objective evidence, was insufficient to establish serious injury.

06/12/12       Davis v. Alnhmi
Appellate Division, First Department
Plaintiff Successfully Defeats Defendants’ Motion
On appeal, the trial court is reversed.  Plaintiff raised a triable issue of fact as to whether she sustained serious injuries to her cervical and lumbar spines under the permanent consequential and/or significant limitation of use categories through the submission of MRI reports showing disc herniation at L5-S1 and several cervical bulges, an EMG report showing radiculopathy, and the affirmation of her orthopedist who measured range-of-motion limitations on numerous occasions, including recently.  Her orthopedist also attributed her injuries to the accident and there was no evidence in the record that the young plaintiff had any prior injuries or treatment.  In addition, she supported her 90/180-day claim by alleging that she was confined to her home for more than three months and was instructed by her doctors not to lift heavy items which was a requirement of her job. 

06/12/12       Vega v. MTA Bus Co.
Appellate Division, First Department
Plaintiff’s Reliance on Examination Performed Three Years Before IME Is Insufficient to Defeat Defendants’ Motion
Defendants met their burden on the issue of negligence by showing that the bus driver acted reasonably in an emergency situation not of his own making when he applied the brakes to avoid hitting a car coming from the opposite direction that crossed double yellow lines to make a sudden left turn directly in front of the bus.

In addition, defendants submitted expert medical reports finding plaintiff had normal range-of-motion and there was no objective evidence of any limitations.  In opposition, the most recent report plaintiff submitted was from one of her treating physicians outlining the treatment received in 2007, almost three years before defendants’ experts’ findings of full range-or-motion.  The trial court, which had denied defendants’ motion, was unanimously reversed.

06/08/12       Tyson v. Nazarian
Appellate Division, Fourth Department
Plaintiff’s Failure to Differentiate Injuries Between Prior and Subject Accident Results in Summary Judgment to Defendants
Defendant turned left in front of plaintiff who had the right-of-way.  Plaintiff claimed that the prior back and neck injuries she sustained in a motor vehicle accident in 2002 were exacerbated by the subject accident of 2008.  She filed a motion and cross-motion for summary judgment on the issues of negligence and serious injury. 

Defendant submitted persuasive evidence that plaintiff’s alleged pain and injuries were related to her pre-existing conditions as she underwent a spinal fusion in 2006, obtained Social Security disability benefits for a “sever impairment,” and continued to complain of lumbar back problems and neck pain until the date of the subject accident.  Defendant also submitted a peer review which indicated that her symptoms before and after the 2008 accident were essentially the same, an affirmation from another physician who concluded that the imaging studies before and after were virtually identical, and an affirmation from a third physician who reviewed diagnostic films and found no evidence of traumatic injury attributable to the 2008 accident.

In opposition, plaintiff submitted the affidavit of her treating physician who noted a significant disc herniation at L4-5 on an MRI performed in 2008.  He recommended surgery which he performed in 2009, but plaintiff continued to have back pain.  Although this was sufficient to raise a triable issue of fact, but given the evidence submitted by defendant, plaintiff was required to offer some explanation as to how her current symptoms and limitations were caused by the 2008 accident rather than the pre-existing condition.  Her physician, even if he could not provide a quantitative comparison, was required to provide a qualitative comparison.  Simply stating that she had “persistent worsening” of symptoms was conclusory and insufficient to refute defendant’s experts.

On appeal, the trial court’s denial of plaintiff’s motion and cross-motion, and dismissal of the complaint, was affirmed with a two-judge dissent.  The dissent expressed concern that the decision of the majority sets “an almost impossible standard for persons with preexisting injuries and conditions to have their cases heard by a jury when those persons are injures in subsequent motor vehicle accidents.
Note:  The dissent cites to the standard set in Perl v Meher, the recent Court of Appeals decision specifically addressing soft tissue injuries.  With a two-judge dissent, it will not surprise us if this case also travels to Albany to seek clarification on the very problematic area of pre-existing injuries and conditions.

06/14/12       Boone v. Milano
Appellate Division, Third Department
Issue of Fact Not Raised Where Treating Chiropractor Fails to Account for Why Preexisting Conditions Are Not Source of Injuries Claimed Resulted from Accident
Plaintiff alleged she suffered injuries to her neck, back and left shoulder, as well as pain from a trauma induced Chiari malformation, and psychological and emotional distress. She made claims under the permanent loss of use, permanent consequential and/or significant limitation of use categories and 90/180-day category.

In support of their motion, defendants submitted plaintiff’s medical records as well as affidavits and reports based on examinations by a neurologist and a specialist in orthopedics.  The orthopedic specialist noted that plaintiff’s medical records documented preexisting conditions and complaints very similar to those claimed in her bill of particulars.  He also noted that a Chiari malformation could not be caused by trauma and had to exist prior to the accident.  He concluded that plaintiff suffered a mild temporary cervical strain and not a serious injury under any of the categories claimed.

Defendants’ neurologist found plaintiff had full range-of-motion of the cervical and lumbar spine.  He attributed any restrictions in the left elbow or left shoulder to prior injuries and surgeries.  He noted there were no objective findings related to the accident and, although plaintiff had subjective complaints of pain, a comparison of MRI from before and after the accident revealed no significant changes.  He also observed that her history of chronic headaches and neck pain could have been caused by the Chiari malformation, and that her claimed restrictions, other than those in the left elbow and shoulder, were entirely subjective and self-limiting.

In opposition, plaintiff failed to present the required quantitative or qualitative assessment of the claimed injuries.  She offered the affirmation of her treating chiropractor, who did not begin to treat her until 2 ½ years after the accident.  He opined that her limitations were causally related to the accident, but failed to account for why her preexisting physical conditions were not the cause of the injuries and limitations she claimed were caused by the accident.  The trial court did not admit the chiropractor’s testimony because in was not in affidavit form, as it must be.  However, even if the court had accepted his testimony, it would have failed to raise an issue of fact.

With regard to plaintiff’s claim under the 90/180-day category, plaintiff only missed work following surgery that was performed on the Chiara malformation nearly a year after the accident.  Her medical records documented, and she admitted, that many of the restrictions claimed all existed before the accident and apparently were caused by conditions that predated the accident. 

 

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

On vacation this week.
Editor’s Note:        Vacation?  Since when do we allow those?

 

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

06/15/12       Christodoulides v. First Unum Ins. Co.
Appellate Division, Fourth Department
Injury Arising from Weight Lifting Deemed an Accident for Disability Coverage
Plaintiff was employed as a urologist when he purchased three separate policies of long term disability coverage from defendant First Unum.  Importantly, under the terms of his policies, plaintiff was entitled to lifetime coverage if he was disabled due to an accident.  Conversely, should plaintiff’s disability arise from a sickness, he would only be entitled to coverage up to the age of 65 (two years from the date of the incident).

Plaintiff submitted a claim after he allegedly tore his rotator cuff while lifting weights in the course of his normal fitness regimen.  Defendant accepted the claim that plaintiff was totally disabled, and began to provide payments.  Two years later, defendant terminated payments on the basis that plaintiff’s weightlifting-induced disability arose from a “sickness.” 

In the instant litigation, defendant switched its position to argue that the disability did not arise from an accident.  The term “accident” was defined as “bodily injury resulting directly and independently of all other causes of action.” 

The Appellate Division quickly dispatched the argument that a weight lifting injury was not an accident.  Rather, the Court noted the long-established rule that intentional actions (i.e. weightlifting) can give rise to unintended consequences (i.e. injury).  In addition, the Court also rejected First Unum’s contention that “ordinary physical activity” could give rise to an accident. 

However, the Appellate Division refused to grant plaintiff’s motion for summary judgment.  Citing the Record before it, the Court noted that First Unum produced an IME report which indicated that plaintiff’s previously injured shoulder in 2001 gave rise to the weight lifting injury.  Thus, in First Unum’s view, the loss was separate and independent.  Plaintiff, for his part, argued that the 2001 injury had completely resolved and had no impact on the weight lifting injury.  Where there are competing theories, as here, a question of fact always follows.

06/14/12       Amery Realty Company, Inc. v. Finger Lakes Fire & Cas. Co.
Appellate Division, Third Department
Laundry Equipment Is Personal Property, Not Equipment or Fixtures
Plaintiff’s building in Cortland was damaged by fire in June of 2008.  At the time of the loss, defendant provided a coverage limit on the structure (Coverage A) of $829,000.  In addition, defendant also provided Business Personal Property Coverage (Coverage B) of $50,000. 

Plaintiff submitted a total combined claim of $258,145 in damages resultant from the fire.  Upon adjustment, defendant tendered $371,801.50 to repair damage to the structure.  In addition, it was determined that plaintiff had sustained an Actual Cash Value loss of nearly $61,000 to its personal property.  Accordingly, defendant tendered its limits under Coverage B of $50,000. 

Plaintiff rejected the payment, and commenced the instant action arguing that the loss of certain laundry equipment in the premises actually qualified under Coverage A.  Plaintiff’s argument was based upon the clause of the Policy which provided coverage for “permanent fixtures, machinery or equipment forming a, or pertaining to, the services of the building or its premises.”  Under plaintiff’s theory, the fact that the laundry equipment was “hard wired’’ to the building qualified it as a Coverage A loss.

In affirming the defendant’s refusal to pay the loss under Coverage A, the Court noted that laundry equipment was not the type of fixture, equipment or machinery contemplated by the policy.  In addition, the Court also noted that part of the premises was used as rental units, and had nothing to do with the laundry service on the first floor.

06/08/12       Alexander v. New York Central Mutual
Appellate Division, Fourth Department
No Sworn Proof of Loss – No Coverage
Plaintiff commenced the instant action against NY Central after it incurred a loss due to a burglary at his home.  Unfortunately, plaintiff failed to provide sworn proofs of loss within the 60 time period provided by the Insurance Law.  Where an insured fails to proffer a sworn proof of loss in a timely manner, all coverage is lost.  It makes no difference, per the Appellate Division, that the plaintiff provided an unsworn proof of loss and receipts of the replacement items. 

 

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

Today is the last day of the legislative session, and as always there is a last minute flurry of activity.  Thanks to our friends at Century it was brought to our attention that Senate Bill S3761 has seen some recent and unanticipated movement.  Essentially, this bill would allow a plaintiff to enter a judgment against a defendant and enforce the defendant’s contribution or indemnification claims directly.

S3761 – Last Minute Legislation Expanding Plaintiff’s Rights Against Parties They Haven’t Sued

 

This proposed bill would add a new provision to CPLR § 1405 which would allow a plaintiff to recover and collect unsatisfied judgment or portion of a judgment against third-party defendants or co-defendants liable for contribution or indemnification.  This would be allowed where plaintiff has entered a judgment against a defendant which remains unsatisfied for 30 days and there is a judgment against a co-defendant or third-party defendant for indemnification or contribution as well.  In those instances, the plaintiff may collect any unsatisfied amount of the judgment against the defendant from the indemnifying/contributing co-defendant or third-party defendant. 

In those instances where the defendant has a cause of action for contribution/indemnification but no judgment, the plaintiff would be able to take an assignment from the defendant and prosecute the action in the plaintiff’s own name.

This section would not authorize direct recovery against a third-party defendant where the third-party claim against that third-party defendant would have been barred by the provisions of § 11 of the Workers’ Compensation Law (i.e. no grave injury). 

This act would take effect immediately and would apply to judgments entered by plaintiff after the effective date.  Thus, it would apply to currently pending litigation as long as the judgment is entered after the effective date.

Regulatory Agenda

The Department of Financial Services recently released their Regulatory Agenda for the second half of 2012.  Some of the proposed actions include:

Amending 11 NYCRR 216.6 (Unfair Claims Settlement Practices and Claim Control Measures – Standards for prompt, fair and equitable settlements).  DFS intends to update the regulations with the Department’s current interpretation with regard to releases of liability.

In an effort to obtain a little more information regarding the anticipated changes, I called DFS and they advised a search of the Office of General Counsel Opinions regarding releases and specifically referenced an opinion released on October 10, 2007, regarding releases for third-party property damage claims.

The question presented in that opinion was whether an auto insurer may include a clause that releases the insurer and the insured “from any other relating thing whatsoever, on account of, or in any way growing out of, an accident?”

Relying upon 11 NYCRR §216.6(g) and specifically the phrase “No insurer shall require execution of a release on a first or third party claim that is broader than the scope of settlement,” the department explained that the release is broader than the scope of the settlement because it includes the settlement of any hidden damage that may not have been known at the time of settlement. 

• Amending 11 NYCRR 71 (Legal Defense Costs in Liability Policies).  DFS intends to amend the regulation to permit the inclusion of non-duty-to-defend provisions in D&O liability policies under certain circumstances.

 

• Amendment to 11 NYCRR 67 to include additional circumstances under which an insurer may voluntarily waive mandatory inspection of a motor vehicle for physical damage coverage.

• Amendment to 11 NYCRR 86.6 (Fraud Prevention Plans and SIU) to establish a requirement that any amendment to a fraud prevention plan that had been previously approved must be submitted to the Frauds Bureau within 30 days of its implementation.

 

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

06/15/12       Ewing Const. Co., Inc. v. Amerisure Ins. Co. 
Fifth Circuit Court of Appeals – Texas law applied
Contractual Liability Exclusion – Duty to Defend and/or Indemnify
In June 2008, Ewing Construction Company, Inc. [“Ewing”] entered into a contract with Tuloso - Midway Independent School District, in which Ewing agreed to construct tennis courts at a school in Corpus Christi, Texas.  Soon after the tennis courts were completed, the School District complained that the courts were cracking and flaking, rendering them unfit for playing tennis.  The School District later filed suit in Texas state court against Ewing seeking damages for defective construction.  Ewing tendered its defense to its CGL insurer, Amerisure Insurance Company [“Amerisure”].  Amerisure denied coverage. 

On July 29, 2010, Ewing filed suit against Amerisure in the District Court for the Southern District of Texas, contending that Amerisure was obligated to defend it in the underlying suit.

The parties later moved and cross-moved for summary judgment.  On April 28, 2011, the district court denied Ewing’s motion, granted Amerisure’s motion and entered final judgment dismissing the case.  The district court found that Amerisure had no duty to defend or indemnify.

For the following reasons the Fifth Circuit Court of Appeals [“Court”] agreed with the district court with respect to Amerisure’s duty to defend; however, disagreed on the issue of indemnification.

In determining whether Amerisure had a duty to defend, Texas Court’s follow the eight-corners rule by analyzing the plaintiff’s pleading in the underlying lawsuit and then the insurance policy.

 

The parties’ dispute whether coverage is excluded by the contractual liability exclusion and whether the liability alleged in the underlying lawsuit is of the sort that Ewing would have in the absence of a contract.
In its analysis, the district court relied on the Texas Supreme Court decision in Gilbert Texas Construction, L.P. v. Underwriters at Lloyd’s London, 327 S.W.3d 118 (Tex. 2010) holding that the contractual liability exclusion applied.  Ewing argued, however, that the Court’s reliance on Gilbert was misplaced because entering a construction contract is not the same as assuming liability for faulty workmanship performed under the contract.

In agreeing with the conclusion of the district court, the Court noted that Gilbert principally stands for the proposition that a CGL policy’s contractual liability exclusion excludes coverage for property damage when the insured assumed liability for property damage by means of contract.  The School District’s complaint in the underlying lawsuit reflects that Ewing assumed liability for defective construction by agreeing in a contract to complete a construction project, specifically to build tennis courts, and further stating that, whether the breached promise was implied or express, the promise was of a contractual nature all the same, and concluding that the contractually liability exclusion was triggered excluding coverage.

Applying the approach taken by the Texas Supreme Court in Gilbert the court held that a CGL policy is not protection for the insured’s poor performance of a contract.  The Court went on to point out that although other jurisdictions adopt the principal that poor contractual performance is not an occurrence causing property damage under a CGL policy, Texas chooses to arrive at this holding through its interpretation of coverage exclusions, and further noting that, more often than not, faulty workmanship will be excluded from coverage by specific exclusions because that is the CGL’s structure. 

Having determined that the contractual liability exclusion applied, the Court went on to analyze whether any exception to that exclusion restored coverage.  The district court found inapplicable the exception to the contractual liability exclusion that allows coverage for liability that “the insured would have in the absence of a contract or agreement”.  Ewing argued that the district court erred because the petition in the underlying lawsuit used the term negligence, and liability for negligence is liability that exists irrespective of a contract. 

The Court disagreed with Ewing determining that the liability Ewing faces is contractual; it is not liability that would arise in the absence of a contract notwithstanding the use of the word “negligence” in its pleading.
Before addressing the issue of indemnification the Court went on to comment on what it called a “troubling concern”, i.e., if the contractual liability exclusion means what it says, then it will often exclude coverage under the same circumstances as the “your work” exclusion.  Based on this concern, the dissent was persuaded that Ewing’s position that “assumption of liability in a contract” encompasses promises to repair third party property, but not other contractual promises.  The Court determined that no matter how appropriate it may be to resolve cases like the instant case under the “your work” exclusion, it was not a judgment the Court could make stating that if, under Texas law, the contractual liability exclusion applies on the facts of this case, then the Court was bound to apply it – regardless of any misgivings.

On the issue of indemnification the Court stated that unlike the duty to defend, which is determined by the eight-corners rule, the duty to indemnify is determined by the facts actually established in the underlying suit.  As such, the duty to indemnify is not ordinarily justiciable until after the underlying lawsuit is resolved because coverage may turn on facts that are proven, even if those facts were not pled.  Although the district court concluded that the same reasons that negate the duty to defend likewise negate any possibility the insurer will ever have a duty to indemnify, the Court held that this determination was premature because the School District might prove that Ewing’s performance damaged property other than tennis courts, thus triggering tort liability and the exception to the contractual liability exclusion.  Coverage, at least to some extent, may be restored.
Editor’s Note:        This decision puts an insurer in a position where it has to defend to assure a proper defense if there is any possibility that it will have to indemnify in the future.

 

MARC’S REMARKS

Marc A. Schulz
[email protected]

06/15/12       S. Constr., Inc. v. Everest Natl. Ins. Co.
Supreme Court, Richmond County
Agency-type Relationship May Impose Liability to Insurer Under Respondeat Superior
A general contractor hired plaintiff to perform excavation work and, as a result of plaintiff’s alleged negligence in doing so, the adjacent property was damaged.  The property owners sued the contractor, who commenced a third-party action against plaintiff.  Plaintiff brought a declaratory action against Everest in connection with the property damage action and sought damages against various defendants for their alleged negligence in procuring, selling and/or purchasing insufficient insurance coverage.  

A binder was issued by defendant, Inter-Reco, who collected premiums on behalf of Everest, and who issued an Everest policy to plaintiff.  Plaintiff’s policy and endorsement only covered four risks, and none were for “excavation.”  After plaintiff notified Everest of the claims of the property owners, Everest denied coverage and moved for summary judgment because (1) excavation was not a “covered” activity under plaintiff’s policy, (2) plaintiff failed to timely notify Everest of the occurrence, and (3) the general contractor was not named as an “additional insured” under the policy. 

The court held that the pre-discovery summary judgment motion was premature, thus allowing plaintiff to explore the relationship between defendants Everest and Inter-Reco, potentially subjecting Everest to liability for any negligence on Inter-Reco’s part which may have deprived plaintiff of the desired coverage, under principles of respondeat superior. 

06/15/12       Back to Back Chiropractor, P.C. v. State Farm Mut. Auto Ins.
District Court of Suffolk County, Third District
Appearance at EUO or Written Objections to EUO Condition Precedent to Coverage  
State Farm’s pre-answer motion to dismiss asserted plaintiff violated a policy condition for verification of a claim as plaintiff never appeared at two EUOs and failed to provide additional verification of the claim.  Plaintiff argued the request to attend the EUOs contained a document demand seven days prior to the EUO for tax returns and general ledgers, and proof of ownership of the corporation that rendered the medical services.  Plaintiff claimed there was no point in going to the EUOs as State Farm had no intention of paying the claim without receipt of the improperly requested documents.

The court held State Farm demonstrated the EUO notices and requests were sent twice to plaintiff’s address and were sufficient to establish timely notification.  Plaintiff’s inaction was, according to the court, “fatal to its causes of action for alleged services rendered.”  However, the court agreed with plaintiff that the document demand was “palpably improper” as it was clearly outside the scope of permissible information.  Even so, the court held plaintiff’s reaction to the palpably improper document demand vitiated its causes of action as plaintiff did nothing to protest the requests.  The court therefore granted State Farm’s motion to dismiss the complaint.      

 

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

MOLD CASES GROW BACK (MAYBE)

At one time, toxic mold claims were expected to be a new font of personal injury litigation, and plaintiff lawyers were attending seminars entitled “Mold is Gold”.  However, several cases, including Fraser v. 301-52 Townhouse Corp., 57 A.D. 3d 416 (First Department) cast a pall on the growth of mold litigation.  However, a recent decision by the First Department in Cornell v. 360 West 51st St. Corp., (First Department, March 6, 2012) allowed a mold case to proceed by a 3-2 decision and ruled that the trial court had interpreted Fraser incorrectly to (in effect) preclude toxic mold litigation. 

Plaintiff alleged symptoms such as dizziness, chest tightness, congestion, shortness of breath, a rash, swollen eyes, et al. allegedly caused by moisture induced mold in her apartment at 350 West 51st Street.  Eventually, plaintiff left the apartment due to her alleged symptoms, and told the landlord she could not live there and would not pay rent.  The landlord commenced a summary proceeding against her in civil court for non-payment of rent.  Plaintiff-tenant counterclaimed alleging constructive eviction and breach of the warranty of habitability.  Following a 17 day trial, the civil court ruled in favor of the plaintiff and forgave her rent.

Ms. Cornell then filed a personal injury suit against 360 West 51st Street Corp. and presented evidence from experts who took samples in the apartment and allegedly found mold spores and other toxins.  These experts presented evidence to that effect, as did her personal physician, arguing that her symptoms were attributable to toxic mold.

In January 2010, the trial tourt granted the landlord’s motion for summary judgment relying in large part on the Fraser decision which had dismissed a toxic mold claim on the basis that plaintiff’s expert testimony did not pass the standard for admissibility of being “generally accepted within the particular scientific community” (the “Frye Test”).

The Appellate Division reversed in a 3-2 vote, meaning that the case is virtually certain to go on to the Court of Appeals.  The majority wrote that the Fraser decision was specific to the expert testimony and medical evidence in that particular case wherein plaintiff’s expert and medical submissions did not succeed in raising any triable issue of fact.  In Cornell, the majority opined that the studies relied upon by the plaintiff demonstrated a “clear relationship” between exposure to mold and respiratory and other symptoms, and that the evidence satisfied the threshold for admissibility. 

The two dissenting justices raised an important distinction.  They argued that plaintiff’s experts relied upon studies purporting to show a link between toxic mold and plaintiff’s symptoms, but plaintiff had failed to establish that these conclusions were “generally accepted in the relevant scientific community”, as required by the Frye standard.  The dissent in Cornell was a nuanced reading of the Frye test.  Even if plaintiff’s expert reports demonstrated a conceptual relationship between exposure to mold and respiratory symptoms, plaintiff may not have shown (a) a relationship between mold exposure and Ms. Cornell’s exact symptoms, and/or (b) that such conclusions about a causal relationship were generally accepted in the relevant scientific community.

An interesting aspect of Cornell is that mold litigation continues in some respects in New York State and elsewhere in the United States.  The nature of scientific studies relied upon by claimants, and whether conclusions drawn from those studies are “generally accepted” within the scientific community, continues to be problematic.  To some extent, the issues are also framed by a given plaintiff’s alleged medical history, medical symptoms, and the differing levels and types of mold that might be encountered.  Plaintiff’s lawyers and experts may try to refine and bolster their scientific arguments.  On the other hand, much time and effort was spent in the Cornell case to be forestalled by a trial court dismissal, 2 dissents at the Appellate Division, and probable Court of Appeals review just to keep a claim alive.  Fraser may not have inherently precluded all toxic mold claims, but it still stands as an impressive and well-reasoned barrier to such claims.

In Cornell, the trial court did take the step of granting the former landlord summary judgment.  However, the asserted reasoning that the Fraser decision necessarily precluded all personal injury claims for alleged exposure to toxic mold as not being based on “generally accepted scientific evidence” might be overly expansive.  The dissent in Cornell raised an important distinction that it may not be enough to suggest that studies allegedly link toxic mold exposure to certain personal injury symptoms, but also that a claimant has to show that such a causal link is likewise generally accepted by the scientific community, which may be a slightly different and more difficult proposition. 

Due to the fact that there were two dissents in Cornell, the case is most likely destined for the Court of Appeals which will give its interpretation of the Fraser decision, perhaps articulate additional law on the Frye test, and may also parse to what extent scientific data must be generally accepted within the scientific community in order to be admissible not only on a motion for summary judgment but at trial.

 

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

06/19/12       In the Matter of Cordero
Superior Court of New Jersey, Appellate Division
No Award of Accidental Disability Benefits Without a Showing of a “Traumatic Event”
Cordero was employed as a maintenance worker for the Jersey City Housing Authority.  Due to total and permanent orthopedic disability, the Board of Trustees of the Public Employees’ Retirement System awarded disability retirement benefits and denied accidental benefits because Cordero’s injury was not a “traumatic event.”  Cordero also later claimed that he was psychiatrically disabled from being mugged several years prior.  Under New Jersey law, an award of accidental disability benefits must stem directly from a “traumatic event.”  The appellate court found that Cordero failed to meet this showing when his medical evidence was questionable and submitted ten years after the incident.
Submitted by: Marc Harwell and Emma Paige of Leitner, Williams, Dooley & Napolitan PLLC.

 

Reported Decisions

25 Avenue C New Realty, LLC v. Alea North America Ins. Co.

Mintzer, Sarowitz, Zeris, Ledva & Meyers, LLP, New York (Erika L. Omundson of counsel), for appellant.
Kaufman Borgeest & Ryan, LLP, New York (Dennis J. Dozis of counsel), for respondent.

Order, Supreme Court, Bronx County (Stanley Green, J.), entered August 23, 2010, which, to the extent appealed from as limited by the briefs, granted plaintiffs' motion for summary judgment to the extent of declaring that defendant Merrimack Mutual Fire Insurance Company (Merrimack) is obligated to defend and indemnify plaintiffs in an underlying personal injury action, granted defendant Alea North America Insurance Company's cross motion for summary judgment dismissing the complaint and all cross claims against it, and denied Merrimack's cross motion for summary judgment, modified, on the law, to the extent of denying plaintiffs' motion for summary judgment, and granting defendant Merrimack's cross motion for summary judgment to the extent of declaring that Merrimack is not obligated to defend and indemnify plaintiffs in the underlying personal injury action, and otherwise affirmed, without costs.

Plaintiffs are the owners and parties in interest to property located at 25 Avenue C in New York County. Defendant Merrimack insured this property under a liability policy that was in effect on June 27, 2003. Defendant Alea North America Insurance Company (Alea) insured this property under a liability policy that was in effect on June 27, 2005.

On June 27, 2005, Eamonn Grimes commenced an action against 25 Avenue C to recover for personal injuries allegedly sustained on that property. The complaint alleged that the date of the accident was June 27, 2005. Plaintiffs gave timely notice of the summons and complaint to Alea, and Claims Administration Corporation (CAC), Alea's third-party claims administrator, assigned the defense of this action to the Law Office of Jeffrey Samel (Samel).

In May 2007, an investigator from CAC discovered, after speaking with Grimes, that the accident actually occurred on June 27, 2003, not June 27, 2005 as stated in the complaint. In August 2007, Samel's office received a bill of

particulars which alleged that Grimes's accident occurred on June 27, 2003. At the same time, it also received hospital records showing Grimes was hospitalized from June 28 to July 8, 2003. On October 4, 2007, Samel's office took the deposition of a nonparty witness who testified that Grimes' accident occurred on June 27, 2003.

On May 15, 2008, CAC contacted plaintiffs to determine the name of the insurance carrier that insured the premises during 2003. Plaintiffs advised CAC that Merrimack was the insurer during that period. On May 23, 2008, Samel notified Merrimack that the actual date of the incident was June 27, 2003 and that Alea's policy was not in effect at that time. It tendered the defense of the Grimes action to Merrimack.

On July 8, 2008, Merrimack rejected Alea's tender on the ground that it had not been given timely notice of the claim. Alea advised plaintiffs on August 11, 2008 that it was declining coverage, as the actual date of the incident predated Alea's policy coverage.

Plaintiffs thereafter commenced this action seeking a declaration that either Alea or Merrimack is obligated to defend and indemnify plaintiffs in the underlying personal injury action. All parties subsequently moved and cross moved for summary judgment. Supreme Court granted plaintiffs' motion against Merrimack, finding that Merrimack was obligated to defend and indemnify plaintiffs. It also denied Merrimack's cross motion for, among other things, a declaration that its disclaimer was valid, finding that Merrimack "was notified within a reasonable time under the facts and circumstances and there is no apparent prejudice, as discovery is ongoing." Finally, the court granted Alea's cross motion for summary judgment dismissing the complaint and all cross claims against it.

Supreme Court properly found that there is no basis in equity for compelling Alea to continue defending and indemnifying plaintiffs. Since Alea's insurance policy was not in effect when the incident took place, equitable remedies cannot create insurance where none exists (see Axelrod v Magna Carta Cos., 63 AD3d 444, 445 [2009]; Wausau Ins. Cos. v Feldman, 213 AD2d 179, 180 [1995]).

A different analysis is warranted with respect to the validity of Merrimack's disclaimer of coverage.

Initially, Merrimack was not required to demonstrate any prejudice resulting from the claimed untimely notice, as its policy predated the effective date of the amendments to Insurance Law § 3420(a)(5) that now requires such showing [FN1] (Board. of Mgrs. of the 1235 Park Condominium v Clermont Specialty Mgrs., Ltd., 68 AD3d 496, 497 [2009]).

Although the court found that under the facts and circumstances of this case, Merrimack was notified of the claim within a reasonable period of time, the record before us compels a different conclusion. There is no reasonable explanation for Alea's delay in notifying plaintiffs that their policy was not in effect at the time of the accident. Alea was aware as early as May 2007 that the date of the accident set forth in the complaint was incorrect. Even assuming Alea sought confirmation of that information, its attorneys were conclusively aware in August 2007 that the correct date of the accident was two years prior to the date set forth in the complaint. Moreover, this information was reconfirmed in October 2007 by Samel's deposition of a nonparty witness. Thus, Alea had numerous confirmations that the correct date of the accident was in June 2003, which date was prior to the issuance of its policy on plaintiffs' property.

Moreover, the record is devoid of any explanation as to why CAC, as agent of Alea, waited until May 15, 2008, some seven months after the nonparty deposition, to contact plaintiffs to determine which insurer covered the premises in June 2003.

There is no question that Merrimack was first put on notice of this accident by Alea's assigned defense counsel on May 23, 2008, almost five years after the accident occurred. Although this tender, made on behalf of the insured 25 Ave C, was sufficient to fulfill the policy's notice of claim requirements so as to trigger the insurer's obligation to issue a timely disclaimer pursuant to Insurance Law § 3420(d) (see J.T. Magen v Hartford Fire Ins. Co., 64 AD3d 266, 269 [2009], lv dismissed 13 NY3d 889 [2009]), the delay in giving such notice of claim is clearly unreasonable as a matter of law (see Tower Ins. Co. of N.Y. v Classon Hgts., LLC, 82 AD3d 632, 634 [2011] [five-month unexcused delay unreasonable as a matter of law]; Juvenex Ltd. v Burlington Ins. Co., 63 AD3d 554, 554 [2009] [two-month delay inexcusable]).

We have repeatedly held that an unexcused delay in giving timely notice will relieve an insurer of its obligations to defend (see e.g. Tower Ins. Co., 83 AD3d at 634; Juvenex,, 63 AD3d at 554; Young Israel Co-Op City v Guideone Mut. Ins. Co., 52 AD3d 245, 246 [2008] [reversing motion court's finding that 40- day delay in giving notice was reasonable]).

Since the record is devoid of any valid excuse on Alea's part for delaying notification to plaintiffs and Merrimack for over a year in total from when it first became aware of the correct date of the accident, under these circumstances, Merrimack properly disclaimed coverage on the basis of untimely notice.

All concur except Tom, J.P. and Sweeny, J. who concur in a separate memorandum by Sweeny, J. as follows:

SWEENY, J. (concurring)

Although I concur with the ultimate result in this case, I write separately because, under the facts of this case, notification of the underlying incident by Alea to Merrimack does not fulfill the requirement that notice must be given by plaintiff.

I agree that there is no reasonable explanation for Alea's delay in notifying plaintiffs that their policy was not in effect at the time of the accident, and that the delay in giving notice to Merrimack of the underlying action was unreasonable as a matter of law. Where I part company with the majority is their conclusion that Alea's tender of the defense of the underlying action to Merrimack was sufficient to fulfill the policy's notice of claim requirements, since the ultimate duty of notification of the incident to the appropriate insurer rests with plaintiffs. There is no question that Merrimack was first put on notice of this accident by Alea's assigned defense counsel on May 23, 2008, almost five years after the accident occurred. However, "[t]he law is clear that an insured's obligation to provide timely notice is not excused on the basis that the insurer has received notice of the underlying occurrence from an independent source" (Travelers Ins. Co. v Volmar Constr. Co., 300 AD2d 40, 43 [2002]; see also American Mfrs. Mut. Ins. Co. v CMA Enters., 246 AD2d 373 [1998]).

J.T. Magen v Hartford Fire Ins. Co. (64 AD3d 266 [2009], lv dismissed 13 NY3d 889 [2009]) does not compel a different result. In Magen, the plaintiff was the construction manager on a job site and hired a subcontractor named Erath. The contract between the two contained a provision requiring Erath to indemnify and hold Magen harmless for personal injuries arising out of Erath's work. Erath secured an insurance policy from defendant Hartford to comply with this provision, naming the plaintiff as an additional insured (id. at 267). The underlying personal injury action involved a worker employed by Erath who was injured on the job site. The plaintiff timely notified its insurer (Travelers) of the commencement of the personal injury action. Travelers, in turn, notified defendant Hartford on June 24, 2005 of the action and requested Hartford to defend and indemnify the plaintiff as an additional insured under its policy with Erath. On August 10, 2005, Hartford asserted that it had not received a copy of the summons and complaint in the underlying action. Although it claimed a copy of the summons and complaint had been included in its tender letter, Travelers mailed another copy to Hartford on August 16, 2005. Fifty-one days later, by letter dated October 6, 2005 Hartford disclaimed coverage, alleging that plaintiff had failed to comply with the policy requirement that plaintiff give notice "as soon as practical" of any occurrence that might give rise to damages (id. at 268.)

We held that "the tender letter insurer Travelers wrote on behalf of [the] plaintiff and others to insurance carrier Hartford — asking that their mutual insureds be provided with a defense and indemnity, as additional insured under the policy issued to Erath — fulfills the policy's notice of claim requirements so as to trigger the insurer's obligation to issue a timely disclaimer" (64 AD3d at 269).

It is significant that Magen involved two insurers who simultaneously provided coverage to the same party, one as a principal insurer (Travelers) and one as the additional insurer (Hartford). There was no question that the plaintiff gave timely notice to Travelers, its principal insurer who in turn tendered defense of the action to Hartford pursuant to the policy terms naming the plaintiff as an additional insured. Hartford's disclaimer was properly found to be untimely as a matter of law. Since both insurers mutually insured plaintiff, timely notice by one carrier to the other fulfils the policy requirements that plaintiff give timely notice of claim.

Here, plaintiffs are not in the situation of a mutual insured. Alea's policy was not in effect at the time of the incident. There is nothing in the record to indicate that plaintiffs ever gave notice of the incident to Merrimack after they became aware that Merrimack was the proper insurer. Rather, as their complaint alleges, "plaintiffs relied to their detriment on CAC/Alea NAIC's acts and omissions, including but not limited to Alea NAIC's delay in providing notice to Merrimack." Such reliance does not relieve plaintiffs of their duty under the policy to give timely notice of the incident to Merrimack. The failure to give such notice as required by the terms of the policy requires a declaration in favor of Merrimack.

Tishman Construction Corp. v. Great American Ins. Co.

Jones Hirsch Connors & Bull P.C., New York (Richard Imbrogno of counsel), for appellants.
Hardin, Kundla, McKeon & Poletto, P.A., New York (Stephen P. Murray of counsel), for Great American Insurance Company, respondent.
Greenblatt Lesser LLP, New York (Judah D. Greenblatt of counsel), for Schiavone Construction Company, respondent.

Order, Supreme Court, New York County (Jane S. Solomon, J.), entered October 15, 2010, which to the extent appealed from as limited by the briefs, denied plaintiffs' motion for summary judgment seeking contractual indemnification, and order, same court and Justice, entered June 27, 2011, which, inter alia, granted defendant Schiavone Construction Company's motion to renew and reargue, and upon reargument, vacated that portion of its prior decision denying defendant Schiavone's motion for summary judgment seeking dismissal of the cause of action for contractual indemnification, granted the motion and declared that Schiavone has no obligation to indemnify plaintiffs Tishman Construction Corp. and Carnegie Hall Corporation under the applicable insurance policies, unanimously affirmed, without costs.

Two employees of defendant Schiavone, a subcontractor performing work at a construction site owned by plaintiff Carnegie Hall and managed by plaintiff Tishman, sustained personal injuries when a replacement piston failed on a material hoist in which they were riding, causing it to collapse. One of the employees settled the litigation he commenced as a result of the injuries he suffered, and the other commenced litigation against Carnegie Hall and Tishman, as well as the hoist designer and manufacturer, and the manufacturer of the allegedly defective piston. Since Schiavone was not a party to that litigation, its liability was never determined, and it cannot now be bound by any testimony given by its employees therein (see Riedel Glass Works, Inc. v Indemnity Ins. Co. of N. Am., 261 AD 886 [1941]), nor does that testimony fall within the parameters of CPLR 4517.

This conclusion is not altered by considering the offered testimony. The apportionment of responsibility between Carnegie Hall, Tishman and Schiavone was not determined in the underlying trial. More importantly, such apportionment is irrelevant to the instant dispute because there are enforceable waivers of subrogation contained within the primary insurance policies issued to the respective parties (see Duane Reade v Reva Holding Corp., 30 AD3d 229, 232-33 [2006]). These waivers preclude recovery by the plaintiffs.

Finally, we reject plaintiffs' argument that the "cross liability" exclusion contained within the Great American excess policy issued to Schiavone was not a waiver of subrogation; that exclusion must be read together with the contractual indemnification coverage afforded by the underlying National Union policy (cf. Twin City Fire Ins. Co. v Ohio Cas. Ins. Co., 480 F3d 1254 [11th Cir 2007]). Coverage under the Great American policy for "contractual liability" followed the underlying form, thereby incorporating National Union's waiver of subrogation provision (see Jefferson Ins. Co. of N.Y. v Travelers Indem. Co., 92 NY2d 363, 369 [1998]). In contrast, in Twin City Fire Ins. Co. (480 F3d 1254), the primary policy provided coverage.

JP Morgan Chase & Co. v. Indian Harbor Insurance Company

Appeals from orders of the Supreme Court, New York County (Barbara R. Kapnick, J.), entered May 31, 2011, which granted the motions by Arch Insurance Company, St. Paul Mercury Insurance Company, Twin City Fire Insurance Company, Lumbermens Mutual Casualty Company and Swiss Re International SE for summary judgment dismissing the amended complaint as against them with prejudice, and from an order, same court and Justice, entered on or about May 31, 2011, which denied the motion by Indian Harbor Insurance Company, Houston Casualty Company and Travelers Indemnity Company to compel production of certain documents.

Proskauer Rose LLP, New York (John H. Gross, Steven E. Obus, Seth B. Schafler, Francis D. Landrey, Michelle R. Migdon, and Lauren J. Rabinowitz of counsel), for JP Morgan Chase & Co., JP Morgan Chase Bank, N.A., and J.P. Morgan Securities, Inc., appellants/ respondents.
Troutman Sanders LLP, New York (Matthew J. Aaronson of counsel), Troutman
Sanders LLP, Washington, DC (John R. Gerstein, of the bar of the District of Columbia and the State of Maryland, admitted pro hac vice, of counsel), and Troutman Sanders LLP, Chicago, IL (David F. Cutter, of the bar of the States
of Illinois and Maryland and the District of Columbia, admitted pro hac vice, of
counsel), for Indian Harbor Insurance Company. appellant.
Melito & Adolfsen PC, New York (S. Dwight Stephens of counsel), for Houston
Casualty Company, appellant.
Kaufman Borgeest & Ryan LLP, Valhalla (Scott A. Schechter of counsel), for
Travelers Indemnity Company, appellant, and for Arch Insurance Company and St. Paul Mercury Insurance Company, respondents.
Akin Gump Strauss Hauer & Feld LLP, New York (Mitchell P. Hurley, Elizabeth
J. Young, and Isabelle R. Liberman of counsel), for Twin City Fire Insurance
Company, respondent.
Lewis Brisbois Bisgaard & Smith, LLP, New York (Stephanie A. Nashban of counsel), for Lumbermens Mutual Casualty Company, respondent.
Caughlin Duffy LLP, New York (Robert J. Kelly of counsel), for Swiss Re International SE, respondent.

DEGRASSE, J.

Plaintiff alleges that defendants breached their contractual obligations to provide indemnification under excess insurance policies they issued. Plaintiff's predecessor, Bank One Corporation, purchased $175 million in "claims made" bankers professional liability insurance and securities action claim coverage for the period October 1, 2002 to October 1, 2003. Bank One's insurance program was structured as a tower of follow-the-form coverage in excess of a self-insured retention. Defendant Indian Harbor Insurance Company was the primary carrier while defendants Houston Casualty Company, Arch Insurance Company, St. Paul Mercury Insurance Company, Twin City Fire Insurance Company, Lumbermens Mutual Insurance Company, Swiss Re International SE and nonparties Federal Insurance Company, American Zurich Insurance Company and Gulf Insurance Company provided excess coverage. The carriers and the tiers of coverage they provided are listed in descending order as follows:

Tier/ Insurance Company	Coverage Limits
Seventh Excess - Swiss Re	$50 million in excess of $150 million
Sixth Excess - Federal	$10 million in excess of $140 million
Fifth Excess - Lumbermens, St. Paul and Arch	$30 million in excess of $110 million, with a "quota share" apportionment of $10 million among the three carriers
Fourth Excess - Twin City	$15 million in excess of $95 million
Third Excess - Zurich	$15 million in excess of $80 million
Second Excess - Gulf	$15 million in excess of $65 million
First Excess - Houston	$15 million in excess of $50 million
Primary - Indian Harbor	50% of loss up to $50 million subject to a maximum coverage limit of $25 million

In November 2002, actions were brought against Bank One and some of its affiliates in connection with their roles as indenture trustee and otherwise with regard to certain notes issued by NPF XII, Inc. and NPF VI, Inc. Plaintiff's entities (the JP Morgan entities) were defendants in some of the actions as well as other related actions in which the Bank One entities were not defendants. Between July and November 2004, while the NPF litigation was still pending, the Bank One entities were merged into the JP Morgan entities. Between February 2006 and March 2008, plaintiff settled six actions that were part of the NPF litigation for an aggregate of $718 million. Plaintiff's theory of recovery in this action is that the portion of the settlement attributable to claims made against the heritage Bank One entities, as opposed to claims based on the conduct of the premerger JP Morgan entities, exceeded the combined limits of the policies in the Bank One tower of insurance.

Before bringing this action, plaintiff settled with Federal for the sum of $17 million. That settlement agreement covered Federal's liability under the Bank One program as well as claims under separate policies issued by Federal's affiliate, Executive Risk Indemnity, Inc., under a different insurance program. The agreement provided for no allocation of the settlement as between plaintiff's claims against Federal and those against Executive Risk. As shown above, Swiss Re is the only carrier that was higher than Federal in the Bank One tower.
After commencing this action, plaintiff entered into another $17 million settlement, this time with Zurich and its affiliate, Steadfast Insurance Company.

This settlement covered plaintiff's $15 million claim under Zurich's policy in the Bank One tower as well as a $13.4 million claim against Steadfast under separate insurance covering unrelated litigation. After that settlement, plaintiff amended the complaint so as to drop Zurich as a defendant.
Twin City moved for summary judgment, asserting that plaintiff could not establish the occurrence of express conditions precedent to coverage under Twin City's policy. Invoking their own policy provisions, Swiss Re, Lumbermens, St. Paul and Arch also moved for summary judgment on similar grounds. The motion court granted all of the motions for summary judgment on the basis of its construction of the various policies. We affirm.

The parties agree that Illinois law governs the disposition of the motions for summary judgment. Under the law of that state, the construction of an insurance policy is a question of law that requires a court to ascertain the intent of the parties to the contract (Outboard Marine Corp. v Liberty Mut. Ins. Co., 154 I11 2d 90, 108, 607 NE2d 1204, 1212 [1992]). Accordingly, insurance policies are construed like any other contract (Putzbach v Allstate Ins. Co., 143 Ill App 3d 1077, 1082, 494 NE2d 192, 196 [1986]).

The Twin City policy provided "that liability for any loss shall attach to [Twin City] only after the Primary and Underlying Excess Insurers shall have duly admitted liability and shall have paid the full amount of their respective liability." Hence, by the plain language of this attachment provision, the underlying insurers' admission of liability and the payment of the full amount of their liability were conditions precedent to Twin City's liability under its policy. "A condition precedent is defined as an event which must occur or an act which must be performed by one party to an existing contract before the other party is required to perform" (Vuagniaux v Korte, 273 Ill App 3d 305, 309 [1995] [internal quotation marks omitted]).

The first condition was not met because Zurich, the insurer directly beneath Twin City in the Bank One tower, did not admit liability when it settled with plaintiff. In fact, the settlement agreement between Zurich and plaintiff provided that "the negotiation, execution and performance of this Agreement shall not constitute, or be construed as, an admission of liability or infirmity of any defense or claim whatsoever by any Party." Moreover, there is no way to determine that Zurich paid the full amount of its liability under its Bank One tower policy because the settlement provided for no allocation of the $17 million payment between Zurich and Steadfast. Therefore, the second condition set forth in Twin City's attachment provision was not met either. For reasons that follow, conditions precedent to liability under the remaining movants' excess policies have not been met either.

Lumbermens' policy provided that the insurance afforded thereunder "shall apply only after all applicable Underlying Insurance with respect to an Insurance Product has been exhausted by actual payment under such Underlying Insurance . . ." St. Paul's policy provided that "[St. Paul] shall only be liable to make payment under this policy after the total amount of the Underlying Limit of Liability has been paid in legal currency by the insurers of the Underlying Insurance as covered loss thereunder." Similarly, the insurance coverage afforded by Arch's policy applied "only after exhaustion of the Underlying Limit solely as a result of actual payment under the Underlying Insurance in connection with Claim(s) and after the Insureds shall have paid the full amount of any applicable deductible or self insured retentions" (emphasis omitted). Swiss Re's liability under its policy attached "only when the Underlying Insurer(s) shall have paid or have been held liable to pay, the full amount of the Underlying Limit(s) . . ."

The foregoing attachment provisions are analogous to two attachment provisions that were at issue in Great American Ins. Co. v Bally Total Fitness Holding Corp. (US Dist Ct, ND Ill, 06 Civ 4554, Andersen, J., 2010). Under one such provision in Great American, excess coverage became applicable "only after all Underlying Insurance has been exhausted by payment of the total underlying limit of insurance" (id. at *1). Pursuant to the other excess policy before the Great American court, liability for covered losses attached "only after the insurers of the Underlying Policies shall have paid, in the applicable legal currency, the full amount of the Underlying Limit and the insureds shall have paid the full amount of the uninsured retention, if any, applicable to the primary Underlying Policy" (id.). We are persuaded by Great American's holding that the excess policies before the court unambiguously required the insured to collect the full limits of the underlying policies before resorting to excess insurance (id. at 5).

We are also persuaded by the Fifth Circuit's reasoning in Citigroup Inc. v Federal Ins. Co. (649 F3d 367 [2011]) in which it was held that under Texas law "settlement for less than the underlying insurer's limits of liability does not exhaust the underlying policy" (id. at 373). In this case, summary judgment was properly granted because the aforementioned combination of plaintiff's settlements with Zurich and Steadfast preclude any determination of whether Zurich's policy limits were reached as required by the policies issued by Twin City, Lumbermens, St. Paul, Arch and Swiss Re. Plaintiff's pre-action settlement with Federal and Executive Risk had the same effect on Swiss Re's liability because there was no allocation of the settlement between the two underlying carriers.

Plaintiff seeks refuge in language in a maintenance provision of Twin City's policy which provided that the insured's failure to maintain all of the underlying policies in full effect would not invalidate the policy. "If the words in the policy are unambiguous, a court must afford them their plain, ordinary and popular meaning" (Outdoor Marine Corp., 154 I11 2d at 108).

Guided by Outdoor Marine Corp., we reject plaintiff's argument that its settlement with Zurich can be construed as a failure to maintain the underlying policies within the contemplation of the maintenance provision. In addition, Twin City does not challenge the validity of its policy. It simply maintains that conditions precedent to coverage were not met. As stated above, its premise is that conditions precedent to its liability have not been met. Therefore, the maintenance provision is irrelevant to Twin City's motion.

Plaintiff also relies on Zeig v Massachusetts Bonding & Ins. Co. (23 F2d 665 [2d Cir 1928]). In Zeig, an insured who settled with his primary carriers for less than their policy limits, sued his excess carrier, seeking indemnification for the amount of his loss exceeding the underlying policy limits (id. at 665). The policy in Zeig provided that the excess insurance thereunder "shall apply and cover only after all other insurance herein referred to shall have been exhausted in the payment of claims to the full amount of the expressed limits of such other insurance" (id.).

The Second Circuit found this provision ambiguous, reasoning that "payment" as used therein could refer to "the satisfaction of a claim by compromise, or in other ways" in addition to "payment in cash" (id. at 666). The Zeig court, nevertheless, recognized that parties are free to impose any condition precedent to liability upon a policy as they choose (id.). Here, Twin City's attachment provision stands apart from the one before the court in Zeig because of its exacting requirement that the underlying carriers shall have admitted and paid the full amounts of their respective liabilities. For reasons already stated, the attachment provisions of the other policies before this Court are also distinguishable from the one before the Zeig court. Like the court in Great Am. Ins. Co. v Bally Total Fitness Holding Corp. (US Dist Ct., ND Ill, 06 Civ 4554, Andersen, Jr., 2010, supra), we find no ambiguity in any of the policies that would make Zeig controlling (id. at *5). We further note that the United States District Court for the Northern District of Illinois, interpreting Illinois law, found Zeig to be contrary to Seventh Circuit precedent insofar as it stands for the proposition that " exhaustion' of the primary policies' payments does not require collection of the primary policies as a condition precedent to the right to recover excess insurance" (see Premcor USA, Inc. v Am. Home Assur. Co., 2004 WL 1152847, *8 US Dist LEXIS 9275, *22 [ND Ill 2004], affd 400 F3d 523 [7th Cir 2005]). Plaintiff's reliance on Hasemann v White (177 I11 2d 414 [1997]) is misplaced because that case involved the interpretation of a statutory provision as opposed to an insurance policy.

By its own terms, the attachment provision of Swiss Re's policy was subject to Condition 3 of the policy, which provided that "[i]n the event of erosion or exhaustion of the aggregate limit of liability on the Underlying Insurer(s) policy by reason of loss(es), this Policy shall (a) if erosion be partial, pay the excess of the reduced Underlying Limit(s) of the Policy(ies) of the Underlying Insurer(s), or(b) if exhaustion be complete, continue in force in place of such Policy(ies) of the Underlying Insurer(s)."

In Qualcomm, Inc. v Certain Underwriters at Lloyd's, London (161 Cal App 4th 184 [2008]) the court distinguished Zeig and held that a "paid or have been held liable to pay" provision required primary insurance to be exhausted or depleted by actual payment of losses by the underlying insurer (id. at 195, 198-200). Like the Qualcomm court, we reject the notion that "when an insured settles with its primary insurer for an amount below the primary policy limits but absorbs the resulting gap between the settlement amount and the primary policy limit, primary coverage should be deemed exhausted and excess coverage triggered, obligating the excess insurer to provide coverage under its policy" (id. at 188). Accordingly, we are still not persuaded by plaintiff's argument that there was an exhaustion under the Swiss Re policy.

The motion court correctly applied New York law in deciding the discovery motion. The law of the place where the evidence in question will be introduced at trial or the location of the discovery proceeding, is applied when deciding privilege issues (People v Greenberg, 50 AD3d 195, 198 [2008], lv dismissed 10 NY3d 894 [2008]). As the motion court found, the cooperation clauses in the insurance policies did not operate as waivers of plaintiff's attorney-client and work-product privileges (see Gulf Ins. Co. v Transatlantic Reins. Co., 13 AD3d 278, 279-280 [2004]). We have considered the appealing parties' remaining contentions for affirmative relief and find them unavailing.

Accordingly the orders of the Supreme Court, New York County (Barbara R. Kapnick, J.), entered May 31, 2011, which granted the motions by Arch, St. Paul, Twin City, Lumbermens and Swiss Re for summary judgment dismissing the amended complaint as against them with prejudice, should be affirmed, with costs. The order of the same court and Justice, entered on or about May 31, 2011, which denied the motion by Indian Harbor, Houston and Travelers to compel production of certain documents, should be affirmed, with costs.
ALL Concur.

Orders, Supreme Court, New York County (Barbara R. Kapnick, J.), entered May 31, 2011, affirmed, with costs. Order, same court and Justice, entered on or about May 31, 2011, affirmed, with costs.

Admiral Insurance Company v. Joy Contractors, Inc.

Jon D. Lichtenstein, for appellant-respondent.
Justin N. Kinney, for respondent-appellant.
Sarah Mitchell, for respondents Kennelly, et al.
Chad E. Sjoquist, for respondent Reliance Construction Ltd. d/b/a RCG Group Ltd.
Richard M. Kuntz, for respondent Lincoln General Insurance Company.

READ, J.:

A tower crane operated by defendant Joy Contractors, Inc., collapsed on March 15, 2008 during construction of a luxury high-rise condominium at 303 East 51st Street in Manhattan, killing seven people and injuring dozens, damaging several buildings and destroying one. A tower crane is a type of lifting device which utilizes a vertical mast or tower topped by a horizontal structure that is either fixed (a jib) or moveable up and down (a boom) in an elevated position (see 29 CFR 1926.1401). For the period from June 21, 2007 through June 21, 2008, Joy carried a comprehensive general liability (CGL) policy with defendant Lincoln General Insurance Company, with coverage up to $1 million per occurrence and an aggregate limit of $2 million; and a follow-form excess policy with plaintiff Admiral Insurance Company, with limits of $9 million for each loss event and in the aggregate, for a deposit premium of $22,000.

Admiral, which received notice of the crane accident on March 17, 2008, notified Joy of several coverage issues in a reservation-of-rights letter dated March 27, 2008, and requested more information. On April 25, 2008, Admiral sent similar reservation-of-rights letters to Reliance Construction Ltd. d/b/a RCG Group Ltd., the general contractor on the project; the tower crane's lessor, New York Crane & Equipment Company, Inc.; and the building's owners/developers.

In its March 27th letter to Joy, Admiral "denie[d] any present obligation" to indemnify Joy because no claims had yet been made or lawsuits brought, and the CGL policy had not been exhausted. Notably, Admiral reserved its right to deny coverage on the ground the accident occurred during "residential construction activities," which are excluded under a provision in the excess policy stating that

"[t]his insurance does not apply to liability, injury or damage of any kind, including costs or expenses, arising out of, resulting from, caused or contributed to by any past, present or future 'residential construction activities' performed by or on behalf of any 'insured' or others.

"For the purposes of this endorsement, 'residential construction activities' means any work or operations related to the construction of single-family dwellings, multi-family dwellings, multi-family dwellings, condominiums, townhomes, townhouses, cooperatives and/or apartments."

Admiral further warned that there might be no coverage "based on . . . inaccuracies . . . identified in [Joy's] underwriting submission, which could render [the excess policy] void and/or be a breach of conditions precedent to coverage." In particular, Admiral claimed that Joy had represented that it specialized in drywall installation, did not carry out exterior work and performed no work at a level above two stories in height from grade other than drywall interior work, whereas "[b]ased on the information that [Admiral had] to date," Joy was actually the structural concrete contractor, performing work on the building's entire exterior with the tower crane.

On May 30, 2008, after further investigation, Admiral sent letters to Joy, Reliance, New York Crane and the owners/developers to deny coverage for claims arising out of the accident, based in part upon the residential construction activities exclusion. On June 8, 2008, Admiral brought this lawsuit against these same entities, all of which claim coverage under the excess policy as "additional insureds" within the meaning of the CGL policy, and Lincoln, asserting numerous causes of action and seeking a declaration of no coverage. Admiral and defendants subsequently filed various motions and cross motions, which Supreme Court disposed of in a decision filed on June 25, 2009.

Supreme Court denied Admiral's motion for summary judgment on its cause of action pursuant to the exclusion in the excess policy for residential construction activities, but also denied defendants' motions to dismiss that cause of action. The judge observed that although it was "undisputed" that a "condominium tower" was being constructed, there was conflicting evidence as to whether the "building was intended to be strictly residential" or was "mixed-use"; therefore, "there remain[ed] material questions of fact" on this subject, which had not yet been explored in examinations before trial.

Next, the judge dismissed against Reliance and the owners/developers (having granted Admiral summary judgment declaring that New York Crane did not qualify as an additional insured) those causes of action related to Admiral's assertion that Joy made false statements in its underwriting submission. Relying on Lufthansa Cargo, AG v New York Mar. & Gen. Ins. Co. (40 AD3d 444 [1st Dept 2007]) and BMW Fin. Servs. v Hassan (273 AD2d 428 [2nd Dept 2000]), lv denied 95 NY2d 767 [2000]), Supreme Court opined that "[w]hatever the outcome is as to Joy," with respect to these causes of action,

"any additional insured is provided with the full benefits of . . . coverage. Should it be determined at some later date that Reliance and/or the owners are additional insureds under the excess policy, any of Joy's alleged misrepresentations would have no effect on their coverage" (internal citations omitted).

As relevant to this appeal, Supreme Court also dismissed Admiral's cause of action asserting that the LLC exclusion in the CGL policy precluded coverage of those owners/developers (all but one of them) that are limited liability companies; as previously touched on, decided that New York Crane was not an "additional insured" under endorsements in the CGL; held that former section 3420 (d) (2) of the Insurance Law, requiring timely written disclaimer of liability or denial of coverage, was not a defense to Admiral's lawsuit; denied motions and cross motions to dismiss Admiral's cause of action seeking a declaration of no coverage on the ground the injuries sustained in the accident did not arise from Joy's acts or omissions; denied motions and cross motions to dismiss Admiral's cause of action seeking a declaration of no coverage as to Joy for claims by its employees in light of the CGL policy's employer's liability exclusion; and denied motions and cross motions to dismiss Admiral's cause of action seeking a declaration of no coverage for bodily injury or property damage arising out of the rendering or failure to render professional services in light of the professional services exclusions in the CGL and excess policies.

In a decision and order entered on February 17, 2011, the Appellate Division modified by declaring that the residential construction activities exclusion was inapplicable, and otherwise affirmed (81 AD3d 521 [1st Dept 2011]). In the court's opinion,

"[t]he evidence overwhelmingly indicate[d] that, at the time of the accident, the building was intended to be a mixed-use structure, not a purely residential one" (id. at 522). In particular, "[t]his evidence include[d] references to 'storefronts' in various documents, correspondence in which the New York City Department of Buildings confirm[ed] that the building to be constructed [was] a 'mixed use' structure, and the affidavits by two people associated with the project" (id.).

The Appellate Division rejected the contrary view expressed by Admiral's engineering expert because "he lacked personal knowledge of the project, and his speculative conclusions [were] insufficient to overcome the evidence of mixed-use intent" (id.). Upon New York Crane's motion and Admiral's cross motion, the Appellate Division on July 14, 2011 granted leave to appeal, certifying the following question to us: "Was the order of the Supreme Court, as modified by this Court, properly made?"

The Residential Construction Activities Exclusion

Admiral correctly states that an expert's opinion need not be based upon personal knowledge (see Prince, Richardson on Evidence § 7-308; People v Miller, 91 NY2d 372, 379 [1998], citing Fisch, New York Evidence § 429, at 280 [2d ed] [an "expert witness may base his opinion on facts which are not within his personal knowledge"]). An expert may instead ground his opinion on facts in evidence, as was the case here (see Cassano v Hagstrom, 5 NY2d 643, 646 [1959] ["opinion evidence must be based on facts in the record or personally known to the witness"]). Consequently, the Appellate Division erred by disregarding the affidavit of Admiral's engineering expert on the basis that "he lacked personal knowledge of the project," rendering his conclusions "speculative" (81 AD3d at 522).

Next, the Appellate Division relied upon affidavits submitted by defendants, but to the extent these conflicted with the affidavit of Admiral's expert, the court should not have made credibility determinations. Further, evidence presented on the motion and cross motions requires interpretation and factual findings — i.e., whether references in documents to "storefronts" literally mean the entrances to commercial spaces or, as Admiral's engineering expert averred, a construction style, or what various construction drawings denote.

Defendants stress the owners/developers' intent at various times, but intent does not control whether the excess policy afforded coverage. Joy purchased insurance that excluded residential construction activities; if Joy nevertheless was engaged in residential construction, there is no coverage. Contrariwise, there is concededly coverage for construction of a residential building with commercial or retail space (i.e., a "mixed-use" building) because of the endorsement's definition of "residential construction activities." The factual dispute over the nature of the construction in this case can only be resolved with reference to what defendants were actually building (see e.g. Bovis Lend Lease LMB, Inc. v Royal Surplus Lines Ins. Co., 27 AD3d 84, 94 [2005] [resolving a dispute as to whether a residential exclusion applied by looking to the construction contract]). In sum, there are material issues of fact in this case as to whether the high-rise building under construction was residential or "mixed-use."

The Causes of Action Related to Joy's Alleged FalseStatements

Admiral asserted four causes of action seeking relief with respect to the coverage claims of Reliance, New York Crane and the owners/developers, which the lower courts considered to be unaffected by Joy's alleged misrepresentations in its underwriting submission. These causes of action requested rescission of the excess policy (the sixth cause of action) or, in the alternative, its reformation to conform retroactively with such terms as might have been offered if Joy had responded accurately to the questions and inquiries posed to it by Admiral during the underwriting process (the ninth cause of action); a declaration that the excess policy was void, consistent with the policy condition providing for this in the event of fraud and/or misrepresentation by Joy relating to the policy (the seventh cause of action); and a declaration that the claims arising from the crane accident were not within the scope of coverage afforded by the CGL and excess policies (the tenth cause of action).

The lower courts dismissed these causes of action against Reliance and the owners/developers solely on the basis of the Appellate Division's decisions in BMW Fin. Servs. and Lufthansa Cargo, AG. These cases, in turn, relied on Morgan v Greater N.Y. Taxpayers Mut. Ins. Assn. (305 NY 243 [1953]) and Greaves v Public Serv. Mut. Ins. Co., 5 NY2d 120 [1959]). Notably, however, the insurers in Morgan and Greaves did not seek rescission — i.e., they made no claim that the policies at issue were void ab initio because of material misrepresentation, as Admiral does here. Instead, we were asked in those cases to interpret provisions of policies that everyone agreed were valid and effective.

In Morgan, for example, we considered whether an assault and battery committed by one insured would preclude coverage under a public liability policy for an innocent co-insured, who was the business partner of the insured who committed the assault. The plaintiff, who held an unsatisfied judgment for damages for personal injuries as a result of the assault, stood in the shoes of the innocent co-insured. We held that coverage was available as "[t]he proper view of the policy under consideration is that by it [the insurer] has undertaken separate and distinct obligations to the various assureds, named and additional . . . In short, since [the insurer] has undertaken separate obligations to each of the assureds, an assault committed by an assured relieves [the insurer] of its obligation to that particular assured but not of its obligations to the other assureds" (305 NY at 249).

The plaintiff in Greaves sought coverage for tort claims against him under an automobile liability policy issued to the employer of the employee he allegedly injured. There was no dispute that the plaintiff was an additional insured under this policy. The insurer denied him coverage, though, based on an exclusion for sickness, disease or death of "any employee of the insured" if benefits were payable or required under any workers' compensation law (5 NY2d at 123). The insurer insisted that the word "insured" in the exclusion referred to the named insured employer, and that since the injured employee was entitled to and received workers' compensation benefits, the exclusion applied to foreclose coverage to the plaintiff. Applying the rule of Morgan, we held that the exclusion had no effect as to the plaintiff because the injured employee was not his employee, and he was therefore not liable to this individual for workers' compensation benefits.

In the BMW case, BMW Financial Services (BMW) leased a vehicle to Khaldoon and Khaled Hassan on the condition that they obtain a policy naming it as an additional insured. Instead, the Hassans persuaded Khaldoon's parents to insure the vehicle under their automobile insurance policy with New York Central Mutual. To that end, the parents represented to the insurance company that they had leased the vehicle from BMW and that Khaldoon was an additional driver residing with them. The policy listed BMW as the owner/lessor of the vehicle and named it as an additional insured. Following the car's theft, New York Central Mutual disclaimed coverage to both the parents and BMW on the ground that the parents had no insurable interest in the car.

BMW sought coverage under the policy, and the Appellate Division held that BMW, as the owner of the vehicle, had an insurable interest for which the insurer provided coverage and therefore it was irrelevant that the principal insureds had misrepresented their own interest. Thus, in BMW the insurer was aware of the subject matter of the insurance (the car) and BMW's interest in it, and specifically agreed to insure that interest. Indeed, the policy listed BMW as the owner/lessor and as an additional insured.

In Lufthansa, Lufthansa Cargo (Lufthansa) was named as an additional insured under a commercial insurance policy issued to Century Motor Leasing, with which Lufthansa contracted for trucking services (see 2006 NY Slip Op 30678 [U] [2006]). Century had represented to the insurer that a driver who had a previous conviction for driving while intoxicated would not be driving for Century. In fact, though, this driver drove the truck and was injured in a single-vehicle accident. He sued Lufthansa, alleging that it was negligent in loading the truck. In a memorandum decision, the Appellate Division opined that even though the policy was void as to Century on account of its misrepresentation, "'each individual additional insured . . . must be treated as if separately covered by the policy and indeed as if he . . . had a separate policy of his own'" (Lufthansa, 40 AD3d at 445, quoting Greaves, 5 NY2d at 124). As in BMW, Lufthansa was named in the policy as an additional insured.

In short, in both BMW and Lufthansa the named insureds' misrepresentations did not deprive the insurer of knowledge of or the opportunity to evaluate the risks for which it was later asked to provide coverage — i.e., the risk of damages arising from automobile theft (BMW) and accident (Lufthansa). Further, both BMW and Lufthansa were named as additional insureds on the relevant policies as separate parties so their interests were known to the insurers.

This is in no way comparable to what happened here, accepting Admiral's allegations about Joy's misrepresentations to be true, as we must on these motions. Admiral evaluated the risk of, and collected a premium for, providing excess insurance for interior drywall installation, not the obviously much greater risk presented by exterior construction work with a tower crane at a height many stories above grade. And as Admiral puts it, the only additional insureds it "could have contemplated would [have been] entities associated with projects on which [Joy] was performing interior drywall work and . . . the risk associated with them would [have been] limited to liability caused by acts or omissions of [Joy] in performing drywall work."

While BMW and Lufthansa are thus distinguishable from Greaves and Morgan, we do not endorse their holdings to the extent they may be read to extend the holding of Morgan and Greaves to cases where an insurer seeks rescission (see e.g. Sirius Am. Ins. Co. v Burlington Ins. Co., 81 AD3d 562, 563 [1st Dept 2011] [even if a contractor not named in the insurance policy as a named or additional insured demonstrates a triable issue of fact as to whether it was a covered insured under the policy, this "would have been unavailing as the policy was void ab initio on account of material misrepresentations made by (its insured) in the application process to procure the insurance"]). As Admiral points out, the lower courts' decisions dismissing its sixth cause of action seeking rescission as against all defendants except Joy illogically "leaves in place [the excess policy] to be enforced by other parties even if [this policy] ultimately is rescinded. In effect, these other parties [would be] permitted to rely on the terms of a policy that . . . may be deemed never to have existed to create coverage" in the first place. In short, "additional" insureds, by definition, must exist in addition to something; namely, the named insureds in a valid existing policy.

Finally, neither Morgan and Greaves nor BMW and Lufthansa addressed (much less preclude) claims, as asserted here by Admiral, for reformation or for declarations based on an express policy condition regarding fraud or misrepresentations, or the scope of coverage properly afforded under a policy. Thus, Admiral's other claims related to Joy's alleged misrepresentations in its underwriting submission (the seventh, ninth and tenth causes of action) are properly interposed against Reliance and the owners/developers as well as against Joy.

Remaining Issues

Finally, we conclude, solely for the reason put forward by Supreme Court, that the LLC exclusion does not foreclose coverage of those owners/developers that are limited liability companies: the CGL policy's language is ambiguous as to whether the exclusion precludes from coverage any limited liability company not shown as a named insured in the CGL policy's declarations (Admiral's view) or only limited liability companies (if any) acquired or formed during the contract period (the position taken by the owners/developers); consequently, this provision should be construed in the owners/developers' favor. We have reviewed and consider to be without merit the other arguments pressed by defendants on this appeal.

Accordingly, the order of the Appellate Division should be modified, without costs, in accordance with this opinion and, as so modified, affirmed, and the certified question answered in the negative.

Lancer Insurance Company v. Super Value, Inc.

Montalbano, Condon & Frank, P.C., New City, N.Y. (John E. Finnegan of counsel), for appellant.
Law Offices of Curtis, Vasile, P.C., Merrick, N.Y. (Patricia M. D'Antone of counsel), for respondent.

DECISION & ORDER

In an action for a judgment declaring that the plaintiff is not obligated to defend or indemnify the defendant Super Value, Inc., in an underlying action entitled Seda v Super Value, Inc., commenced in the Supreme Court, Bronx County, under Index No. 309310/08, the defendant Super Value, Inc., appeals from an order of the Supreme Court, Nassau County (Brown, J.), entered August 8, 2011, which granted the plaintiff's motion for summary judgment declaring that the plaintiff is not obligated to defend or indemnify it in the underlying action.

ORDERED that the order is affirmed, with costs, and the matter is remitted to the Supreme Court, Nassau County, for the entry of a judgment declaring that the plaintiff is not obligated to defend or indemnify the defendant Super Value, Inc., in the underlying action.

The plaintiff established, prima facie, its entitlement to judgment as a matter of law by showing that it properly disclaimed coverage on the ground of late notice of the underlying accident (see Ciampa 21, LLC v QBE Ins. Corp., 81 AD3d 586 ; Lobosco v Best Buy, Inc., 80 AD3d 728 , 731-732; Bigman Bros., Inc. v QBE Ins. Corp., 73 AD3d 1110 , 1112; Sputnik Rest. Corp. v United Natl. Ins. Co., 62 AD3d 689 ; St. James Mech., Inc. v Royal & Sunalliance, 44 AD3d 1030 , 1032; Felix v Pinewood Bldrs., Inc., 30 AD3d 459 , 461; Jordan Constr. Prods. Corp. v Travelers Indem. Co. of Am., 14 AD3d 655 , 656). In opposition, the defendant Super Value, Inc. (hereinafter Super Value), failed to raise a triable issue of fact (see Bigman Bros., Inc. v QBE Ins. Corp., 73 AD3d at 1112; Sputnik Rest. Corp. v United Natl. Ins. Co., 62 AD3d at 690). Super Value's contention that it had a reasonable, good faith belief in nonliability was belied by its failure to inquire into the circumstances of the accident at issue in the underlying action (see Great Canal Realty Corp. v Seneca Ins. Co., Inc., 5 NY3d 742 , 743; Security Mut. Ins. Co. of N.Y. v Acker-Fitzsimons Corp., 31 NY2d 436, 441; Hanson v Turner Constr. Co., 70 AD3d 641 , 643; York Specialty Food, Inc. v Tower Ins. Co. of N.Y., 47 AD3d 589 , 590; St. Nicholas Cathedral of Russian Orthodox Church in N. Am. v Travelers Prop. Cas. Ins. Co., 45 AD3d 411 , 412; Felix v Pinewood Bldrs., Inc., 30 AD3d at 461). Accordingly, the Supreme Court properly granted the plaintiff's motion for summary judgment (see Zimmerman v Peerless Ins. Co., 85 AD3d 1021 , 1024-1025; Magistro v Buttered Bagel, Inc., 79 AD3d 822 , 825; Hanson v Turner Constr. Co., 70 AD3d at 643).

Since this is a declaratory judgment action, the matter must be remitted to the Supreme Court, Nassau County, for the entry of a judgment declaring that the plaintiff is not obligated to defend or indemnify the defendant Super Value, Inc., in the underlying action (see Lanza v Wagner, 11 NY2d 317, appeal dismissed 371 US 74, cert denied 371 US 901).

Vermont Mutual Ins. Co. v. Mowery Construction, Inc.

Calendar Date: April 16, 2012
Before: Peters, P.J., Mercure, Stein, McCarthy and Garry, JJ.

Brennan & White, L.L.P., Queensbury (Daniel J. Stewart of counsel), for appellant.
Conway & Kirby, L.L.P., Latham (Andrew W. Kirby of counsel), for respondent.

MEMORANDUM AND ORDER

Mercure, J.

Appeal from an order of the Supreme Court (Krogmann, J.), entered March 21, 2011 in Warren County, which denied plaintiff's motion to amend the complaint.
In March 2005, defendant James Ciuffo was injured while working at a construction site overseen by defendant Mowery Construction, Inc., a general contractor. Mowery failed to inform plaintiff, its liability insurer, of the incident until Ciuffo commenced a personal injury action against it over two years later. In January 2008, plaintiff sent Mowery a reservation of rights letter in which it agreed to provide a defense in the personal injury action subject to its right to disclaim coverage if it determined that Mowery had not provided timely notice of the claim or that another policy exclusion provided a basis for disclaimer.
Plaintiff commenced this action in February 2008, seeking a declaration that it was not obliged to indemnify or defend Mowery due to the lack of timely notice. Following joinder of issue and discovery, plaintiff moved in January 2010 for leave to serve an amended complaint asserting a new basis for disclaiming coverage, namely, that Ciuffo was an employee of Mowery rather than an independent contractor as Mowery claimed and, therefore, a policy provision excluding coverage for injuries to employees was applicable. Supreme Court denied the motion, concluding that the amendment should have been sought sooner and that Mowery would be prejudiced by it. Plaintiff appeals and we now affirm.

Whether leave to amend a complaint should be granted rests within the sound discretion of the trial court, although leave should be freely granted if the amendment is not plainly lacking in merit and does not unduly prejudice or surprise the nonmoving party (see Davis v Wyeth Pharms., Inc., 86 AD3d 907, 908 [2011]; Dever v DeVito, 84 AD3d 1539, 1541 [2011], lv dismissed 18 NY3d 864 [2012]). Supreme Court correctly determined that the amendment had arguable merit, inasmuch as there is evidence suggesting that Mowery exercised substantial control "over the results produced or the means used to achieve the results" of the work performed (Bynog v Cipriani Group, 1 NY3d 193, 198 [2003]; see Clemens v Brown, 69 AD3d 1197, 1199 [2010]). We further agree with Supreme Court, however, that the proposed amendment would unduly prejudice and surprise defendants.

 

Plaintiff did not seek leave to amend until almost two years after the action was commenced and, while that delay alone did not bar the amendment, plaintiff failed to show a satisfactory excuse for the delay (see McCaskey, Davies & Assoc. v New York City Health & Hosps. Corp., 59 NY2d 755, 757 [1983]; Duquette v Oliva, 75 AD3d 727, 728 [2010]). The record demonstrates that plaintiff had evidence suggesting that Ciuffo was Mowery's employee before it sent the reservation of rights letter and commenced the present action, but nevertheless failed to raise the issue in its complaint or promptly seek leave to amend. In the interim, Mowery based its defense in both this action and the underlying personal injury action upon Ciuffo's status as an independent contractor, and plaintiff's failure to timely raise the issue was prejudicial to Mowery [FN1]. Under these circumstances, Supreme Court properly exercised its discretion in denying plaintiff's motion (see Bastidas v Epic Realty, LLC, 58 AD3d 776, 777-778 [2009]; Hassan v Schweizer, 277 AD2d 797, 799-800 [2000]; cf. Caceras v Zorbas, 74 NY2d 884, 885 [1989]).

ORDERED that the order is affirmed, with costs.

Footnotes

Footnote 1: Mowery was held liable in Ciuffo's action prior to Supreme Court's decision on the present motion, and Ciuffo has appealed from the ensuing award of damages.

Tyson v. Nazarian

Appeal from an order and judgment (one paper) of the Supreme Court, Monroe County (Thomas A. Stander, J.), entered August 15, 2011 in a personal injury action. The order and judgment granted the motion of defendant for summary judgment, dismissed the complaint and denied the motion and cross motion of plaintiff for summary judgment.

Parisi & Bellavia, Rochester (Timothy C. Bellavia of Counsel), for Plaintiff-Appellant.
Burgio, Kita & Curvin, Buffalo (Hilary C. Banker of Counsel), for Defendant-Respondent.


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

Memorandum: Plaintiff commenced this action seeking damages for injuries she allegedly sustained when a vehicle operated by defendant collided with her vehicle in March 2008. According to plaintiff, her prior back and neck injuries were exacerbated by the accident. Supreme Court properly granted defendant's motion for summary judgment dismissing the complaint on the ground that plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102 (d) and denied plaintiff's "motion and cross motion" for summary judgment on the issues of negligence and serious injury. Defendant met his initial burden on the motion "by submitting medical records and reports constituting persuasive evidence that plaintiff's alleged pain and injuries were related to . . . preexisting condition[s]' " rather than the 2008 accident (Spanos v Fanto, 63 AD3d 1665, 1666). Plaintiff's medical records demonstrated that she sustained injuries from a March 2002 motor vehicle accident. Plaintiff complained to her medical providers of severe neck and lower back pain after the 2002 accident and, in May 2006, she underwent a spinal fusion. In November 2006 she obtained Social Security disability benefits for a " severe' impairment" consisting of "lumbar back problems and status post surgery, with chronic pain." Plaintiff continued to complain of neck pain and lower back pain until the date of the 2008 accident.

Defendant also submitted the report of a physician who reviewed plaintiff's medical records and examined her on defendant's behalf. The physician opined that "[t]he symptoms that [plaintiff] had before [and after] March . . . 2008 . . . are essentially one in the same," and that there were no new abnormalities or disc problems attributable to the 2008 accident. Defendant submitted the affirmation of another physician who reviewed plaintiff's medical records at defendant's request, and he also concluded that plaintiff's "imaging studies that were performed prior to and subsequent to the [2008] accident . . . are essentially the same[, and her] cervical spine and lumbar spine complaints prior to and subsequent to the [2008] motor vehicle accident . . . are virtually the same." In addition, defendant submitted the affirmation of a third physician who reviewed plaintiff's diagnostic films, and he too found no evidence of a traumatic injury to the spine attributable to the 2008 accident.

The burden therefore shifted to plaintiff "to come forward with evidence addressing defendant's claimed lack of causation" (Carrasco v Mendez, 4 NY3d 566, 580). Plaintiff submitted the affidavit of her treating physician, who noted "a significant disc herniation broad based with foraminal encroachment at L4-L5" on an MRI performed after the 2008 accident and recommended surgery. In April 2009 he performed "an acute discectomy at L4-5 with posterior lumbar interbody fusion to repair the L4-5," but plaintiff continued to have back pain after the surgery. Plaintiff's treating physician opined that the 2008 accident caused the "large lumbar disc herniation at L4-5" and accounted for a persistent worsening of her pain symptoms. Although that affirmation was sufficient to raise a triable issue of fact concerning the existence of a new injury, plaintiff failed to raise a triable issue of fact whether she had any new physical symptoms, i.e., worsening of her pain or limitations, that were attributable to the 2008 accident. Once defendant met his initial burden, plaintiff's treating physician was required "to adequately address plaintiff's preexisting . . . condition" (Franchini v Palmieri, 1 NY3d 536, 537). In light of the evidence submitted by defendant establishing that plaintiff had no new symptoms or pain complaints after the 2008 accident, plaintiff was required to offer some explanation with respect to how her current limitations were caused by that accident rather than the preexisting condition. In the event that plaintiff's treating physician was unable to do so by giving a quantitative comparison of plaintiff's limitations before and after the 2008 accident, he was required to give a qualitative comparison (see Toure v Avis Rent A Car Sys., 98 NY2d 345, 350-351). Here, however, he failed to provide either comparison. His statement that plaintiff had a "persistent worsening" of symptoms was conclusory, and he "failed to refute the opinion of defendant's expert[s] that plaintiff did not sustain a functional disability or limitation related to the [2008] accident by, for example, comparing plaintiff's pre- and post-accident range of motion restrictions in her neck or back or assessing her pre- and post-accident qualitative limitations" (Overhoff v Perfetto, 92 AD3d 1255, 1256).

In light of our determination, we do not address plaintiff's contention that she is entitled to summary judgment on the issue of defendant's negligence.

All concur except Sconiers and Martoche, JJ., who dissent and vote to modify in accordance with the following Memorandum: We respectfully dissent because we conclude that there are issues of fact with respect to whether plaintiff sustained a serious injury under the categories for "permanent consequential limitation of use of a body organ or member" and "significant limitation of use of a body function or system" within the meaning of Insurance Law § 5102 (d) as a result of the subject March 2008 accident (hereafter, 2008 accident). While plaintiff clearly suffered a serious injury to her back in 2002 that resulted in surgery in 2006, as well as significant ongoing pain and limitations, the evidence submitted by plaintiff in opposition to defendant's motion for summary judgment dismissing the complaint was sufficient to raise issues of fact with respect to whether plaintiff also sustained a serious injury in the 2008 accident.

In his affidavit, plaintiff's treating surgeon determined that an MRI taken after the 2008 accident "revealed a significant disc herniation broad based with foraminal encroachment at L4-[]5," which did not appear on several pre-accident lumbar spine MRIs. He opined "to a reasonable degree of medical certainty that the [2008] accident [caused that] large lumbar disc herniation at L4-5[ and] account[ed] for a persistent worsening of [plaintiff's] pain symptoms."The treating surgeon further concluded that plaintiff's "pain symptoms, physical limitations and limitations with respect to activities of daily life caused by her lumbar large disc herniation at L4-5 should be considered both permanent and the direct result of the [2008] accident . . . ." He stated that the "traumatic injury to [plaintiff's] lumbar spine at L4-[]5 . . . necessitated surgery, [i.e.,] an acute discectomy at L4-5 with posterior lumbar interbody fusion."

Another of plaintiff's treating physicians compared her 2006 and 2008 MRIs, noting that the 2008 MRI "revealed a new disc herniation at L4-5." That physician opined that the 2008 accident resulted in both the L4-5 herniation and "an exacerbation of [plaintiff's] pre[]existing condition at L5-S1," which caused "increased symptoms and new symptoms . . . from which [plaintiff now] suffers."

The physician further stated that those symptoms affected "any activities of daily life which require standing, sitting or walking for more than a brief period of time." In addition, in her reply papers, plaintiff submitted the report of a physician who examined plaintiff on behalf of her insurance company and found that plaintiff's "conditions are causally related to the [2008] accident" and that, if she was employed, her restrictions would include no prolonged positioning of the neck, overhead reaching, repetitive reaching, bending, twisting, stooping or lifting of greater than 15 to 20 pounds. Moreover, one of the physicians who examined plaintiff on behalf of defendant's insurance company opined, after his first examination of plaintiff, "that 75% of [plaintiff's] current disability with respect to the neck and back is due to the injury [resulting from the 2008 accident] and 25% [is] due to the prior injury and the documented disc abnormalities that were noted after the injury of 2002." While that physician later asserted that such opinion was expressed before he was fully and accurately informed of the extent of plaintiff's physical condition prior to the 2008 accident, the physician's repudiation of his prior opinion presents an issue for the finder of fact.

Based on that evidence and other evidence in the record, we conclude that plaintiff presented objective proof in evidentiary form that she sustained a new injury in the 2008 accident and, in addition to the pain and limitations caused by that new injury, plaintiff lost all movement of her spine at L4-5 as a result of surgery in 2009 and suffered residual pain and limitations resulting from that surgery. While "an expert's designation of a numeric percentage of a plaintiff's loss of range of motion can be used to substantiate a claim of serious injury . . . [, an] expert's qualitative assessment of a plaintiff's condition also may suffice, provided that the evaluation has an objective basis and compares the plaintiff's limitations to the normal function, purpose and use of the affected body organ, member, function or system" (Toure v Avis Rent A Car Sys., 98 NY2d 345, 350).

We conclude that the evidence submitted by plaintiff in opposition to defendant's motion was sufficient to raise issues of fact based on that standard. Moreover, we fear that the majority's conclusion to the contrary sets an almost impossible standard for persons with preexisting injuries and conditions to have their cases heard by a jury when those persons are injured in subsequent motor vehicle accidents.

In Perl v Meher (18 NY3d 208, 214), the Court of Appeals, quoting its decision in Pommells v Perez (4 NY3d 566, 571), noted that "[n]o-fault abuse still abounds today" and "that many courts, including ours, approach claims that soft-tissue injuries are serious' with a well-deserved skepticism.' " Nevertheless, in two of the three cases decided under Perl, the Court concluded that "the evidence [the] plaintiffs . . . put forward [was] legally sufficient" and that "the role of skeptic is properly reserved for the finder of fact" (18 NY3d at 215).

Specifically, the Court held that the "plaintiffs' evidence of serious injury in [those two cases was] legally sufficient, [even though] both cases have troubling features" (id. at 219), which in one case included the sworn assertion by a defense physician accusing the plaintiff of malingering. Nevertheless, "[t]he issue presented by [such] evidence, of course, is one of credibility, which is not for this Court to decide" (id.). Moreover, the Court in Perl determined that "a rule requiring contemporaneous' numerical measurements of range of motion could have perverse results[ because p]otential plaintiffs should not be penalized for failing to seek out, immediately after being injured, a doctor who knows how to create the right kind of record for litigation" (id. at 218). The Court "therefore reject[ed] a rule that would make contemporaneous quantitative measurements a prerequisite to recovery" (id.). The extraordinary burden the majority appears to be placing on automobile accident plaintiffs who have preexisting injuries or conditions "could have [even more] perverse results" by penalizing plaintiffs for not being prepared at all times with " contemporaneous' numerical measurements of [their] range of motion" (id.), inasmuch as no one can ever know if or when an automobile accident is going to occur. While the majority is understandably skeptical of the plaintiff's serious injury claims, as well as her credibility, this is one case where "the role of skeptic is properly reserved for the finder of fact" (id. at 215).

Given the result reached by our colleagues in the majority, they understandably did not address the merits of plaintiff's contention that she is entitled to partial summary judgment on the issue of defendant's negligence.

However, given that defendant turned left in front of plaintiff, who had the right-of-way, there can be no doubt that the evidence establishes as a matter of law that defendant was negligent and that his negligence was the sole proximate cause of the 2008 accident (see Rogers v Edelman, 79 AD3d 1803, 1804; Guadagno v Norward, 43 AD3d 1432, 1433). We would therefore modify the order and judgment by denying those parts of defendant's motion for summary judgment dismissing plaintiff's claims under the permanent consequential limitation of use and significant limitation of use categories of serious injury and granting that part of plaintiff's "motion and cross motion" for partial summary judgment on the issue of defendant's negligence.

Vega v. MTA Bus Company

Sullivan & Brill LLP, New York (Allison E. McKenzie of counsel), for appellants.
Mallilo & Grossman, Flushing (Francesco Pomara, Jr. of counsel), for respondent.

Order, Supreme Court, New York County (George J. Silver, J.), entered October 11, 2011, which, to the extent appealed from as limited by the briefs, denied defendants' motion for summary judgment dismissing the complaint based on the grounds of lack of negligence and failure to establish a serious injury under the permanent loss, permanent consequential and significant limitation categories of Insurance Law § 5102(d), unanimously reversed, on the law, without costs, and the motion granted. The Clerk is directed to enter judgment dismissing the complaint.

Defendants made a prima facie showing that defendant bus driver acted reasonably in an emergency situation not of his own making and thus was not negligent (see Caristo v Sanzone, 96 NY2d 172, 174 [2001]; Rahimi v Manhattan & Bronx Surface Tr. Operating Auth., 43 AD3d 802, 803 [2007]). Indeed, the bus driver testified that the bus was crossing an intersection when a car, traveling in the opposite direction, crossed over the double yellow lines and cut in front of the bus in order to make a left turn, forcing the bus driver to apply the brakes. Plaintiff's testimony that the bus driver was "speeding" was insufficient to raise a triable issue of fact (see Alston v American Tr., Inc., 82 AD3d 546, 547 [2011]).

Defendants also made a prima facie showing that plaintiff did not suffer a serious injury within the meaning of Insurance Law § 5102(d) by submitting expert medical reports finding normal ranges of motion in the claimed affected body parts and no objective evidence that any limitations resulted from the accident (see Spencer v Golden Eagle, Inc., 82 AD3d 589, 590 [2011]). The finding of a minor limitation in plaintiff's lumbar spine by one of defendants' physicians was "insignificant for purposes of Insurance Law § 5102(d)" (Rosa-Diaz v Maria Auto Corp., 79 AD3d 463, 464 [2010]). In opposition, plaintiff failed to raise a triable issue of fact, since she did not submit any objective evidence of limitations based on a recent examination of any of the subject body parts (see Shu Chi Lam v Wang Dong, 84 AD3d 515, 516 [2011]; Townes v Harlem Group, Inc., 82 AD3d 583, 584 [2011]). The most current medical evidence upon which plaintiff relied was the affirmed report of one of her treating physicians, outlining treatment she received in 2007, nearly three years before defendants' experts' findings of full range of motion (see Zambrana v Timothy, ___ AD3d ___, 943 NYS2d 92 [2012]).

Davis v. Alnhmi

Law Offices of Robert Washuta, P.C., New York (Robert Washuta of counsel), for appellant.
Cheven, Keely & Hatzis, New York (William B. Stock of counsel), for respondents.

Order, Supreme Court, Bronx County (Lucindo Suarez, J.), entered June 3, 2011, which granted defendants Mohmmed Alnhmi and Talia S. Diaz-Alnehmi's motion for summary judgment dismissing plaintiff Natalie Davis's complaint on the ground that she did not suffer a serious injury within the meaning of Insurance Law § 5102(d), unanimously reversed, on the law, and the motion denied, without costs.

Defendants made a prima facie showing that plaintiff Natalie Davis did not suffer a "permanent consequential limitation of use" or "significant limitation of use" (Insurance Law § 5102[d]) of her cervical and lumbar spines as a result of the accident. In opposition, Davis raised an issue of fact by submitting affirmed MRI reports showing disc herniation at L5-S1 and multiple cervical disc bulges, an affirmed EMG report revealing radiculopathy, and an affirmation by her treating orthopedist, who repeatedly and recently measured her diminished ranges of motion (see Toure v Avis Rent a Car Sys., 98 NY2d 345, 350-351 [2002]).

Davis also raised an issue of fact as to causation, with her treating orthopedist's opinion attributing her injuries to the accident (see Perl v Meher, 18 NY3d 208, 218-219 [2011]; Williams v Perez, 92 AD3d 528, 529 [2012]). Moreover, Davis was relatively young at the time of the accident, and there is no evidence in the record that before then she had had any injuries or treatment (see Vera v Islam, 70 AD3d 525 [2010]; June v Akhtar, 62 AD3d 427 [2009]).

Plaintiff alleges that she was confined to home and could not work for over three months. She further alleges that her doctors told her she could not lift heavy items, which was a required part of her job. Thus there are issues of fact as to her 90/180 day claim.

Armand v. Raman

Law Offices of Feder & Rodney, PLLC, Brooklyn (Giselle L. Eras of counsel), for appellant.
Gladstein Keane & Partners, LLC, New York (Richard M. Sands of counsel), for respondents.

Order, Supreme Court, Bronx County (Kibbie F. Payne, J.), entered June 24, 2011, which, in an action alleging serious injuries within the meaning of Insurance Law § 5102(d), denied plaintiff-appellant's motion to vacate an order granting, upon plaintiffs' default, defendants' motion for summary judgment dismissing the complaint, unanimously affirmed, without costs.

Defendants correctly served their notice of motion for summary judgment upon plaintiff's former counsel, which continued as her attorney of record, given that plaintiff failed to change counsel in the manner prescribed by CPLR 321(b)(1) (see Vitale v City Constr. Mgt. Co., 172 AD2d 326 [1991]; see also Splinters, Inc. v Greenfield, 63 AD3d 717, 719 [2009]). In any event, even if plaintiff provided a reasonable excuse for her default, she failed to demonstrate that her action has merit (see Carroll v Nostra Realty Corp., 54 AD3d 623 [2008], lv denied 12 NY3d 792 [2009]; see also Vargas v Ahmed, 41 AD3d 328, 329 [2007]). Indeed, her affidavit asserting the existence of bulging or herniated discs is not, in and of itself, "evidence of serious injury without competent objective evidence of the limitations and duration of the disc injury" (Rubencamp v Arrow Exterminating Co., Inc., 79 AD3d 509, 510 [2010]).

Luigi v. Avis Cab Co., Inc.

Baker, McEvoy, Morrissey & Moskovits, P.C., New York, N.Y. (Mead, Hecht, Conklin & Gallagher, LLP [Elizabeth M. Hecht], of counsel), for appellants.
Stefano A. Filippazzo, P.C., Brooklyn, N.Y. (Louis A. Badolato of counsel), for respondents.

DECISION & ORDER

In an action to recover damages for personal injuries, etc., the defendants appeal from an order of the Supreme Court, Queens County (Flug, J.), entered September 6, 2011, which denied their motion for summary judgment dismissing the complaint on the ground that the plaintiff Todd C. Luigi did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident.

ORDERED that the order is affirmed, with costs.

The defendants failed to meet their prima facie burden of showing that the injured plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident (see Toure v Avis Rent A Car Sys., 98 NY2d 345; Gaddy v Eyler, 79 NY2d 955). The injured plaintiff alleged, inter alia, that he sustained certain injuries to his left shoulder as a result of the subject accident. Although the defendants asserted that those alleged injuries did not constitute a serious injury within the meaning of Insurance Law § 5102(d) (see Toure v Avis Rent A Car Sys., 98 NY2d at 352; Gaddy v Eyler, 79 NY2d at 955-956), the defendants' examining orthopedic surgeon recounted, in an affirmed report submitted in support of the defendants' motion for summary judgment, that range-of-motion testing performed during his examination revealed the existence of a significant limitation in the left shoulder (see Scott v Gresio, 90 AD3d 736). Further, the opinion of that physician that the left shoulder injuries were degenerative in nature and not causally related to the subject accident was too equivocal to satisfy the defendants' prima facie burden of demonstrating that such injuries were not caused by a traumatic event (see Reyes v Diaz, 82 AD3d 484; Spanos v Harrison, 67 AD3d 893, 894).

Since the defendants failed to meet their prima facie burden, the Supreme Court properly denied their motion for summary judgment without considering the sufficiency of the plaintiffs' opposition papers (see Scott v Gresio, 90 AD3d at 737).

Moran v. Kollar

Sobo & Sobo, LLP, Middletown, N.Y. (Suzan D. Paras of counsel), for appellant.
Craig P. Curcio, Middletown, N.Y. (Bryan R. Kaplan of counsel), for respondent.

DECISION & ORDER
In an action to recover damages for personal injuries, the plaintiff appeals from an order of the Supreme Court, Orange County (Slobod, J.), dated March 22, 2011, which granted the defendant's motion for summary judgment dismissing the complaint on the ground that he did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident

ORDERED that the order is affirmed, with costs.

The defendant met his prima facie burden of showing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident (see Toure v Avis Rent A Car Sys., 98 NY2d 345; Gaddy v Eyler, 79 NY2d 955, 956—957). The defendant submitted competent medical evidence establishing, prima facie, that the alleged injuries to the plaintiff's left eye and the cervical region of his spine did not constitute serious injuries within the meaning of Insurance Law § 5102(d) (see Staff v Yshua, 59 AD3d 614; Rodriguez v Huerfano, 46 AD3d 794, 795; Koppelmann v Lepler, 135 AD2d 507, 508). The defendant also submitted evidence establishing, prima facie, that the plaintiff did not sustain a serious injury under the 90/180 day category of Insurance Law § 5102(d) (see Rivera v Bushwick Ridgewood Props., Inc., 63 AD3d 712, 713-714).

In opposition, the plaintiff failed to raise a triable issue of fact. The defendant was not required to address the plaintiff's shoulder injuries, since no claim for shoulder injuries appeared in the complaint or bill of particulars, and the plaintiff made no motion to amend the bill of particulars so as to include those injuries (see Kreimerman v Stunis, 74 AD3d 753, 754; Felix v Wildred, 54 AD3d 891, 892; Ifrach v Neiman, 306 AD2d 380). Accordingly, the Supreme Court properly granted the defendant's motion for summary judgment dismissing the complaint.

Boone v. Milano

Calendar Date: April 19, 2012
Before: Lahtinen, J.P., Spain, Malone Jr., Kavanagh and McCarthy, JJ.

Horigan, Horigan & Lombardo, P.C., Amsterdam (Peter M. Califano of counsel), for appellant.
Napierski, VanDenburgh & Napierski, L.L.P., Albany (Christina D. Porter of counsel), for respondents.
MEMORANDUM AND ORDER

Kavanagh, J.

Appeals (1) from an order of the Supreme Court (Ferradino, J.), entered April 12, 2011 in Saratoga County, which granted defendants' motion for summary judgment dismissing the complaint, and (2) from an order of said court, entered October 25, 2011 in Saratoga County, which denied plaintiff's motion for reconsideration.

On April 18, 2008, plaintiff was involved in a motor vehicle accident with a car driven by defendant Cynthia A. Milano and owned by defendant Felix J. Milano. As a result, plaintiff commenced this action alleging that she suffered injuries to her neck, back and left shoulder, had headaches, as well as "pain from a trauma induced Chiari malformation," and psychological and emotional distress, all of which she alleges were caused by this accident. She claims that she suffered a permanent consequential and significant limitation of use of her cervical spine, neck, lumbar spine, head and left shoulder, and a permanent loss of use of a body organ, member function or system, and that, because of these injuries, she was unable to perform her usual and customary activities for 90 of the 180 days immediately following the accident (see Insurance Law § 5102 [d]). Defendants moved for summary judgment dismissing the complaint arguing that plaintiff did not suffer a serious injury in this accident and that her complaints of injury and pain all relate to physical conditions that predated it. Supreme Court granted the motion and dismissed the complaint. Thereafter, plaintiff moved to renew, and the court denied that motion. Plaintiff now appeals from the order granting defendants' motion for summary judgment and the order denying her motion to renew.

Defendants, in support of their motion, made a prima facie showing that plaintiff did not suffer a serious injury in this accident based on information contained in plaintiff's medical records, as well as affidavits and reports from Sheldon Staunton, a neurologist, and Thomas Eagan, a physician specializing in orthopedics, both of whom examined her (see Toure v Avis Rent A Car Sys., 98 NY2d 345, 352 [2002]; MacMillan v Cleveland, 82 AD3d 1388, 1388 [2011]; Wolff v Schweitzer, 56 AD3d 859, 860 [2008]). Eagan noted that plaintiff's medical records documented the existence of conditions, as well as complaints she made prior to the accident, that were strikingly similar to the injuries that she now had claimed in her bill of particulars were caused by this accident. He also stated that the Chiari malformation [FN1] could not be caused by trauma, but rather was structural in nature and had to have existed prior to the accident. As such, Eagan concluded that while plaintiff "may have suffered a mild temporary cervical strain" from the accident, she did not sustain a permanent consequential limitation, a permanent loss of use or significant limitation of a body organ, member, function or system, or any injury that prevented her from performing her usual activities during the 90 of the 180 days immediately following the accident.
Staunton reported that his neurological examination of plaintiff was "essentially normal," that she had full range of motion to her cervical and left spine, and a fused left elbow as a result of a surgery that predated the accident. Similarly, he attributed the restrictions that plaintiff had in moving her left shoulder to a prior injury and a resulting surgical procedure that was performed prior to the accident. Moreover, Staunton found "no objective findings of any restrictions or limitations" related to the accident and, while plaintiff had subjective complaints of pain, he noted that an MRI performed after the accident revealed only mild degenerative changes and, when compared to an MRI performed prior to the accident, showed that there had been no significant changes in plaintiff's condition. As for plaintiff's Chiari malformation, Staunton observed that she "experienced long-standing and chronic headaches and neck pain" before the accident that could have been caused by this condition. He further found that plaintiff's claimed restrictions or limitations — other than those that existed in her elbow and shoulder — were entirely subjective and self-limiting.

In opposition to defendants' motion for summary judgment, plaintiff was required to present medical evidence that "'contain[ed] objective, quantitative evidence with respect to diminished range of motion or a qualitative assessment comparing [her] present limitations to the normal function, purpose and use of the affected body organ, member, function or system'" (Peterson v Cellery, 93 AD3d 911, 913 [2012], quoting Dean v Brown, 67 AD3d 1097, 1098 [2009]). In that regard, plaintiff offered the affirmation of Scott Rosa, a chiropractor who began treating plaintiff 2½ years after the accident [FN2] . Rosa noted a significant limitation in plaintiff's ability to move her neck, as well as injuries to her spine, back, shoulder and arm, which he found were caused by the motor vehicle accident. However, Rosa failed to account for why plaintiff's preexisting physical maladies were not the source of the injuries and limitations that she now claims were caused by this accident. As such, Rosa's affirmation does not create a factual issue that required denial of defendants' motion for summary judgment, and plaintiff's claims that she suffered a permanent consequential limitation as well as a significant limitation of a body organ, member, function or system were properly dismissed (see Franchini v Palmieri, 1 NY3d 536, 537 [2003]; Cirillo v Swan, ___ AD3d ___, ___, 2012 NY Slip Op 03493, *2 [2012]; Foley v Cunzio, 74 AD3d 1603, 1604-1605 [2010]).

As for the 90/180-day category, plaintiff only missed work after surgery was performed on the Chiari malformation in March 2009 — nearly a year after the accident. In addition, her medical records document, and plaintiff admits, that many of the restrictions she now claims were caused by injuries she sustained in

this accident — walking her dogs, making crafts and doing housework — all existed before the accident and were apparently caused by medical conditions that predated it (see Crawford-Reese v Woodard, ___ AD3d ___, ___, 2012 NY Slip Op 03502, *2 [2012]). Finally, Supreme Court properly denied plaintiff's motion to renew — in which she submitted an affidavit by Rosa in support thereof — because said affidavit did not serve to establish that a question of fact existed requiring denial of defendants' motion for summary judgment.

Footnotes

Footnote 1: He described a Chiari malformation as "a condition in which crowded brain tissue protrudes into the spinal canal . . . when the skull is abnormally small or misshapen pressing the brain and forcing it downward."

Footnote 2: Supreme Court refused to consider Rosa's testimony, finding that because he was not a physician, he could not submit an affirmation (see CPLR 2106). However, the court noted that even if it considered the assertions set forth in this affirmation, they failed to create a question of fact as to whether plaintiff sustained a serious injury in this accident.

State Farm Fire & Casualty v. Ricci

Appeal from an order of the Supreme Court, Oneida County (Anthony F. Shaheen, J.), entered October 12, 2011 in a declaratory judgment action. The order, insofar as appealed from, denied in part the motion of plaintiff seeking partial summary judgment dismissing the second, third, and fourth counterclaims of defendant Matthew Ricci.

Hurwitz & Fine, P.C., Buffalo (Dan D. Kohane of Counsel), for Plaintiff-Appellant.
Conway & Kirby, LLP, Latham (Andrew W. Kirby of Counsel), for Defendants-Respondents Raymond Pink And Michelle Pink.

It is hereby ORDERED that the order so appealed from is unanimously modified on the law by granting that part of plaintiff's motion for partial summary judgment dismissing the second counterclaim of defendant Matthew Ricci to the extent that it alleges bad faith and improper conduct by plaintiff and as modified the order is affirmed without costs.

Memorandum: Defendant Raymond Pink was a spectator at a youth hockey game when a fight broke out among other spectators in the stands. Defendant Matthew Ricci was one of those spectators, and Raymond Pink was injured during the fight. Raymond Pink and his wife, defendant Michelle Pink, subsequently commenced a personal injury action (hereafter, underlying action) against, inter alia, Ricci, seeking damages for the injuries that Raymond Pink sustained. Plaintiff, State Farm Fire & Casualty Company (State Farm), insured Ricci pursuant to a policy of homeowner's insurance (policy) and reserved its right to deny and disclaim coverage in the underlying action in a letter sent to Ricci five days after State Farm received its first notice of the underlying action. Four days after reserving its right to deny coverage, State Farm advised Ricci that, based on the question of coverage, Ricci had the right to select attorneys of his choice to defend him at State Farm's expense in the underlying action. Ricci did not select independent counsel to defend him in that action.

Approximately two years later, State Farm commenced this action seeking, inter alia, a declaration of the rights of the parties under the policy. Ricci joined issue by submitting an answer in which he asserted four counterclaims, the second of which alleged that Ricci "is entitled to have his attorney[s'] fees paid by [State Farm] with reference to the cost of defending [the underlying] action, particularly in view of the bad faith and improper conduct engaged in by [State Farm] and its representatives and agents." The Pinks submitted an answer that did not allege that State Farm had acted in bad faith.

State Farm subsequently moved for partial summary judgment dismissing Ricci's second through fourth counterclaims. Supreme Court granted only those parts of the motion with respect to the third and fourth counterclaims. We modify the order by granting that part of the motion with respect to Ricci's second counterclaim to the extent that it alleges bad faith and improper conduct by State Farm.

"[I]n order to establish a prima facie case of bad faith [based on a disclaimer of coverage], [a party] must establish that the insurer's conduct constituted a gross disregard of the insured's interests . . . In other words, [the party] must establish that the . . . insurer engaged in a pattern of behavior evincing a conscious or knowing indifference to the interests of the insured" (Bennion v Allstate Ins. Co., 284 AD2d 924, 926 [internal quotation marks omitted]; see Pavia v State Farm Mut. Auto. Ins. Co., 82 NY2d 445, 453-454, rearg denied 83 NY2d 779).

Here, State Farm met its initial burden on that part of the motion with respect to its alleged bad faith and improper conduct (see generally Zuckerman v City of New York, 49 NY2d 557, 562). Within days of receiving the complaint in the underlying action, State Farm reserved its right to deny and disclaim coverage (see Progressive Northeastern Ins. Co. v Farmers New Century Ins. Co., 83 AD3d 1519, 1520) and, shortly thereafter, it afforded Ricci the opportunity to select attorneys of his choice to represent him in the underlying action at State Farm's expense (see Public Serv. Mut. Ins. Co. v Goldfarb, 53 NY2d 392, 401; Hall v McNeil, 125 AD2d 943). State Farm's reservation of rights is based on the complaint and, after reserving its right to deny and disclaim coverage, State Farm maintained its defense of Ricci in the underlying action. By commencing this declaratory judgment action, State Farm seeks merely to clarify its obligations under the policy, and such an approach is not only permissible but advisable (see Lang v Hanover Ins. Co., 3 NY3d 350, 356).

With respect to the issue of State Farm's alleged bad faith and improper conduct, defendants failed to raise a triable issue of fact sufficient to defeat the motion. Ricci has not submitted a brief in this appeal, and we assume for the sake of argument that the Pinks have standing to oppose it. Contrary to the contention of the Pinks, State Farm's failure to disclaim coverage in a timely manner is insufficient to establish bad faith. To the extent that State Farm failed to notify the Pinks in a timely manner that it disclaimed coverage based on a policy exclusion, the untimely disclaimer would be ineffective with respect to the Pinks (see Arida v Essex Ins. Co., 299 AD2d 902, 903; cf. HBE Corp. v Sirius Am. Ins. Co., 63 AD3d 1509, 1510). Moreover, the declaratory judgment action is premised upon the theory that the claim is not covered by the policy in the first instance, and no disclaimer is required where a claim falls outside the scope of coverage afforded by the policy (see Markevics v Liberty Mut. Ins. Co., 97 NY2d 646, 648).

Contrary to the Pinks' further contention, Insurance Law § 3420 (former [d]) considers the time in which an insurer must disclaim coverage, not the time in which an insurer may bring a declaratory judgment action seeking a determination of its policy obligations. We reject the contention of the Pinks that State Farm's delay of approximately two years between the time it reserved its right to disclaim or deny coverage and its commencement of this action evinces bad faith. In addition, there is no merit to the Pinks' contention that State Farm improperly relied on sealed records from the criminal proceedings against Ricci in determining whether to deny coverage for Ricci in the underlying action. There is no merit to the Pinks' contention that the subject records were unsealed only with respect to the underlying action (Pink v Ricci, 74 AD3d 1773). In fact, in the underlying action, the Pinks moved for an order "directing that all court and police records, statements, investigation and transcripts involving the criminal proceeding against [Ricci] in the City of Rome Court regarding the November 26, 2006 incident for which [he] plead[ed] to assault in the third degree . . . [be] unsealed," and that relief was granted. We concluded in the appeal in the underlying action that Ricci waived his statutory privilege of confidentiality with respect to those records by asserting cross claims alleging that he had been harmed by Raymond Pink and others acting in concert with him (id. at 1774). Here, the Pinks contend that the cross claims were asserted approximately one week after State Farm first learned of the underlying action and several months before the records at issue were first disclosed in the underlying action by the Pinks, who had obtained them through a Freedom of Information Law request. Put differently, nothing in the record suggests that State Farm obtained the records at issue while they were sealed. We have considered the Pinks' remaining contentions with respect to State Farm's alleged bad faith and improper conduct, and we conclude that none has merit.

We next turn to the issue whether the court erred in denying without prejudice pursuant to CPLR 3212 (f) that part of the motion with respect to Ricci's second counterclaim to the extent that it alleges bad faith and improper conduct by State Farm. "Although a motion for summary judgment may be opposed on the ground that facts essential to justify opposition may exist but cannot then be stated' . . ., the opposing party must make an evidentiary showing supporting [that] conclusion, mere speculation or conjecture being insufficient' " (Preferred Capital v PBK, Inc., 309 AD2d 1168, 1169; see Newman v Regent Contr. Corp., 31 AD3d 1133, 1134-1135). Here, for the foregoing reasons, the Pinks' contention that State Farm acted in bad faith is merely speculative, and the court thus abused its discretion in denying that part of the motion without prejudice and with leave to renew following further discovery (see Welch Foods v Wilson, 277 AD2d 882, 883; cf. Rincon v Finger Lakes Racing Assn., Inc., 11 AD3d 950).

Finally, we conclude that the court properly denied that part of the motion with respect to Ricci's second counterclaim to the extent that it seeks attorneys' fees, inasmuch as " an insured who prevails in an action brought by an insurance company seeking a declaratory judgment that it has no duty to defend or indemnify the insured may recover attorneys' fees regardless of whether the insurer provided a defense to the insured' " (RLI Ins. Co. v Smiedala, 77 AD3d 1293, 1295, quoting U.S. Underwriters Ins. Co. v City Club Hotel, LLC, 3 NY3d 592, 598).

Ragins v. Hospitals Insurance Company, Inc.

Shaub, Ahmuty, Citrin & Spratt, LLP, Lake Success, N.Y. (Steven J. Ahmuty, Jr., and Christopher Simone of counsel), for appellants.
Silverson, Pareres & Lombardi, LLP, New York, N.Y. (Joseph T. Pareres of counsel), for respondent.

DECISION & ORDER

In an action to recover damages for breach of contract and, in effect, for a judgment declaring that the defendants are obligated under an insurance policy to indemnify the plaintiff for costs and the remaining amount of unpaid interest incurred in connection with an underlying action entitled Villanueva v Kahn, commenced in the Supreme Court, Bronx County, under Index No. 21290/00, the defendants appeal, as limited by their brief, from so much of an order of the Supreme Court, Westchester County (Murphy, J.), entered June 24, 2011, as denied those branches of their motion which were pursuant to CPLR 3211(a)(1) and (5), in effect, to dismiss so much of the complaint as sought to recover damages for breach of the subject insurance policy and for a judgment declaring that they are not obligated to indemnify the plaintiff for costs and the remaining amount of unpaid interest incurred in connection with the underlying action.

ORDERED that the order is reversed insofar as appealed from, on the law, with costs, those branches of the defendants' motion which were pursuant to CPLR 3211(a)(1) and (5), in effect, to dismiss so much of the complaint as sought to recover damages for breach of the subject insurance policy and for a judgment declaring that they are not obligated to indemnify the plaintiff for costs and the remaining amount of unpaid interest incurred in correction with the underlying action are granted, and the matter is remitted to the Supreme Court, Westchester County, for the entry of a judgment, inter alia, declaring that the defendants are not obligated to indemnify the plaintiff for costs and the remaining amount of unpaid interest incurred in connection with the underlying action.

In 1999, the defendants, Hospitals Insurance Company, Inc., and HANYS Insurance Company, Inc. (hereinafter together HIC), issued an Excess Professional Liability Insurance Policy (hereinafter the excess policy) to the plaintiff. The policy provided coverage in excess of an underlying professional liability policy, which had a policy limit of $1,000,000 per claimant and was issued by the nonparty Group Council Mutual Insurance Company (hereinafter Group Council). Subsequently, an action entitled Villanueva v Kahn was commenced against the plaintiff in the Supreme Court, Bronx County (hereinafter the underlying action). In or about March 2002, Group Council became insolvent, and the Superintendent of Insurance of the State of New York (hereinafter the Superintendent) was appointed as Group Council's liquidator.

In March 2006, the jury in the underlying action returned a verdict against the plaintiff in the principal sum of $1,100,000. After the Superintendent and HIC paid $1,000,000 and $100,000, respectively, the Supreme Court in the underlying action entered an amended judgment against the plaintiff for costs and the accumulated interest. Thereafter, HIC paid its proportional share of the interest, based on that portion of the underlying judgment which it had been obligated to pay under the excess policy. The plaintiff commenced this action against HIC, alleging, among other things, that HIC breached the excess policy by failing to indemnify him for costs and the remaining amount of unpaid interest. Prior to answering, HIC moved, inter alia, pursuant to CPLR 3211(a)(1) and (5), in effect, to dismiss so much of the complaint as sought to recover damages for breach of the subject insurance policy and for a judgment declaring that they are not obligated to indemnify the plaintiff for costs and the remaining amount of unpaid interest incurred in connection with the underlying action. The Supreme Court denied those branches of the motion. HIC appeals, and we reverse the order insofar as appealed from.

A party seeking relief pursuant to CPLR 3211(a)(1) " on the ground that its defense is founded upon documentary evidence has the burden of submitting documentary evidence that resolves all factual issues as a matter of law, and conclusively disposes of the plaintiff's claim'" (Flushing Sav. Bank, FSB v Siunykalimi, 94 AD3d 807, 808, quoting Mazur Bros. Realty, LLC v State of New York, 59 AD3d 401, 402; see Leon v Martinez, 84 NY2d 83, 88). Further, a motion pursuant to CPLR 3211(a)(5) may be granted where the documentary evidence establishes the defense of payment as a matter of law (see Stone v National Bank & Trust Co., 188 AD2d 865, 866-867).

Contrary to the plaintiff's contention, the documentary evidence submitted by HIC, including the insurance policies and a check payable to the plaintiff in the underlying action, representing HIC's proportional share of the costs and interest set forth in the amended judgment, conclusively disposed of the plaintiff's claim that HIC failed to satisfy its obligations under the excess policy. HIC was only responsible for prejudgment interest on that portion of the underlying judgment which it was obligated to pay under its policy (see generally Dingle v Prudential Prop. & Cas. Ins. Co., 85 NY2d 657; Fama v Metropolitan Prop. & Cas. Ins. Co., 242 AD2d 663; Home Indem. Co. v Reid, 216 AD2d 530, 531), and the excess policy conclusively established that HIC had no obligation to pay post-judgment interest or costs.

The parties' remaining contentions either need not be reached in light of our determination or are without merit.

Accordingly, the Supreme Court should have granted those branches of HIC's motion which were pursuant to CPLR 3211(a)(1) and (5), in effect, to dismiss so much of the complaint as sought to recover damages for breach of the subject insurance policy and for a judgment declaring that they are not obligated to indemnify the plaintiff for costs and the remaining amount of unpaid interest incurred in connection with the underlying action.

Since this is, in part, a declaratory judgment action, we remit the matter to the Supreme Court, Westchester County, for the entry of a judgment, inter alia, declaring that HIC is not obligated to indemnify the plaintiff for costs and the remaining amount of unpaid interest incurred in connection with the underlying action (see Lanza v Wagner, 11 NY2d 317, appeal dismissed 371 US 74, cert denied 371 US 901).

Smith v. Reeves

Appeals from an order of the Supreme Court, Onondaga County (John C. Cherundolo, A.J.), entered June 20, 2011. The order denied the motion of defendants Ronald B. Reeves, Jr. and Nola M. Reeves and the cross motion of defendants Pharmalogic Syracuse, LLC and Wendy Ladue for summary judgment dismissing the complaints.

Mackenzie Hughes LLP, Syracuse (Jonathan H. Bard of Counsel), for Defendants-Appellants Ronald B. Reeves, Jr. and Nola M. Reeves.
Law Office of Susan B. Owens, White Plains (Paul J. Catone of Counsel), for Defendants-Appellants Pharmalogic Syracuse, LLC and Wendy Ladue.
Greene & Reid, PLLC, Syracuse (Jeffrey G. Pomeroy of Counsel), for Plaintiff-Respondent.

It is hereby ORDERED that the order so appealed from is unanimously reversed on the law without costs, the motion and cross motion are granted and the complaints are dismissed.

Memorandum: Plaintiff commenced this action seeking damages for injuries she sustained when the vehicle in which she was a passenger, owned by defendant Nola M. Reeves and operated by defendant Ronald B. Reeves, Jr., collided at an intersection with a vehicle owned by defendant Pharmalogic Syracuse, LLC and operated by defendant Wendy Ladue. Defendants moved and cross-moved for summary judgment dismissing the respective complaints against them on the ground that plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102 (d), and Supreme Court denied the motion and cross motion. On appeal, plaintiff's brief limits the categories under which she claims a serious injury to the permanent consequential limitation of use and significant limitation of use categories of serious injury, and we therefore deem abandoned her prior claims that she sustained a serious injury under other categories as well (see Ciesinski v Town of Aurora, 202 AD2d 984, 984). We reverse.

Plaintiff alleges that she sustained a traumatic brain injury in the accident that has resulted in symptoms of postconcussion syndrome and a "chorea-like" movement disorder of her distal extremities. We note that we have long recognized the subjective nature of complaints associated with a claim of postconcussion syndrome (see Costa v Billingsley, 127 AD2d 990, 991). Defendants contend that the fact that plaintiff did not seek or receive any medical treatment for 10 months following the accident renders any finding on the issue of causation speculative. We agree (cf. Perl v Meher, 18 NY3d 208, 217-218).

We reject plaintiff's characterization of that void in medical treatment, with which the court agreed, as a "gap in treatment" (see generally Pommells v Perez, 4 NY3d 566, 574). Indeed, rather than a "gap in treatment," plaintiff received no treatment contemporaneous with the accident and the injuries she claims to have sustained therein (cf. Perl, 18 NY3d at 217-218). Further, the record establishes that none of the objective imaging tests and scans performed on plaintiff's head and brain has revealed a medically determined injury (see Alcombrack v Swarts, 49 AD3d 1170, 1172-1173). Defendants submitted the affirmation and report of the physician who examined plaintiff at defendants' request, who stated that the only objective test for delayed diagnosis of postconcussion syndrome is a Cerebral SPECT scan. It is undisputed that plaintiff's SPECT scan was within "normal limits." The physician further opined that, based upon the lack of medical treatment for 10 months following the accident, the negative SPECT scan and the lack of objective findings, plaintiff's neurological symptoms, including those described by some providers in the medical records as "post concussional Chorea," were not caused by the accident. In addition, defendants submitted the affirmation of another physician who examined plaintiff and concluded that, based upon the normal findings in the SPECT and MRI scans, "a post traumatic brain injury has been ruled out." Thus, defendants met their initial burden on the motion and cross motion by establishing the "absence of admissible [objective] evidence that plaintiff suffered a serious injury . . . when the accident occurred" (Perez v Rodriguez, 25 AD3d 506, 509).

The affirmation of plaintiff's treating physician, who examined plaintiff 10 months after the accident, is insufficient to raise an issue of fact because it fails to address the absence of objective findings on the CT, SPECT and MRI scans, relies upon subjective complaints of tenderness and headaches (see Alcombrack, 49 AD3d at 1171-1172), and does not contain an adequate assessment of how the alleged "chorea-like" injuries were related to the accident—particularly in light of the complete absence of any contemporaneous or objective findings on the various scans of plaintiff's brain (see generally Toure v Avis Rent A Car Sys., 98 NY2d 345, 350-351; Smith v Besanceney, 61 AD3d 1336, 1337-1338; Fitzmaurice v Chase, 288 AD2d 651, 653-654; Kristel v Mitchell, 270 AD2d 598, 599). Thus, the opinion of plaintiff's treating physician that her neurologic condition is causally related to the accident is speculative and conclusory and therefore inadequate to raise an issue of fact (see Franchini v Palmieri, 307 AD2d 1056, 1058, affd 1 NY3d 536; Clark v Basco, 83 AD3d 1136, 1138-1139). Similarly, the affirmation of another physician submitted by plaintiff fails to address the absence of objective findings on the SPECT, CT and MRI scans and does not contain an adequate assessment of how the alleged "chorea-like" injuries were related to the accident and is therefore insufficient to raise an issue of fact.

Christodoulides v First Unum Life Insurance Company

Appeal from a judgment of the Supreme Court, Erie County (Joseph R. Glownia, J.), entered November 17, 2011. The judgment awarded plaintiff money damages against defendant First Unum Life Insurance Company.

Phillips Lytle LLP, Buffalo (Paul K. Stecker of Counsel), for Defendant-Appellant.
Gross, Shuman, Brizdle & Gilfillan, P.C., Buffalo (Hugh C. Carlin of Counsel), for Plaintiff-Respondent.

It is hereby ORDERED that the judgment so appealed from is unanimously vacated and the order entered November 1, 2011 is modified on the law by denying that part of plaintiff's cross motion against defendant First Unum Life Insurance Company, and by vacating the declaration and the award of damages against that defendant, and as modified the order is affirmed without costs.

Memorandum: Plaintiff commenced this action seeking, inter alia, a declaration that he is entitled to lifetime benefits under three disability insurance policies issued to him by defendants. Defendant First Unum Life Insurance Company (First Unum) issued one of the disability insurance policies, and defendant Life Insurance Company of Boston and New York (BNY) issued the remaining two policies. The First Unum policy insures against "(1) loss or disability resulting directly and independently of all other causes from accidental bodily injury occurring during any term of this policy, being hereinafter referred to as such injury' or (2) loss or disability commencing during any term of this policy, resulting from sickness, hereinafter referred to as such sickness.' " Where the loss or disability results from an accident, the insured is entitled to lifetime benefits. Where the loss or disability results from sickness, however, the maximum benefit period is to age 65.

Under the BNY policies, the maximum benefit period similarly depends upon whether the disability is caused by "injury" or "sickness." Where, as here, the insured is between the ages of 63 and 64 at the onset of disability, the maximum benefit period is "lifetime" for disability caused by injury and 24 months for disability caused by sickness. The BNY policies define “injury" as "accidental bodily injury that . . . results directly and independently of all other causes in loss or disability." "Sickness" is defined as "a sickness or disease first diagnosed or treated while the Policy is in force and resulting in a loss or disability commencing while the Policy is in force."

In September 2006, plaintiff experienced pain in his right shoulder while lifting five-pound weights in his home as part of his regular exercise routine. A February 2007 MRI revealed a rotator cuff tear in plaintiff's right shoulder. As a result of the pain in his shoulder, plaintiff was unable to perform his duties as a physician, and he ceased working as a urologist in June 2007. Thereafter, plaintiff applied for benefits under the three disability policies issued by defendants. Defendants determined that plaintiff was totally disabled and paid him disability benefits under the policies for a period of 24 months. At that point, defendants ceased paying benefits on the ground that plaintiff's disability was the result of "sickness" as opposed to "injury" within the meaning of the policies. Defendants moved for summary judgment dismissing the complaint, and plaintiff cross-moved for summary judgment declaring that he is entitled to lifetime benefits under the three policies and awarding him damages in the amount of the benefits allegedly owed under the policies. Supreme Court denied defendants' motion, granted plaintiff's cross motion, and awarded judgment against First Unum in the amount of $18,172.50 (appeal No. 1) and against BNY in the amount of $174,670 (appeal No. 2). In both appeals, defendants contend that the court erred in denying their motion for summary judgment because plaintiff's alleged disability did not result from an "accidental bodily injury" resulting "directly and independently of all other causes," as required by the subject insurance policies.

Contrary to defendants' contention, we conclude that plaintiff established as a matter of law that his shoulder injury constitutes an "accidental bodily injury" within the meaning of the subject policies. "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). "Unless otherwise defined by the policy, words and phrases are to be understood in their plain, ordinary, and popularly understood sense, rather than in a forced or technical sense" (Hartford Ins. Co. of Midwest v Halt, 223 AD2d 204, 212, lv denied 89 NY2d 813; see Rocon Mfg. v Ferraro, 199 AD2d 999, 999). Thus, "[t]he meaning of the language used in the policy must be found in the common sense and common speech of the average person" (Stainless, Inc. v Employers Fire Ins. Co., 69 AD2d 27, 32-33, affd 49 NY2d 924; see Canfield v Peerless Ins. Co., 262 AD2d 934, 934, lv denied 94 NY2d 757). Of course, "[i]f the terms of a policy are ambiguous, . . . 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; Salimbene v Merchants Mut. Ins. Co., 217 AD2d 991, 992).
The subject insurance policies do not define the terms "accident" or "accidental."

"When interpreting the multifaceted term accident in an insurance policy, we must construe the word accident as would the ordinary [person] on the street or ordinary person when he [or she] purchases and pays for insurance . . . The term is not given a narrow, technical definition by the law. It is construed, rather, in accordance with its understanding by the average [person] . . . who, of course, relates it to the factual context in which it is used" (Michaels v City of Buffalo, 85 NY2d 754, 757 [internal quotation marks and emphasis omitted]; see Arthur A. Johnson Corp. v Indemnity Ins. Co. of N. Am., 7 NY2d 222, 227). Black's Law Dictionary defines "accident" as, inter alia, "[a]n unintended and unforeseen injurious occurrence" (id. at 16 [9th ed 2009]). In New York, unlike other jurisdictions, there is no distinction made between "accidental means and accidental results" (Burr v Commercial Travelers Mut. Acc. Assn. of Am., 295 NY 294, 302; see Miller v Continental Ins. Co., 40 NY2d 675, 678). Thus, the term "accident" in an insurance policy may "pertain not only to an unintentional or unexpected event which, if it occurs, will foreseeably bring on [injury], but [may pertain] equally to an intentional or expected event which unintentionally or unexpectedly has that result" (Miller, 40 NY2d at 678; see Salimbene, 217 AD2d at 993-994).

Here, there is no question that, although plaintiff was intentionally engaged in the exercise of lifting weights at the time of his injury, the resulting rotator cuff tear was unintended, unexpected, and unforeseen (see Black's Law Dictionary, accident; Miller, 40 NY2d at 677-678; see also Lachter v Insurance Co. of N. Am., 145 AD2d 540, 541). Defendants, however, contend that plaintiff's rotator cuff tear does not qualify as an accidental bodily injury because it occurred during the course of his "ordinary physical activity," i.e., his usual workout routine. We reject that contention. Defendants rely on Valente v Equitable Life Assur. Socy. of U. S. (120 AD2d 934, 935, lv denied 68 NY2d 608), in which this Court concluded that a heart attack suffered as a consequence of ordinary physical exertion does not constitute an accident within the meaning of the accidental death provision of an insurance policy on the life of the plaintiff's decedent. That reliance is misplaced, however. The decedent, a 41-year-old man with no history of heart disease, had a heart attack and died shortly after lifting and moving large cartons of coffee as part of his routine duties at the supermarket where he worked (id. at 934). The insurance policy in Valente, unlike in this case, specifically excluded coverage for "[l]osses resulting from, or caused directly or indirectly" by a "bodily . . . infirmity" (id. at 935). Although this Court noted that "the sudden heart attack suffered by plaintiff's decedent was neither expected nor foreseen by him," we reasoned that "the problem with that definition of accidental death is that it would include, contrary to the clear intent of the policy, any sudden death resulting from natural causes" (id. [emphasis added]).

We agree with defendants, however, that the court erred in granting plaintiff's cross motion for summary judgment because there is an issue of fact whether plaintiff's disability resulted from the September 2006 accident, "directly and independently of all other causes" (see Arbour v Commercial Life Ins. Co., 240 AD2d 1001, 1001-1003; see generally Lachter, 145 AD2d at 541). Defendants submitted, inter alia, plaintiff's deposition testimony in which he testified that he first experienced pain in his right shoulder in 2001, approximately five years before the subject accident. An X ray report of plaintiff's right shoulder from April 2001 found "[i]nferior spurring from the acromion," and an April 2001 MRI report noted a "[s]mall 5 or 6 mm anterior rotator cuff tear" in the same shoulder. The February 2007 MRI of plaintiff's right shoulder revealed a "[r]ight side supraspinatus tendon rotator cuff insertion tear about 1.5 cm gap present," and the report states that "[t]his is a changing pattern of progression compared to the 2001 baseline exam." Defendants also submitted a March 2007 report from an orthopedic surgeon who noted that plaintiff reported a "similar episode back in 2001," and that the 2001 MRI "revealed a partial-thickness tear of the rotator cuff." The orthopedic surgeon concluded that the April 2001 MRI films of plaintiff's right shoulder showed "some evidence of rotator cuff tendinosis." In addition, defendants submitted a 2007 BNY claim form, in which plaintiff described the onset of his symptoms as "years ago." Defendants further submitted the affirmation of another orthopedic surgeon who, upon reviewing plaintiff's medical records, opined that the rotator cuff tear diagnosed in 2007 "was the result of normal and expected progression of the smaller tear with which he was diagnosed in 2001, as a result [of] an ongoing degenerative process in the right shoulder." That orthopedic surgeon further opined that plaintiff's September 2006 onset of shoulder pain was "not associated with any specific acute new trauma or injury," but rather was caused by his "underlying degenerative condition of his right shoulder."

Defendants also submitted, however, plaintiff's deposition testimony to the effect that his 2001 right shoulder pain was gone in about 10 days or two weeks, that the pain was "not significant," and that it did not interfere with his ability to practice medicine. Plaintiff further testified that he experienced "[n]o symptoms" between 2001 and September 2006. The statement of the attending physician accompanying plaintiff's 2007 claim for benefits from BNY indicates that plaintiff's symptoms first occurred in September 2006, and that plaintiff had never had the same or similar condition. Finally, in opposition to defendants' motion and in support of his cross motion, plaintiff submitted an affidavit in which he averred that his 2001 shoulder episode resolved in 10 to 14 days, that he did not lose any time from work as a result of that episode, and that he had "no further discomfort or limitation with [his] right shoulder until September, 2006."

We therefore vacate the judgment in each appeal and modify the single order underlying the judgments by denying plaintiff's cross motion for summary judgment, and by vacating the declarations and the award of damages against each defendant.

 

Amery Realty Company, Inc. v.
Finger Lakes Fire And Casualty Company

Calendar Date: April 19, 2012
Before: Lahtinen, J.P., Spain, Malone Jr., Kavanagh and McCarthy, JJ.

Gustave J. DeTraglia Jr., Utica, for appellant.
Kynch & Whritenour, L.L.C., Syracuse (Peter W. Kynch of counsel), for respondent.

MEMORANDUM AND ORDER

Malone Jr., J.

Appeal from an order of the Supreme Court (Rumsey, J.), entered October 5, 2011 in Cortland County, which, among other things, granted defendant's cross motion for summary judgment dismissing the complaint.

Plaintiff owns a building in the City of Cortland, Cortland County that was damaged by a fire in June 2008. The second floor of the building contained apartments and the first floor contained two spaces for retail stores and a self-service laundromat, which was owned and operated by plaintiff and was open to the public. At the time of the fire, plaintiff maintained a policy of insurance with defendant consisting of two parts, each part providing actual cash value compensation; coverage A had a limit of $829,000 and covered damage to the building and coverage B had a limit of $50,000 and covered damage to plaintiff's business property contained within the building. Plaintiff then submitted a claim for both damage to the building and damage to the laundry equipment, alleging, among other things, a "replacement cost" loss of $258,145 for the laundry equipment. Defendant paid plaintiff $371,801.50 for damage to the building under coverage A and, after calculating the actual cash value of plaintiff's loss with respect to the laundry equipment to be $60,723, paid plaintiff $50,000 under coverage B, the maximum amount available under the policy.

Plaintiff then commenced this action seeking, as is relevant here, a declaration that the damage to the laundry equipment was insured under coverage A, as part of the building, rather than coverage B, as part of the business, and, as such, defendant was required to pay the remainder of its claim for damages to the equipment. Following joinder of issue, plaintiff moved for summary judgment and, in response, defendant cross-moved for summary judgment dismissing the complaint. Supreme Court denied plaintiff's motion and granted defendant's cross motion after finding that the laundry equipment was insured by only coverage B of the policy. Plaintiff appeals.

As is relevant here, coverage A of the policy at issue insured plaintiff's "building," including "permanent fixtures, machinery and equipment forming a part of or pertaining to the services of the building or its premises." Coverage B of the policy insured plaintiff's "business property," including "furniture and fixtures . . . machinery and equipment not servicing the building . . . [and] all other business property owned by [plaintiff] and used in [plaintiff's] business." In support of its position that the laundry equipment was insured under coverage A, plaintiff submitted the affidavit of its owner, Theresa Tutino, who opined that because the laundry equipment was hard-wired into the utilities systems of the building, it was part of the "structural integrity of the laundry walls" and, therefore, constituted fixtures forming a part of the building and pertained to the services of the building. In support of its position that the equipment was not insured under coverage A, defendant presented expert evidence that the laundry equipment neither formed a part of the building nor pertained to the services of the building.

Specifically, one of defendant's experts, a licensed independent insurance adjuster, averred that he had inspected the damage to the contents of the building and that, in his opinion, even though the laundry equipment was hard-wired into the utilities of the building, that fact did not render the equipment either part of the building or pertaining to the services of the building. The remainder of defendant's evidence supports the finding that the laundry equipment was property used by plaintiff solely in the business of the laundromat and was not used by plaintiff in its capacity as a landlord to service the second floor apartments. Inasmuch as plaintiff's self-serving and conclusory statements to the contrary are insufficient to defeat defendant's cross motion (see Charter One Bank, FSB v Leone, 45 AD3d 958, 959 [2007]; Rosen Auto Leasing, Inc. v Jacobs, 9 AD3d 798, 800 [2004]), we agree with Supreme Court that defendant was entitled to summary judgment dismissing the complaint.

Finally, we have considered plaintiff's argument that certain language of the insurance policy is ambiguous and find it to be without merit.
Lahtinen, J.P., Spain, Kavanagh and McCarthy, JJ., concur.
ORDERED that the order is affirmed, with costs.

 

Alexander v. New York Central Mutual

Appeal from a judgment (denominated order) of the Supreme Court, Monroe County (David Michael Barry, J.), entered March 25, 2011. The judgment granted the motion of defendant for summary judgment.

Michael J. Kieffer, Rochester, for Plaintiff-Appellant.
Rupp, Baase, Pfalzgraf, Cunningham & Coppola LLC, Buffalo (Timothy P. Barna of Counsel), for Defendant-Respondent.

It is hereby ORDERED that the judgment so appealed from is unanimously modified on the law by vacating the provision dismissing the complaint and granting judgment in favor of defendant as follows: It is ADJUDGED and DECLARED that defendant is not obligated to indemnify plaintiff for any property theft losses arising from the burglary of plaintiff's residence on December 19, 2008, and as modified the judgment is affirmed without costs.

Memorandum: Plaintiff commenced this action seeking a judgment declaring, inter alia, that defendant is obligated to indemnify plaintiff for the property theft losses resulting from the burglary of his home. Supreme Court properly resolved the merits of the action in favor of defendant, but erred to the extent that it granted defendant's motion for summary judgment dismissing the complaint rather than declaring the rights of the parties (see Maurizzio v Lumbermens Mut. Cas. Co., 73 NY2d 951, 954), and we therefore modify the judgment accordingly. "When an insurer gives its insured written notice of its desire that proof of loss under a policy of . . . insurance be furnished and provides a suitable form for such proof, failure of the insured to file proof of loss within 60 days after receipt of such notice, or within any longer period specified in the notice, is an absolute defense to an action on the policy, absent waiver of the requirement by the insurer or conduct on its part estopping its assertion of the defense" (Igbara Realty Corp. v New York Prop. Ins. Underwriting Assn., 63 NY2d 201, 209-210; see Insurance Law § 3407 [a]; Aryeh v Westchester Fire Ins. Co., 138 AD2d 337, 338, lv denied 73 NY2d 703). It is undisputed that defendant demanded that plaintiff submit a sworn proof of loss and provided the necessary form, and that plaintiff failed to comply with the demand. Defendant therefore has an absolute defense to the action on the policy (see Anthony Marino Constr. Corp. v INA Underwriters Ins. Co., 69 NY2d 798, 800; Stopani v Allegany Co-op Ins. Co., 83 AD3d 1446, 1447; Bailey v Charter Oak Fire Ins. Co., 273 AD2d 691, 692).

Contrary to plaintiff's contention, his unsworn statement of loss and receipts for the stolen items were not sufficient to comply with the demand (see Maleh v New York Prop. Ins. Underwriting Assn., 64 NY2d 613, 614; Darvick v General Acc. Ins. Co., 303 AD2d 540; Aryeh, 138 AD2d at 338). The policy required that plaintiff provide defendant, "within 60 days after [its] request, your signed, sworn proof of loss," and thus the "unsworn statement[] of loss do[es] not satisfy the contractual or statutory requirement to serve defendant[] with sworn proofs of loss" (Bailey, 273 AD2d at 693).

RLI Insurance Company v. Smiedala

Appeal from a judgment (denominated order) of the Supreme Court, Niagara County (Frank Caruso, J.), entered May 23, 2011. The judgment, insofar as appealed from, denied the motion of defendant Regional Integrated Logistics, Inc. for a declaration.

Sliwa & Lane, Buffalo (Kevin A. Lane of Counsel), for Defendant-Appellant.
Hurwitz & Fine, P.C., Buffalo (Dan D. Kohane of Counsel), for Plaintiff-Respondent.

It is hereby ORDERED that the judgment insofar as appealed from is unanimously reversed on the law without costs, the motion of defendant-appellant is granted and judgment is granted in favor of defendant-appellant as follows: It is ADJUDGED and DECLARED that plaintiff is obligated to defend and indemnify defendant-appellant for the obligations it assumed pursuant to its indemnification agreement with defendant Michael J. Hale, and

It is further ADJUDGED and DECLARED that a hearing to determine the legal services that should be apportioned between defendant-appellant and defendant Michael J. Hale is no longer necessary.

Memorandum: Plaintiff commenced this action seeking judgment declaring that it is not obligated to defend or indemnify defendant Michael J. Hale and defendant-appellant, Regional Integrated Logistics, Inc. (Regional), in the underlying personal injury action and related third-party action under the commercial automobile insurance policy issued by plaintiff to Regional. Defendant Leslie Smiedala commenced the underlying personal injury action seeking damages for injuries he allegedly sustained when the vehicle in which he was a passenger collided with a vehicle driven by Hale, which Hale had leased from Audi Financial Services and VW Leasing, Ltd. (Audi/VW), defendants-third-party plaintiffs in the underlying action. Hale, an employee of Regional, was driving to the bank at the time of the accident in order to make a deposit for Regional. Audi/VW commenced the third-party action against Regional seeking contribution and/or indemnification for any liability arising from Hale's negligence under the doctrine of respondeat superior. 

Hale and Regional moved for summary judgment declaring that plaintiff must defend and indemnify them under the policy. Before that motion was decided, Regional and Hale entered into an indemnification agreement (R-H Agreement) pursuant to which Regional agreed to indemnify and hold harmless Hale "from and against any and all claims, damages, losses, expenses, liability and exposure, including, but not limited to, counsel fees, costs and disbursements, imposed upon or awarded against Hale as a result of and/or in connection with" the motor vehicle accident. Although Supreme Court denied the initial motion of Hale and Regional, the court thereafter granted their motion for leave to reargue and, upon reargument, granted the initial motion and issued the requested declaration. On a prior appeal, we concluded that the court should have granted the declaration only in favor of Regional but not Hale. We thus modified the judgment accordingly (RLI Ins. Co. v Smiedala, 71 AD3d 1553 [first appeal]).

While the first appeal was pending, Hale and Regional moved for summary judgment declaring that plaintiff was obligated to pay the costs and legal fees incurred by them in defending the declaratory judgment action commenced by plaintiff. The court granted that motion but, on appeal, we modified the judgment by denying that part of the motion with respect to Hale, based on our earlier determination that plaintiff was not obligated to defend or indemnify Hale in the underlying personal injury action (RLI Ins. Co. v Smiedala, 77 AD3d 1293 [second appeal]). We also remitted the matter to Supreme Court "to determine the amount of reasonable attorneys' fees to which Regional is entitled in the declaratory judgment action following a hearing, if necessary," on the ground that the same attorney represented Hale and Regional in the declaratory judgment action, and it was not possible on the record before us to determine that part of the attorneys' fees attributable to each (id. at 1295).

Following our decision in the second appeal, Regional moved for summary judgment seeking a declaration that plaintiff was "obligated to provide coverage to [Hale] for the contractual indemnification agreement that [Regional] entered into with [Hale]." Regional also sought a declaration that a hearing was no longer needed to determine the amount of attorneys' fees that should be attributed to Hale and Regional. Regional contended in support of the motion, as it does on this appeal, that plaintiff was "obligated to provide coverage for the [R-H] [A]greement that Regional entered into with [Hale]," including coverage for Regional's obligation "to pay the counsel fees of [Hale]." We conclude that the court erred in denying Regional's motion.

We agree with Regional that our decision in the first appeal does not preclude us from deciding the merits of the issues raised on this appeal inasmuch as our earlier decision neither addressed nor resolved the contention that plaintiff is obligated to defend and indemnify Regional for liabilities it assumed under the R-H Agreement (see New York State Thruway Auth. v KTA-Tator Eng'g Servs., P.C., 78 AD3d 1566, 1567; Matter of El-Roh Realty Corp., 74 AD3d 1796, 1798).
We further agree with Regional that the insurance policy issued by plaintiff to Regional would cover the liability assumed by Regional but for a policy exclusion providing that the insurance does not apply to "[l]iability assumed under any contract or agreement." Nevertheless, the policy further provides that there is an exception to that exclusion, which states that the exclusion does not apply to liability "[a]ssumed in a contract or agreement that is an insured contract' provided the bodily injury' or property damage' occurs subsequent to the execution of the contract or agreement" (emphasis added).

We reject plaintiff's contention that the liability coverage section in the policy is not triggered by the R-H Agreement. "It is well settled that a contract must be read as a whole to give effect and meaning to every term . . . Indeed, [a] contract should be interpreted in a way [that] reconciles all [of] its provisions, if possible' " (New York State Thruway Auth., 78 AD3d at 1567; see El-Roh Realty Corp., 74 AD3d at 1799). If the policy had not been intended to cover indemnification agreements such as the one at issue herein, there would be no need to include an express provision excluding from coverage indemnification agreements that were entered into after the bodily injury or property damage occurred. Therefore, we must interpret the policy in such a way that indemnification agreements are encompassed by the coverage section. Regional does not dispute the fact that the liability it assumed in the R-H Agreement would normally be excluded from coverage because the R-H Agreement was executed after the bodily injury or property damage occurred. Regional likewise does not dispute that it violated a provision of the policy by assuming an obligation without plaintiff's consent. Regional correctly contends, however, that plaintiff is precluded from relying on the exclusion or the policy condition violated by Regional because plaintiff did not timely disclaim coverage or deny liability.

Insurance Law § 3420 (d) (2) requires an insurer who is seeking to disclaim liability or to deny coverage to "give written notice as soon as is reasonably possible of such disclaimer of liability or denial of coverage to the insured." The timely disclaimer requirement applies whether the insurer is relying on a policy exclusion (see HBE Corp. v Sirius Am. Ins. Co., 63 AD3d 1509, 1510) or the violation of a policy condition (see Oster v Aetna Cas. & Sur. Co., 283 AD2d 409, 410), and "[t]he timeliness of an insurer's disclaimer [or denial] is measured from the point in time when the insurer first learns of the grounds for disclaimer of liability or denial of coverage" (Matter of New York Cent. Mut. Fire Ins. Co. v Steiert, 68 AD3d 1120, 1121; see Continental Cas. Co. v Stradford, 11 NY3d 443, 449; Matter of Allcity Ins. Co. [Jimenez], 78 NY2d 1054, 1056, rearg denied 79 NY2d 823; George Campbell Painting v National Union Fire Ins. Co. of Pittsburgh, PA, 92 AD3d 104, 106).

Regional established that plaintiff was notified as early as April 2010 and on multiple occasions thereafter that Regional was seeking coverage for the obligations it assumed under the R-H Agreement. It is undisputed that plaintiff never formally disclaimed liability or denied coverage, although we agree with plaintiff that its opposition to the instant motion, which is dated December 10, 2010, may be deemed such a disclaimer or denial (see Allcity Ins. Co., 78 NY2d at 1056; Matter of New York Cent. Mut. Fire Ins. Co. v Gonzalez, 34 AD3d 816, 816). We conclude, however, that plaintiff's disclaimer and denial were untimely as a matter of law (see e.g. First Fin. Ins. Co. v Jetco Contr. Corp., 1 NY3d 64, 70; Hartford Ins. Co. v County of Nassau, 46 NY2d 1028, 1030, rearg denied 47 NY2d 951), and thus plaintiff is obligated to defend and indemnify Regional for the obligations Regional assumed in the R-H Agreement. Based on our determination, we agree with Regional that a hearing is no longer required to apportion the legal services associated with the defense and indemnification of Regional and Hale.

We note that we have not addressed Regional's contention that a potential third-party action by plaintiff against Hale would violate the antisubrogation rule. That contention is not preserved for our review inasmuch as Regional did not raise that contention in the motion underlying this appeal. In view of our determination, we need not address Regional's remaining contention.

Miraglia v. Essex Insurance Company

Simonson Hess Leibowitz & Goodman, P.C. (Pollack, Pollack, Isaac & De Cicco, New York, N.Y. [Edward S. Goodman and Brian J. Isaac], of counsel), for appellant.
Hurwitz & Fine, Buffalo, N.Y. (Dan D. Kohane and Katherine Fijal of counsel), for respondent.

DECISION & ORDER
In a turnover proceeding pursuant to CPLR 5225(b), the petitioner appeals from an order of the Supreme Court, Orange County (Bartlett, J.), dated October 28, 2010, which denied the petition to direct the respondent to pay over funds received pursuant to an indemnification agreement between the judgment debtor and a third party.

ORDERED that the order is affirmed, with costs.

A judgment creditor's ability to satisfy a judgment in his or her favor from assets that are not in the possession of the judgment debtor is governed by CPLR 5225. That statute "provides for an expedited special proceeding by a judgment creditor to recover money or other personal property' belonging to a judgment debtor against a person in possession or custody of money or other personal property in which the judgment debtor has an interest' in order to satisfy a judgment" (Matter of Signature Bank v HSBC Bank USA, N.A., 67 AD3d 917, 918 [internal citation omitted], quoting CPLR 5225[b]). According to the express language of CPLR 5225(b), a judgment creditor must first establish that the judgment debtor has an interest in the property held by the third party, and then must demonstrate either that the judgment debtor is entitled to possess the property or that the judgment creditor has a right to the property superior to that of the party who possesses it (see Beauvais v Allegiance Securities, Inc., 942 F2d 838, 840-841).

Contrary to the petitioner's contention, the Supreme Court properly denied the instant turnover petition. Pursuant to the terms of an insurance agreement between the judgment debtor, H & L Holding Corp. (hereinafter H & L), and the respondent, Essex Insurance Company (hereinafter Essex), any right of indemnification that H & L possessed was "transferred" to Essex once Essex paid out the policy limits on behalf of H & L to the petitioner, and H & L no longer possessed an interest in that right. The obligation of Essex ran only to H & L as its insured, and only to the extent of the policy limits (see Winkelmann v Excelsior Ins. Co., 85 NY2d 577, 583). Accordingly, the petitioner failed to satisfy the requirements of CPLR 5225(b) and, under the circumstances presented, he cannot recover additional funds from Essex or compel Essex to seek additional funds from other third parties. Rather, his recourse is to proceed against the remaining judgment debtor.

Admiral Ins. Co. v. American Empire Surp. Lines Ins. Co.

Coughlin Duffy LLP, New York (Justin N. Kinney of counsel), for appellant-respondent.
L'Abbate, Balkan, Colavita & Contini, L.L.P., Garden City (Richard P. Byrne of counsel), for respondent-appellant.
Keidel, Weldon & Cunningham LLP, White Plains (Debra M. Krebs of counsel), for respondent.

Order, Supreme Court, New York County (Edward H. Lehner, J.), entered on or about December 29, 2009, which, to the extent appealed from as limited by the briefs, granted the motion by defendant Scottsdale Insurance Company (Scottsdale) for summary judgment declaring that Scottsdale is not obligated to reimburse plaintiff Admiral Insurance Company (Admiral) for any portion of Admiral's contribution to the settlement of the underlying action, granted the cross motion of defendant American Empire Surplus Lines Insurance Company (AEI) to the extent of declaring that AEI is not obligated to reimburse Admiral for any portion of Admiral's contribution to the settlement of the underlying action, implicitly denied AEI's cross motion to the extent it sought summary judgment declaring it entitled to be reimbursed by Admiral for $433,333 of AEI's contribution to the settlement of the underlying action, and denied Admiral's cross motion for summary judgment declaring it entitled to be reimbursed by AEI for $566,667 of Admiral's contribution to the settlement of the underlying action and to be reimbursed by Scottsdale for $300,000 of Admiral's contribution to the settlement of the underlying action, unanimously modified, on the law, to deny Scottsdale's motion and AEI's cross motion in their entirety and to grant Admiral summary judgment declaring that Admiral's insured, Cross Country Contracting, LLC (Cross Country), was entitled to coverage with respect to the underlying action as an additional insured under the primary policy issued by AEI to B & R Rebar Consultants, Inc. (B & R) and under the excess policy issued by Scottsdale to B & R, and further declaring that Admiral is entitled to reimbursement for its contribution to the settlement of the underlying action in the amount of $566,667, plus interest, from AEI, and in the amount of $150,000, plus interest, from Scottsdale, and otherwise affirmed, with costs to Admiral against AEI and Scottsdale, each of which shall pay half of the costs.

Nonparty Cross Country, the concrete superstructure contractor on a Manhattan construction project, subcontracted the steel reinforcing work to nonparty B & R. On October 19, 2005, a B & R employee named Li Xiong Yang was working on the project, following the B & R foreman's instructions to straighten rebar dowel rods extending from the concrete flooring to enable the attachment of pre-formed concrete to the rods to create a wall. While engaged in this work for B & R, Yang was struck by falling plywood, sustaining serious injuries. Yang and his wife subsequently commenced the underlying personal injury action against Cross Country and others in Supreme Court, Kings County. B & R was not brought into the underlying action as a third-party defendant or otherwise. The underlying action resulted in a jury verdict holding Cross Country solely liable for Yang's injuries. During the damages phase of the trial, the primary insurer of both B & R and Cross Country, defendant AEI, and the excess insurer of Cross Country, plaintiff Admiral, settled the case for $2.3 million. AEI contributed $1,433,333 to the settlement, and Admiral, while reserving all of its rights, contributed the remaining $866,667.

After the settlement, Admiral commenced this action against AEI and defendant Scottsdale, B & R's excess insurer, for declaratory relief and equitable contribution among co-insurers. Admiral argues that AEI should have contributed to the settlement the full $2 million of aggregate primary coverage under both the policy AEI issued to Cross Country and the policy AEI issued to B & R, under which Cross Country is an additional insured [FN1]. Admiral further argues that, because Cross Country was an additional insured under the excess policy Scottsdale issued to B & R, Scottsdale should bear all or half (depending on the effect of the relevant policies' "Other Insurance" clauses) of the $300,000 of the settlement remaining after exhaustion of AEI's primary coverage. Scottsdale moved for summary judgment declaring that it had no obligation to contribute to the settlement, Admiral cross-moved for summary judgment on its claims, and AEI cross-moved for summary judgment requiring Admiral to reimburse AEI for the $433,333 it contributed to the settlement in excess of the applicable coverage limit of the policy it issued to Cross Country. The motion court granted Scottsdale's motion, denied Admiral's cross motion, and granted AEI's cross motion to the extent of ruling that AEI did not owe Admiral any reimbursement, although the court did not grant AEI's request for reimbursement. We modify to deny Scottsdale's motion and AEI's cross motion in their entirety, and to grant

Admiral's motion to the extent of holding it entitled to reimbursement of $566,667 from AEI and to reimbursement of $150,000 from Scottsdale.[FN2]
It is undisputed that Cross Country is an additional insured under the primary policy and excess policy issued to B & R by AEI and Scottsdale, respectively. In this regard, the primary policy AEI issued to B & R provides in pertinent part that it "include[s] as an insured the person or organization shown in the Schedule as an insured but only with respect to liability arising out of your [i.e., B & R's] operations[.]"[FN3] The primary issue on this appeal is whether Cross Country's liability for the injuries at issue in the underlying action constitutes "liability arising out of [B & R's] operations" under the B & R policies. Although it is undisputed that the plaintiff in the underlying action was injured while performing his duties as an employee of B & R in the course of the work for which B & R was hired by Cross Country, AEI and Scottsdale argue that Cross Country's liability did not "aris[e] out of [B & R's] operations" because B & R (which was not a party to the underlying action) was not found to be responsible for those injuries in any way, and because there is no evidence that those injuries resulted from any fault on B & R's part.

In construing a similar provision for additional insured coverage, the Court of Appeals specifically rejected the argument made by AEI and Scottsdale. In Regal Constr. Corp. v National Union Fire Ins. Co. of Pittsburgh, PA (15 NY3d 34 [2010]), a construction manager (URS) for a project was sued by an employee of the prime construction contractor (Regal), who was injured while engaged in his duties at the project. URS sought coverage as an additional insured under Regal's policy, which afforded such coverage to URS "only with respect to liability arising out of [Regal's] ongoing operations" (id. at 38 [internal quotation marks omitted]). The Court of Appeals held that URS was entitled to coverage under this provision, explaining:

"We have interpreted the phrase arising out of' in an additional insured clause to mean originating from, incident to, or having connection with.' It requires only that there be some causal relationship between the injury and the risk for which coverage is provided.

"Here, Regal's employee, LeClair, was walking through the work site to indicate additional walls that needed to be demolished by Regal's subcontractor when he slipped on a recently-painted metal joist. Although Regal and [its insurer] contend that LeClair's injury did not arise from Regal's demolition and renovation operations performed for URS, but that it was URS employees who painted the joist on which LeClair slipped, the focus of the inquiry is not on the precise cause of the accident but the general nature of the operation in the course of which the injury was sustained. Accordingly, the injury "ar[ose] out of' Regal's operations notwithstanding URS's alleged negligence, and fell within the scope of the additional insured clause of the insurance policy" (id. at 38 [internal citations and some internal quotation marks omitted).

In Regal, the Court of Appeals distinguished its earlier decision in Worth Constr. Co., Inc. v Admiral Ins. Co. (10 NY3d 411 [2008]) on the ground that the general contractor in Worth was denied additional insured coverage under a policy issued to one of its subcontractors (Pacific) because Pacific was neither the employer of the injured worker nor responsible for the accident, which occurred while Pacific was not even present at the job site (see 15 NY3d at 38-39)[FN4] . The Court of Appeals elaborated in Regal:

"Here, there was a connection between the accident and Regal's work, as the injury was sustained by Regal's own employee while he supervised and gave instructions to a subcontractor regarding work to be performed. That the underlying complaint alleges negligence on the part of URS and not Regal is of no consequence, as URS's potential liability for LeClair's injury ar[ose] out of' Regal's operation and, thus, URS is entitled to a defense and indemnification according to the terms of the CGL policy" (id. at 39 [emphasis added]).

Less than a month after Regal was issued, we followed it, holding: "Where . . . the loss involves an employee of the named insured, who is injured while performing the named insured's work under the subcontract, there is a sufficient connection to trigger the additional insured arising out of' operations' endorsement and fault is immaterial to this determination" (Hunter Roberts Constr. Group, LLC v Arch Ins. Co., 75 AD3d 404, 408 [2010]). More recently, we held that a clause covering "liability caused by [the subcontractor's] ongoing operations performed for" the additional insured — language arguably narrower than the "arising out of" language at issue in Regal, Hunter Roberts and the instant case — also covered a "loss involv[ing] an employee of . . . the named insured, who was injured while performing the named insured's work under the
subcontract" (W & W Glass Sys., Inc. v Admiral Ins. Co., 91 AD3d 530, 531 [2012]).[FN5]

Cross Country's coverage as an additional insured under the policies issued to B & R having been established, it follows that AEI should have contributed to the $2.3 million settlement (to which AEI was a party) $2 million, the sum of the applicable limits under the primary policies AEI issued to B & R and Cross Country. Hence, Admiral, as an excess insurer, is entitled to equitable contribution from AEI in the amount of the difference between $2 million and $1,433,333 (the amount AEI actually contributed), which is $566,667. In addition, Admiral is entitled to recover half of the remaining $300,000 of its contribution to the settlement from Scottsdale pursuant to Cross Country's additional insured coverage under the excess policy Scottsdale issued to B & R. Contrary to Admiral's argument, the substantially identical "Other Insurance" clauses of the Admiral and Scottsdale policies cancel each other out, with the result that the two excess insurers must share ratably the cost of the settlement in excess of the available primary coverage.[FN6]

Scottsdale makes various arguments in support of its contention that, even if Cross Country were its additional insured for purposes of this loss, it should not be required to reimburse Admiral for any portion of the settlement. None of these arguments has merit. In particular, because Admiral is entitled to equitable contribution in its own right, without regard to being subrogated to any rights of its insured, the "voluntary payments" clause of the Scottsdale policy does not bar Admiral's recovery. Nor was Admiral's participation in the settlement voluntary so as to preclude it from seeking contribution. The loss plainly fell within the scope of Admiral's coverage of Cross Country, and Admiral was obligated to indemnify Cross Country for the portion of the settlement amount for which it now seeks reimbursement from Scottsdale, i.e., the amount in excess of AEI's primary coverage. In addition, the existing record, on which there are no material factual disputes, establishes as a matter of law that the settlement of the underlying action was reasonable.

Footnotes

Footnote 1:The primary coverage policies AEI issued to B & R and Cross Country both have limits of $1 million per occurrence.

Footnote 2:Admiral's appellate brief states that the principal amount it seeks to recover from AEI is "$567,667," which appears to be a typographical error.

Footnote 3: B & R's Scottsdale policy provides that "[a]ny additional insured under policy of underlying insurance' [including the AEI policy] will automatically be an insured under this insurance."

Footnote 4: Bovis Lend Lease LMB Inc. v Garito Contr., Inc. (65 AD3d 872 [2009]), on which AEI and Scottsdale also rely, is similarly distinguishable, in that there, as in Worth, the injured worker was not an employee of the named insured (see id. at 877 [the injured worker was "a union carpenter working for another subcontractor," i.e., not the named insured] [Andrias, J.P., dissenting]).

Footnote 5: Notably, Scottsdale's appellate brief does not even cite Regal or Hunter Roberts. AEI's attempt to distinguish Regal and Hunter Roberts on the ground that those cases involved the duty to defend (which is not at issue here) is without merit. In each of those decisions, the holding that the additional insured was covered in the underlying action was based on allegations that the plaintiff therein had been injured while doing his job as an employee of the named insured on work the named insured was performing as a contractor of the additional insured. The same is true here; indeed, the matter is not even in dispute. Given that the liability at issue thus arises from the named insured's (B & R's) operations on behalf of the additional insured (Cross Country), it is immaterial both that there was apparently no fault on the part of the former and that there was (as determined in the underlying action) fault on the part of the latter.

Footnote 6: Each of the Admiral and Scottsdale policies has a limit of $10 million per occurrence.

Larrabee v. Bradshaw

Calendar Date: April 16, 2012
Before: Peters, P.J., Mercure, Stein, McCarthy and Garry, JJ.

Grasso, Rodriguez & Grasso, Schenectady (Christopher R. Burke of counsel), for appellant.
Friedman, Hirschen & Miller, L.L.P., Albany (Carolyn B. George of counsel), for respondents.

MEMORANDUM AND ORDER

tein, J.

Appeal from an order of the Supreme Court (Kramer, J.), entered July 12, 2011 in Schenectady County, which, among other things, granted defendants' motion for summary judgment dismissing the complaint.

Plaintiff commenced this action to recover damages for a variety of injuries to her neck, back and arms that she allegedly sustained as a result of a motor vehicle accident in November 2008. Defendants moved for summary judgment dismissing the complaint on the basis that plaintiff did not suffer a causally related serious injury within the meaning of Insurance Law § 5102 (d) and plaintiff cross-moved for partial summary judgment on the issue of liability. Plaintiff now appeals from Supreme Court's order granting defendants' motion and dismissing the complaint.[FN1]

"On a motion for summary judgment dismissing a complaint that alleges a serious injury under Insurance Law § 5102 (d), the defendant bears the initial 'burden of establishing by competent medical evidence that plaintiff did not sustain a serious injury caused by the accident'" (Howard v Espinosa, 70 AD3d 1091, 1091-1092 [2010], quoting Haddadnia v Saville, 29 AD3d 1211, 1211 [2006]; see Toure v Avis Rent A Car Sys., 98 NY2d 345, 352 [2002]). Here, plaintiff claims that her injuries constituted a permanent loss of use of her cervical spine, permanent consequential limitation of use of her neck and cervical spine, significant limitation of use of her neck and cervical spine and an injury or impairment that prevented her from performing substantially all of her usual and customary daily activities for at least 90 out of the 180 days following the accident.

In support of their motion, defendants submitted plaintiff's deposition testimony, in which she testified that she worked as a waitress from 1997 to 2004 and had previously worked as a waitress, housekeeper and maid. Although plaintiff testified that she was not aware of any problems with her neck and shoulders before the accident, she was previously determined to be disabled due to arthritis in her spine, and had retired from employment and was receiving Social Security benefits [FN2]. She also testified that she developed carpal tunnel syndrome from waitressing, which had subsided but became symptomatic again after the accident.

Approximately six days after the collision, plaintiff went to chiropractor Michael Adamec for treatment for pain in her spine, numbness in her hands and aching in her arms. She continues to have neck pain when she turns her head quickly and headaches brought on by muscle spasms in her neck. Her treatment with Adamec alleviated some of the pain in her neck, and she treats herself at home with aspirin and heating pads. She has not received any treatment for her carpal tunnel symptoms since the accident. Plaintiff further testified regarding her daily activities prior to the accident and claimed that she "[cannot] do anything for [her]self at all" and has had difficulty sleeping, among other things, since the accident. However, defendants point to the absence of any objective medical evidence in Adamec's records of plaintiff's treatment to support plaintiff's claim that she was medically curtailed from engaging in her usual and customary activities for 90 out of 180 days following the accident.

Defendants also submitted an independent medical evaluation report prepared by Shashi Patel, an orthopedic surgeon. Patel examined plaintiff in April 2010 and reviewed, among other things, plaintiff's emergency room record, X rays taken of her cervical spine on January 22, 2009 and the report relating thereto, plaintiff's bill of particulars, her response to defendants' discovery demands and her deposition testimony. Based on the foregoing, Patel diagnosed plaintiff with resolved cervical strain and right shoulder sprain. He further opined that plaintiff has mildly restricted range of motion of her spine that is not unusual for a person of her age, as well as some minimal restriction of range of motion of her shoulders, which should not interfere with her daily activities. Patel attributed the numbness in plaintiff's hands to the carpal tunnel syndrome.

We agree with Supreme Court's determination that the foregoing evidence was sufficient to demonstrate defendants' prima facie entitlement to judgment dismissing plaintiff's complaint based upon the lack of a causally related serious injury (see Toure v Avis Rent A Car Sys., 98 NY2d at 351-352; MacMillan v Cleveland, 82 AD3d 1388, 1388 [2011]; Parks v Miclette, 41 AD3d 1107, 1108-1109 [2007]) by showing that plaintiff's injuries were too "mild, minor or slight" to rise to the level of serious injury (Pugh v DeSantis, 37 AD3d 1026, 1029 [2007], quoting Palmer v Moulton, 16 AD3d 933, 935 [2005] [internal quotation marks and citations omitted]; see Toure v Avis Rent A Car Sys., 98 NY2d at 350-351), were not permanent and/or were not causally related to the accident. In addition, we agree with defendants' contention that plaintiff's medical records are bereft of any indication that the alleged limitations on plaintiff's activities were medically indicated for 90 out of 180 days immediately following the accident [FN3]. Thus, the burden shifted to plaintiff to "'set forth competent medical evidence based upon objective medical findings and tests to support [the] claim of serious injury and to connect the condition to the accident'" (Tracy v Tracy, 69 AD3d 1218, 1219 [2010], quoting Blanchard v Wilcox, 283 AD2d 821, 822 [2001]; accord Clark v Basco, 83 AD3d 1136, 1138 [2011]; MacMillan v Cleveland, 82 AD3d at 1388).

In our view, plaintiff failed to meet this burden. In opposition to defendants' motion, plaintiff submitted her own affidavit, in which she averred that, prior to the collision, she had no problems with her neck, arms or back and that her carpal tunnel syndrome and arthritis were both asymptomatic. She also reaffirmed that she was unable to perform her customary daily tasks. In addition, plaintiff submitted an affidavit from Adamec setting forth, among other things, objective findings of limited range of motion based upon his initial examination of plaintiff in November 2008 [FN4]. Adamec diagnosed plaintiff with cervical radiculopathy and cervical and thoracic strain/sprain and opined that plaintiff's cervical pain was causally related to the motor vehicle accident. Adamec also opined that plaintiff's carpal tunnel syndrome was aggravated by the accident and that plaintiff's use of her arms and hands has been significantly limited.

This evidence is insufficient to raise a question of fact as to plaintiff's claims under the permanent consequential limitation or significant limitation of use categories because no test results or other objective medical evidence was provided beyond October 2009. Thus, there was a complete absence of "objective, quantitative evidence with respect to diminished range of motion or a qualitative assessment comparing plaintiff's present limitations to the normal function, purpose and use of the affected body organ, member, function or system" (Pugh v DeSantis, 37 AD3d at 1029 [internal quotation marks and citations omitted]). Likewise, Adamec offers no objective evidence to substantiate his opinion that plaintiff sustained a permanent loss of use and function of her cervical spine and both arms and hands (compare Byong Yol Yi v Canela, 70 AD3d 584, 585 [2010]).

Plaintiff also failed to raise a triable issue of fact as to whether she suffered a serious injury under the 90/180-day category. Even assuming that plaintiff's self-serving testimony and affidavit sufficiently allege that she was unable to perform substantially all of her regular activities for the required period of time, such conclusion is not supported by Adamec's records (see Howard v Espinosa, 70 AD3d at 1094). Nor is Adamec's conclusory affidavit, which merely parrots the statutory language, sufficient to raise a triable issue of fact (see generally Oberly v Bangs Ambulance, 271 AD2d 135, 139 [2000], affd 96 NY2d 295 [2001]).

We have examined plaintiff's remaining contentions and find them to be without merit.

Peters, P.J., Mercure, McCarthy and Garry, JJ., concur.
ORDERED that the order is affirmed, with costs.
Footnotes


Footnote 1:As noted by Supreme Court, this determination rendered plaintiff's cross motion moot.

Footnote 2:As noted by Supreme Court, while plaintiff claimed that her disability was only for her lower spine, the decision finding her to be disabled for purposes of Social Security benefits indicated that she had a history of, among other things, neck and back pain, as well as pain in her legs, back, arms and hands.

Footnote 3:The only records before us relate to Adamec's treatment of plaintiff during the period from November 12, 2008 through October 17, 2009. We note that, while they contain an "[a]bbreviation [k]ey," they are handwritten and difficult to decipher. The only comment we were able to discern regarding any medically indicated restrictions on plaintiff's daily activities was made on the date of Adamec's initial examination and indicated that such restrictions were for a period of no more than two weeks. Nor were we able to interpret any quantitative measures or qualitative assessments that might lend further support to plaintiff's serious injury claims.

Footnote 4:Notably, while Adamec's affidavit provides a fair amount of detail regarding his findings and opinions based upon his initial examination of plaintiff, the affidavit merely asks Supreme Court to refer to his records, generally, to support his remaining conclusions, without any detailed discussion or explanation.