Dear Coverage Pointers Subscribers:
It's been a long two weeks, with eight hot and humid days in Colonial Williamsburg for the Annual Meeting of the Federation of Defense & Corporate Counsel (FDCC) and then two days in New York City for an examination under oath on Tuesday and a full-day mediation on Wednesday. It's nice to be home.
Educational Events to Schedule:
Here are some upcoming programs that I'm certain you will want to consider scheduling:
2011 Insurance Industry Institute
Federation of Defense & Corporate Counsel
Wednesday to Friday, November 16-18, 2011 -- NYC
Building on the success and critical acclaim of 2009's 20/20 Insurance Symposium, the FDCC is presenting a program that focuses on emerging issues of interest to the insurance industry over the next three to five years. This year's institute focuses on four broad areas where significant change is occurring in the legal environment, the increase in regulation at the federal level, the preservation of the attorney-client privilege, the challenge of protecting both insurers and policyholders from breaches of privacy and the globalization of the claim environment.
I am pleased to be part of the "attorney-client" privilege panel and hope to see you there. Information is available on the FDCC website, www.thefederation.org.
2011 Law School for Insurance Professionals
Torts, Insurance and Compensation Law Section of the NYS Bar Association.
Friday, September 23, 2011 - Albany
Friday, September 23, 2011 - Syracuse
Wednesday, September 28, 2011 - Buffalo
Thursday, October 6, 2011 - Long Island
Wednesday, October 12, 2011 - NYC
I will be presenting the kick-off topic, An Overview of the Coverage Analysis, including disclaimers, partial disclaimers and reservation of rights letters, timely notice under a CGL, auto, homeowners policy (the Prejudice Standard) and the right to independent counsel at the Long Island and Buffalo locations
Steve Peiper will be presenting an Update on Bad Faith in New York, including proper file handling and documentation, discovery in bad faith actions and available damages in first and third party suits in the Syracuse location.
See Steve's note below for registration information
No Fault - Current Issues and Strategies
National Business Institute
September 13, 2011 - Syracuse
September 14, 2011 -- Buffalo
Cassie Kazukenus will be speaking on Understanding the No Fault System in the Syracuse location and Audrey Seeley will be speaking No-Fault Case Law Update and Recent Developments and Handling a No Fault Claim in the Buffalo and Syracuse case. Contact us for registration information.
2011 Insurance Coverage and Practice Symposium
DRI
December 15-16, 2011 -- NYC
Program material and registration soon to be available on the DRI website, www.dri.org.
Words from the Queen of No Fault:
The summer months are producing fewer and fewer decisions, but we have a small number to report this edition. The litigated cases address procedural issues on personal service upon an insurer and whether a default judgment motion sought over a year after the complaint was served should be granted. There is one interesting decision from Arbitrator O'Connor this edition regarding whether an applicant made a material misrepresentation.
There are two seminars coming up this fall and winter that you should be aware of. The first is a pure No-Fault law (first party) by NBI for September 13 (Syracuse) and 14 (Buffalo). The American Arbitration Association is participating in this seminar and Arbitrator Kent L. Benziger and Arbitrator Veronica K. O'Connor will be speaking. If you are interesting in attending but need more information please let me know and I can send you the brochure.
The second seminar is the DRI Insurance Law Committee's Insurance Coverage and Practice Symposium from December 15-16 in New York City. Some of the topics being presented are successfully using experts in insurance coverage litigation; a policy holder's perspective on common mistakes insurers and their counsel make; and the insurer's strategy for defending class action suits.
For those insurers who are interested in attending but concerned about the cost, please know that DRI has a few incentives that you could participate in to potentially have the registration, hotel, and airfare paid for those you send to the conference. If you wish to find out more details please send me an email at [email protected].
I hope everyone is enjoying the great weather!
Audrey Seeley
One Hundred Years Ago Today
Following the News of the World scandal in the UK? Not a fan of Rupert Murdoch? There is little new under the sun:
TAPPED WIRELESS, INDICTED: E.T. Earl Under Felony Charge for Publishing Private Message in Paper.
New York Times
August 5, 1911
Los Angeles, CA - Edwin Tobias Earl was indicted by the Grand Jury today for tapping a wireless and publishing a private message. Under the laws of California, this is a felony punishable with imprisonment of five years and a fine of $5000.
Earl, who is a big stockholder in the Home Telephone Company, was blamed for a recent effort to increase the rates which is now being investigated by the Grand Jury. Earl has charged General Harris Gray Otis, publisher of The Times of this city and W. R. Hearst with being in a conspiracy against him and his two papers.
Last Monday Morning Earl printed a telegram sent by the managing editor of The Herald to the publisher, who was at Catalina Island which, he contended, proved the conspiracy against him. The wireless was interrupted by some boy amateur operators and printed in both of Earl's papers.
The wireless company protested and filed complaints, declaring that if it could not protect its messages its business would be ruined. It is expected that this case will go to the highest court to test the privacy of wireless messages.
Edwin Tobias Earl was the owner and publisher of the Los Angeles Express (Evening Express) and founder of the Earl Fruit Company. In 1890 he invented the first successful combination ventilator-refrigerator car used in the transportation of California products to the Atlantic Coast. Mr. Earl sold the fruit company in 1900 or 1901 to Armour & Co. of Chicago. In 1903 he was also involved the "Great Western Power Company" which was in Plumas and Lassen Counties in north eastern California. In 1911 he purchased the now defunct Los Angeles Tribune. Earl lived in Los Angeles since 1885 until his death in January 1919.
Editor's Note. Indeed, the case did reach the California Supreme Court and it ruled in Earl's favor. The statute, the Court held, was intended only to apply to interception by those who worked for the telegraph company:
It appears very clear to us that the intent was, by the enactment of section 619, to preserve secrecy as to telegraphic messages only among all those who have a duty to perform with respect to the dispatch, transmission or delivery thereof. Any other interpretation placed upon the provisions of that section would cause it to embrace every person who might obtain knowledge of the contents of any message, no matter how such contents might have been learned, or through however so many persons such information may have been communicated, as well as to include the sender of the message and the persons whom he might have informed of its contents. To so hold, in our opinion, would be to give to the statute an unreasonable and absurd meaning. The history of the legislation upon the subject, as well as other sections of the code, which we need not further refer to, support the view we have taken in our construction of the statute.
People v. Earl, 19 Cal. App. 69, 70-75 (Cal. App. 1912)
Mike's Medicare Missive:
This week we find a case from the District Court of the Western District of Louisiana which obtained court approval of a Medicare Set-Aside. This case may pave the way for other applications in the federal system.
I welcome comments from our loyal readers as all of us work through the uncertainty of the Medicare Secondary Payer Act.
Michael F. Perley
From Our Albany Office:
I just wanted to take this chance to remind our No-Fault adjusters and practitioners that Audrey and I will be in Syracuse on September 13 for the NBI No-Fault Law seminar. It should be jam packed with lots of helpful tips and practical information to aid in handling no-fault claims, and we hope to see you there!
There are a few opinions from the Office of General Counsel for the Insurance Department to report, including an opinion for those attorneys who wish to be licensed as an independent adjuster as well. Other than that, it is pretty quiet in Albany right now (probably because everyone I talk to has been spending time at the track!) Hopefully things will begin to pick up this fall. In the meantime, if anyone meets a man with the last name Kazukenus today at the track - I have an important tip: don't pick the same horse!
Cassie Kazukenus
[email protected]
One Hundred Years Ago Today:
The most famous double-play team in history, Tinker-to-Evers-to-Chance had its troubles as well, as shortstop Joe Tinker is suspended two games for "Indifferent play" after he misplays two pop flies. Manager Frank Chance also fines Tinker $150.
Peiper's Pleadings:
Crickets. Only one measly Labor Law decision in this week's offering. With Summer winding down, I am certain things will pick up in the near term. Until then, I am more than willing to enjoy the warm sun, green grass, and the return of football.
With no cases to discuss this week, I did want to get you an early "Save The Date" for this year's version of Law School for Claims Professionals. As many of you know, the New York State Bar Association's Torts Insurance and Compensation Law Section sponsors a day long program that is geared toward, and marketed to, insurance professionals. Over the years, as this program has developed, it has gained a well earned reputation for providing insightful, practical tips and strategies to claims professionals of all levels and experience.
This year's program is, again, no exception. Topics to be covered include
Coverage Analysis Auto Liability Update Premises Liability Update Uncovering and Combating Fraud Protecting Against Bad Faith & Extra-Contractual Claims Liens and Subrogation Update Judicial Perspective - Thoughts from JudgesIf you're interested, please check out the NYSBA's website or drop me a line directly. The program will presented in New York City (10/12), Long Island (10/6), Albany (9/23), Syracuse (9/23) and Buffalo (9/28). If you wish to see one of us live and in person, I am advised that our fearless editor will be presenting at both the Buffalo and Long Island locations. Your's truly has been asked to chair the Syracuse location. Hope to see you there.
Steve Peiper
Editor's Note: Crickets?
One Hundred Years Ago today - Shades of Bergs to Come
New York Times
August 5, 1911
Liner Hits Iceberg, Twisting Her Bow
The Columbia, Nearing Port Under Reduced Speed,
Sends News by Wireless
Passengers in No Danger
Other Steamships Have Reported Massive Bergs Near
The Transatlantic Lane in the Past Week
With her bow torn and twisted by collision with an iceberg, the Anchor liner Columbia, from Glasgow, is making port, The news of the accident came to the office of the line yesterday .
Vessels crossing the Atlantic are now on the long course - a precaution to avoid ice. There has been plenty of ice along the course during the past ten days.
Editor's Note: The Titanic's icy encounter was eight short months later, on April 14, 1912.
In This Week's Coverage Pointers:
KOHANE'S COVERAGE CORNER
Dan D. Kohane
[email protected]
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Four and a Half Years Late Notice is Unexcused, Holds Split Court
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Split Court Finds Plaintiff NOT an Employee Under California Law
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Question of Fact Exists About Promptness of Late Notice Disclaimer
MARGO'S MUSINGS ON SERIOUS INJURY UNDER NEW YORK NO FAULT
Margo M. Lagueras
[email protected]
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Grant of Unopposed Motion Is Vacated
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Without Comparison, It Cannot Be Concluded That Pre-Existing Limitation Was Not Exacerbated by the Accident
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Failure to Conduct Objective ROM Testing Renders Conclusion Insufficient
LIENING TOWER OF PERLEY
Michael F. Perley
A Federal District Court Approves Medicare Set-Aside
AUDREY'S ANGLES ON NO-FAULT
Audrey A. Seeley
[email protected]
ARBITRATION
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Material Misrepresentation Denial Upheld - There Was No Accident as Applicant ClaimedPeer Review Insufficient to Maintain Denial of Electrodiagnostic Equipment
LITIGATION
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Default Judgment Motion Denied and Complaint Dismissed Sua SponteFailure to Serve Insurer Properly Leads to Dismissal of Action
PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper
[email protected]-
Runner in Place: Third Department Holds the Line on the Proposed Expansion of Labor Law 240(1) Liability
CASSIE'S CAPITAL CONNECTION
Cassandra A. Kazukenus
[email protected]-
Reviewing Office of General Counsel Opinions
FIJAL'S FEDERAL FOCUS
Katherine A. Fijal
[email protected]-
Policy Terms Control Priority of Coverage
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New Jersey Allows Reformation Based on Mutual Mistake Against a Party That Did Not Participate in the Negotiation of a Contract
JEN'S GEMS
Jennifer A. Ehman
[email protected]-
Court Refuses to Grant Motion to Renew Where Plaintiff's Counsel Allegedly Attached the Wrong Disclaimer Letter to Its Motion for Summary Judgment
EARL'S PEARLS
Earl K. Cantwell
Attorney Client Privilege in Defending
Legal Malpractice ClaimsI do love the summer. It is racing by with breakneck speed. Phooey.
Dan
Dan D. Kohane
Hurwitz & Fine, P.C.
1300 Liberty Building
Buffalo, NY 14202
Phone: 716.849.8942
Fax: 716.855.0874
E-Mail: [email protected]
H&F Website: www.hurwitzfine.comLinkedIn: www.linkedin.com/in/kohane
Hurwitz & Fine, P.C. is a full-service law firm
providing legal services throughout the State of New York
NEWSLETTER EDITOR
Dan D. Kohane
[email protected]ASSOCIATE EDITOR
Audrey A. Seeley
[email protected]ASSISTANT EDITOR
Margo M. Lagueras
[email protected]INSURANCE COVERAGE TEAM
Dan D. Kohane, Team Leader
[email protected]
Michael F. Perley
Katherine A. Fijal
Audrey A. Seeley
Steven E. Peiper
Margo M. Lagueras
Cassandra Kazukenus
Jennifer A. Ehman
Diane F. BosseFIRE, FIRST-PARTY AND SUBROGATION TEAM
Andrea Schillaci, Team Leader
[email protected]
Jody E. Briandi
Steven E. PeiperNO-FAULT/UM/SUM TEAM
Audrey A. Seeley, Team Leader
[email protected]
Margo M. Lagueras
Cassandra Kazukenus
Jennifer A. EhmanAPPELLATE TEAM
Jody E. Briandi, Team Leader
[email protected]
Scott M. Duquin
Diane F. BosseIndex to Special Columns
Kohane’s Coverage Corner
Margo’s Musings on “Serious Injury”
Liening Tower of Perley
Audrey’s Angles on No Fault
Peiper on Property and Potpourri
Cassie’s Capital Connection
Fijal’s Federal Focus
Jen’s Gems
Earl’s Pearls
Across BordersKOHANE’S COVERAGE CORNER
Dan D. Kohane
[email protected]07/28/11 Savik, Murray, etc. v. ITT Hartford Ins. Group
Appellate Division, First Department
Four and a Half Years Late Notice Unexcused, Holds Split Court
Savik is an LLC managed by Vero and two others. In 1998, it began its work as a construction manager (CM) involved in a shopping center project, owned by FDC. Savik was an additional insured under policies issued by Hartford and QBE. Savik worked with Aurora, another company managed by Vero that also performed CM duties. Savik left the job site in May 2000, three months after the project was substantially completed. A September 1999 letter signed by Joseph Koslow, plaintiff's project executive, recognized that the project had been plagued by numerous ongoing roof leaksOn May 12, 2004, FDC served plaintiff with an arbitration demand, which cited plaintiff's failure to take action with respect to the construction of the project's roofing system. Savik notified Hartford and QBE of the arbitration demand on June 4, 2004, which was also its first notice to Hartford and QBE of the occurrence. Both carriers thereupon issued reservation of rights letters and, after plaintiff commenced this action, moved for summary judgment. The grounds for summary judgment asserted by Hartford and QBE included plaintiff's purported breach of a provision in each of their policies that required plaintiff, as the insured, to notify the respective carrier, as soon as practicable, of "an occurrence' or an offense which may result in a claim."
The motion court granted summary judgment and dismissed the complaint on the ground that the underlying claim came under the work product exclusion of each of the applicable policies. Upon granting leave to reargue, the court again ruled in favor of Hartford and QBE, finding that the costs FDC sought to recover in the underlying arbitration arose out of plaintiff's work product.
The motion court never dealt with the late notice issues.
There was evidence of water infiltration problems for several years before notice was given to the carriers. Hartford and QBE made prima facie showings of entitlement to judgment as a matter of law based upon plaintiff's 4+ year delay in notifying them of the occurrence. There was no affidavit setting forth what plaintiff believed or did not believe at the time of the occurrence or thereafter. For this reason, plaintiff's failure to submit an affidavit by any of its members is fatal to its argument that it has a good faith belief in non-liability.
Two dissenting judges would have found a question of fact as to whether the delay in notification was timely.
Editor’s Notice: In bodily injury and wrongful death cases, a reservation of rights on the late notice issues would be ineffective in New York to preserve the carrier’s right to disclaim on notice or exclusionary grounds.07/28/11 Illinois Union Ins. Co. v. Assurance Co. of America
Appellate Division, First Department
Split Court Finds Plaintiff NOT an Employee Under California Law
Under California law, which the parties agree governs this action, whether the plaintiff in the underlying action was an "Employee" under the Illinois Union policy is a dispositive issue; if the plaintiff was an employee, then Illinois Union had the duty to defend, but if the plaintiff was not an employee, Illinois Union had no such duty, and thus would be entitled to full reimbursement. The record establishes that Cronnelly, the plaintiff in the underlying action, was not an "Employee" within the definition of Illinois Union's policy.Two dissenting judges disagree, and found a question of fact on the issue.
07/28/11 Admiral Insurance Co. v. State Farm Fire and Casualty Co.
Appellate Division, First Department
Question of Fact Exists About Promptness of Late Notice Disclaimer
In November 2000, the Dormitory Authority hired P & K, , an Admiral insured, to perform construction work at a Bronx hospital. P & K entered a subcontract with Shahid which required Shahid to procure additional insured coverage for P & K. Shahid obtained that coverage under a policy with defendant State Farm.On October 19, 2002, Singh, a Shahid employee, was injured when he fell from a ladder at the job site. In 2003, Singh sued P & K, the City of New York and New York City Health and Hospitals Corporation. The timetable of events thereafter is meaningful:
- 9/22/03: Tender by Admiral to P&K with request that P&K turn letter over to its insurer
- 12/17/03: Follow up letter by Admiral, sending copy to State Farm. State Farm claims letter was sent to inactive claims office;
- 1/22/04: State Farm receives Admiral’s letter of 12/17/03
- 22/5/04: State Farm asked for further information, it knowing nothing about the accident or claim,
- 3/19/04: State Farm reserved its rights to deny defense and indemnity to P & K based on late notice.
- 3/222/04: Admiral advises State Farm that Shahid had been placed on notice on September 22, 2003 and reiterated its request that State Farm assume the defense of P & K.
- 3/23/04: State Farm responded that it needed to know when P & K was first given notice of the claim, and whether the matter was in suit.
- 4/13/04: State Farm disclaims on late notice
- 2/07: Declaratory judgment action commenced by Admiral and P&K.
Plaintiffs moved for summary judgment on the ground that State Farm's April 14, 2004 disclaimer was untimely, and that State Farm thus failed to comply with Insurance Law § 3420(d). Prior to the determination of the motions, the Singh action was settled at mediation, attended by counsel for P & K and Admiral, for $975,000. P & K's share of the settlement was $900,000, which is within the limits of both the Admiral and State Farm policies.
The relevant correspondence demonstrates that the tender was issued on P & K's behalf and fulfilled the State Farm policy's notice-of-claim requirements so as to trigger State Farm's obligation to issue a timely disclaimer to P & K pursuant to Insurance Law § 3420(d). Triable issues of fact exist regarding the timeliness of State Farm's disclaimer, given the factual dispute as to whether any delay in issuing its denial of coverage was brought about by the deliberate failure of Admiral and UCS to respond to State Farm's reasonable and good faith request for assistance in investigating the underlying claim.
An insurer is not required to disclaim on timeliness grounds before conducting a prompt, reasonable investigation into other possible grounds for disclaimer; in fact, a reasonable investigation is preferable to piecemeal disclaimers"
State Farm delayed 113 days in denying coverage. However an issue of fact exists as to whether State Farm acted reasonably in seeking to investigate further inasmuch as that letter contained no information regarding when P & K received notice of the incident or suit, and thus did not make it "readily apparent" that State Farm had the right to disclaim coverage. Moreover, this Court has disapproved of the policy urged by plaintiffs to "disclaim now and investigate later".
Editor’s Note: State Farm properly documented its file to establish, at least, a good faith reason not to deny coverage immediately. Document. Document. Document.MARGO’S MUSINGS ON SERIOUS INJURY UNDER NEW YORK NO FAULT
Margo M. Lagueras
[email protected]08/02/11 Chery v. Castello
Appellate Division, Second Department
Grant of Unopposed Motion Is Vacated
Plaintiff appealed the trial court’s denial to vacate a prior order granting the unopposed motion for summary judgment of defendant Thornton. The appellate court determined that plaintiff demonstrated both a reasonable excuse for her failure to oppose the motion, and a triable issue of fact constituting a meritorious opposition to the motion by way of competent medical evidence showing that the alleged injuries to her lumbar spine constituted a serious injury under the permanent consequential and/or significant limitation of use categories. In addition, plaintiff also presented a reasonable explanation for her cessation of treatment. Therefore, the trial court should have vacated that part of the order which granted summary judgment to Thornton.08/02/11 Giangrasso v. Callahan
Appellate Division, Second Department
Without Comparison, It Cannot Be Concluded That Pre-Existing Limitation Was Not Exacerbated by the Acccident
In a rear-end collision case, plaintiff was granted summary judgment on the issue of liability, and defendants’ threshold cross-motion was denied. On appeal, the trial court is affirmed. First, as regards liability, the deposition testimony of both plaintiff and defendant driver supported plaintiff’s motion that defendant’s inattentiveness was the sole proximate cause of the accident. With respect to the serious injury threshold question, because defendants’ examining physicians failed to compare their findings from after the accident with plaintiff’s range-of-motion limitations from a prior accident, it could not be concluded that the pre-existing limitation was not exacerbated by the accident. Therefore, defendants’ failed to meet their burden and it was not necessary to consider plaintiff’s opposition to the cross-motion.07/19/11 Sparks v. Detterline
Appellate Division, Second Department
Failure to Conduct Objective ROM Testing Renders Conclusion Insufficient
On appeal, defendants’ motion is denied as they failed to meet their prima facie burden because the affirmed report of their examining physician was insufficient. The Examining physician stated that plaintiff’s complaints were subjective and that there were no objective identifiable neurological deficits and thus no disability. However, these conclusions were speculative and conclusory because the examining doctor did not perform any range-of-motion testing. In addition, the doctor’s comment that plaintiff was “essentially unable” to move her neck to allow for range-of-motion suggests that plaintiff’s limitations were significant. Therefore, the report was insufficient to support defendants’ motion and the motion should have been denied.LIENING TOWER OF PERLEY
Michael F. Perley
[email protected]A Federal District Court Approves Medicare Set-Aside
Schexnayder v. Scottsdale Insurance Company, et al (2011 U.S. Dist. LEXIS 83687)
On July 28, 2011, the Federal District Court for the Western District of Louisiana approved a Medicare Set-Aside in what appears to have been a personal injury case brought in the District Court under its diversity jurisdiction. The matter was settled and a Medicare Set-Aside specialist determined that the appropriate Medicare Set-Aside from the settlement was $239,253.84. The matter was submitted to CMS who took no action, leaving the parties at a loss on how to obtain approval of the Medicare Set-Aside amount, which was a condition of the settlement. The plaintiff and defendants made a joint application to the court for approval and the U.S. Magistrate ordered service to be made on the Secretary of Health and Human Services for an evidentiary hearing that was ordered to be conducted in order to determine approval or modification of the proposed set-aside amount. Health and Human Services advised the court that it would not participate in the evidentiary hearing. This left the court to take testimony and receive submissions based upon which Magistrate Judge Hanna made findings of fact that approved the set-aside amount.
Obviously, the federal court can exercise its jurisdiction over the Department of Health and Human Services. The parties to this litigation acted in the manner that this column has advocated consistently, namely that the interests of Medicare be considered actively by both parties in a cooperative manner when reaching a settlement or, for that matter, paying a judgment. Their cooperation allowed the federal court to exercise its jurisdiction over Health and Human Services and issue an order which, in all likelihood, will be binding upon the United States government, thereby relieving the parties of any further uncertainty with regard to Medicare issues. This can only happen in the federal system, as state courts do not have jurisdiction over the United States government. This may be yet one more reason to invoke the diversity jurisdiction of the court when appropriate so that these issues may be determined in a manner that satisfies the interests of all parties. It is significant that CMS again declined to cooperate with the parties in reaching the Medicare Set-Aside amount and, it is further significant that the set-aside amount did not contain a reduction for procurement costs or attorney’s fees. This appears to be in conformance with the regulations promulgated under the Medicare Secondary Payer Act.
AUDREY’S ANGLES ON NO-FAULT
Audrey A. Seeley
[email protected]
ARBITRATION
07/29/11 Applicant v. Respondent
Arbitrator Veronica K. O’Connor, Erie County
Material Misrepresentation Denial Upheld – There Was No Accident as Applicant Claimed
The primary issue in this arbitration was whether the insurer properly denied the entire claim based upon the Applicant, alleged eligible injured person’s material misrepresentation of the claim. The assigned arbitration determined that the denial was proper.The Applicant claims on January 5, 2010, he was a pedestrian struck by a motor vehicle operated by Mr. Pembrock. The insurer conducted an EUO of Mr. Pembrock and the Applicant to ascertain each person’s version of how the alleged accident occurred. Mr. Pembrock testified that he borrowed the named insured’s vehicle to drive to his girlfriend’s house. He parked the vehicle in a small parking lot on Fritz Alley. He came back to the vehicle and was leaving at about 5 mph when he saw the Applicant and a woman walking two pit bulls off leash. He stopped the vehicle because the dogs were not leashed and he was afraid that one of them would run under his vehicle. Mr. Pembrock rolled down his window and heard the Applicant yell at him. Then the Applicant pulled out his cell phone, brushed snow off the vehicle and took a photo of the license plate. Mr. Pembrock claimed that he tried to pull away slowly but the Applicant reached into the vehicle and tried to punch him. Mr. Pembrock maintained that he did not step on the gas while the Applicant had his arm in the vehicle; never knocked the Applicant to the ground; nor hit the Applicant with the vehicle. Mr. Pembrock left the scene unaware that the police were called claiming Mr. Pembrock hit the Applicant. Mr. Pembrock did go to the police station once aware of the claim and provided his version of the incident. He was not arrested and never obtained a copy of the police report.
The Applicant testified that he was walking his two pit bulls off leash with his girlfriend. He saw Mr. Pembrock’s vehicle in the alley and all of a sudden the vehicle hit him on his back side with the driver’s side of the vehicle. The Applicant claimed he was struck on the back from his knees to his waist with the impact knocking him to the ground. He did not know what part of the vehicle hit him. Further into Applicant’s testimony he claimed that the impact threw him into the air but that he was able to get up and run after Mr. Pembrock. Then, the Applicant testified that he injured his back, left shoulder, both knees, left toe and right thumb. This contradicted his earlier testimony that he was struck from the back only injuring his knees up to his waist.
The assigned arbitrator found the testimony of Mr. Pembrock as to the events that evening more credible. Thus, the insurer’s denial was upheld.
07/22/11 Applicant v. Respondent
Arbitrator Veronica K. O’Connor, Erie County
Peer Review Insufficient to Maintain Denial of Electrodiagnostic Equipment
The Applicant sought payment of an interferential unit that the insurer denied upon a peer review. The assigned arbitrator did not uphold the insurer denial.Dr. Slavina Gardella, a neurologist, prescribed an interferential unit and supplies to the eligible injured person (“EIP”) on July 7, 2005, after a May 13, 2005, accident. The medical necessity letter provided that the EIP was diagnosed with cervical and lumbar sprain/strain as well as radiculopathy. The unit was necessary to relax muscle spasm, re-educate muscles, and decrease pain.
Dr. Edward Weiland conducted a peer review and concluded that the unit was excessive based upon the physical examination findings. This was because the EIP was already undergoing a course of multimodality therapy including nerve stimulation treatments. Thus the unit was redundant and excessive.
On August 3, 2005, Dr. Gardella provided a rebuttal opining that the unit provided her patient with home therapy at an increased treatment per week over traditional physical therapy. She further articulated why the unit was beneficial to the EIP.
The assigned arbitrator determined that Dr. Weiland’s report did not indicate how the unit deviated from generally accepted medical /professional practice. Thus, the peer review was insufficient to uphold the denial of the equipment.
LITIGATION
07/25/11 Citywide Social Work and Psych. Svcs., PLLC a/a/o Cousins Leopaul v. Allstate Ins. Co.
Appellate Term, Second Department
Default Judgment Motion Denied and Complaint Dismissed Sua Sponte
Plaintiff commenced an action for No-Fault benefits in February 2006 and waited until January 2009, to seek, among other things, a default judgment against the defendant. The trial court denied the default judgment motion and dismissed the complaint sua sponte under CPLR §3215(c). The motion was properly denied as the plaintiff failed to seek the default judgment within one year and did not proffer a reasonable excuse for its delay.07/25/11 Omni Med. Svcs, PC a/a/o Curtis Smith v. Arch Ins.
Appellate Term, Second Department
Failure to Serve Insurer Properly Leads to Dismissal of Action
The insurer’s motion to vacate the default judgment and dismiss the action should have been granted as the insurer was never properly served with the summons and complaint. The evidence demonstrated that the process server served a clerk employed by the third-party claims administrator for the insurer and not a required officer, director, or agent authorized to accept service. Thus, the court lacked personal jurisdiction over the insurer.PEIPER ON PROPERTY (and POTPOURRI)
Steven E. Peiper
[email protected]07/28/11 Davis v Wyeth Pharms, Inc.
Appellate Division, Third Department
Runner in Place: Third Department Holds the Line on the Proposed Expansion of Labor Law 240(1) Liability
While in the course of his employment, plaintiff Davis sustained injury when a filtration unit (weighing in excess of 1,000 lbs.) fell onto his leg. At the time of the injury, plaintiff and another worker were moving the filtration unit.In order to accomplish this task, the unit was placed onto a pallet jack and hoisted 8 to 10 inches above the surface of the floor. At that point, plaintiff pulled (and co-employee pushed from the other side) the unit toward him. As the unit was being moved across an otherwise flat floor, plaintiff slipped and fell. In an attempt to break the fall, plaintiff grabbed the unit causing it to tip over and land on his leg.
In reliance upon the Court of Appeals’ decision in Runner, plaintiff sought to amend his lawsuit against the property owner to assert a claim under Labor Law 240. In support of this motion, plaintiff argued that under the Court of Appeals’ analysis the weight of a falling object must be considered when determining whether there was significant height differential.
In affirming the Trial Court’s decision that plaintiff’s attempt to amend was not meritorious, the Third Department noted that Labor Law 240(1) is triggered by an injury caused by the force of gravity being exerted on an object or person. However, in addition to the force of gravity, the risk of injury must be related to an elevation differential. Here, recall, that the filtration unit was on the same level as the plaintiff. That is to say that it was being moved horizontally at the time of the accident. In contract, the incident giving rise to the Runner decision occurred as an object was being moved vertically.
The court ruled that the “tipping point” in the argument was the fact that the incident would/could have happened whether or not the filtration unit was elevated at the time of the loss. Indeed, if filtration unit was flat on the ground the incident could have still occurred in exactly the same way.
For those of you unfamiliar with the Runner decision, please see our write up from the 2009 Christmas Day Edition of Coverage Pointers.
12/17/09 Runner v New York Stock Exchange, Inc.
Court of Appeals
Force of Gravity which Pulls a Worker into Another Object Falls Within the Scope of Protection Afforded Under Labor Law § 240(1)
The facts of this case are relatively simple. Plaintiff was working as part of a larger crew that was installing what appears to have been a large generator at the NYSE. At some point, plaintiff’s crew was requested to move a large roll of wire, weighing approximately 800 lbs, down a set of four stairs. To accomplish this task, plaintiff and/or plaintiff’s colleagues tied a rope to the roll of wire.
They then wrapped the rope around a metal bar that they had placed across the door jamb at the top of the four stairs. After wrapping the rope around the metal bar several times, three workers (including plaintiff) held the end of the rope as counterweights to the roll of wire.Unfortunately, the men were not able to stop the wire from rolling down the stairs. In the process, plaintiff struck his hands on the metal bar and sustained injury as a result. Understandably, plaintiff argued that the need to move the roll of wire down the stairs created an elevation differential, and as such triggered the protections under Labor Law § 240(1). Defendants, on the other hand, argued that this was not within the scope of Labor Law § 240(1) because neither the plaintiff, nor the object that struck plaintiff, changed elevation levels. In short, defendant contends that the force of gravity must be directly applied to the plaintiff, or the object striking plaintiff.
The Court of Appeals noted that the correct inquiry, in their estimation, was whether the harm sustained by plaintiff was a direct result of gravity on the object. Because the force of gravity on the roll of wire caused plaintiff to strike his hand on the metal bar, the protections of the statute had been triggered.
CASSIE’S CAPITAL CONNECTION
Cassandra A. Kazukenus
[email protected]OGC Opinion No. 11-06-01
The Insurance Department’s Office of General Counsel was asked if a licensed attorney who wishes to become a sub-licensee of a corporation that wishes to be licensed as an independent adjuster in New York must take and pass a personal written exam and otherwise qualify as an independent adjuster. The answer was a resounding yes. Insurance Law § 2101(g)(1)(H) has an exception from independent adjuster licensing for an attorney duly licensed to practice law in New York State. However, the OGC reasons that while an attorney may investigate and adjust losses on behalf of an insurer without obtaining an independent adjuster’s license, if the licensed attorney is to be designated as a sub-licensee of an insurance adjuster, in order for the corporation to be licensed as an independent adjuster, the attorney must be licensed. All licensed independent adjusters must take and pass the personal written exam in order to become a licensed independent adjuster. The fact that an attorney is employed as an adjuster does not exempt the corporation from the requirement to obtain an independent adjuster’s license because the exemption only applies to attorneys, not corporations.
OGC Opinion No. 11-06-03
Does an insurer have to send a copy of a cancellation notice to all insurance agents and brokers that may be within the chain of producers of a particular policy? No! Insurance Law § 3425 only requires an insurer to provide a cancellation notice to the authorized insurance agent or broker that the insured designates to receive the information on the insured’s behalf. The Department interprets the phrase “the insured’s authorized agent or broker” to be an agent or broker that the insured designates to receive information on their behalf.
OGC Opinion No. 11-06-02
This opinion pertains to a regulation that is applicable in the underwriting process, but I think it is worth knowing that there is an “anti-arson application” that is required to be completed with a fire policy issued to a contractor, especially if there is a suspicious loss under the policy. The question presented to the OGC is whether insurers must require a construction contractor to complete the anti-arson application in connection with a builders’ risk policy.
Insurance Law § 3403(b) requires an insurer to obtain an anti-arson application for all property insurance policies covering the peril of fire or explosion, but the statute does contain a number of exceptions. These exceptions basically limit this requirement to policies covering multiple-unit residential properties that are not owner-occupied and commercial properties in New York City and other municipalities that filed a petition with the Superintendent requesting this mandate, such as Buffalo and Rochester. The OGC states that unless one of the exceptions apply, it is clear that the construction contractor must complete an anti-arson application in connection with a builders’ risk policy and it is important for the contractor to obtain the required information.
FIJAL’S FEDERAL FOCUS
Katherine A. Fijal
[email protected]07/27/11 Wright Ryan Construction, Inc. v. AIG Ins. Co. of Canada
First Circuit Court of Appeals –Maine
Policy Terms Control Priority of Coverage
At the time of the loss Wright-Ryan, a Maine construction company, was hired by the University of Southern Maine as a general contractor for the construction of a building known as University Commons. Wright-Ryan then subcontracted with Canadian company, Norgate Metal, Inc. for the fabrication and erection of structural steel for the project. Although Wright-Ryan had its own CGL policy issued by Acadia Insurance Company, it required Norgate, as a condition of the subcontract, to obtain CGL insurance for the project and name Wright-Ryan as an additional insured. Norgate procured the requisite coverage from AIG. AIG issued a certificate of insurance naming Wright-Ryan and the University of Southern Maine as additional insureds on Norgate’s policy. The certificate indicated that the coverage provided by AIG was on a primary and non-contributory basis for all liability “arising out of [Norgate’s] premises or operations.”While the University Commons project was ongoing, an employee of a company hired by Norgate to assist with the erection of the structural steel tripped and fell through an unguarded stair opening. The employee fell four stories and landed on wet pavement on ground level. The employee later filed suit against Wright-Ryan in Maine’s Superior Court for negligence in connection with the accident. Norgate and the employer were joined as defendants in a later amended complaint.
Upon receipt of the complaint Wright-Ryan tendered the claim to Norgate and AIG – neither responded and Acadia assumed responsibility for Wright-Ryan’s defense. Wright-Ryan and Acadia filed a declaratory judgment action against Norgate and AIG in the federal court for the District of Maine. Acadia was later successful in settling the suit against all three defendants for $150,000 and amended their complaint to seek reimbursement for payment of the $150,000 settlement and for over $40,000 of attorneys’ fees incurred in defending Wright-Ryan. The parties each moved for summary judgment and the matter was submitted to the Magistrate for review.
The Magistrate concluded: (1) the employee’s accident arose out of Norgate’s “premises or operations,” triggering coverage for Wright-Ryan as an additional insured on the AIG policy; (2) the AIG policy was excess to Wright-Ryan’s own policy issued by Acadia. Because the $150,000 was well within the Acadia policy the Magistrate recommended that AIG’s motion for summary judgment be granted. The Magistrate’s decision was adopted by the district court judge in its entirety. After reviewing well-settled principles of policy interpretation the First Circuit reversed.
The district court and the First Circuit analyzed the Other Insurance clauses in the Acadia and AIG policies to determine the priority of coverage. The difference in the outcome was how each court analyzed the word “you”. The Other Insurance clauses in both policies were essentially the same and provided that the coverage provided was primary except in certain circumstances where the coverage would be excess. As relevant here, the policies state that coverage is excess over “any other primary insurance available to you covering liability for damages arising out of premises or operations for which you have been added as an additional insured by attachment of an endorsement.”
Neither party disputed that the injury arose out of Norgate’s work; however, as expected, on appeal the parties presented differing arguments on how the word “you” should be interpreted. Wright-Ryan and Acadia argued that “you” means only the “Named Insured” identified in each policy and that based on the language of the Other Insurance Clause the AIG policy should be primary.
AIG on the other hand, agreed with the district court’s broad interpretation of the word which equated “you” with the Named Insured as well as an Additional Insured added to the policy.
The First Circuit agreed with Wright-Ryan and Acadia. The Court recognized that it was required to begin its analysis with the plain language of the policies and that the very first page of each policy states, “Throughout this policy the words ‘you’ and ‘your’ refer to the Named Insured shown in the Declarations, and any other person qualifying as a Named Insured under this policy.” In order to determine the identify of “any other person qualifying as a Named Insured” the Court looked to Section II of the policy which identified Who Is An Insured; and determined that additional insureds did not qualify for Named Insured status because it found the definition of “you” to be unambiguous in that it referred solely to a person or organization listed as a Named Insured in the policy Declarations or “qualifying as a Named insured” by virtue of being a corporation newly formed or acquired by a Named Insured.
Based on this analysis the Court held that Wright-Ryan was an additional insured on the AIG policy; the AIG policy would provide primary coverage to Wright-Ryan for liability arising out of Norgate’s work at the University Commons site; and, that the Acadia policy issued to Wright-Ryan would be treated as excess.
08/03/11 Illinois National Insurance Company v. Wyndham Worldwide
Third Circuit Court of Appeals – New Jersey
New Jersey Allows Reformation Based on Mutual Mistake Against a Party That Did Not Participate in the Negotiation of a Contract
In 2001, Wyndham’s predecessor, Cendant Operations, Inc. and Jet Aviation entered into the first of several Aircraft Management Services Agreements. Among other things, the agreements obligated Jet Aviation to provide domestic flight planning and scheduling, flight crew staffing, and management of scheduled and unscheduled maintenance for Wyndham’s aircraft. If Wyndham’s aircraft was not available when needed, Jet Aviation would arrange for an aircraft for Wyndham’s use from another source. Pursuant to the Aircraft Management Services Agreements, Jet Aviation agreed to procure insurance for Wyndham’s aircraft while it was managed by Jet Aviation. The agreement also stated that it would provide Wyndham with insurance coverage when Wyndham used non-owned aircraft at the direction of Jet Aviation.For successive one year periods beginning in 2004, and through the 2008 policy year, a series of aircraft fleet management insurance policies were purchased by Jet Aviation and issued by Illinois National. Each was negotiated by Illinois National and Jet Aviation.
The 2004-2007 policies contained a Managed Aircraft Endorsement which identified the Wyndham entities as an “Insured Owner” and specifically identified Jet Aviation in the Endorsement. In the negotiations leading up to the 2008 policies, Jet Aviation proposed new language for the endorsement. The revised endorsement, which was integrated into the 2008 policy, replaced “Jet Aviation” with “Named Insured”,
Jet Aviation and Illinois National asserted that the drafting change was designed to make it clearer that the entities affiliated with Jet Aviation were covered. Both contracting parties stated that they believed that it did not expand coverage to entities that were unaffiliated with Jet Aviation, such as Wyndham. However, the modifications, as written, appeared to provide third parties [Wyndham] with coverage when using non-owned aircraft.
In August 2009, a Wyndham employee rented a Cessna 172 from Aviation Adventures to travel to a work-related meeting in Oregon. Jet Aviation had no involvement with the transaction. The employee crashed into a house in Oregon, killing five people. This resulted in various claims for damages against Wyndham.
A coverage dispute became apparent and Illinois National filed suit against Wyndham seeking a declaratory judgment that the 2008 policy did not cover the claims arising out the August 2008 Cessna crash. Illinois National asked the court to exercise its equitable power of reformation because there had been a mutual mistake in the drafting of the endorsement in the contract between Illinois National and Jet Aviation. Wyndham filed a counterclaim asking that the court find coverage based on the plain language of the policy.
The District Court held that Wyndham was entitled to coverage under the 2008 policy and that Illinois National was not entitled to reformation based upon mutual mistake. The District Court held that the 2008 policy was clear on its face and that Wyndham was entitled to coverage as a matter of law. The District Court also held that “because Wyndham did not participate in the negotiation and drafting of the 2008 policy, there can be no mutual mistake.” For the following reasons the Third Circuit Court of Appeals reversed.
In rendering its decision the Third Circuit noted that the Supreme Court of New Jersey has set out general principles of contract interpretation and reformation and noted that, “as a general rule, courts, should enforce contract as the parties intended . . . The court’s role is to consider what is written in the context of the circumstances at the time of drafting and to apply a rational meaning in keeping with the expressed general purpose.” Pacifico v. Pacifico, 920 A.2d 73 (N.J. 2007).
Although the court recognized that an insurance policy should be interpreted according to its plain language, in New Jersey, even an unambiguous contract may be reformed when there is mutual mistake and the written contract does not match what the parties intended. Cent. State Bank v. Hudik-Ross Co., Inc., 396 A.2d 347 (N.J.Super. 1978). The court noted that a mutual mistake is either a mistake in which each party misunderstands the other’s intent; or, a mistake that is shared and relied on by both parties to a contact. A mutual mistake must be evaluated by determining the understanding of the parties at the time the contact was formed. Bonnco Petrol, Inc. v. Epstein, 560 A.2d 655 (N.J.1989). A party seeking reformation for mutual mistake must show that both parties labored under the same misapprehension as to a particular and essential fact. The understanding of persons who were not contracting parties at the time of the consummation of the contract is irrelevant.
Inasmuch as Illinois National and Jet Aviation were the only parties that negotiated and drafted the 2008 policy; and, Wyndham had no involvement with the revision to the Endorsement; and, Jet Aviation and Illinois National agreed that their intent, at the time the contract was drafted, was to limit coverage for non-owned aircraft to aircraft used by or at the direction of Jet Aviation, the Court held that reformation based on mutual mistake was required and reversed the decision of the District Court.
There was one dissenting Judge who agreed with the District Court’s decision.
JEN’S GEMS
Jennifer A. Ehman
[email protected]07/08/11 Citizens Ins. Co. of Am. v Hatzigeorgiou
Supreme Court, New York County
Court Refuses to Grant Motion to Renew Where Plaintiff’s Counsel Allegedly Attached the Wrong Disclaimer Letter to Its Motion for Summary Judgment
This decision comes to us on a motion to renew a prior motion for summary judgment. Plaintiff’s motion was denied and judgment was then granted in favor of the defendants after the court opted to use its power to search the record.An application for leave to renew must be based on additional material facts which existed at the time the prior motion was made, but were not then known to the party seeking leave to renew and, therefore, not made known to the court.
Plaintiff asserted that, at the time of its original motion, its attorney inadvertently annexed the wrong denial letter to its motion papers. Specifically, plaintiff attached a July 9, 2008 letter, which purportedly established that it timely denied coverage to defendants based on late notice. In opposition, counsel for defendants’ directed the court’s attention to the fact that the July 9, 2008 letter did not deny coverage, but rather, merely reserved plaintiff’s right to deny coverage. As most of you know, a reservation of rights letter in New York serves virtually no purpose and does not toll an insurer’s time to deny coverage. Additionally, defendants asserted that the July 9th letter was untimely. Ultimately, the court agreed with defendants and found that the letter was merely a reservation of rights. Thus, plaintiff was obligated to defend and indemnify defendants in the underlying action.
In support of this motion to renew, plaintiff asserted, via an adjuster affidavit, that the correct denial letter was issued July 16, 2008, and that the July 9th letter was a draft that was never sent out.
In considering plaintiff’s application for leave to renew, and ultimately denying it, the court held that the assertion of plaintiff’s counsel that the July 9th letter was mistakenly annexed to the motion papers did not constitute a reasonable justification for its failure to submit the “actual” letter with its original motion papers. Specifically, plaintiff never raised this issue in the initial motion, even after defendants asserted that the July 9th letter was a reservation of rights letter and not a disclaimer of coverage. Thus, not until after the court reached the determination that the letter was a reservation of rights letter, did plaintiff come forward this with new letter. Additionally, the court noted that plaintiff’s position that the July 9th letter was improperly attached was in direct conflict with the affidavits submitted in support of its initial motion.
EARL’S PEARLS
Earl K. Cantwell
[email protected]Attorney Client Privilege in Defending
Legal Malpractice ClaimsLegal malpractice claims inherently involve questions of privileged documents. Several different types of communication may be involved including between attorney-client, between attorneys in the law firm, and between counsel who may be retained to review or defend the claim. This leads to discovery problems concerning the production of documents such as in the recent case of TattleTale Alarm Systems, Inc. v Calfee, Halter & Griswold, LLP, 2011 U.S.Dist. LEXIS 104.2 (S.D. Ohio February 3, 2011).
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TattleTale involved a claim of legal malpractice against the Calfee Halter firm concerning non-payment of maintenance fees on a patent held by TattleTale. Tattletale claimed that the law firm assumed responsibility for ensuring that the fees were paid, but failed to do so resulting in lapse of the patent.TattleTale filed a motion to compel discovery as to which privilege was claimed, but in a detailed Decision, that motion to compel was denied by the U.S. Magistrate and ultimately by the District Court.
According to the law firm, most if not all of the documents on which it claimed privilege related to “loss prevention efforts” after it became aware that TattleTale might assert a malpractice claim. Some of the documents concerned communications with outside counsel, and some admittedly post-dated termination of the attorney-client relationship between TattleTale and Calfee Halter. TattleTale’s primary argument was that documents which came into being during the period of time when it and Calfee Halter still had an attorney-client relationship could not properly be withheld. TattleTale also pressed for an in camera review of the documents by the Federal Court for review and possible production.
In response, the law firm generally argued that “loss prevention communications”, even if made during the existence of the attorney-client relationship were privileged making an argument akin to that preventing disclosure of post-accident design changes in a product liability setting. TattleTale’s response was that privilege could not be asserted over these types of communications because they occurred at a time when the law firm owed fiduciary obligations to the client and therefore would be a conflict of interest for the firm to engage in privileged communications about the client adverse to the client’s interest. There was also limited factual disagreement about the precise date when the attorney-client relationship terminated.
The Court held that the motion presented two discrete issues for resolution:
- When did the attorney-client relationship between TattleTale and Calfee end; and
- Were the “loss prevention communications” concerning a present client which took place during the attorney-client relationship exempt from production and disclosure?
The Court held that it only had to address the first issue if it answered the second question in a way which favored TattleTale.
The Federal Court first ruled that, under the Federal Rules of Evidence, since Ohio state law provided the “rule of decision” on the underlying legal malpractice claim, state law should apply to questions concerning discoverability and admissibility of the allegedly privileged documents. The Federal Court then tried to determine whether Ohio courts would permit production of the “loss prevention communications”, or find them to be privileged, or at least not subject to any exception to the privilege.
The Court first concluded that the “loss prevention communications” were attorney-client privileged. This was especially true with respect to communications between the Calfee Halter firm and outside counsel retained to advise and assist the investigation.
The Court then examined Ohio cases on the attorney-client privilege and various exceptions thereto and held that these “loss prevention communications” were not subsumed within any stated or implied exception historically stated in the State of Ohio to the attorney-client privilege.
The Court then dealt with the “dual representation” argument in which there is a body of case law finding an exception to the attorney-client privilege where an attorney is attempting to serve “two clients” and the communications are not privileged in a subsequent controversy between the two parties. However, the Federal Court disagreed with the reasoning of these cases and held that Ohio had not adopted that reasoning or line of cases. Therefore, TattleTale’s motion to compel production of the internal loss prevention communications was denied.
Some of the lessons of TattleTale are that:
First, courts will generally construe facts and cases to favor the attorney-client privilege where there is a reasonable argument for it. The courts are clearly not inclined to “punish” a lawyer with a problem for seeking outside legal advice.
Courts will favor “loss prevention communications” undertaken by counsel. The courts certainly do not want to penalize attorneys for consulting other counsel to advise them in a time of trouble. In defending legal malpractice cases, it is important to identify, classify and protect any attorney-client privileged documents if the defendant lawyer reaches out and seeks outside legal advice.
One of the background issues in TattleTale was trying to determine when the attorney-client relationship ceased. If an attorney experiences difficulty with a client, even to the point where a client is asserting legal malpractice, care should be taken to clearly and definitively end the relationship so there is a bright line established as to when that relationship ended. This case also presents the perils to law firms generally of undertaking to provide client services which are not strictly speaking legal services, but which might be considered administrative and ministerial. The claim in TattleTale was that the law firm had not paid maintenance fees on the patent leading to a lapse of the patent, which is hardly an act requiring extensive legal analysis or services. Law firms should not generally undertake administrative duties such as giving notices, registering people or items, or paying fees which generally do not fall within the normal range of legal services.
The law firm should carefully distinguish and separate the “client matter” file from other external and internal communications about the alleged malpractice “problem” and what to do about it.
ACROSS BORDERS
Courtesy of the FDCC Website
www.thefederation.org07/27/11 Wright Ryan Const. Inc. v. AIG Co. of Canada
First Circuit (applying Maine law)
In Comparing Other Insurance” Clauses in CGL Insurance Policies, Subcontractor’s Policy Afforded Primary Additional Insured Coverage to the General Contractor
United States Court of Appeals for the First Circuit
In a case described by the First Circuit as “straightforward”, the sole issue on appeal was the application of two “other insurance” clauses to a construction accident resulting in serious bodily injury to a subcontractor employee. Other Insurance clauses “govern priority of coverage between overlapping insurance policies.”The general contractor and its insurer, Acadia Insurance Company, successfully argued that the district court erred in its interpretation of the “Other Insurance” clauses in the two CGL policies. Applying Maine law, the First Circuit agreed that a proper reading of the “Other Insurance” clauses rendered the subcontractor’s policy issued by AIG primary. The First Circuit described the three typical types of “Other Insurance” provisions: an “escape” clause (denies coverage when other insurance is available); a “pro rata” clause (applicable policies share coverage); or an “excess” clause (policy affords coverage only after exhaustion of other insurance). This dispute concerned an “excess” Other Insurance provision which read in pertinent part as follows: a. Primary Insurance This insurance is primary except when b., below, applies.... b. Excess Insurance This insurance is excess over: * * * (2) Any other primary insurance available to you covering liability for damages arising out of the premises or operations for which you have been added as an additional insured by attachment of an endorsement.
The First Circuit explained that the definition of “you” is the key to correctly interpreting and applying Other Insurance provisions. The general contractor and its insurer argued that “you” only refers to the “Named Insured” identified in each policy. Under this view, the general contractor’s policy would afford excess coverage over the additional insured coverage afforded by the subcontractor’s primary policy. Conversely, the subcontractor’s insurer urged the First Circuit to adhere to the trial court’s adoption of the broader definition of “you” which includes the Named Insured as well as any Additional Insureds added to the respective policies. The subcontractor’s insurer argued that the dispute could be resolved “merely by plugging the definition of “you” it advocates into the [subcontractor] policy, which, thus interpreted, provides that its coverage must be excess to the [general contractor’s] policy.”
The First Circuit began its analysis with a plain reading of the policies. The first page of both policies stated: “Throughout this policy the words ‘you’ and ‘your’ refer to the Named Insured shown in the Declarations, and any other person or organization qualifying as a Named Insured under this policy.” Turning to the Declarations page of the each policy the Court noted that the general contractor and subcontractor were designated as the Named Insured in their respective policies No other individual or entity was listed. The Court next examined the policies’ “WHO IS AN INSURED” provision, which extends coverage to various individuals and entities not expressly listed in the respective policies' Declarations and Endorsements.
Both policies specified that “[a]ny organization you newly acquire or form, ... and over which you maintain ownership or majority interest, will qualify as a Named Insured if there is no other similar insurance available to that organization.” Section II did not identify any other persons or entities who may qualify as a Named Insured, and there was no mention of others so qualifying anywhere else in the policies. Reading these provisions in tandem, the Court held “the definition of ‘you’ to be unambiguous: it refers solely to a person or organization listed as a Named Insured in the policy Declarations or ‘qualifying as Named Insured’ by virtue of being newly formed or acquired by a Named Insured.” Where, as here, “a term is expressly defined within the four corners of an insurance policy, an inquiring court must defer to that definition and thereby give effect to the intent of the parties.”
Because the parties did not disclose the existence of any newly formed or acquired organizations that might qualify as a Named Insured, the First Circuit concluded that the term “you” was limited to the Named Insured in the respective policies. As such, the additional insured coverage afforded by the subcontractor’s policy must be treated as primary. Declaring the pertinent language of the insurance contracts to be unambiguous, the First Circuit eschewed extrinsic evidence of the parties' intentions as “wholly unnecessary.”
Nonetheless, the First Circuit was satisfied that its interpretation “is consistent with the design manifest in the parties' course of dealing.” By requiring the subcontractor to afford primary additional insurance coverage in the parties’ written agreement, the general contractor clearly evinced its intent to “shift the risk to [the subcontractor] for liability arising out of [the subcontractor’s] work for [the general contractor. . . This arrangement and the risk-shifting motivation underlying it appear to be typical of subcontracting relationships.”
Submitted by: Catherine O’Donnell and Barbara O’Donnell, Zelle McDonough & Cohen, LLP7/27/11 Leprino Foods v. Factory Mutual Insurance Compant
Tenth Circuit Court of Appeals
The Tenth Circuit Examines whether An “All-Risk” Property Policy Provides Coverage for Mozzarella Cheese, Which Was Contaminated While Stored in a Cold Storage Warehouse Prior To Distribution, Based On An Exception To The Policy’s Contamination Exclusion For Contamination Directly Resulting From Other Physical Damage
Leprino is the largest manufacturer of mozzarella cheese in the United States. It stores vast amounts of cheese in its own cold-storage facilities and third party warehouses. After receiving complaints regarding the odor and flavor of its cheese, Leprino traced the problem to Gress Cold Storage Warehouse. Leprino executives visited Gress and found spilled and damaged products, boxes broken open by forklifts, frozen turkeys left on cheese palettes, and spilled fruit juices. There was a strong odor of fruit in the air, which was stagnant. Leprino’s insurer, Factory Mutual, denied coverage based on the contamination exclusion in the all risk property policy. The exclusion contained an exception for contamination directly resulting from other physical damage.The district court granted Factory Mutual partial summary judgment, holding that the contamination was not covered under the policy’s express terms. However, it allowed the question of whether Leprino reasonably expected coverage for the contamination to go to the jury. The jury found that Leprino subjectively expected that the contamination would be covered but concluded that its expectation was not reasonable. On appeal, the Tenth Circuit reversed and remanded holding that coverage depended on whether the contamination was the direct result of other physical damage.
At trial, the jury was instructed that it should find for Leprino if it determined that the damage to the cheese was the result of some event or condition at the warehouse, other than the mere storage of other food products with the cheese. On appeal, Factory Mutual argued that the contamination was covered only if it was caused by the damaged, spoiled food and not if it was caused by the cheese’s proximity to unspoiled food. While not specifically addressed in the decision, the parties appeared to agree that if the spoiled food caused the contamination, the exception to the exclusion was satisfied.
Factory Farm argued that the testimony of Leprino’s expert, a professor of flavor chemistry at Oregon University, was insufficient to establish that the contamination was caused by spoiled food. The Tenth Circuit disagreed. It held that the expert’s testimony, buttressed by the lay testimony of persons who visited the warehouse and found it to be a “mess,” was sufficient.
The Tenth Circuit also disagreed with Factory Mutual’s claim of error with respect to the district court’s exclusion of Leprino’s revised cold storage guidelines. The Tenth Circuit held that the revised cold storage guidelines, arguably a subsequent remedial measure, were inadmissible as evidence and could not be used for impeachment purposes. Leprino was awarded $14 million in damages. The judgment with prejudgment interest totaled $23 million. The court held that a set off could be taken for Leprino’s recovery of $2.4 million in its direct action against Gress after deducting the costs incurred in pursuing the Gress action.
Submitted by: Diane Bucci and Barbara O’Donnell, Zelle, McDonough & Cohen LLPREPORTED DECISIONS
Admiral Insurance Co. v. State Farm Fire and Casualty Co.
Saretsky Katz Dranoff & Glass, L.L.P., New York (Allen L.
Sheridan of counsel), for appellant-respondent.
Kral, Clerkin, Redmond, Ryan, Perry & Van Etten, LLP,
Melville (Leonard Porcelli of counsel), for respondents-appellants.
Order, Supreme Court, Bronx County (Alexander W. Hunter, Jr., J.), entered May 5, 2009, which, in an action seeking, inter alia, a declaration that defendant must defend and indemnify plaintiff P & K Contracting, Inc. (P & K) in the underlying personal injury action, denied plaintiffs' motion for summary judgment and denied defendant's cross motion for summary judgment dismissing the complaint, unanimously affirmed, without costs.In November 2000, the New York State Dormitory Authority hired P & K, insured by plaintiff Admiral Insurance Company, to perform construction work at North Central Bronx Hospital. On May 14, 2001, P & K entered a subcontract with Shahid Enterprises which required Shahid to procure additional insured coverage for P & K. Shahid obtained that coverage under a policy with defendant State Farm.
On October 19, 2002, Lakhwinder Singh, a Shahid employee, was injured when he fell from a ladder at the job site. In 2003, Singh sued P & K, the City of New York and New York City Health and Hospitals Corporation. It is unclear from the record when P & K first received notice of the accident or suit.
On or about September 22, 2003, United Claims Service (UCS), as "authorized representatives for Admiral Insurance Company, the liability insurance carrier for P & K," sent a letter to Shahid, with copies to Admiral and P & K, stating: "Please accept this letter as notice that in view of the fact that our insured [P & K] did not have any employees or equipment on this job site and that the ladder that the claimant fell from was owned by your company, we demand that you assume the defense and indemnification of this matter." UCS asked Shahid to turn the letter over to its insurance carrier.
On or about December 17, 2003, UCS sent a follow up letter to Shahid, with copies to State Farm, Admiral and Singh's counsel, stating that Shahid was responsible for Singh's injuries and that UCS had been attempting to secure Shahid's cooperation "in the form of reporting this matter to your insurance carrier." UCS asked for information as to the Workers' Compensation carrier to whom the accident was reported and stated that the letter would serve to advise Singh's counsel that his claim should be pursued through State Farm. State Farm contends that its copy of the letter was forwarded to an inactive claims office and that it did not receive the tender until January 22, 2004.
On or about February 5, 2004, State Farm wrote to USC acknowledging receipt of the December 17, 2003 letter and requesting a copy of the file because it had no information about any alleged accident occurring on October 19, 2002. On the same date, State Farm wrote to P & K, requesting information, and to Shahid, asking its principal to call. State Farm also noted that it had been attempting unsuccessfully to contact Shahid.
By letter dated March 19, 2004, addressed to P & K with copies to UCS, Admiral, Singh's counsel and Shahid, State Farm reserved its rights to deny defense and indemnity to P & K based on late notice. By letter dated March 22, 2004, UCS advised State Farm that Shahid had been placed on notice on September 22, 2003 and reiterated its request that State Farm assume the defense of P & K based upon the contractual and indemnification agreement in the subcontract. By letter dated March 23, 2004, addressed to USC with a copy to P & K, State Farm responded that it needed to know when P & K was first given notice of the claim, and whether the matter was in suit.
By letter dated April 13, 2004, addressed to P & K with copies to UCS, Admiral, Shahid, and Singh's attorney, State Farm advised P & K that it was disclaiming coverage based on P & K's alleged failure to give prompt notice. In February 2007, Admiral and P & K commenced this suit seeking a declaration that the State Farm policy offers primary coverage for the Singh action and that State Farm is obligated to defend and indemnify P & K for any damages awarded against P & K in that action and to reimburse Admiral and P & K for all attorneys' fees, costs, expenses and disbursements they had expended therein. State Farm alleged as an affirmative defense that plaintiffs failed to notify it promptly of the accident, claim and suit, as required by the policy.
Plaintiffs moved for summary judgment on the ground that State Farm's April 14, 2004 disclaimer was untimely, and that State Farm thus failed to comply with Insurance Law § 3420(d). State Farm opposed and cross moved for summary judgment dismissing the complaint, arguing that Insurance Law § 3420(d) was not applicable, and that, even if it were, any delay in issuing its denial of coverage was reasonable. Sometime prior to the determination of the motions, the Singh action was settled at mediation, attended by counsel for P & K and Admiral, for $975,000. P & K's share of the settlement was $900,000, which is within the limits of both the Admiral and State Farm policies.
Supreme Court denied both the motion and cross motion. The court found that while Insurance Law § 3420(d) applied because this action was commenced long before the settlement in the underlying action, and P & K, a co-plaintiff, had a real stake in its outcome, there was a question of fact as to whether State Farm had disclaimed coverage as soon as was reasonably possible. We now affirm.
Insurance Law § 3420(d)(2) requires that an insurer intending to disclaim liability under a liability policy "shall give written notice as soon as is reasonably possible of such disclaimer of liability or denial of coverage to the insured and the injured person or any other claimant." "The purpose of Insurance Law § 3420 (d) is to protect the insured, the injured party, and any other interested party who has a real stake in the outcome' from prejudice resulting from a belated denial of coverage" (Tops Mkts. v Maryland Cas., 267 AD2d 999, 1000 [1999], quoting Excelsior Ins. Co. v Antretter Contr. Corp., 262 AD2d 124, 127 [1999]). Recognizing that this is not a risk to which a coinsurer is subject, New York courts have held that § 3420(d) does not apply to an insurer seeking contribution from a coinsurer for the defense and indemnification of an alleged joint insured (see American Guar. & Liab. Ins. Co. v State Natl Ins. Co., Inc., 67 AD3d 488 [2009]; Bovis Lend Lease LMB, Inc. v Royal Surplus Lines Ins. Co., 27 AD3d 84, 92 [2005]; AIU Ins. Co. v Investors Ins. Co., 17 AD3d 259, 260 [2005]; Top Mkts., 267 AD2d at 1000).
In contrast, an insurer has been required to give timely notice of disclaimer pursuant to Insurance Law § 3420(d), where the letter requesting a defense and indemnity was sent by the plaintiff's insurance carrier on behalf of the plaintiff (see Industry City Mgt. v Atlantic Mut. Ins. Co., 64 AD3d 433, 433 [2009] ["Industry correctly argues that a March 2005 letter to defendant, written on Industry's behalf by its own insurer's claims administrator, seeking coverage for Industry as an additional insured, constituted timely notice to the insurer within the meaning of Insurance Law § 3420(a)(3), and as such required a timely disclaimer from defendant"]; J.T. Magen v Hartford Fire Ins. Co., 64 AD3d 266, 269 [2009] ["the tender letter insurer Travelers wrote on behalf of plaintiff and others to insurance carrier Hartford - asking that their mutual insureds be provided with a defense and indemnity, as additional insureds 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 pursuant to Insurance Law § 3420(d)"], lv dismissed, 13 NY3d 88 [2009]; 233 E. 17th St., LLC v L.G.B. Dev., Inc., 78 AD3d 930, 932 [2010] ["Contrary to Mt. Hawley's contention, it was required to give timely notice of disclaimer pursuant to Insurance Law § 3420(d), even though the letter requesting a defense and indemnity was sent by the plaintiff's insurance carrier on behalf of the plaintiff"]).
Here too, the relevant correspondence demonstrates that the tender was issued on P & K's behalf and fulfilled the State Farm policy's notice-of-claim requirements so as to trigger State Farm's obligation to issue a timely disclaimer to P & K pursuant to Insurance Law § 3420(d). In its September 22, 2003 letter to Shahid, UCS, as Admiral's representative, sought a defense and indemnification for P & K. UCS's December 17, 2003 follow-up, which referenced the September 22, 2003 letter, was sent to Shahid and State Farm. When State Farm received the letter, it acknowledged the claim and, among other things, wrote directly to P & K, requesting information. By letter dated March 19, 2004, State Farm addressed its reservation of rights letter to P & K. In its March 22, 2004, UCS reiterated its request that State Farm assume the defense of P & K based upon the contractual and indemnification agreement in the subcontract. State Farm's April 13, 2004 disclaimer letter was addressed to P & K.
P & K is also a named plaintiff in this declaratory judgment action. At the time the action was commenced, the Singh action remained pending. While the action was later settled, the rider to the mediation agreement expressly states that State Farm declined to participate in the mediation or contribute to the settlement, which was without prejudice to P & K's and Admiral's right to pursue this declaratory judgment action.
Although Insurance Law § 3420(d) is applicable to the tender on behalf of P & K, triable issues of fact exist regarding the timeliness of State Farm's disclaimer, given the factual dispute as to whether any delay in issuing its denial of coverage was brought about by the deliberate failure of Admiral and UCS to respond to State Farm's reasonable and good faith request for assistance in investigating the underlying claim.
The timeliness of a disclaimer is generally a question of fact (see Continental Cas. Co. v Stradford, 11 NY3d 443, 449 [2008]), unless the basis for the disclaimer was, or should have been, readily apparent before the onset of the delay (see First Fin. Ins. Co. v Jetco Contr. Corp., 1 NY3d 64, 69 [2003]; West 16th St. Tenants Corp. v Public Serv. Mut. Ins. Co., 290 AD2d 278, 279 [2002], lv denied 98 NY2d 605 [2002]). "An insurer is not required to disclaim on timeliness grounds before conducting a prompt, reasonable investigation into other possible grounds for disclaimer; in fact, a reasonable investigation is preferable to piecemeal disclaimers" (DiGuglielmo v Travelers Prop. Cas., 6 AD3d 344, 346 [2004], lv denied 3 NY3d 608 [2004] [internal quotation marks omitted]).
Here, plaintiffs' claim that State Farm delayed 113 days is based on their contention that State Farm could have disclaimed upon receiving the December 17, 2003 letter. However, an issue of fact exists as to whether State Farm acted reasonably in seeking to investigate further inasmuch as that letter contained no information regarding when P & K received notice of the incident or suit, and thus did not make it "readily apparent" that State Farm had the right to disclaim coverage. Moreover, this Court has disapproved of the policy urged by plaintiffs to "disclaim now and investigate later" (Ace Packing Co., Inc. v Campbell Solberg Assoc., Inc., 41 AD3d 12, 15-16 [2007] [internal quotation marks omitted]).
Finally, we note that if coverage is available under the State Farm policy, it would be a co-primary insurer with Admiral (see 233rd St. Partnership, L.P. v Twin City Fire Ins. Co., 52 AD3d 292, 293 [2008]).
Illinois Union Ins. Co. v. Assurance Co. of AmericaHodgson Russ LLP, Buffalo (Kevin D. Szczepanski of counsel),
for appellant.
Melito & Adolfsen P.C., New York (S. Dwight Stephens of
counsel), for respondent.
Order, Supreme Court, New York County (Charles E. Ramos, J.), entered October 6, 2009, which, insofar as appealed from as limited by the briefs, denied in part plaintiff's motion for summary judgment and found that, under California law, plaintiff Illinois Union Insurance Company was entitled only to reimbursement for defense costs associated with the slander claim in the underlying action, reversed, on the law, with costs, to declare that defendant Assurance Company of America is obligated to reimburse Illinois Union for the defense costs it paid in the underlying action.Under California law, which the parties agree governs this action, whether the plaintiff in the underlying action was an "Employee" under the Illinois Union policy is a dispositive issue; if the plaintiff was an employee, then Illinois Union had the duty to defend, but if the plaintiff was not an employee, Illinois Union had no such duty, and thus would be entitled to full reimbursement (see County of San Bernardino v Pacific Indem. Co., 56 Cal App 4th 666, 680 [1997], lv denied 1997 Cal LEXIS 6282 [1997]; Devin v United Servs. Auto. Assn., 6 Cal App 4th 1149, 1157 [1992], lv denied 1992 Cal LEXIS 4241 [1992]). The record establishes that Cronnelly, the plaintiff in the underlying action, was not an "Employee" within the definition of Illinois Union's policy.
We have considered the remaining contentions and find them unavailing.
All concur except Saxe, J.P. and Acosta, J. who dissent in a memorandum by Saxe, J.P. as follows:
Saxe, J.P. (dissenting)
I agree with my colleagues that the question of whether the plaintiff in the underlying action was an "employee" under the Illinois Union policy is a dispositive issue; if that plaintiff was an employee, then Illinois Union had the duty to defend, but if plaintiff was not an employee, Illinois Union had no such duty, and thus would be entitled to full reimbursement of its defense costs (see County of San Bernardino v Pacific Indem. Co., 56 Cal App 4th 666, 680 [1997], lv denied 1997 Cal LEXIS 6282 [1997]; Devin v United Servs. Auto. Assn., 6 Cal App 4th 1149, 1157 [1992], lv denied 1992 Cal LEXIS 4241 [1992]). However, I disagree with their conclusion that the record permits that determination to be made as a matter of law.Victoria Cronnelly, the nurse-anesthetist who was the plaintiff in the underlying action, sued plaintiff's insured, the El Dorado Surgery Center, based on an oral agreement under which she would be entitled to perform anesthesia services on the Center's patients in a "second room" that would be for her exclusive use. She alleged that the defendants had breached that oral agreement by permitting others to perform anesthesia in the second room, and further asserted that one of the Center's officers damaged her by making defamatory misstatements about her. She was ultimately awarded a $30,000 verdict on her claim of negligent misrepresentation only.
The question of whether the Illinois Union policy issued to El Dorado covered Cronnelly's claim turns on its definition of the term "employees": "Employees means all persons who were, now are or shall be: a) employees of the Company, including voluntary, seasonal and temporary employees[,] b) any individuals applying for employment with the Company, and c) any individuals who are leased or are contracted to perform work for the Company, or are independent contractors for the Company, but only if such individuals perform work or services solely for or on behalf of the Company." This exceedingly broad definition's use of the phrase "all persons who were, now are or shall be" (emphasis added) employees of the insured, would seem to cover claims not only by current employees performing work solely for El Dorado, but also individuals who were to subsequently become employees performing services solely for El Dorado.
The limited information offered on these motions fails to definitely establish whether Cronnelly qualified as an employee under that definition, but based on Cronnelly's complaint, it appears that she may fall within its parameters. I would therefore deny summary judgment.
Savik, Murray, etc. v. ITT Hartford Ins. GroupGoetz Fitzpatrick LLP, New York (Neal M. Eiseman of
counsel), for appellant.
Churbuck Calabria Jones & Materazo, P.C., Hicksville
(Nicholas P. Calabria of counsel), for ITT Hartford Insurance Group,
respondent.
Kalison, McBride, Jackson & Robertson, P.C., New York
(Andrew F. McBride III of counsel), for QBE Insurance Corp.,
respondent.
Order, Supreme Court, New York County (Charles E. Ramos, J.), entered February 2, 2010, which, insofar as appealed from as limited by the briefs, upon reargument, effectively adhered to its judgment, entered May 12, 2009, declaring the verified amended complaint dismissed, modified, on the law, to declare that Hartford and QBE had no duty to defend plaintiff in the underlying arbitration, and, as so modified, affirmed, without costs.This is an action for a judgment granting reimbursement of defense costs and declaring that defendants, plaintiff's insurers, were obligated to defend and indemnify plaintiff in an arbitration proceeding brought by Farmingdale Development Corporation (FDC). On this record, we find, as a matter or law, that Hartford and QBE did not receive timely notice of the underlying occurrence as required by their respective policies. Plaintiff is a limited liability company managed by Frank Vero, Sr. and two other managing members. In 1998, plaintiff began its work as the construction manager in the development of a shopping center pursuant to a written agreement with FDC, the owner. As to this project, plaintiff was an additional insured under standard commercial general liability policies issued by Hartford and QBE. A third carrier, defendant The Insurance Corp. of New York, is now in rehabilitation. Aurora Construction, Inc. performed construction management duties on behalf of plaintiff. Vero, who was Aurora's president, owned its stock solely or jointly with his son at different times. Plaintiff left the job site in May 2000, three months after the project was substantially completed. As confirmed by a September 1999 letter signed by Joseph Koslow, plaintiff's project executive, the project had been plagued by numerous ongoing roof leaks.
On or about May 12, 2004, FDC served plaintiff with an arbitration demand, which cited plaintiff's failure to take action with respect to the construction of the project's roofing system and parapets. According to the arbitration demand, extensive roof leaks occurred in all of the project's buildings. It was not until June 4, 2004 that plaintiff notified Hartford and QBE of FDC's claim or the occurrence. Both carriers thereupon issued reservation of rights letters and, after plaintiff commenced this action, moved for summary judgment. The grounds for summary judgment asserted by Hartford and QBE included plaintiff's purported breach of a provision in each of their policies that required plaintiff, as the insured, to notify the respective carrier, as soon as practicable, of "an occurrence' or an offense which may result in a claim." The motion court granted summary judgment and dismissed the complaint on the ground that the underlying claim came under the work product exclusion of each of the applicable policies. Upon granting leave to reargue, the court again ruled in favor of Hartford and QBE, finding that the costs FDC sought to recover in the underlying arbitration arose out of plaintiff's work product.
For reasons that follow, the judgment below should be modified on the late notice-of-occurrence ground that was asserted by Hartford and QBE but never addressed by the motion court.
"Where a policy of liability insurance requires that notice of an occurrence be given as soon as practicable,' such notice must be accorded the carrier within a reasonable period of time" (Great Canal Realty Corp. v Seneca Ins. Co., Inc. 5 NY3d 742, 743 [2005] [citation omitted]). "The insured's failure to satisfy the notice requirement constitutes a failure to comply with a condition precedent which, as a matter of law, vitiates the contract'" (id. [citation omitted]).
Nevertheless, circumstances that give rise to an insured's "good-faith belief of nonliability may excuse or explain a seeming failure to give timely notice" (Security Mut. Ins. Co. of N. Y. v Acker-Fitzsimons Corp., 31 NY2d 436, 441 [1972]).
By an August 11, 2003 letter to the roofing manufacturer, John A. Buchholz, the project's architect stated, among other things, that FDC was prepared to have the roof leaks repaired and begin litigation with plaintiff and others. The letter indicates that it was carbon copied to Vero. Plaintiff does not challenge the admissibility of the letter. Instead, plaintiff coyly asserts that there is nothing in the record to confirm that Vero received a copy of the letter. This assertion rings hollow as plaintiff has not submitted an affidavit on this or any other issue by Vero or, for that matter, either of plaintiff's other two members. To be sure, plaintiff never denied that it received Buchholz's letter in 2003. Plaintiff skirted the issue of notice of the occurrence by submitting the affidavit of Nicholas R. Aldorisio, Aurora's CFO, who merely stated that "[t]he first actual notice to [plaintiff] of an affirmative claim by Farmingdale occurred when [plaintiff] received Farmingdale's demand for arbitration on or about May 2004." Aldorisio's affidavit begs the question because it addresses plaintiff's receipt of a formal claim as opposed to its knowledge of an " occurrence' or offense which may result in a claim." An insured's duty to timely report an occurrence is distinct from its duty to report a claim (American Tr. Ins. Co. v Sartor, 3 NY3d 71, 75 [2004]).
Hartford and QBE made prima facie showings of entitlement to judgment as a matter of law based upon plaintiff's 4½-year delay in notifying them of the occurrence (see e.g. Sorbara Constr. Corp. v AIU Ins. Co., 11 NY3d 805, 806 [2008]). In opposition, plaintiff was required to demonstrate the existence of actual issues of fact by assembling and laying bare proofs in order to show that its claims are capable of being established at trial (cf. Machinery Funding Corp. v Loman Enters., 91 AD2d 528, 528 [1982]). On the basis of the construction management agreement, the dissent posits that there is an issue of fact as to whether plaintiff had a reasonable belief in its nonliability. The record does not support the dissent's conclusion because there is no affidavit setting forth what plaintiff believed or did not believe at the time of the occurrence or thereafter. For this reason, plaintiff's failure to submit an affidavit by any of its members is fatal. Hence, plaintiff has failed to raise a triable factual issue as to whether there was a reasonable excuse for its delay in notifying Hartford and QBE of the occurrence.
We also reject plaintiff's claim of a reasonable excuse. In Ferreira v Mereda Realty Corp. (61 AD3d 463, 463 [2009]), we found that "the insureds could not have reasonably believed that there would be no litigation arising out of the accident," once they acquired knowledge of the seriousness of the underlying injury. In Eveready Ins. Co. v Levine (145 AD2d 526, 528 [1988]), the Second Department found that an insured's "bare reliance upon the fact that no one complained of any bodily injuries at the time of the accident" did not excuse the insured's failure to notify its carrier until after suit was commenced. By contrast, in Kambousi Rest. v Burlington Ins. Co. (58 AD3d 513, 515 [2009]), we held that a good-faith belief in nonliability was established by statements and actions of an injured patron and her husband that led the insured restauranteur to believe that the couple would not seek to hold the insured liable for a trip-and-fall accident. Like the insureds in Ferreira and Eveready, plaintiff appreciated the seriousness of the occurrence and its potential for liability. Indeed, as footnoted above, early on in the project, plaintiff's project executive saw fit to advise a subcontractor to notify its own carrier about the "disaster." Unlike the insured in Kambousi, however, plaintiff offered no evidence of any representation that could have reasonably led it to believe that FDC would not seek to hold it liable.
Correspondence sent by Aurora also establishes when plaintiff acquired notice of the underlying occurrence. On or about December 4, 2003, Aurora apparently faxed a letter from Buchholz to plaintiff's counsel. The fax cover sheet reads as follows: "Attached please find a letter received from John Buchholz regarding the roof leak issue at Airport Plaza. We have written correspondence in the past detailing our position as construction manager. Please draft an appropriate response." By way of another fax cover sheet, dated February 2, 2004, Aurora informed counsel that it appeared that the owner was blaming Aurora for the leaks. Although they are separate entities, Aurora was plaintiff's agent. It is settled that knowledge acquired by an agent acting within the scope of its authority is presumptively imputed to its principal (Kirschner v KPMG LLP, 15 NY3d 446, 465 [2010]). Plaintiff has failed to rebut this presumption particularly in light of its close relationship with Aurora.
"An insurer's duty to defend is liberally construed and is broader than the duty to indemnify," in order to ensure an adequate defense of the insured, "without regard to the insured's ultimate likelihood of prevailing on the merits of a claim" (Fieldston Prop. Owners Assn., Inc. v Hermitage Ins. Co., Inc., 16 NY3d 257, 264 [2011]). A liability insurer has a duty to defend its insured in pending litigation if the pleadings allege a covered occurrence, even though the facts outside the four corners of those pleadings indicate that the claim may be meritless or not covered (Fitzpatrick v American Honda Motor Co., 78 NY2d 61, 63 [1991]).
Thus, timely notice of the occurrence would have required Hartford and QBE to defend plaintiff in the arbitration proceeding inasmuch as the owner's arbitration claim included the costs of the repair of water damage and the remediation of mold conditions in various tenant spaces. Such costs would be associated with a legal liability incurred by property damage to something other than plaintiff's work product (see e.g. George A. Fuller Co. v United States Fid. & Guar. Co., 200 AD2d 255, 259, lv denied 84 NY2d 806 [1994]). In any event, plaintiff's failure to provide Hartford and QBE with timely notice of the underlying occurrence is dispositive.
As this is an action for a declaratory judgment, the rights of the parties should have been declared (see Medical World Publ. Co. v Kaufman, 29 AD2d 859 [1968]). The mere dismissal of the complaint, as recited by the judgment the court adhered to, is not an affirmative declaration of the parties' rights (id.). Accordingly, the rights of the parties are declared as indicated above (see e.g. 600 W. 115th St. Corp. v 600 W. 115th St. Condominium, 180 AD2d 598, 598 [1992]).
All concur except Andrias, J.P. and Moskowitz, J. who dissent in a memorandum by Andrias, J.P. as follows:
ANDRIAS, J.P. (dissenting)
Although the majority finds that the work product exclusions in the subject commercial general liability (CGL) policies are inapplicable and would not, in and of themselves, bar plaintiff's claim for its defense costs in the underlying arbitration, they would nevertheless grant summary judgment dismissing this action on the ground that plaintiff did not provide defendants ITT Hartford Insurance Group (Hartford) and QBE Insurance Corp. (QBE) with notice of the underlying occurrences as soon as practicable. Because I believe that issues of fact exist as to whether there was an "occurrence" within the meaning of the policies, whether the work product exclusions apply, and, if there was an occurrence, whether plaintiff's delay in notifying defendants Hartford and QBE is excusable, I respectfully dissent and would reinstate the complaint.On or about April 1, 1998, Farmingdale Development Corp. (FDC) retained plaintiff, Savik, Murray & Aurora Construction Management Co., LLC (SMA), as construction manager for its Airport Plaza shopping center project (the Project). Under the Construction Management Agreement (CMA), SMA, as FDC's agent, was to arrange for, coordinate and supervise the provision of all labor, materials, services and equipment for the Project "in accord with plans and specifications" prepared by FDC's architect or other professional designer, and assist FDC in its dealings with contractors and suppliers to enforce warranties. SMA retained Aurora Construction, Inc. (Aurora), owned by Frank Vero, Sr., a managing member of SMA, to provide personnel to perform SMA's duties under the CMA. Aurora or Expressway Acoustics (Expressway), a division of Aurora, was retained by FDC as a carpentry contractor.
The project was substantially completed by February 2000. SMA left the job site in May 2000. On or about May 12, 2004, FDC filed a demand for arbitration seeking $872,249,96 in damages from SMA for "breach of the [CMA] which required SMA to, among other things, supervise tradesman in the construction of the Airport Plaza by assuring that said tradesman comply with the architectural plans . . . " FDC alleged that SMA failed to "take action against the relevant tradesman concerning the construction of the roofing system and parapets on Phase I and II of the project," which resulted in persistent and extensive roof leaks; failed "to require [*5]tradesman to perform their respective tasks in accordance with approved methods [which] resulted in other structural damage to the buildings"; and failed to "obtain the required roof warranties . . . "
SMA was an additional insured under CGL policies issued by Hartford and QBE which covered "Property damage," including "physical injury to tangible property, including all resulting loss of use of that property," caused by an occurrence during the policy period. An "occurrence" is defined as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions."
The policies exclude property damage to:
"That particular part of real property on which you or any contractors or subcontractors working directly or indirectly on your behalf are performing operations, if the property damage' arises out of those operations; or . . . [t]hat particular part of any property that must be restored, repaired or replaced because your work' was incorrectly performed on it" (Work Product Exclusion).
They also contain a notice provision which provides: "You Must see to it that we are notified as soon as practicable of an occurrence' . . . which may result in a claim." The Hartford policy was effective from March 16, 1998 to May 3, 2000; the QBE policy from March 15, 2002 to March 15, 2005.On June 4, 2004, SMA put QBE and Hartford on notice of FDC's claim. By letters dated June 16, 2004 and June 28, 2004, respectively, QBE and Hartford reserved their rights with respect to providing a defense and indemnification. In January 2005, FDC particularized its arbitration claims, asserting that as a result of SMA's breach of the CMA, certain "flashing terminations," "entrance peaks," gutters and sidewalks were not installed in accordance with the contract documents and that leaks passed through the roof and walls of the shopping center, causing mold and water and other property damage. FDC also claimed that due to inadequate insulation a pipe burst in freezing weather, causing additional water damage, and that SMA failed to obtain a "Johns Manvill[e] 15 year no dollar limit warranty with respect to all buildings except buildings A, B and C." FDC estimated that the cost of repair, including "the replacement of the parapet cap assembly and repairing the water damage to various tenant spaces and remediating the mold conditions is $512,500.00." By letter dated March 17, 2005, Hartford disclaimed coverage on the grounds that there was no claim for "property damage" caused by an "occurrence," there was no allegation of property damage during the policy, and the work product exclusion excluded coverage.
On or about June 8, 2006, an arbitration award in the amount of $214,689 was entered in FDC's favor against SMA for breach of contract in connection with the improper installation of the roofing system ($130,737), needed emergency repairs ($11,318), the cost of obtaining the roof warranties ($62,374), and the cost of investigating and remediating the damage ($9,900). SMA then commenced this action seeking reimbursement of defense and indemnification costs.
Supreme Court dismissed the complaint, finding that "the CGL policies did not cover [FDC]'s claims, because SMA was responsible for the entire Project as construction manager, and any damage to the Project was, in effect, damage caused by SMA's work product, which was excluded from coverage." Upon granting reargument, Supreme Court adhered to this determination, stating that "the damages sought in the underlying arbitration were costs to correct defective installation of walkway canopies, parapet wall sections and metal cap flashing causing [*6]water and mold to infiltrate, and did not arise from an occurrence' resulting in damage to property distinct from SMA's own work product . . . The damages were allegedly caused by, inter alia, SMA's failure to supervise contractors, their services and the installation of materials in accordance with the project plans and specifications . . . Thus, the costs that [FDC] sought were the costs allegedly incurred to remediate SMA's own work product." Supreme Court did not reach the late notice issue.
While the duty to defend is broader than the duty to indemnify, "it is equally well settled that the obligation of an insurer to defend does not extend to claims which are not covered by the policy or which are expressly excluded from coverage" (30 W. 15th St. Owners Corp. v Travelers Ins. Co., 165 AD2d 731, 733 [1990]). "[A]n insurer can be relieved of its duty to defend if it establishes as a matter of law that there is no possible factual or legal basis on which it might eventually be obligated to indemnify its insured under any policy provision" (Allstate Ins. Co. v Zuk, 78 NY2d 41, 45 [1991]).
CGL policies provide coverage for physical damage to others and not for contractual liability of the insured for economic loss due to faulty workmanship or non-bargained for outcomes. (see George A. Fuller Co. v United States Fid. & Guar. Co., 200 AD2d 255, 259 [1994], lv denied 84 NY2d 806 [1994]). Hence, Courts have typically found no "occurrence" or that the work product exclusion applies in cases involving damage to the product the contractor was to construct (see Exeter Bldg. Corp. v Scottsdale Ins. Co., 79 AD3d 927 [2010] ["because the complaint seeks relief for conduct that falls solely and exclusively under the work product exclusions of the CGL policies, and the damages sought therein do not arise from an occurrence resulting in damage to property distinct from the work product of Exeter or its hired subcontractors, Scottsdale is not obligated to provide Exeter with a defense or to indemnify it in the underlying action"]; Bonded Concrete, Inc. v Transcontinental Ins. Co., 12 AD3d 761 [2004]). In contrast, a covered occurrence may be found where the faulty workmanship "creates a legal liability by causing bodily injury or property damage to something other than the work product" (Fuller, 200 AD2d at 259; see Baker Residential Ltd. Partnership v Travelers Ins. Co., 10 AD3d 586 [2004]).
In addition to seeking to recover damages in connection with the improper installation of the roofing system, emergency repairs and the cost of obtaining the roof warranties, FDC sought to recover for "damage to various tenant spaces." On the record before us, issues of fact exist as to whether that damage was an "occurrence" within the meaning of the policy or within the scope of the work product exclusion. Although the insurers claim that SMA was responsible for construction of the entire building, the plans and specifications that would establish the scope of SMA services under section 2.02 of the CMA are not included in the record. While Aurora's Vice-President, when asked if Aurora was responsible for supervising Expressway's work, replied that SMA "was responsible for everything, and . . . hired Aurora to supervise," he also stated that he did not think that SMA did any work directly for tenants. According to Aurora's project manager, "SMA did not coordinate and had nothing whatsoever to do with the construction of the interior spaces" and Expressway was retained by certain tenants to perform work in some of the interior spaces, including the installation of Sheetrock and ceiling tiles. The project manager also stated that other tenants retained their own contractors to renovate the raw space delivered by Farmingdale. Thus, there is an issue of fact as to whether the damages sought in the underlying arbitration arise from an occurrence resulting in damage to property distinct from the work product of SMA. [*7]
That the arbitrators did not award FDC anything for the cost of replacing damaged interior tile and drywall does not prove otherwise. An insurer may be obligated to defend its insured even if, at the conclusion of an underlying action, it is found to have no obligation to indemnify its insured (see Automobile Ins. Co. of Hartford v Cook, 7 NY3d 131, 137 [2006]; Global Constr. Co. LLC v Essex Ins. Co., 52 AD3d 655, 655-656 [2008]).The majority would nevertheless dismiss on the ground that Hartford and QBE did not receive timely notice of the underlying occurrence as required by their respective policies. I disagree.
Although there is proof that the project was plagued by leaks, it is unclear when SMA learned that the leaks had caused damage to various tenant spaces, as opposed to SMA's work product. Even if Hartford and QBE are deemed to have satisfied their prima facie burden on the late-notice issue by pointing to SMA's multi year delay in providing them with notice (see Tower Ins. Co. of New York v Classon Hgts, LLC, 82 AD3d 632, 634 [2011]), an issue of fact exists as to whether the delay was excusable.
"[A]n insured's good-faith belief in nonliability, when reasonable under the circumstances, may excuse a delay in notifying the insurer" (Spa Steel Prods. Co. v Royal Ins., 282 AD2d 864, 865 [2001] [internal quotation marks omitted]). The issue of whether an insured had a good faith belief in nonliability, and whether that belief was reasonable, ordinarily presents an issue of fact (id. at 865; see also Deso v London & Lancashire Indem. Co. of Am., 3 NY2d 127, 129 [1957]; Morehouse v Lagas, 274 AD2d 791, 794 [2000]). It is only when the facts are undisputed and not subject to conflicting inferences that an issue can be decided as a matter of law (see Greenwich Bank v Hartford Fire Ins. Co., 250 NY 116, 131 [1928]).
Here, both Aurora's CFO and its Vice-President averred that the first actual notice of an affirmative claim by FDC against SMA occurred when SMA received the arbitration demand in May 2004. In a signed statement, Aurora's CFO stated that "[s]ubsequent to the completion of the project, [SMA] received correspondence directed to the roofing manufacturer regarding leaks. None of the correspondence was directed to [SMA] . . . Due to the fact that Aurora was not involved with the roof construction, we felt that there was no exposure on the part of Aurora." An issue of fact exists as to whether this belief was reasonable in light of section 15.06 of the CMA, which provides that the contractors hired by SMA would assume liability and responsibility for their own work and that "in the event of any loss or damage arising out of the construction of the Project, [FDC] shall look first to those contractors for recovery of any damages"; that SMA did not "insure, guarantee or warrant" the work of the independent contractors; and that in the event of a dispute between FDC and any such contractor, SMA was obligated to assist FDC "in the preparation of any claim . . . and otherwise consult with [FDC] and the counsel about the course of those proceedings."
Given these contractual provisions, even if SMA can be charged with its agent Aurora's knowledge that there was a problem with leaks on the project, that would not establish, as a matter of law, that SMA was aware of an occurrence that would lead to a claim against it as construction manager, rather than a claim against the contractors who actually performed the work and their suppliers. For example, in the September 1999 letter cited by the majority, Aurora's project manager advised a subcontractor to notify its insurance company of the leak problem, implying that the contractor would be held accountable.
True, an August 11, 2003 letter from the project architect to the roofing contractor, which indicates that it was copied to Vero, a managing member of SMA and principal of Aurora, did state that over 100 roof leaks had been documented and that FDC was prepared to perform [*8]repairs and bring suit against SMA and others. However, the letter does not identify SMA as a copied party and there is nothing in the record that would confirm that Vero received the copy.
The majority would disagree, stating that plaintiff "coyly" asserts that there is nothing in the record to confirm receipt by Vero, who has not submitted an affidavit, and that the affidavit of Aurora's CFO begs the question because it addresses plaintiff's receipt of a formal claim as opposed to its knowledge of an "occurrence" which may result in a claim. However, neither Hartford nor QBE offered anything that would suffice to raise a presumption that the August 11, 2003 letter was actually mailed to and received by Vero (see Hospital for Joint Diseases v Nationwide Mut. Ins. Co., 284 AD2d 374 [2001]), such as a certificate of mailing or "proof of a standard office practice or procedure designed to ensure that items are properly addressed and mailed" (Residential Holding Corp. v Scottsdale Insurance Company, 286 AD2d 679, 680 [2001]).
Nor do the December 4, 2003 and February 2, 2004 faxes from Aurora to its counsel establish that SMA had notice of an occurrence that could lead to a claim. The December 4, 2003 fax does not reference the August 11, 2003 letter and was sent in response to a fax from the Project Architect to Vero which covered the minutes of a meeting concerning roof issues. While the minutes discuss leaks, they do not place SMA on notice that FDC would seek to hold SMA, rather than the contractors or suppliers, responsible for them.
The February 2, 2004 fax was in response to a January 30, 2004 letter from the Project Architect to Peter Levine of FDC concerning remedial work performed and to be performed to the roof and the need "to review evidence we are going to pursue with Aurora." On February 2, 2004, Aurora forwarded that letter to counsel, noting: "It appears . . . that Airport Plaza is blaming the leaks . . . on Expressway Acoustics (Aurora). . . Please review and determine if any action needs to be taken at this time." The vague reference to the need "to review evidence we are going to pursue with Aurora" does not provide clear cut proof that SMA received notice that FDC would seek to hold it accountable for the roof defects. In light of the language of the CMA referenced above, the reference may have related to SMA's duty to cooperate in pursuing claims against the roofing contractors that actually did the work, not as a claim against SMA for breach of the CMA. Indeed, even if notice to Aurora may be deemed notice to SMA, when Aurora forwarded the January 30, 2004 letter to counsel for review, it was concerned with a claim against Expressway, as a contractor that provided carpentry work on the roof for FDC, not a claim against SMA, as construction manager.
Accordingly, I would reinstate the complaint.
Finkelstein & Partners, LLP, Newburgh, N.Y. (Ann R. Johnson
of counsel), for appellant.
Burke, Scolamiero, Mortati & Hurd, LLP, Albany, N.Y. (Sarah
B. Brancatelle of counsel), for
respondents.
DECISION & ORDER
In an action to recover damages for personal injuries, the plaintiff appeals from an order of the Supreme Court, Dutchess County (Wood, J.), dated September 2, 2010, which, in effect, granted the defendants' motion for summary judgment dismissing the complaint on the ground that she did not sustain a serious injury within the meaning of Insurance Law § 5102(d).
ORDERED that the order is reversed, on the law, with costs, and the defendants' motion for summary judgment dismissing the complaint is denied.
The defendants failed to meet their prima facie burden of showing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident (see Toure v Avis Rent A Car Sys., 98 NY2d 345; Gaddy v Eyler, 79 NY2d 955, 956-957; Alvarez v Prospect Hosp., 68 NY2d 320, 324; Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 852; Zuckerman v City of New York, 49 NY2d 557, 559). The conclusion set forth in the affirmed report of the defendant's examining physician, Dr. Jeffrey S. Oppenheim, that the plaintiffs' complaints were subjective in nature and that she had "no objective identifiable neurological deficit, and therefore, no objective neurological disability," was conclusory, speculative, and insufficient to establish the defendants' prima facie entitlement to judgment as a matter of law, as Dr. Oppenheim conducted no objective range-of-motion testing (see Borras v Lewis, 79 AD3d 1084; Powell v Prego, 59 AD3d 417, 418-419; cf. Conder v City of New York, 62 AD3d 743. Further, Dr. Oppenheim's assertion that the plaintiff, during his examination of her, was "essentially unable" to move her neck in any direction "in any significant way that would allow for a definition of range of motion testing" suggests that any limitation was not insignificant (cf. Kharzis v PV Holding Corp., 78 AD3d 1122; Kjono v Fenning, 69 AD3d 581). Accordingly, the Supreme Court should have denied the defendants' motion for summary judgment dismissing the complaint.
Chery v. Castello
Harmon, Linder & Rogowsky, New York, N.Y. (Mitchell Dranow
of counsel), for appellant.
Mendolia & Stenz, Westbury, N.Y. (Tracy Morgan of counsel),
for respondent.
DECISION & ORDER
In an action to recover damages for personal injuries, the plaintiff appeals, as limited by her brief, from so much of an order of the Supreme Court, Queens County (Grays, J.), dated May 20, 2010, as denied that branch of her motion which was to vacate so much of a prior order of the same court dated October 29, 2009, as granted the unopposed motion of the defendant Ronnie Thornton for summary judgment dismissing the complaint insofar as asserted against her on the ground that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) and, thereupon, to deny that motion.
ORDERED that the order is reversed insofar as appealed from, on the law and in the exercise of discretion, with costs, that branch of the plaintiff's motion which was to vacate so much of the order dated October 29, 2009, as granted the motion of the defendant Ronnie Thornton for summary judgment dismissing the complaint insofar as asserted against her and, thereupon, to deny that motion, is granted, so much of that order as granted that motion is vacated, and that motion is denied.
The plaintiff demonstrated a reasonable excuse for her failure to oppose the motion of the defendant Ronnie Thornton for summary judgment dismissing the complaint insofar as asserted against her (see CPLR 5015[a][1]; Political Mktg., Int'l., Inc. v Jaliman, 67 AD3d 661; cf. Felder v New York City Tr. Auth., 238 AD2d 543; Krystofic v Rapisardi, 112 AD2d 196, 196-197). The plaintiff also "established the existence of a triable issue of fact constituting a meritorious opposition to" Thornton's motion (Political Mktg., Int'l., Inc. v Jaliman, 67 AD3d at 662; see CPLR 5015[a][1]). The plaintiff provided competent medical evidence establishing that the alleged injuries to the lumbar region of her spine constituted a serious injury under the permanent consequential limitation of use and/or significant limitation of use categories of Insurance Law § 5102(d) (see Dixon v Fuller, 79 AD3d 1094, 1094-1095). She also provided a reasonable explanation for a cessation of medical treatment (see Pommells v Perez, 4 NY3d 566, 574; Abdelaziz v Fazel, 78 AD3d 1086).
Accordingly, the Supreme Court should have granted that branch of the plaintiff's motion which was to vacate so much of the order dated October 29, 2009, as granted Thornton's motion for summary judgment, should have vacated so much of that order as granted Thornton's motion for summary judgment, and thereupon should have denied Thornton's motion (see Political Mktg., Int'l., Inc. v Jaliman, 67 AD3d at 661).
Giangrasso v. Callahan
Morenus, Conway, Goren & Brandman, Melville, N.Y.
(Christopher M. Lochner of counsel), for appellants.
Kelner & Kelner, New York, N.Y. (Joshua D. Kelner, Ronald
C. Burke, and Gail S. Kelner of
counsel), for respondent.
DECISION & ORDER
In an action to recover damages for personal injuries, the defendants appeal from an order of the Supreme Court, Suffolk County (Cohalan, J.), dated January 13, 2010, which granted the plaintiff's motion for summary judgment on the issue of liability and denied their cross motion for summary judgment dismissing the complaint on the ground that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d).
ORDERED that the order is affirmed, with costs.
The Supreme Court properly granted the plaintiff's motion for summary judgment on the issue of liability. A driver of a vehicle approaching another vehicle from the rear is required to maintain a reasonably safe distance and rate of speed under the prevailing conditions to avoid colliding with the other vehicle (see Vehicle and Traffic Law § 1129[a]; Ortiz v Hub Truck Rental Corp., 82 AD3d 725, 726; Nsiah-Ababio v Hunter, 78 AD3d 672). Accordingly, a rear-end collision establishes a prima facie case of negligence on the part of the operator of the rear vehicle, thereby requiring that operator to rebut the inference of negligence by providing a nonnegligent explanation for the collision (see Tutrani v County of Suffolk, 10 NY3d 906, 908; Ortiz v Hub Truck Rental Corp., 82 AD3d at 726; Parra v Hughes, 79 AD3d 1113, 1114; DeLouise v S.K.I. Wholesale Beer Corp., 75 AD3d 489, 490). In support of his motion, the plaintiff principally relied upon his own deposition testimony and the deposition testimony of the defendant driver, Martin Callahan. The plaintiff testified that as his vehicle was stopped at a stop sign at the end of a Northern State Parkway exit ramp, awaiting clearance to merge into the right lane of Route 110 south, his vehicle was struck in the rear by the defendants' vehicle. At his deposition, Callahan testified that as his vehicle entered the exit ramp, he saw the plaintiff's vehicle stopped at the end of the ramp, and he brought his vehicle to a stop behind it. Upon seeing the plaintiff's vehicle move forward, Callahan took his eyes off the plaintiff's vehicle, looked to his left, and accelerated forward before looking forward, striking the plaintiff's vehicle. Contrary to the defendants' contention, under the circumstances of this case, Callahan's own deposition testimony established that his inattentiveness in not looking in the direction he was driving was the sole proximate cause of the accident (see Sheeler v Blade Contr., 262 AD2d 632, 633). Accordingly, the plaintiff made a prima facie showing of his entitlement to judgment as a matter of law (see Alvarez v Prospect Hosp., 68 NY2d 320, 324). In opposition, the defendants failed to raise a triable issue of fact.
The Supreme Court also properly denied the defendants' cross motion for summary judgment dismissing the complaint on the ground that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d). The defendants contended that the plaintiff's injuries were from a prior accident. The defendants' examining physicians failed to compare the results of their findings as to the plaintiff's range of motion in his spine after the subject accident with his condition before the accident. Absent such a comparative quantification of their findings, it cannot be concluded that the pre-existing limitation in the range of motion in the plaintiff's spine was not exacerbated by the accident (see McKenzie v Redl, 47 AD3d 775, 777; McLaughlin v Rizzo, 38 AD3d 856, 858; Spektor v Dichy, 34 AD3d 557, 558). Since the defendants failed to make a prima facie showing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident, it is unnecessary to consider whether the plaintiff's papers in opposition were sufficient to raise a triable issue of fact (see Levin v Khan, 73 AD3d 991, 992; McKenzie v Redl, 47 AD3d at 775; Coscia v 938 Trading Corp., 283 AD2d 538, 538).Davis v Wyeth Pharmaceuticals, Inc
Conway & Kirby, L.L.P., Latham (Kimberly Boucher
Furnish of counsel), for appellant.
Whiteman, Osterman & Hanna, L.L.P., Albany
(Christopher E. Buckey of counsel), for Wyeth Pharmaceuticals, Inc.,
respondent.
Towne, Ryan & Partners, Inc., Albany (Amanda R.
Stern of counsel), for Stantec Consulting Group, Inc. and
another, respondents.
Kelly & Leonard, Ballston Spa (Thomas E. Kelly of
counsel), for Landrock E & S Consulting, Inc., respondent.MEMORANDUM AND ORDER
Stein, J.
Appeal from an order, an amended order and a second amended order of the Supreme Court (McGill, J.), entered December 6, 2010 and December 9, 2010 in Clinton County, which denied plaintiff's motion for leave to amend the complaint.
In the course of his employment as a construction laborer, plaintiff was injured while moving a filtration unit weighing in excess of 1,000 pounds within a building owned by defendant Wyeth Pharmaceuticals, Inc. Plaintiff and a coworker had used two pallet jacks to hoist the unit 8 to 10 inches off the floor in order to move it. With the unit sitting on the pallet jacks, plaintiff pulled and his coworker pushed the unit along. In the process of moving the unit horizontally across the floor, plaintiff slipped and grabbed the unit, causing it to tip over and land on his leg as he fell to the ground.
Plaintiff commenced this action against Wyeth and, subsequently, a separate action against defendants Stantec Consulting Group, Inc., Stantec Architecture, Inc., and Landrock E & S Consulting, Inc. — who Wyeth had hired to ensure the safety and well-being of those persons lawfully at its facility — alleging negligence and violations of Labor Law §§ 200 and 241 (6). Following consolidation of the actions, plaintiff served an amended complaint that contained an additional claim under Labor Law § 240 (1). Failing to obtain the consent of all parties, plaintiff then moved for leave to amend the complaint (see CPLR 3025 [b]) and Supreme Court denied the motion [FN1]. Plaintiff now appeals [FN2] and we affirm.
While leave to amend a pleading "'should be freely granted'" so long as no prejudice befalls the nonmoving party and "'the amendment is not plainly lacking in merit'" (Shelton v New York State Liq. Auth., 61 AD3d 1145, 1149 [2009], quoting Smith v Haggerty, 16 AD3d 967, 967-968 [2005]), such a decision rests squarely in the discretion of the trial court and will not be disturbed absent a clear abuse of discretion (see CPLR 3025 [b]; Swergold v Cuomo, 70 AD3d 1290, 1294 [2010]; Leclaire v Fort Hudson Nursing Home, Inc., 52 AD3d 1101, 1102 [2008]). Here, assuming without finding, as Supreme Court did, that the proposed amendment resulted in no prejudice to defendants, we agree with Supreme Court's determination that it was lacking in merit.
Labor Law § 240 (1) requires that contractors and owners provide adequate safety devices to protect workers against elevation-related safety risks (see Zimmer v Chemung County Performing Arts, 65 NY2d 513, 521 [1985]; Sereno v Hong Kong Chinese Rest., 79 AD3d 1414, 1414 [2010]; Johnson v Small Mall, LLC, 79 AD3d 1240, 1241 [2010]). However, "not all gravity-related risks fall within the parameters of the statute" (Sereno v Hong Kong Chinese Rest., 79 AD3d at 1414; see Labor Law § 240 [1]; Ross v Curtis-Palmer Hydro-Elec. Co., 81 NY2d 494, 499-501 [1993]) and, therefore, "not every object that falls on a worker[] gives rise to the extraordinary protections of Labor Law § 240 (1)" (Narducci v Manhasset Bay Assoc., 96 NY2d 259, 267 [2001]). "[T]he single decisive question is whether [a] plaintiff's injuries were the direct consequence of a failure to provide adequate protection against a risk arising from a physically significant elevation differential" (Runner v New York Stock Exch., Inc., 13 NY3d 599, 603 [2009]).
Here, plaintiff argues that, in Runner v New York Stock Exch., Inc. (13 NY3d 599, 603 [2009]), the Court of Appeals changed the law regarding what constitutes a significant elevation differential for purposes of Labor Law § 240 (1), as a result of which this case falls within the purview of that statute. Specifically, plaintiff contends that, pursuant to Runner, the weight of a falling object must now be considered in determining whether a height differential is significant and that, given the weight of the object that fell on him, he has a meritorious cause of action. In our view, plaintiff's reliance on Runner is misplaced. In Runner, "the Court made it clear that it was not establishing any new principles, merely expounding on the governing principle enunciated almost 20 years previously" (Harris v City of New York, 83 AD3d 104, 109 [2011]; see Runner v New York Stock Exch., Inc., 13 NY3d at 604), namely that "'Labor Law § 240 (1) was designed to prevent those types of accidents in which the scaffold, hoist, stay, ladder or other protective device proved inadequate to shield the injured worker from harm directly flowing from the application of the force of gravity to an object or person'" (Runner v New York Stock Exch., Inc., 13 NY3d at 604, quoting Ross v Curtis-Palmer Hydro-Elec. Co., 81 NY2d at 501)[FN3]. Thus, it remains the law "that the purpose of the strict liability statute is to protect construction workers not from routine workplace risks, but from the pronounced risks arising from construction work site elevation differentials, and, accordingly, that there will be no liability under the statute unless the injury producing accident is attributable to the latter sort of risk" (Runner v New York Stock Exch., Inc., 13 NY3d at 603).
Here, Supreme Court's determination that plaintiff's injury was not the result of a risk related to an elevation differential was supported by the record. We note that the object that resulted in plaintiff's injury was not being hoisted or secured (compare Narducci v Manhasset Bay Assoc., 96 NY2d at 268; Mueller v PSEG Power N.Y., Inc., 83 AD3d 1274, 1275 [2011]; Cambry v Lincoln Gardens, 50 AD3d 1081, 1083 [2008]) or otherwise being moved vertically from one elevation to another (see Runner v New York Stock Exch., Inc., 13 NY3d at 602). Rather, it was being moved horizontally and tipped over because, when plaintiff slipped, he grabbed it and pulled it toward him. Thus, it was not the elevation of the unit from the ground that presented a risk to plaintiff. Indeed, there is nothing in the record to indicate that the same result would not have occurred had the unit been sitting directly on the ground. Inasmuch as plaintiff's proposed Labor Law § 240 (1) claim lacked merit, Supreme Court did not abuse its discretion in denying plaintiff's motion to amend the complaint.
Plaintiff's remaining contentions have been examined and are either academic or unavailing.
Spain, J.P., Kavanagh, Garry and Egan Jr., JJ., concur.
ORDERED that the order, amended order and second amended order are affirmed, with one bill of costs.
Footnotes
Footnote 1:Supreme Court amended its order twice to correct errors, but did not make any substantive changes to the original order.
Footnote 2:Although plaintiff's notice of appeal from Supreme Court's original order dated November 10, 2010 is technically premature, as it was filed prior to the entry of that order, we will treat the notice of appeal as valid in the exercise of our discretion (see CPLR 5520 [c]; Matter of Loomis v Yu-Jen G., 81 AD3d 1083, 1084 [2011]; People v Barrier, 58 AD3d 1086, 1087 n [2009], lvs denied 12 NY3d 707 [2009]).
Footnote 3:The primary issue resolved in Runner was the extent to which a plaintiff could recover in a falling object case when the object and the plaintiff did not actually make contact with one another (Runner v New York Stock Exch., Inc., 13 NY3d at 604-605).