Coverage Pointers - Volume XIII, No. 5

Dear Coverage Pointers Subscribers:

We surely hope that you have recovered, or in the process of recovering, from Irene.  I know that Cassie Kazukenus is still awaiting the restoration of power in Albany, my sisters in Sullivan County and northwest Jersey were without power for four days and my 90-year old mother lost power as well, complaining that she couldn’t get on the Internet!

Database Development

We’ve upgraded our e-mail system over here and that, of course, may result in some Coverage Pointers mailing snafus.  I hope not, but no promises of easy sailing.

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            (Peiper on the program)

Wednesday, September 28, 2011 – Buffalo     (Kohane on the program)

Thursday, October 6, 2011 - Long Island          (Kohane on the program)

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.

One Hundred Years Ago – Baseball and Bill McKechnie
Regular readers know how much your Editor enjoys baseball stories.  My son Jacob, a die-hard Yankee fan (he did not get that from my side of the family), was impressed by the record breaking three-grand-slams-in-a-game accomplished by the pin-stripers the other day.  So, not to be undone, I wondered what baseball record may have been set or tied on September 2, 1911. 

Well, I found one.

Future Pirate Hall of Famer, Bill “Deacon” McKechnie – a third-baseman and later a coach and manager, tied a NL record with two inside-the-park homeruns on that day as the Pirates drubbed the St. Louis Cardinals 12-1.  Do you know of Bill?  I didn’t, but do now.

The McKechnie Family Legacy:  I had the pleasure of tracking down some of Bill McKechnie’s descendants during the past couple of week, to get some remembrances of this superb ballplayer and manager.  I thank them for their insight and kindness in responding to me.  A special thanks to Jim McKechnie who tried to contact Bill McKechnie’s daughter without success.  Jim offers the following comments:

Bill McKechnie was an extremely proud member of the McKechnie Clan.  As a child, I remember receiving autographed baseballs and Louisville Slugger’s from him.  Actually, he gave them to my grandfather (his cousin), who shared them with his kids and grandkids.  I wish I still had one of them.  I can tell you that he is the only I know of that took three different teams to the World Series.  The Pittsburgh Pirates and the Cincinnati Reds were the two teams, but only the Pittsburgh team won its series.

Thanks, Jim. Visit the McKechnie’s at Customized Creationzthe family’s customized gun shop.

From Audrey Seeley, Queen of No Fault:

I hope that those hit by the hurricane are hanging on.  I have a family member in Virginia who will be without power for another two weeks and know that many have seen devastating flooding as well as seeing neighborhoods completely destroyed.  You are in our thoughts and prayers in this difficult time.

I wanted to thank the Negligence Chair of the Erie County Bar Association, Greg Pajak, Esq. of Cellino & Barnes for asking me to address the committee on No-Fault.  There was a much bigger turn out than I expected and many people had questions.  Also, it was nice of JW Hunt to provide the food.   I am rarely fed when I show up for a presentation and it was very nice to have lunch waiting for me.  By the way, Mr. Pajak there is an arbitration summary on MRI’s within a month of the accident that you should review.  I found it after the lecture and thought it may be useful.

There are a number of upcoming programs that may be of interest to you. 

September 13 and 14 - NBI No-Fault Seminar

This seminar is being held in Buffalo and Syracuse.  It is not too late to sign up and I believe you can walk in and register the day of.  If you need the brochure please let me know.  Again, the American Arbitration Association is participating and bringing local arbitrators for you to ask questions of at this seminar.  It is a unique opportunity that you should not miss.

October 26-30 – DRI Annual Meeting in Washington DC

This is going to be an amazing conference in the Nation’s Capital with a former President and a Supreme Court Justice speaking.  The Insurance Law and the Trucking Law committees are presenting a program featuring a Pulitzer Prize Winning Journalist speaking about how the heavy use of electronic devices and technology alter our behavior and our brain.  There are presentations from every substantive committee of DRI.  The presentations range from representing corporations against disclosure of confidential information of WikiLeaks sized proportions to Hydraulic Fracturing and the environmental and legal issues it creates.  To sign up for the meeting go to www.dri.org.

December 15-16 – Insurance Coverage and Practice Symposium in NYC

I am very proud to be Vice Chair of the program and know that Matt Foy, Esq. of Gordon Rees has created an amazing program this year.  The program has a diverse and interesting selection of topics from a Coverage B emerging claims discussion to strategy in defending class actions to the evolution of D&O claims and coverage issues.  The professional liability committee is also having its conference at the same time and location.  If you would like to register please send me an email.  Also, if you are an insurer or in house counsel and interested in attending please contact me as you may be eligible to attend the conference for free.  Please note that even if your office only sends one person they could attend for free!!  If you need more information send me an email at [email protected].  

Have a great Labor Day Weekend! 

Audrey

Modern Justice: Texas-Style: 
This order, from the Hon. Sam Sparks, USDJ, was entered on the federal docket on August 26h:

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TEXAS
AUSTIN DIVISION

MORRIS, etc. v. COKER, et al

BE IT REMEMBERED on this day the Court reviewed the files in the above-styled causes, and now enters the following opinion and orders. Non-parties Langford, Erik Hoover, and Brigham Oil & Gas, L.P. invite the Court to quash subpoenas issued to them on behalf of Jonathan L. Woods, in relation to a matter currently pending in the United States District Court for the Western District of Louisiana, Lafayette-Opelousas Division, because the subpoenas were not properly served, are overly broad and unduly burdensome, and seek privileged information. In response, the Court issues the following invitation of its own:

Greetings and Salutations!

You are invited to a kindergarten party on THURSDAY, SEPTEMBER 1 2011, at 10:00 a.m. in Courtroom 2 of the United States Courthouse, 200 W. Eighth Street, Austin, Texas. The party will feature many exciting and informative lessons, including:

• How to telephone and communicate with a lawyer; How to enter into reasonable agreements about deposition dates;
• How to limit depositions to reasonable subject matter;
• Why it is neither cute nor clever to attempt to quash a subpoena for technical failures of service when notice is reasonably given; and;
• An advanced seminar on not wasting the time of a busy federal judge and his staff because you are unable to practice law at the level of a first year law student.

 

Invitation to this exclusive event is not RSVP. Please remember to bring a sack lunch!

The United States Marshals have beds available if necessary, so you may wish to bring a toothbrush in case the party runs late.

Accordingly,

IT IS ORDERED that defense counsel Jonathan L. Woods, and movants' attorney Travis Barton, shall appear in Courtroom 2 of the United States Courthouse, 200 W. Eighth Street, Austin, Texas, on THURSDAY, SEPTEMBER 1, 2011, at 10:00 a.m., for a memorable and exciting event;

IT IS FINALLY ORDERED that Mr. Barton is responsible for notifying Mr. Woods of this order by providing him with a copy by mail or fax on this date.

Editor’s Note:  We checked – the case settled before the hearing.   Smart lawyers, indeed.

Peiper’s Perspective

The trend continues for another issue.  Still very slow in the App Div these days.   Unlike last issue, however, we actually have a few cases for your consideration this week.  The liquidator for Midland is back in the news; this time in a dispute with re-insurer Everest.  In addition, we have highlighted an interesting dispute among the fine Justices of the Fourth Department in Oakes v. Patel.  For those of you representing municipalities, please take a moment to review the  Third Department’s latest musing on the standard governing Late Notices of Claim.

As noted in our column, we found the most interesting discussion point in this week’s edition to be buried within the Midland case.  The First Department appears to acknowledge that discovery of how a carrier handled similarly situated claims is relevant to determining whether a carrier’s conduct in an unrelated case is reasonable.   This is  a classic case of the slippery slope, my friends.  The court’s reference to this issue, which is really tangential to the disputed matter, could provide the basis for a similar requests in other areas of civil litigation.  Certainly, this issue has been contested in bad faith litigation for years, but for the most part has stayed in that arena alone.   

All of this brings us to again remind everyone to pay close attention to discovery demands, and the timelines for responding/objecting.  With the Court’s decision, is a request for similarly situated cases now “proper?”  What about the claims files in those “similarly situationed” cases?  If so, one had better protect his or her file (and the carrier’s) by objecting on basis of breadth, relevancy and cost.  As we’ve detailed several times before, missing the deadline to respond can, and often will, result in the loss of an opportunity to trim an overgrown discovery demand down to size.
That’s it for this week.  Best wishes to everyone for a safe and enjoyable Labor Day weekend. 

Steve Peiper
[email protected]

One Hundred Years Ago:

The front page of the Syracuse Herald contained a little squib on an advertisement for cigars, referencing a murder:

Syracuse Herald
September 2, 1911
Page 1
Escaped the Electric Chair

The bellboy murderer escaped the electric chair and many boxes of Napoleon
Full Dress and 370 cigars were lost and won on the verdict. These brands are favorites with betting and all sensible men who appreciate quality.—Adv.

So, we wondered.  Who was the Bellboy Murderer?  Well, on the same day we found an article about him:

GEIDEL READY FOR PRISON
Twenty Years to Life Imprisonment for His Crime

Paul Geidel, the seventeen-year-old bellboy who has been found guilty of the murder of William H. Jackson, an aged broker in the Hotel Iroquois on July 20, will be sentenced on Tuesday before Judge Crain

The jury brought in a verdict of murder in the second degree after an all-night deliberation.  By this verdict, Geidel escapes the electric chair, but he will be sentenced to a long term in either Sing Sing or Auburn Prison.  A verdict of murder in the second degree provides for imprisonment for a minimum term of twenty years and a maximum term of life.

Editor’s Note:

Geidel, born April 21, 1894 was the longest serving American prison inmate whose sentence ended with his release. After being convicted in 1911, Geidel served 68 years and 245 days in various New York State prisons. He was released on May 7, 1980, at the age of 86.

On July 26, 1911, Geidel decided to rob Jackson, a wealthy broker, who was a guest at the Iroquois Hotel on West 44th Street in New York City where Geidel was working at the Iroquois as a bellhop. Geidel sneaked into Jackson's room, and suffocated him to death with a rag filled with chloroform. Geidel only made off with a few dollars.

Two days later, Geidel was arrested. He was subsequently convicted of second-degree murder and sent to prison for 20 years to life, starting his sentence in Sing Sing.  His sentence was shortened for good behavior, but in 1926, he was declared to be legally insane and confined in a state hospital for the criminally insane for the next 46 years before being transferred to the Fishkill Correctional facility. Geidel was granted parole in August 1974, but the now 80 year old inmate did not want to leave. Having lived in prison for 63 years--his entire adult life--and having no family, he believed that he would not make it on the outside. He chose to remain in prison for almost six more years.

 

One Hundred Years Ago -- Justice:  Oklahoma Style:

Stevens Point (WI) Daily Journal
September 2, 1911

FOUR MEN ROUTED
BY CONGRESSMAN

Charles D. Carter Drubs Clerks
In Store

ONE IS GIVEN BLACK EYE

Oklahoman Alleges Man Insulted Daughter — She Attracts Big Crowd While Fracas Is Going On by Her Screams

Washington, Sept. 2.—Representative Charles D. Carter of Oklahoma created a deal of excitement in fashionable F street and incidentally gave a severe drubbing to four clerks In a department store whom he accused of Insulting his eighteen-year old daughter, Miss Italy Carter.

The Oklahoma congressman, who is seven-sixteenths Indian, put one of the clerks out of commission with his fists and later put the other three, who had come to the rescue of heir associate, to route with his cane.

Surrenders to Police

He quickly departed from the store and, placing his daughter in a passing automobile, hurried to the nearest station house, where he introduced himself, and gave himself up. He explained to Captain Hollinberger the causes leading up to the trouble. He was not detained.

Unless the four clerks demand satisfaction, the incident will be closed, Representative Carter said.

One of the clerks, Joseph Josephson, who is said to have insulted Miss Carter, shows many signs of the encounter. His companions escaped with minor bruises, as the rattan cane carried by the sturdy Oklahoman was not of a dangerous type.

Carter Tells of Insult.

According to Representative Carter his daughter entered the store and asked for a certain make of coat giving a description. The clerk, thinking her alone, Mr. Carter said, tried to encase her in a conversation. "Italy refused to converse with the clerk." “Continuing his advances, which were followed by repulses from my daughter, he became insulting. I took a hand in the conversation at this juncture and politely asked the clerk the cause of the trouble.  He became infuriated and said several uncomplimentary things about my daughter. I told her to accompany me from the store and as we reached the door, he called me several names. I returned and prepared to strike him, when he started toward me. I then gave him a good licking as my long experience on the plains as a boxer would permit. I then started to leave when three of his associates took up the fight.  I struck them right and left with my cane and routed the whole bunch.”

Editor’s Note – In almost every article around the country reporting on this incident, the papers included the reference to Carter being 7/16th “Indian,” race being so important in those days.  At statehood, Carter became the first person to represent Oklahoma's Fourth District in the U.S. House of Representatives.  His 1914 visit to the school in Bug Tussle inspired the career of future Speaker of the House. Carl Albert. Carter worked on legislation affecting Oklahoma's Indians and played a role in keeping Indian homesteads under the protection of the federal government. He served as chair (1917-19) and ranking minority member (1919-21) on the Committee on Indian Affairs and as a member of the Appropriations Committee (1921-27).

In This Week’s Coverage Pointers:

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

• Late Notice of Disclaimer, Based on Policy Exclusion, Renders Disclaimer Invalid
• New York Law Applies in Malpractice Action Against Insurance Broker

 

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

• Affidavit Based on Contemporaneous and Recent Examinations Raises Issue of Fact Sufficient to Defeat Summary Judgment
• Judge Voices Strong Dissent Regarding Both Grant of Leave to Renew and Acceptance of Surgical Report from Four Months after Accident as Meeting “Contemporaneous” Requirement
• Summary Judgment Denied Where Examining Orthopedist Used Inconsistent Norms for Various ROM Findings

 

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

ARBITRATION

• Denial of Various Medical Specialties Not Denial of Lost Wages
• MRIs Conducted Within One Month Of Accident Properly Denied On Peer Review
• One Year Rule Defense Upheld On Low Back Claim.

LITIGATION

• Insurer Prevails On Breach Of Condition For Failure To Attend IMEs
• Sua Sponte Severance Improvident Exercise Of Judicial Discretion In This Case
• Portion of Claim Premature and Remainder Properly Denied On Lack Of Medical Necessity
• Plaintiff Failed to Meaningfully Address Peer Reviewer’s Conclusions

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

• Absent Fraud or Bad Faith, a Re-insurer is Bound by the Investigation and Claims Handling of the Primary Carrier
• Failure to Object to Trial Court’s Additur After Trial #1, Precludes Defense From Challenging It
• At the Conclusion of Trial #2 Existence of Police and Accident Reports Establishes Notice to Municipality, and Saves Petitioner’s Late Notice of Claim

 

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

• Powerless to report

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

• Products/Completed Operations Exclusion

 

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

• Question of Fact as to How Water Entered Building
• Assault and Battery Exclusion Triggered
• Framed Hearing Ordered Where Respondent Purportedly Failed to Obtain SUM Insurer’s Consent Before Settling with Tortfeasor

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

Behind the Increase in Legal Malpractice Claims

That’s all for now.  Happy Labor Day.

See you in a couple.

Dan

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

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

NEWSLETTER EDITOR
Dan D. Kohane
[email protected]

ASSOCIATE EDITOR
Audrey A. Seeley
[email protected]

ASSISTANT EDITOR
Margo M. Lagueras
[email protected]

 

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

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

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

Jody E. Briandi
Steven E. Peiper

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

Margo M. Lagueras
Cassandra Kazukenus
Jennifer A. Ehman

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

Index to Special Columns

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

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

09/01/11         GPH Partners, LLC v. American Home Assurance Company
Appellate Division, First Department
Late Notice of Disclaimer, Based on Policy Exclusion, Renders Disclaimer Invalid
Admiral has a duty to defend.  While a disclaimer is unnecessary when a claim does not fall within the coverage terms of an insurance policy , a timely disclaimer pursuant to Insurance Law § 3420 (d) is required when a claim falls within the coverage terms but is denied based on a policy exclusion".

The timeliness of disclaimer is measured from the time when the insurer first learns of the grounds for disclaimer of liability or denial of coverage." Thus, where an insurer "becomes sufficiently aware of facts which would support a disclaimer," the time to disclaim begins to run, and the insurer bears the burden of explaining any delay in disclaiming coverage including its failure to investigate the claim.

Here, Admiral was on notice of the plaintiff’s claims since January 2007 but did not disclaim until May. Grounds for disclaimer based on either delay in notice of the occurrence or the wrap-up exclusion should have been readily apparent to Admiral in January 2007, and, even if they were not, at a minimum, Admiral should have started an investigation at that time.

Admiral's position that it only learned that plaintiff was making a coverage request via its attorney's April 23, 2007 letter requesting "confirmation" of coverage, and that it could not have known about the existence of the wrap-up policy until May 10, 2007, is not borne out by the record.

08/30/11         Rose v. Arthur J. Gallagher & Co.
Appellate Division, Second Department
New York Law Applies in Malpractice Action Against Insurance Broker
This was an action for professional malpractice against an insurance broker.  The question is the case is which of two states’ laws should apply. In a contract action, the law of the jurisdiction where the contract was created is often selected.  However, in a malpractice case – which sounds in tort – it the place of the tort that applies.

In this case, the allegedly negligent quote was requested by the plaintiffs, and provided by the defendants, through e-mail communications that were sent from and received in New York. Thus, the tortious conduct alleged in the amended complaint is governed by New York law.

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

08/30/11         Kanarad v. Setter
Appellate Division, Second Department
Affidavit Based on Contemporaneous and Recent Examinations Raises Issue of Fact Sufficient to Defeat Summary Judgment
In opposition to defendant’s motion, plaintiff submitted the affidavit of his treating chiropractor which was based on both contemporaneous and recent examinations which revealed significant range-of-motion limitations of plaintiff’s cervical and lumbar spine.  In addition, the chiropractor reviewed MRI reports showing disc bulging.  He therefore concluded that plaintiff’s injuries were significant and causally related to the accident.  This affidavit was sufficient to raise a triable issue of fact and defeat defendant’s motion.

08/25/11         Salman v. Rosario
Appellate Division, First Department
Judge Voices Strong Dissent Regarding Both Grant of Leave to Renew and Acceptance of Surgical Report from Four Months after Accident as Meeting “Contemporaneous” Requirement
Plaintiff, a 21-year old passenger, was involved in an accident in November 2005.  She complained of a burning sensation going up her spine, a headache and pain in her right knee.  According to her testimony, she missed three days of work and underwent physical therapy five days per week for three months.  She later quit her job approximately three weeks before having knee surgery in March 2006, after which she underwent physical therapy for about one month.  She explained that the subsequent gap in treatment was because her no-fault benefits stopped and she could not afford the treatment.  Her experts also explained that she had reached maximum benefit from the therapy. 

The trial court granted defendants’ motion and dismissed the complaint.  However, she was granted renewal because, although plaintiff’s experts’ conclusions were based on medical evidence that arguably could have been included in her original motion, her attorney averred that the medical office where she initially received treatment had closed and they had difficulty obtaining her records.  Upon renewal, the order was modified to deny the motion with respect to the claim of permanent limitation to the right knee. 

On appeal, the court found that the report by plaintiff’s orthopedic surgeon, four months after the accident, was “sufficiently contemporaneous” to establish serious injury.  Her surgeon stated, based on his observations during the surgery, that the accident was the proximate cause of the injury and not pre-existing degenerative processes.  In addition, the MRI report submitted with her original motion revealed no osteophytes, spondylosis or other evidence of degenerative conditions.  The court reasoned that the initial medical exam, the physical therapy, her young age and the subsequent surgery combined to make the four months between the accident and plaintiff’s objective medical evidence (the surgical report) sufficiently contemporaneous. 

The dissenting judge reasoned that renewal should have been denied because plaintiff’s evidentiary submissions on renewal did not establish any injury contemporaneous with the accident but rather only evinced an examination two months after the accident.  As such, the evidence submitted on renewal would not have changed the outcome of the prior motion as it established medical treatment beginning more than a month after the accident.  An examination one month after an accident is not contemporaneous.  Therefore, an examination four months after the accident certainly cannot be contemporaneous.  The dissenting judge additionally found that, even if it had been contemporaneous, the surgeon’s report was completely lacking in any objective, qualitative or quantitative evidence of injury as is required.  Furthermore, although it might have been probative on the date of the surgery, the surgeon’s observations could not be probative as to whether the accident caused the injury given the fact that the surgeon did not see plaintiff for the first time until substantially after the accident.
Note:  The footnote indicates that the medical report of Dr. Cordaro was unsworn but that this fact was not significant as it was certified as a business record and submitted only to show plaintiff’s complaints and Dr. Cordaro’s referral, but not his opinion as to causality.  It is interesting, however, that Dr. Cordaro first saw plaintiff one month after the accident and apparently this unsworn report was the initial treatment report concerning the knee. 

08/23/11         Cracchiolo v. Omerza
Appellate division, Second Department
Summary Judgment Denied Where Examining Orthopedist Used Inconsistent Norms for Various ROM Findings
On appeal, the court reverses the grant of summary judgment to defendants finding they did not meet their burden where their examining orthopedist used inconsistent norms in the range of motion findings of the cervical and thoracolumbosacral spine of each plaintiff. 

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

ARBITRATION
8/26/11           Applicant v. Respondent
Arbitrator Kent L. Benziger, Erie County
Denial of Various Medical Specialties Not Denial of Lost Wages
The Applicant sought lost wages, in form of unemployment benefits, in the amount of $14,600.40 from September 1, 2009 through January 9, 2011. The parties stipulated that the amount sought was correct. 

The Applicant was involved in a January 18, 2009, accident and treated at the emergency room with complaints of neck, back, and knee pain.  In March 2009, the Applicant treated with a chiropractor with complaints of head and complete back pain.  An EMG/NCV study was normal other than highly suggestive findings of mild bilateral carpel tunnel syndrome.  In May 2009, the Applicant treated with an orthopedic surgeon regarding bilateral knee complaints.  The Applicant underwent an MRI of the right knee which revealed a linear tear of the posterior of the medial meniscus.  The MRI of the left knee revealed an impression of a medial meniscus tear.  The orthopedic surgeon recommended bilateral knee surgery.

The Applicant treated with an orthopedist with bilateral shoulder complaints which resulted in an impression of muscular strain about the shoulders.  By February 2010, the Applicant treated with a different orthopedic surgeon in Florida who recommended bilateral knee surgery.  Ultimately, the Applicant underwent left knee surgery in March 2010.

The assigned arbitrator noted that it did not possess the lost wage denial but only a denial for orthopedic treatment including surgery.  This denial was based upon the IME conducted by Dr. Joseph Elfenbein which the assigned arbitrator reviewed.  It was noted that denials were also issued based upon specialty IMEs in neurology, ophthalmology, acupuncture, and chiropractic.  In reviewing Dr. Elfenbein’s report, it was noted that there was mild cervical and lumbar spine tenderness but normal range of motion.  The neurological findings were normal.  Also, bilateral shoulder testing and bilateral knee testing was limited due to pain.  It was noted that the Applicant had refused to perform some testing and had restricted range of motion due to pain.  Thereafter, she broke down during the examination.  Dr. Elfenbein concluded that the Applicant had resolved sprains of the entire spine, bilateral knees and shoulders.  It was also noted that the IME reports of the chiropractor and acupuncturist also found no disability.

The assigned arbitrator did not find Dr. Elfenbein’s report persuasive.  He failed to address positive MRI findings as well as the treating physician’s opinion as to a knee injury requiring surgery.  Likewise, the Applicant received a number of treatments from physicians that were never mentioned by Dr. Elfenbein who had positive objective findings regarding disability.

The most problematic aspect for the assigned arbitrator was that there was no denial for lost wages but a multitude of denials of medical treatment in different specialties.  The assigned arbitrator determined that the Applicant was entitled to be specifically advised what part of her claim was being denied.  Since she was not informed the insurer was obligated to pay lost wages.

8/22/11           Applicant v. Respondent
Arbitrator Mary Anne Theiss, Onondaga County
MRIs Conducted Within One Month of Accident Properly Denied on Peer Review
The Applicant was involved in an August 18, 2008, accident and underwent two MRIs on September 20, 2008.  The insurer denied the MRI based upon the peer review of Dr. Sachdev.  The assigned arbitrator upheld the denial on the ground that the Applicant’s neurological examination was normal; the range of motion in the spine was normal; she had no x-rays; and there was no documentation of progressive persistent weakness or reflex change.

8/19/11           Applicant v. Respondent
Arbitrator Veronica K. O’Connor, Erie County
One Year Rule Defense Upheld On Low Back Claim
The issue in the arbitration was whether the assignor’s lumbar spine injury was ascertained within one year of the accident.  The assignor was involved in a July 30, 2008, motor vehicle accident and was documented as complaining of neck and left hip pain at the emergency room.  The assignor treated with her primary care physician and complained of abdomen, left flank, shoulder and thigh pain.  By November 2009, the assignor treated with a neurosurgeon for low back pain which she related to the July 2008, accident.

The insurer denied the neurosurgeon treatment on the ground that the low back injury as not ascertained within a year of the accident.  The assigned arbitrator upheld the denial as there was no evidence that demonstrated that the assignor treated for low back pain within a year after the accident occurred.

LITIGATION

8/24/11           Harmonic Physical Therapy, PC a/a/o Victor Giron v. Praetorian Ins. Co.
Appellate Term, First Department
Insurer Prevails On Breach of Condition for Failure to Attend IMEs
The insurer demonstrated entitlement to summary judgment on breach of condition precedent under the policy to attend scheduled IMEs.  The insurer demonstrated that it timely mailed IME notices and that the assignor failed to appear.  The plaintiff failed to raise any triable issue regarding the reasonableness of the insurer’s requests or the assignor’s failure to appear.

8/16/11           New York Cent. Mut. Ins. Co. v. John McGee
Appellate Division, Second Department
Sua Sponte Severance Improvident Exercise of Judicial Discretion in This Case
The insurer commenced an action against the defendant, a medical provider, and 12 professional medical service corporations that defendant owned and operated alleging they were fraudulently incorporated.  The corporations were actually owned, operated, and controlled by unlicensed persons and their management companies.  The insurer sought a declaration that it was not obligated to pay outstanding or future no-fault claims from these entities due to the fraudulent incorporation.  Alternatively, the insurer sought a declaration that the entities breached a condition to coverage under the policy by failing to attend examination under oaths and that there was outstanding verification owed to the insurer.

The defendant asserted counterclaims which the insurer moved to dismiss.  The court, sua sponte, severed the action as to the 12 corporations and denied the motion to dismiss.  Thus, the insurer could proceed against the defendant and three of the 12 entities on the issue of fraudulent incorporation.  The insurer appealed and the Appellate Division held that the lower court improvidently exercised its discretion in sua sponte severing the action against the 12 corporations.  The Court reasoned that the legal theory against all 12 corporations was fraudulent incorporation and to fragment the litigation was an undue increase on court resources.

8/16/11           Jesa Med. Supply, Inc. a/a/o Grigoryan Aris v. Progressive Ins. Co.
Appellate Term, Second Department
Portion of Claim Premature and Remainder Properly Denied on Lack of Medical Necessity
The insurer’s summary judgment motion should have been granted as the insurer had timely requested verification which was outstanding at the time the action was commenced.  Hence, the action was prematurely commenced.  The insurer was also entitled to summary judgment on the issue of lack of medical necessity as the insurer demonstrated timely denial issuance and the IME report set forth sufficient factual and medical rationale that the treatment was not medically necessary.  The plaintiff failed to submit any medical evidence to rebut the insurer’s showing.

8/16/11           MSSA Corp. a/a/o Josephine Pizarro v. Redland Ins. Co.
Appellate Term, Second Department
Plaintiff Failed to Meaningfully Address Peer Reviewer’s Conclusions
The insurer’s summary judgment motion on lack of medical necessity based upon a peer review should have been granted.  The insurer demonstrated a timely denial based upon a sufficient peer review with the plaintiff not proffering any affidavit from a provider that meaningfully referred to the peer reviewer’s conclusions.

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

8/25/11           In re: Liquidation of Midland Ins. Co.
Appellate Division, First Department
Absent Fraud or Bad Faith, a Re-insurer is Bound by the Investigation and Claims Handling of the Primary Carrier
As we all know by now, Midland Insurance Company was placed into liquidation in the mid-1980’s.  At that time, the trial court issued a permanent injunction which effectively precluded any actions against Midland.

The latest Midland decision focuses on claims made by Midland’s reinsurer, Everest Reinsurance Company.  Essentially, Everest sought a declaratory judgment that it owed no reinsurance obligations for certain losses under Midland policies due to the liquidator’s breach of the reinsurance agreement between Everest and Midland.   In short, Everest maintained that the liquidator breached the agreement by failing to provide proper reporting on claims, by precluding Everest from participating in settlement discussion and otherwise blocked Midland from participating in the defense from the inception of a claim. 

In affirming the trial court’s denial of Everest’s petition, the First Department noted that the primary insurer is “solely responsible for the investigation and defense of claims.”  As such, unless a settlement is fraudulent, in bad faith, or plainly beyond the accepted range of the damage the re-insurer is bound by the decisions and actions of the primary insurer.  It follows that Everest had no right to insist on investigation of claims.  Likewise, Everest had no right to interpose defenses on claims at the outset of litigation.   It is noted that, per an earlier Court Order, re-insurers are permitted to interpose defenses to a referee at a later stage in the claims process. 

The First Department also addresses an interesting secondary issue in this decision.  In response to Everest’s challenge of the liquidator’s claims handling, the liquidator sought to introduce evidence of settlements that were negotiated by Everest as a primary carrier.  The thought being, presumably, that the liquidator wanted to show that Everest (as a primary insurer) had conducted itself in the same manner as the liquidator had on behalf of Midland.  Interestingly, the First Department held that the information was relevant and necessary for the liquidator’s defense.  

8/19/11           Oakes v. Patel
Appellate Division, Fourth Department
Failure to Object to Trial Court’s Additur After Trial #1, Precludes Defense From Challenging It At the Conclusion of Trial #2

The instant case involved a medical malpractice claim, and the resulting jury verdict.  After returning a finding of liability, the jury returned a verdict that appeared to be inadequate.  In particular, the jury awarded $1,000,000 in past pain and suffering, $1,000,000 in future pain and suffering and $1,800,000 in future supportive living expenses. 

As a result, the trial court granted plaintiff’s request for a new damages trial, or, in the alternative, requested that the defendants stipulate to a damages calculation that was significantly higher than the verdict returned by the jury.  The defendants rejected the trial court’s proposed additur, and elected to proceed with a new trial. 

At the same time, the defendants also moved to add an affirmative defense when it was learned that the plaintiff has previously reached a settlement agreement (with Release) with the insurance carrier for one of the defendants.  In support of its motion to add an affirmative defense, the defendant Kaleida, argued that it did not learn of the Settlement and Release until after the conclusion of the first trial. 

The trial court denied Kaleida’s motion to amend.  Thereafter, at the conclusion of the second trial, the jury returned a verdict that was much more favorable to the plaintiff. At the conclusion of the second trial, plaintiff was awarded $5,600,000 in past pain and suffering, $4,000,000 in future pain and suffering and $4,720,000 in future custodial support. 

Defendants’ appealed both the denial of the second award, as well as the denial of Kaleida’s motion to amend its Answer. 

The Fourth Department affirmed the trial court’s decision to deny defendant Kaleida’s motion to amend.  In so holding, the Appellate Division ruled that the terms of the Release relied upon by Kaleida did not apply to the instant case.  Finally, the Court agreed that the trial properly granted a new trial, and that the second award of damages did not “materially deviate from what would be reasonable compensation.” 

Finally, with respect to the trial court’s additur at the conclusion of the first trial, the Court ruled that defendant failed to object to the trial court’s recommendation.  As such, it was not properly preserved and could not be visited for a first time on appeal.

In a well-reasoned dissent, Justice Peradotto initially stated that she concurred that the first jury’s award was not appropriate compensation.  However, she then argued that the trial court’s additur at the conclusion of the first trial was excessive. Accordingly, prior to proceeding to the second trial (and the appropriateness of a second verdict), Justice Peradotto posited that the Appellate Division must review the appropriateness of the trial court’s additur.  If it was excessively high, it is argued that the defendants should have been presented with an opportunity to stipulate to “an appropriate additur.” 

Accordingly, it would appear that Justice Peradotto would be in favor of the Court modifying the trial court’s initial additur.  Thereafter, the defendants would be given the opportunity to decide if the wished to resolve the matter.  This would all be done prior to the Appellate Division reaching a determination on the appropriateness of the second jury’s verdict. 

Finally, Justice Smith penned a short dissent that disagreed with the majority’s ruling that the award from the second trial was proper.  Justice Smith, however, does not address to what extent the second verdict should be reduced. 

8/18/11           Franco v. Town of Cairo
Appellate Division, Third Department
Existence of Police and Accident Reports Establishes Notice to Municipality, and Saves Petitioner’s Late Notice of Claim
In accordance with General Municipal Law § 50(e), Ms. Franco filed for leave to serve a late notice of claim.  The trial court denied the request on the basis that the she had failed to establish a reasonable excuse for waiting more than 90 days to provide notice, and likewise failed to establish that the municipality/defendant had knowledge of the incident for which damages were now being sought.  Finally, the trial court ruled that plaintiff failed to establish that the delay did not result in prejudice to the Town.

In reversing the trial court, the Third Department held that Ms. Franco’s petition to serve a late notice of claim was sufficiently supported where she was able to point to evidence establishing that the Town’s police and emergency medical technicians responded to the incident within minutes of its occurrence.  This resulted in a police report, and accident report, both being generated.  Accordingly, where detailed and specific knowledge of an incident is obtained by an employee of a municipality, such information will be imputed for notice purposes under the Notice of Claim requirements of the General Municipal Law.

In so holding, the Court noted that the Town’s likely defense that there was no prior written notice of a defective condition may well provide a basis for summary judgment.  However, in deciding whether Ms. Franco had alleged facts sufficient to permit a Late Notice of Claim, the Court noted that dispositive arguments are irrelevant.

In dissent, Justice Rose argued that the police and accident reports upon which the majority based its decision only vaguely referenced the accident.  Without a concrete description of the incident, injury and location of the incident, Justice Rose posits that no knowledge can be imputed to the municipality as a whole.  It follows that under the dissent’s view, the “mere presence of a medic” at the accident scene does not create actual knowledge of the possibility of a claim. 

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

Powerless to report this week, thanks to Irene.

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

08/07/11         Slater LCI v. Republic Vanguard Insurance Co.
Eighth Circuit Court of Appeals – Texas law applied
Products/Completed Operations Exclusion
LCI Equipments, Inc. [“LCI”], a Texas Corporation, imported and sold a Yanmar tractor that had been manufactured and used in Japan and then rebuilt in Vietnam.  Rudy Slater subsequently purchased the tractor at auction and was killed in a roll-over accident.  His wife, Arkansas resident Wanda Slater, commenced a wrongful death action in state court, asserting negligence and strict product liability claims against LCI and others. The suit focused primarily on the tractor’s lack of a Roll-Over Protection System. LCI’s insurer, Republic-Vanguard Insurance Company [“Republic”], also a Texas Corporation, denied coverage and refused to defend LCI under its Commercial General Liability policy. 

With the wrongful death suit pending, LCI assigned its rights in the policy to Slater who then commenced this action against Republic in Arkansas state court, joining LCI as a nominal plaintiff and seeking a declaratory judgment that the policy covered her claims against LCI. Republic moved the action to federal court, alleging diversity jurisdiction because LCI is a nominal plaintiff. Slater neither moved to remand nor questioned federal jurisdiction.

The district court granted Republic’s motion for summary judgment, concluding it had no duty to defend or indemnity LCI because coverage was excluded by the “Products/’Completed-Operations” endorsement on the policy.

Slater appealed, asserting for the first time the absence of diversity jurisdiction and further arguing that the district court erred in construing the policy exclusion.  For the following reasons the Eight Circuit Court of Appeals [“Court”] affirmed the district court’s decision.

First, on the issue of jurisdiction Slater argued that LCI’s interest is real that there was no evidence of an improper motive to destroy diversity jurisdiction.  The Court found, however, that motive is not the dispositive issue.  The Court pointed out that Slater added LCI to the lawsuit as a nominal party; and, this created diversity jurisdiction allowing Republic to remove the case in reliance on that status giving the district court original jurisdiction over the action. The court determined that Slater could have moved to remand or otherwise deny federal jurisdiction, presenting evidence that LCI was not a nominal party.  This did not happen; instead Slater litigated her claim to judgment in the district court and then raised this issue for the first time on appeal. The Court took exception with Slater’s action because it believed she was attempting to nullify the district court’s expenditure of scarce judicial resources because she lost on the merits of her claim in federal court. The Court held that as Slater structured the case the district court properly exercised diversity jurisdiction.

Next, having settled the diversity issue, the court addressed the merits of the case.  The policy provided LCI coverage for “bodily injury,” including death, “to which this insurance applies.”  Republic denied coverage based on the Products/Completed-Operations endorsement, which provides that “no coverage is provided, nor is there any duty to defend, claims, suits, actions or proceedings against the insured arising out of ‘products’ or ‘completed operations’.

In the wrongful death lawsuit, Slater alleged that LCI “designed, manufactured, sold, marketed and/or distributed an unreasonably dangerous tractor which caused the death of Rudolph Slater.  She further alleged that LCI negligently failed to “design, manufacture and install safety features,” to adequately test and inspect the subject tractor,” and to “adequately warn of hazards in the use of the subject tractor.”  The district court concluded that Republic had no duty to defend or indemnify LCI because these claims were all excluded by the Products/Completed Operations exclusion – the tractor was a product “manufactured, sold, handled, or distributed” by LCI.  It had left LCI’s premises at the time of Rudy Slater’s accident. It was “completed” when it left LCI’s possession, despite lacking a Roll-Over Protection System, because it was put to its intended use by Rudy Slater.  The district court held that the exclusion applied to LCI’s alleged negligent failure to install a Roll-Over Protection System and to provide safety warning, as well as to the strict product liability claims, because these claims are grounded on a defect in a product sold not to a negligent omission unrelated to any product defect.

On appeal Slater argued that Republic had a duty to defend LCI in the underlying lawsuit and a duty to indemnify LCI for the judgment in Slater’s favor because LCI’s failure to install the Roll-Over Protection System safety equipment on the tractor falls within an exception to the Products/Completed-Operations exclusion for bodily injury “arising out of the existence of uninstalled equipment.”  This issue was not raised by Slater in the district court, however, Slater urged the Court to consider this issue because it is “purely legal and requires no additional factual development.”

In analyzing this issue the Court found no law in Texas interpreting this exception and, after reviewing case law in other jurisdictions, accepted the decisions of those courts which determined that the “uninstalled equipment” exception to a completed-operations exclusion only applied to equipment at the site when the accident occurred.  The Court held that if it agreed with Slater’s position it could have potentially wide ranging impact, excepting from the Products/Completed-Operations exclusion all claims alleging that a completed product caused injury away from the insured’s premises because the insured failed to install a particular feature.  The court determined that such a sweeping interpretation contrasts starkly with the exception’s narrow focus on the “existence of tools, uninstalled equipment or abandoned and unused materials.”  Ultimately, the Court held that the issue as argued by Slater is not purely legal and may require additional factual development.  The Court concluded that the issue was not properly preserved in the district court and declined to consider it further.

Slater then argued that her claims for bodily injury caused by LCI’s negligent failure to inspect and test the tractor, and to provide adequate safety warnings, are not excluded because those injuries arose out of services LCI was required to perform, not its product.”  The Court rejected this argument noting that in this case there are allegations of a defective product.  The fact that plaintiffs have alleged negligence in their petition does not mean that a claim based in products liability becomes one based in negligence.

In its brief Republic argued that these are defective product claims; or, in the alternative that the claims for negligent inspection and testing are excluded because they fall within the definition of the “Your Work” portions of the Products/Completed-Operations exclusion which excludes “work or operations performed by you or on your behalf” and “the providing or failure to provide warning or instructions.”  Slater argued, without reference to relevant authority, that the “Your Work” exclusion “encompasses only affirmative work or operations performed by the insured, not omissions.” 

The Court held that Republic’s contention is more consistent with the plain language of the policy and that Slater has failed to show plain error.

JEN’S GEMS
Jennifer A. Ehman
[email protected]
8/23/11           Congregation Chesed L’Avraham v Nationwide Mutual Ins. Co.
Supreme Court, Kings County
Question of Fact as to How Water Entered Building
Plaintiff’s building was damaged by storm water.  Nationwide disclaimed coverage citing two exclusions.  First, Nationwide’s policy provided that it would “not pay for loss or damage caused by or resulting from…faulty, inadequate for defective…design, specifications, workmanship, repair, construction, renovation, remodeling, grading compaction or maintenance.”  Second, it excluded coverage for “loss or damage to property…caused by or resulting from rain, snow, sleet, ice, sand or dust, whether driven by wind or not, unless: (1) the building or structure first sustains damage by a Covered Cause of Loss to its roof or walls through which the rain, snow, sleet, ice, sand or dust enters; or (2) the loss or damage is caused by or results from thawing snow, sleet or ice on the building or structure.”

Nationwide presented evidence in support of this motion for summary judgment that either the storm rain alone caused the subject loss or, alternatively, the loss was caused by plaintiff’s failure to properly maintain the roof and drain. 

In denying plaintiff’s motion, the court held that a trier of fact could find that virtually every item noted by Nationwide’s inspecting adjuster and engineer—worn out air conditioning ducts, discolored patches of the roof surface, blocked or poorly functioning drains—could have been caused by the storm and not by plaintiff’s failure to clean or maintain the building.  According to the court, the presence of debris or discolored areas on the roof does not necessary have a prohibitive value concerning how well residents maintained or cleaned the subject building. 

With regard to the second exclusion, the court likewise found a question of fact.  It held that a trier of fact could reasonably conclude that a covered event damaged the roof and subsequently rain water entered the building through the previously damaged areas of the roof. 

8/15/11           QBE Ins. Corp. v. Jinx-Proof Inc.
Supreme Court, New York County
Assault and Battery Exclusion Triggered
During an altercation at Beauty Bar, Vera Hendrix sustained injury when a security guard threw a glass at her face.  Ms. Hendrix brought an action against, among others, the security guard and defendant, owner of Beauty Bar.  The claims against all defendants included negligence, gross negligence, violation of the Dram Shop Act and a claim of negligent hiring and supervision against defendant. 

In the underlying action, the court dismissed the negligent hiring and Dram Shop Act claims.  Thus, the remaining claims were allegations that the guard: (1) caused physical contact to occur without Ms. Hendrix’s consent; (2) intentionally placed her in apprehension of imminent harmful and/or offensive contact; and (3) as an agent of defendant, was negligent in kicking and touching her.  

QBE, defendant’s insurer, commenced this action seeking to deny coverage based on Assault and Battery exclusion.  In reply, defendant argued that the denial was untimely, and that the evidence indicated that no assault and battery occurred. 

An assault and battery exclusion applies if the underlying causes of action alleged are “rooted in intentional tortious behavior.”  The court reasoned that the pleadings clearly demonstrated that the main act, which would give rise to any recovery, was the security guard’s alleged intentional throwing of a glass object.  Further, the court noted that the possibility that the insured may be found liable under a theory of negligence does not overcome the policy’s Assault and Battery exclusion and any injury resulting from such act.  Thus, the exclusion was triggered.

Lastly, the court determined that QBE timely disclaimed coverage.

8/11/11           Matter of Liberty Mut. Ins. Co. v Walker
Supreme Court, Nassau County
Framed Hearing Ordered Where Respondent Purportedly Failed to Obtain SUM Insurer’s Consent Before Settling with Tortfeasor
Liberty Mutual sought a permanent stay of arbitration or, in the alternative, a framed hearing on the issue of Jacqueline Walker’s compliance with the SUM endorsement.  The basis of its application was that Ms. Walker vitiated any right to SUM benefits as a result of her failure to comply with the express terms of the insuring agreement.  Specifically, Ms. Walker failed to obtain Liberty Mutual’s consent to her underlying lawsuit prior to executing a release in favor of the tortfeasor.  As a result, she forfeited any right to seek SUM benefits under the Liberty Mutual policy. 

In opposition, counsel for Ms. Walker argued that, upon being retained by Ms. Walker, he immediately put Liberty Mutual on notice of the SUM claim.  Liberty Mutual acknowledged that it was a valid claim and requested documents concerning the accident and treatment received by Ms. Walker.  Counsel then provided this documentation.  Following months of contact and negotiation with the tortfeasor’s insurer, the insurer made what was essentially a policy limits offer.  Throughout the process the claims representative from Liberty Mutual has been updated concerning the progress.  After finally receiving the offer, counsel called the claim’s representative at Liberty Mutual to obtain his consent to settle and faxed a letter requesting same (the court noted that no fax confirmation sheet was provided).  Thereafter, he allegedly called the representative ten more times, each time leaving a message. 

Approximately 34 days after initial verbal and written notice via fax of the maximum available settlement offer was made, the release was awarded. Thus, Ms. Walker argued that the she complied with the governing SUM endorsement. 

The court determined, that under these circumstances, Liberty Mutual’s petition was granted to the sole extent that a framed hearing should be held to determine whether or not Ms. Walker complied with the SUM requirements of the subject insurance policy.

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

BEHIND THE INCREASE IN LEGAL MALPRACTICE CLAIMS

Statistical and anecdotal evidence indicates that law firms are being targeted with significantly more legal malpractice claims in 2011 compared to prior years.  Statistics show that legal malpractice claims may have increased by 10-20% during the first six (6) months of 2011.  The major reasons for the increase in claims appear to be the negative economy and depressed real estate markets, with lawyers being looked at as a “deep pocket” to repair a bad balance sheet or poor financial statement. 

Real estate, foreclosures and securities practices are most likely to give rise to legal malpractice claims, with the primary allegations being conflicts of interest or failure to timely file or follow through on certain tasks.  These conflicts of interest can involve competing or conflicting clients and situations where attorneys in a firm may be officers, directors or shareholders of a conflicted company or entity.  One reason for the rise in real estate malpractice claims is the large volume of transactions that took place between 2005 and 2008, followed by the national economic downturn which generally weakened commercial and residential real property values. 

Mortgage practices and securities are big sources of current malpractice claims. One major issue is whether large institutional investors, banks and financial firms may wind up suing their attorneys in connection with advice and transactions regarding mortgage foreclosures and the creation and sale of mortgage-backed securities. 

The best protections against such legal malpractice claims are to avoid and turn down cases where there is any possibility of law firm conflicts of interest, and double and triple diary deadlines and filing obligations to avoid missing or being late with a filing.  Especially in cases of commercial real estate, mortgage practice and investments and securities, it may not even be sufficient to get written conflict waivers because the economic downturn and real estate depression can change people’s minds in a hurry about whether their lawyer was acting in their best interests.  It is also important to preserve and document conflict of interest checks and copies of any filed deeds, papers, certifications, etc.  Of course, claims of conflict of interest may in turn lead to claims and allegations of breach of attorney-client privilege and disclosure or use of confidential client information.

It is inevitable that some claims may involve genuine lawyer mistakes, but many others are simply hindsight with the plaintiff now thinking that “I should not have done that deal”, or in the current economic climate the deal is not viable.  Plaintiffs are now trying to claim that, if the attorney had not committed malpractice, they would not have done the deal, or because of attorney malpractice the property lost value.  

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

08/22/11         Crossman Communities of NC, Inc. v. Harleysville Mutual Ins. Co.
South Carolina Supreme Court
South Carolina Supreme Court Adopts the “Time on Risk” Approach to Define the Scope of Multiple CGL Insurers’ Obligations in a Progressive Damage Case
Harleysville Mutual Insurance Company (“Harleysville”) issued a series of Commercial General Liability (“CGL”) policies to Crossman Communities (“Crossman”) for the development of a series of condominium complexes in Myrtle Beach, South Carolina. The condominiums were negligently constructed, allowing water to seep in over time and cause damage to otherwise sound structural components. The condominium purchasers settled their lawsuit with Crossman, so Crossman brought this action for declaratory judgment to determine the scope of Harleysville’s obligations to Crossman under their CGL policies. Prior to trial, Crossman reached a settlement with several of its other insurers, providing coverage for the homeowners’ claims. The trial court held that Harleysville’s policies also covered the homeowners’ claims, applying the precedent that CGL policies may provide coverage for property damaged as a result of faulty workmanship. The trial court also held that Harleysville, along with Crossman’s other insurers, was jointly and severally liable for the homeowners’ claims.

The Supreme Court, on rehearing, affirmed the trial court’s holding that coverage existed under Harleysville’s policies because progressive water damage could constitute an “occurrence” under the policies. But the court reversed the holding that Harleysville was jointly and severally liable for the homeowners’ claims, overruling the precedent set in its controversial Century Indemnity case. The court instead adopted the “time on risk” approach to apportioning damages against multiple insurers. Under that approach, each insurer is liable for the actual damages that occurred during its policy period. Since the exact measure of damages is not provable in most progressive damages cases, each insurer will typically be required to cover a portion of the insured’s liability directly proportionate to the length of that insurer’s policy in relation to the total period over which damages occurred.
Submitted by: Michael O'Connell, Michelle Bibeau, and Steven Zakrzewski of O'Connell, Flaherty & Attmore, LLC

08/19/11         Equine Assisted Growth, et al v. Carolina Casualty Ins. Co.
Utah Supreme Court
Utah Supreme Court Holds that Courts Must Consider Extrinsic Evidence When Comparison of Insurance Policy to Pleadings Does Not Conclusively Determine Whether Preconditions to Insurer’s Duty to Defend are Satisfied
This case stems from a lawsuit brought by the disgruntled former CEO of the Equine Assisted Growth & Learning Association (“EAGALA”) against EAGALA’s board of directors. The ex-CEO had intentionally mis-captioned his lawsuit to make it appear that EAGALA was the plaintiff bringing the action against its own board of directors. The ex-CEO’s frivolous suit was eventually dismissed, but not before the board of directors incurred substantial costs defending against the action.

When EAGALA sought coverage for its defense costs from its insurance carrier, Carolina Casualty, Carolina refused to pay because of an exception to their duty to defend for “any Claim made against an Insured ... by, on behalf of, or in the right of the Insured Entity.” The trial court refused to consider extrinsic evidence establishing that EAGALA’s ex-CEO had no right to bring a claim on behalf of EAGALA, and ruled in favor of Carolina Casualty because the underlying complaint listed EAGALA as the plaintiff, bringing the action within the exception to Carolina’s duty to defend its insured. The Court of Appeals reversed the trial court, holding that it is appropriate to consider extrinsic evidence where the insurance policy at issue conditions coverage upon facts properly proven by extrinsic evidence.

The Supreme Court held that when the terms of an insurance contract condition coverage upon allegations on the face of the complaint, extrinsic evidence is irrelevant and should not be considered. But when the duty to defend is conditioned on something other than the allegations of the complaint, the court may consider extrinsic evidence. Here, the existence of a duty to defend turned on whether the underlying complaint was made “by, on behalf of, or in the right of the Insured Entity.” The court held that this required determination of an objective fact, and the disgruntled ex-CEO’s decision to name EAGALA as the plaintiff in the complaint was not controlling. Consequently, the court held that it was appropriate to consider extrinsic evidence, and affirmed the decision of the appellate court.
Submitted by: Michael O'Connell, Michelle Bibeau, and Steven Zakrzewski of O'Connell, Flaherty & Attmore, L.L.C

Reported Decisions

Salman v. Rosario

Mitchell Dranow, Mineola, for appellant.
Baker, McEvoy, Morrissey & Moskovits, P.C., New York
(Stacy R. Seldin of counsel), for respondent.

Order, Supreme Court, Bronx County (Stanley Green, J.), entered on or about July 6, 2009, which, to the extent appealed from as limited by the briefs, upon renewal and reargument, adhered to a prior order, same court and Justice, entered December 4, 2008, granting defendant Kanate's motion for summary judgment dismissing plaintiff Garcia's complaint, modified, on the law and the facts and in the exercise of discretion, to deny the motion insofar as plaintiff claims a permanent limitation serious injury to her right knee, and otherwise affirmed, without costs.

As an initial matter, while plaintiff's doctors' conclusions were arguably based on medical information previously available and she could arguably have included this information in her original motion, a court has latitude, in the interest of justice, to grant renewal, even on facts known to the movant at the time of the original motion (see Rancho Santa Fe Assn. v Dolan-King, 36 AD3d 460 [2007]). Here, plaintiff's lawyer avers that she was unable to locate the records from Crotona Heights Medical, the initial treating facility after her emergency room visit, in time to submit those papers in opposition to defendant's summary judgment motion because that medical office had closed. The law firm was only able to locate the records in conjunction with another case.

On November 28, 2005, the then 21-year-old plaintiff was a passenger in a motor vehicle that defendant rear-ended with his vehicle. Shortly after the accident, an EMT removed plaintiff from the vehicle. At that time, plaintiff complained to the EMT that she had a "burning sensation going up her spine, [a] headache from her head hitting the car and [her] knee." Plaintiff testified that she had never hurt those body parts in any other accidents before or after the accident.

After the accident, plaintiff was taken by ambulance to the emergency room at Metropolitan Hospital where she made the same physical complaints. The hospital took x-rays, but found nothing broken. Plaintiff believed she was then given a prescription for Motrin and was driven home.

Plaintiff testified that she missed three days of work after the accident and then returned to work. However, she had to quit work approximately three weeks before having knee surgery on March 30, 2006 because her knee was "extremely swollen." Plaintiff stated that, beginning approximately one week after the accident, she received physical therapy for approximately two months. Following her surgery in March 2006, plaintiff resumed physical therapy for approximately one month. In her affidavit in opposition, plaintiff explained her gap in treatment. She stated that once her no-fault benefits stopped, she could not afford to pay for medical care (see Mendez v Mendez, 72 AD3d 402 [2010] ["(p)laintiff's experts also explained any gap in her treatment by stating that she had reached the maximum benefit possible from the treatment"]). Plaintiff also testified that, as a result of the accident, she cannot stand for long periods, has difficulty walking and running, cannot lift heavy objects, has trouble sleeping and is sensitive to light.

Dr. Andrew Cordaro, who examined plaintiff just one month after the accident, noted that plaintiff complained about her right knee. He referred her for x-rays and an evaluation with an orthopedic surgeon [FN1] . The MRI report from Dr. Andrew Caruthers, dated March 13, 2006, describes a "longitudinal tear of the lateral meniscus contacting superior surface" and "small knee joint effusion."

Most important, plaintiff's orthopedic surgeon, Dr. Ehrlich, who performed arthroscopic surgery on plaintiff's knee only four months after the accident, opined that "to a reasonable degree of medical certainty, the motor vehicle accident of 11/28/05 is the proximate cause of her condition, and not from a pre-existing or long standing degenerative process." Plaintiff's surgeon based this conclusion on his observations of plaintiff's knee during surgery (documented in the operative report plaintiff submitted on the original motion) and because plaintiff's MRI films (plaintiff submitted the MRI report on the original motion) did not depict the existence of osteophytes, show evidence of spondylosis or show other symptoms of degenerative processes. Thus, plaintiff's surgeon countered defendant's orthopedist's observation that plaintiff's injuries had no traumatic basis. Plaintiff's surgeon also documented range-of-motion limitations in the knee. Dr. Mian, who also conducted an orthopedic examination in 2008 and found deficits in plaintiff's range of motion, opined that the right knee tear was causally related to the accident. Thus, the evidence more than amply raised an issue of fact as to whether plaintiff had sustained a "serious injury" of a permanent nature to the right knee within the meaning of Insurance Law Section 5102(d).

Plaintiff's objective evidence of injury, four months post-accident, was sufficiently contemporaneous to establish that plaintiff had suffered a serious injury within the meaning of the statute. Dr. Ehrlich based his conclusions in large part on his actual observations of plaintiff's knee during the surgery he performed. This conclusion is significant because the doctor was able to see exactly what the injuries were. Moreover, in her affidavit, plaintiff stated that, prior to surgery, she had physical therapy five times a week for three months. It is not unreasonable to try to resolve an injury with physical therapy before resorting to surgery. The circumstances, i.e., plaintiff's initial medical exam that was close in time to the accident, her intensive physical therapy, her young age and eventual surgery, make the four months between the accident and plaintiff's objective medical evidence sufficiently contemporanous to withstand a motion for summary judgment (see Gonzalez v Vasquez, 301 AD2d 438 [2003] [examining physician's affirmation correlating motorist's neck and back pain two years after rear-end collision to quantified range of motion limitations found on physical examination and bulging and herniated discs described in MRI reports, and opining that motorist's symptoms were permanent, raised genuine issue of material fact as to whether motorist suffered serious injury]; see also Rosario v Universal Truck & Trailer Serv., 7 AD3d 306, 309 [2004]).

However, defendants did establish, prima facie, that plaintiff did not suffer a 90/180-day injury, and plaintiff failed to raise a triable issue of fact, given her testimony that she was out of work for only three days (see Pou v E & S Wholesale Meats, Inc., 68 AD3d 446, 447 [2009]).
All concur except Román, J. who dissents in a memorandum as follows:

ROMÁN, J. (dissenting)

To the extent that the majority concludes that renewal of the motion court's order granting summary judgment in favor of Kanate was warranted, and that upon renewal Garcia's evidence precluded summary judgment, I dissent. Here, renewal would only have been warranted in the interest of justice, and to the extent that Garcia's evidentiary submission on renewal failed to establish any injury contemporaneous with her accident, renewal should have been denied.

To the extent that Garcia submitted medical evidence failing to establish treatment earlier than January 25, 2006, two months after this accident, Garcia failed to raise a triable issue of fact as to whether she sustained a serious injury because she failed to submit competent and admissible medical evidence of injury contemporaneous with her accident (see Ortega v Maldonado, 38 AD3d 388, 388 [2007]; Toulson v Young Han Pae, 13 AD3d 317, 319 [2004]; Alicea v Troy Trans, Inc., 60 AD3d 521, 522 [2009]; Migliaccio v Miruku, 56 AD3d 393, 394 [2008]). Accordingly, the motion court properly granted Kanate's initial motion for summary judgment with respect to all categories of injury under Insurance Law § 5102.

On her motion to renew, seeking to remedy shortcomings in her prior submission, Garcia tendered, inter alia, medical records, not previously submitted, purportedly evincing medical treatment contemporaneous with her accident. Specifically and to the extent relevant here, on renewal Garcia submitted records evincing a medical examination occurring a month after her accident. Nothing submitted competently evinced medical treatment at anytime prior thereto. A motion to renew "must be based upon 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" (Foley v Roche, 68 AD2d 558, 568 [1979]). However, when the proponent of renewal seeks to proffer new evidence of which he/she was previously aware but did not provide to the court on a prior motion, renewal may be granted if the interest of justice so dictate (Tishman Constr. Corp. of N.Y. v City of New York, 280 AD2d 374, 376-377 [2001]; Mejia v Nanni, 307 AD2d 870, 871 [2003]). Generally, the interest of justice require renewal when the newly submitted evidence changes the outcome of the prior motion. Here, Garcia sought renewal in order to have the motion court consider evidence previously known to her. Accordingly, renewal would have only been warranted if it served the interest of justice. At best, Garcia's medical evidence of injury on renewal established medical treatment beginning no sooner than a month after her accident. A medical examination occurring a month after an accident is not contemporaneous. Given its plain and ordinary meaning, contemporaneous means "existing, happening in the same period of time" (Webster's New World Dictionary 300 [3rd college ed 2004]). Accordingly, insofar as Garcia's evidence on renewal did not evince medical treatment contemporaneous with the accident, renewal in the interest of justice should have been denied.

The majority takes the untenable position that not only is Garcia's medical examination, occurring a month after the accident, contemporaneous with her accident, but paradoxically that the report of her surgeon, who did not see plaintiff for the first time until four months after her accident, is sufficient to establish the causal link between Garcia's knee injury and her accident such that she raised an issue of fact precluding summary judgment in Kanate's favor. First, if a medical examination occurring one month after an accident is not contemporaneous, then an examination occurring four months after an accident is certainly less so (Mancini v Lali NY, Inc., 77 AD3d 797, 798 [2010] [medical findings made by plaintiff's doctor four months after his accident not sufficiently contemporaneous with the accident to establish a serious injury]); Resek v Morreale, 74 AD3d 1043, 1044-145 [2010] [medical findings made by plaintiff's doctor five months after his accident not sufficiently contemporaneous with the accident to establish a serious injury]). Moreover, even if we assume that this report was temporally contemporaneous with her accident, it was nevertheless bereft of any objective, qualitative, or quantitative evidence of injury to her knee (Blackmon v Dinstuhl, 27 AD3d 241, 242 [2006]; Thompson v Abassi, 15 AD3d 95, 98 [2005]). Second, contrary to the majority's assertion, the report of Garcia's orthopedist might have been probative as to her knee injury on the date he performed surgery, but standing alone, his observations on that date could not have been probative as to whether that injury was caused by this accident (see Pommells v Perez, 4 AD3d 101, 101-102 [2004], affd 4 NY3d 566 [2005] [medical opinion as to causation is speculative when the record is bereft of any evidence establishing contemporaneous medical treatment and the doctor proffering opinion sees plaintiff for the first time after a substantial period of time since the accident]; Vaughan v Baez, 305 AD2d 101, 101 (2003); Shinn v Catanzaro, 1 AD3d 195, 198-199 [2003]; Komar v Showers, 227 AD2d 135, 136 [1996]).

The majority relies on two cases in support of its holding, Gonzalez v Vasquez (301 AD2d 438 [2003]) and Rosario v Universal Truck & Trailer Serv., Inc. (7 AD3d 306 [2004]), neither of which bears on the issue of contemporaneous medical treatment and both of which, to the extent that they allow a doctor to establish causation upon an initial examination conducted a substantial time after an accident, are at odds with Vaughan, Shinn, Komar and Pommells.

Footnote 1: Although the records from Dr. Cordaro's office are unsworn, it is of no moment. The documents are properly certified as business records (see Mayblum v Schwarzbaum, 253 AD2d 380 [1998]; CPLR 4518[a]), and are referenced only to show plaintiff's complaints and the doctor's referral rather than a medical opinion about a causal relation to the accident.

Cracchiolo v. Omerza

Friedman, Khafif & Sanchez, LLP, Brooklyn, N.Y. (Emil J.
Sanchez and Andrew M. Friedman of counsel), for appellants.
Cheven, Keely & Hatzis, New York, N.Y. (William B. Stock
of counsel), for respondents.

DECISION & ORDER

In an action to recover damages for personal injuries, the plaintiffs appeal, as limited by their brief, from so much of an order of the Supreme Court, Richmond County (Maltese, J.), dated February 3, 2010, as granted the defendants' cross motion for summary judgment dismissing the complaint on the ground that the plaintiffs did not sustain a serious injury within the meaning of Insurance Law § 5102(d).

ORDERED that the order is reversed insofar as appealed from, on the law, with costs, and the defendants' cross motion for summary judgment dismissing the complaint on the ground that the plaintiffs did not sustain a serious injury within the meaning of Insurance Law § 5102(d) is denied.

Contrary to the Supreme Court's determination, the defendants failed to meet their prima facie burden of showing that the plaintiffs 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). Based on the inconsistent norms utilized in the findings of the defendants' examining orthopedist, Dr. Harvey Fishman, as to the range of motion tests for the cervical and thoracolumbosacral regions of the spine of each of the plaintiffs, the defendants failed to establish their prima facie entitlement to judgment as a matter of law (see Frey v Fedorciuc, 36 AD3d 587, 588; Powell v Alade, 31 AD3d 523; see also Corcione v John Dominick Cusumano, Inc., 84 AD3d 1010).

The parties' remaining contentions either are without merit or have been rendered academic in light of our determination.

Kanarad v. Setter

Richard T. Lau, Jericho, N.Y. (Linda Meisler of counsel), for
appellant.
Mallilo & Grossman, Flushing, N.Y. (Francesco Pomara, Jr.,
of counsel), for respondent.

DECISION & ORDER
In an action, inter alia, to recover damages for personal injuries, the defendant appeals from an order of the Supreme Court, Suffolk County (Cohalan, J.), dated January 31, 2011, which denied his motion for summary judgment dismissing the complaint on the ground that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d).

ORDERED that the order is affirmed, with costs.

The defendant met his prima facie burden of showing that the plaintiff did not sustain a serious injury within the meaning of Insurance Law § 5102(d) as a result of the subject accident (see Toure v Avis Rent A Car Sys., 98 NY2d 345, 352; Gaddy v Eyler, 79 NY2d 955, 956-957).

However, in opposition, the plaintiff raised a triable issue of fact through the affidavit of his treating chiropractor, Dr. Doug Wright. Dr. Wright concluded, based on his contemporaneous and most recent examinations of the plaintiff, which revealed significant limitations in the cervical and lumbar regions of the plaintiff's spine, and his review of the plaintiff's magnetic resonance imaging reports, which showed, inter alia, disc bulges in the cervical and lumbar regions of the plaintiff's spine, that the plaintiff's injuries were permanent and the range-of-motion limitations were significant (see Dixon v Fuller, 79 AD3d 1094, 1095; Harris v Boudart, 70 AD3d 643, 644). Dr. Wright further opined that the plaintiff's cervical and lumbar injuries and observed range-of-motion limitations were causally related to the subject accident (see Harris v Boudart, 70 AD3d at 644).

Therefore, Dr. Wright's affidavit was sufficient to raise a triable issue of fact as to whether, as a result of the subject accident, the plaintiff sustained a serious injury to the cervical and lumbar regions of his spine under the permanent consequential limitation of use and/or the significant limitation of use categories of Insurance Law § 5102(d) (see Dixon v Fuller, 79 AD3d at 1095; Gussack v McCoy, 72 AD3d 644).
Accordingly, the Supreme Court properly denied the defendant's 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).

Rose v. Arthur J. Gallagher & Co.

Jaspan Schlesinger LLP, Garden City, N.Y. (Steven R. Schlesinger
and Seth A. Presser of counsel), for appellants.

Venable LLP, New York, N.Y. (Edwin M. Larkin of counsel),
for respondents.


DECISION & ORDER

In an action, inter alia, to recover damages for negligence, professional malpractice, and breach of fiduciary duty, the plaintiffs appeal, as limited by their notice of appeal and brief, from so much of an order of the Supreme Court, Nassau County (Warshawsky, J.), entered May 7, 2010, as, upon converting those branches of the defendants' motion which were to dismiss the third, fourth, fifth, and sixth causes of action of the amended complaint into a motion for summary judgment dismissing those causes of action, granted those branches of the motion which were for summary judgment dismissing the third, fourth, and fifth causes of action in the amended complaint.

ORDERED that the order is affirmed insofar as appealed from, with costs.
This action arises from the alleged failure of the defendants, in their capacity as insurance brokers, to provide the plaintiffs with an accurate quote for the cost of certain insurance coverage. The third, fourth, and fifth causes of action in the amended complaint, which are at issue on this appeal, allege negligence, professional malpractice, and breach of fiduciary duty, respectively. The only issue disputed by the parties is whether the conduct alleged in those three causes of action is governed by Louisiana law or New York law.

The three causes of action in question sound in tort and, thus, contrary to the parties' contentions, the conflict-of-laws standard that applies in contract-based actions (see Zurich Ins. Co. v Shearson Lehman Hutton, 84 NY2d 309, 317-319) does not apply here. Since the laws alleged to be in conflict—including those regarding the availability of punitive damages, an important purpose of which is deterrence (see Ross v Louise Wise Servs., Inc., 8 NY3d 478, 489) — are of a conduct-regulating nature, the law of the place of the tort applies (see Padula v Lilarn Props. Corp., 84 NY2d 519; Cooney v Osgood Mach., 81 NY2d 66, 72; Schultz v Boy Scouts of Am., 65 NY2d 189, 198; Shaw v Carolina Coach, 82 AD3d 98, 101). In this case, the allegedly negligent quote was requested by the plaintiffs, and provided by the defendants, through e-mail communications that were sent from and received in New York. Thus, the tortious conduct alleged in the amended complaint is governed by New York law. Since the parties charted a procedural course in which the viability of the three causes of action in question depends upon whether they are governed by Louisiana law, the [*2]Supreme Court properly awarded the defendants summary judgment dismissing those causes of action.

OAKES v PATEL

Appeals from a judgment of the Supreme Court, Erie County (Timothy J. Drury, J.), entered December 23, 2009 in a medical malpractice action. The judgment awarded plaintiffs money damages upon a jury verdict.


DAMON MOREY LLP, BUFFALO (AMY ARCHER FLAHERTY OF COUNSEL), FOR DEFENDANT-APPELLANT KALEIDA HEALTH, AS SUCCESSOR IN INTEREST TO MILLARD FILLMORE HOSPITALS, DOING BUSINESS AS MILLARD FILLMORE SUBURBAN HOSPITAL.
ROACH, BROWN, MCCARTHY & GRUBER, P.C., BUFFALO (GREGORY T. MILLER OF COUNSEL), FOR DEFENDANT-APPELLANT SATISH K. MONGIA, M.D.
BROWN & TARANTINO, LLC, BUFFALO (ANN M. CAMPBELL OF COUNSEL), FOR DEFENDANT-APPELLANT RAJNIKANT PATEL, M.D.
LAW OFFICE OF FRANCIS M. LETRO, BUFFALO (RONALD J. WRIGHT OF COUNSEL), FOR PLAINTIFFS-RESPONDENTS.


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

Memorandum: Plaintiffs commenced this medical malpractice action seeking damages for the failure of defendants to diagnose and treat Daniel C. Oakes (plaintiff) for a sentinel bleed from a cerebral aneurysm. Following the first trial, the jury returned a verdict finding, inter alia, that defendants, Rajnikant Patel, M.D., Satish K. Mongia, M.D., and Kaleida Health, as successor in interest to Millard Fillmore Hospitals, doing business as Millard Fillmore Suburban Hospital (Kaleida), were negligent and also that Kaleida was vicariously liable for the negligence of third-party defendant Dent Neurologic Institute (Dent). The jury apportioned fault among defendants and awarded plaintiffs damages in various amounts including, insofar as relevant to this appeal, $1 million to plaintiff for past pain and suffering and $60,000 to plaintiff wife for past loss of services, as well as future damages covering 18 years in the amount of $1 million for plaintiff's future pain and suffering, $1.8 million for plaintiff's future supportive living expenses and $150,000 for plaintiff wife's future loss of services.

Plaintiffs moved to set aside the verdict on damages only based on, inter alia, the ground that certain elements of the award were inadequate. Supreme Court, inter alia, granted the post-trial motion in part and set aside the verdict with respect to damages for past and future pain and suffering, past and future loss of services and future supportive living expenses, and the court ordered a new trial on those elements of damages unless defendants stipulated to an award of $5 million for past pain and suffering and $1.5 million for past loss of services, as well as an award covering 18 years in the amount of $5 million for future pain and suffering, $2 million for future loss of services and $3.9 million for future supportive living expenses.

Also following the jury verdict, Kaleida moved for, inter alia, leave to amend its answer to the amended complaint to include an affirmative defense of release and an affirmative defense pursuant to General Obligations Law § 15-108. According to Kaleida, plaintiffs each executed and filed a proof of claim in a liquidation proceeding in March 2003 against Kaleida's insurer, PHICO Insurance Company (PHICO), that included a release of claims against any PHICO insured.Kaleida filed its own proof of claim in that proceeding in December 2007 with respect to this action against it and, although the deadline to file proofs of claim in the liquidation proceeding was April 1, 2003, Kaleida averred that it had been advised by PHICO that its proof of claim was timely. Kaleida alleged that it did not receive copies of plaintiffs' proofs of claim until May 2008, after the conclusion of the first trial, and that the proposed amendments to its answer would not prejudice plaintiffs. The court denied the motion.

Defendants subsequently refused to stipulate to the court's increased damages, and a new trial on the issue of those damages was conducted. Following the second trial, the jury returned a verdict awarding plaintiff $5.6 million for past pain and suffering and awarding plaintiff wife $1.5 million for past loss of services and society. The jury also awarded future damages covering 17 years in the amount of $4,720,000 for plaintiff's future custodial care and supportive services, $4 million for plaintiff's future pain and suffering, and $150,000 for plaintiff wife's future loss of household services and $750,000 for her future loss of services and society. Defendants thereafter each moved, inter alia, to set aside the verdict on the ground that the award for past and future pain and suffering, past and future loss of services and society and future custodial home care was excessive. Kaleida and Dr. Mongia also contended that they had been prejudiced when the court erred in admitting certain evidence and precluding other evidence, and when plaintiffs' counsel and the court engaged in inappropriate conduct. The court denied those parts of defendants' respective motions to set aside the verdict, and this appeal ensued.

We conclude that the court properly denied that part of Kaleida's motion for leave to amend its answer to the amended complaint to include an affirmative defense of release and an affirmative defense pursuant to General Obligations Law § 15-108. The proofs of claim executed and filed by plaintiffs in the liquidation proceeding with respect to PHICO contained releases with respect to "any and all claims [that] have been or could be made against [a] PHICO insured based on or arising out of the facts supporting the . . . [p]roof of [c]laim up to the amount of the applicable policy limits and subject to coverage being accepted by the Liquidator . . . ." Further, the notice received by plaintiffs in connection with their proofs of claim states that, "[i]f coverage is avoided by the Liquidator, [the] release[s] become[] null and void." Because Kaleida's liability for the negligence of Dent is included in the claims specified to PHICO and because PHICO's liquidators avoided, or announced that they would avoid, coverage of that portion of the claim, plaintiffs' releases were rendered null and void.

We further conclude that defendants were not denied a fair trial based on the alleged inappropriate conduct of plaintiffs' counsel or the court. Any improper remarks by plaintiffs' counsel did not deny defendants a fair trial because " they did not constitute a pattern of behavior designed to divert the attention of the jurors from the issues at hand' " (Kmiotek v Chaba, 60 AD3d 1295, 1296). Furthermore, although certain actions and statements of the court may have been somewhat intemperate or ill-advised, we conclude that, "overall[,] the conduct complained of was not so egregious as to have deprived the [defendants] of a fair trial" (Malaty v North Ark. Wholesale Co., 305 AD2d 556; see Sheinkerman v 3111 Ocean Parkway Assoc., 259 AD2d 480, lv dismissed in part and denied in part 93 NY2d 956).

We further conclude that the jury's verdict on liability in the first trial is not against the weight of the evidence (see generally Cohen v Hallmark Cards, Inc., 45 NY2d 493, 499), and that the various elements of damages awarded in the second trial do not deviate materially from what would be reasonable compensation (see CPLR 5501 [c]).

Finally, we note our agreement with plaintiffs that the court properly granted those parts of their post-trial motion in the first trial to set aside certain elements of the award of damages as inadequate. With respect to the issue of the additur as raised by the dissent (Peradotto, J.), however, we conclude that, because defendants did not challenge the court's additur before, during or after the second trial, and did not raise that issue on appeal, no such issue is properly before us. Indeed, the only contentions raised by defendants on appeal in the "argument" sections of their briefs regarding damages are that the court erred in granting in part plaintiffs' motion to set aside the jury verdict in the first trial on the ground that certain portions of the damages award were inadequate, without addressing the amount of the court's additur with respect thereto, and that the court erred in denying those parts of their motions seeking to set aside the second verdict on the ground that certain portions of the damages award were excessive. We cannot conclude that, by challenging the court's order setting aside the first verdict in part, defendants thereby implicitly challenged the amount of the court's additur (see generally Gerbino v Tinseltown USA, 13 AD3d 1068, 1072). Nor can we agree with our dissenting colleague that references to the amounts of the court's additur in the factual recitation of defendants' briefs on appeal constitute challenges to the court's additur. In any event, even assuming, arguendo, that such challenges are raised in the briefs, they are raised for the first time on appeal and thus are not properly before us (see Ciesinski v Town of Aurora, 202 AD2d 984, 985). We have considered defendants' remaining contentions with respect to both trials and conclude that they are without merit.

Lindley, Sconiers and Martoche, JJ., concur; Smith, J.P., dissents in part and votes to modify in accordance with the following Memorandum: I respectfully dissent in part, because I cannot agree with the majority that specified elements of the award of damages following the second trial are proper. Initially, I agree with the majority that the issue of the additur, which Justice Peradotto in her dissent asserts must be addressed before we review the excessiveness of the second verdict, is not before us. I also agree with the remainder of the majority's determination, including that, contrary to defendants' contention, Supreme Court properly granted those parts of plaintiffs' post-trial motion to set aside the verdict from the first trial with respect to damages for past and future pain and suffering, past and future loss of services and future supportive living expenses on the ground that the award for those elements of damages "deviates materially from what would be reasonable compensation" (CPLR 5501 [c]).

I agree with defendants, however, that the award after the second trial with respect to damages for past and future pain and suffering, past and future loss of services and future custodial care and supportive services also "deviates materially from what would be reasonable compensation" (id.). Although plaintiff Daniel C. Oakes sustained severe and life-changing injuries, in my view, an award of $2 million for past pain and suffering, $3.5 million for future pain and suffering, $200,000 for past loss of services, $300,000 for future loss of services, and $3 million for future custodial care and supportive services, with all future awards covering 17 years, is the maximum amount that the jury could have awarded as a matter of law based on the evidence at the second trial (see generally Angamarca v New York City Partnership Hous. Dev. Fund, Inc., ___ AD3d ___ [June 21, 2011]; Coque v Wildflower Estates Devs., Inc., 58 AD3d 44, 56; Paek v City of New York, 28 AD3d 207, 208, lv denied 8 NY3d 805; Sawtelle v Southside Hosp., 305 AD2d 659, 660). Therefore, I would modify the judgment by vacating the award with respect to damages for past and future pain and suffering, past and future loss of services and future custodial care and supportive services and grant a new trial on those issues unless plaintiffs stipulate to a reduction of the verdict with respect to those elements of damages as indicated.

Peradotto, J., dissents and votes to modify in accordance with the following Memorandum: I respectfully dissent because, in my view, the majority's decision improperly fails to address the issue of whether the court's additur after setting aside the first verdict was appropriate. In my view, any issues concerning the excessiveness of the second verdict should not be addressed unless and until all issues relative to the first verdict are resolved.

As the majority states, plaintiffs commenced this medical malpractice action seeking damages for the failure of defendants to diagnose and treat Daniel C. Oakes (plaintiff) for a cerebral aneurysm. Following the first trial, the jury found that defendants Rajnikant Patel, M.D., Satish K. Mongia, M.D. and Kaleida Health, as successor in interest to Millard Fillmore Hospitals, doing business as Millard Fillmore Suburban Hospital (Kaleida), were negligent and awarded damages in the amount of $5,123,500. As relevant to this appeal, the jury awarded plaintiff $1 million for past pain and suffering, $1 million for future pain and suffering, and $1.8 million for future supportive living expenses, and awarded plaintiff wife $60,000 for past loss of services and $150,000 for future loss of services. The future damages were awarded to cover a period of 18 years. Plaintiffs moved to set aside the verdict on damages only based on, inter alia, the ground that certain parts of the award were inadequate. The court determined that the award for past and future pain and suffering, past and future loss of services and future supportive living expenses deviated materially from what would be reasonable compensation. The court therefore set aside the jury verdict with respect to those categories of damages and ordered a new trial unless defendants stipulated to increase the award to $5 million for past pain and suffering, $5 million for future pain and suffering, $1.5 million for past loss of services, $2 million for future loss of services, and $3.9 million for future supportive living costs, with all future damages awarded to cover a period of 18 years. With that additur, the verdict would have been increased from $5,123,500 to $18,513,500. Defendants rejected the additur and proceeded to a second trial.

On appeal, defendants contend that, inter alia, the court erred in setting aside certain parts of the verdict from the first trial. The order setting aside the first verdict and granting a new trial unless defendants stipulated to an additur of $13.4 million is, of course, brought up for review on this appeal from the judgment entered after the second trial (see CPLR 5501 [a] [1]). The majority, however, does not address all of defendants' contentions with respect to the verdict after the first trial. Instead, the majority proceeds directly to the claims concerning the verdict after the second trial, concluding that the damages awarded in the second trial are not excessive. That is error. Rather, we must address the propriety of the court's order setting aside parts of the verdict following the first trial and the appropriateness of the court's additur before addressing any issues raised with respect to the second trial (see generally Sherry v North Colonie Cent. School Dist., 39 AD3d 986; Zeigler v Neely, 220 AD2d 345; Libman v McKnight, 204 AD2d 856, lv denied 84 NY2d 812).

In my view, the court properly set aside the award for past and future pain and suffering, past and future loss of services and future supportive living expenses inasmuch as the award with respect to those categories of damages deviated materially from what would be reasonable compensation (see CPLR 4404 [a]). I conclude, however, that the court's additur with respect to the noneconomic damages was excessive (see generally Perlin v King, 36 AD3d 495; Rivera v Lincoln Ctr. for Performing Arts, Inc., 16 AD3d 274; Carlos v W.H.P. 19, 301 AD2d 423), inasmuch as the amounts set by the court did not represent "the minimum amount[s] that the jury could have found as a matter of law based on the evidence at trial" (Camacho v Rochester City School Dist., 20 AD3d 916; see Kmiotek v Chaba, 60 AD3d 1295, 1297; Orlikowski v Cornerstone Community Fed. Credit Union, 55 AD3d 1245, 1247, lv dismissed 11 NY3d 915; see generally Siegel, NY Prac § 407, at 689 [4th ed]). That is the applicable standard because "the amount of damages to be awarded is primarily a question of fact [and] . . . considerable deference should be accorded to the interpretation of the evidence by the jury" (Marshall v Lomedico, 292 AD2d 669, 670 [internal quotation marks omitted]). Further, the successful litigants are "entitled to the benefits of a favorable jury verdict" (Keyser v KB Toys, Inc., 82 AD3d 713, 714; see McDonald v 450 W. Side Partners, LLC, 70 AD3d 490, 491-492). In the context of plaintiffs' motion to set aside the damages award as inadequate, it is the defendants who are entitled to that benefit. In my view, $5 million each for past and future pain and suffering and $3.5 million total for past and future loss of services are simply not "the minimum amounts the jury could have awarded as a matter of law based on the evidence at trial" (Kmiotek, 60 AD3d at 1297; see generally Doviak v Lowe's Home Ctrs., Inc., 63 AD3d 1348). Defendants therefore were deprived of the opportunity to stipulate to an appropriate additur with respect to the award for past and future pain and suffering and past and future loss of services, and that error is not cured by a second trial on those categories of damages. Indeed, this is not a case in which defendants made the strategic decision not to accept an appropriate additur and to proceed at their peril. Thus, defendants should be afforded the opportunity to stipulate to a proper additur in the context of this appeal (see generally Perlin, 36 AD3d at 495; Rivera, 16 AD3d 274; Carlos, 301 AD2d 423). I would therefore modify the judgment accordingly.

The majority concludes that the additur issue is not properly before us because defendants "did not challenge the court's additur before, during or after the second trial, and did not raise that issue on appeal." I disagree. In opposition to plaintiffs' motion to set aside the verdict on damages only after the first trial, defendants contended that the verdict should stand because the award did not deviate materially from what would be reasonable compensation. That contention necessarily encompasses the argument that an additur in any amount would be inappropriate. When the court granted plaintiffs' motion in part, set aside the verdict with respect to certain elements of damages and ordered a new trial on those elements unless defendants stipulated to an additur of more than $13 million, defendants rejected the proposed additur and proceeded to a second trial. I cannot agree with the majority that, in addition to opposing plaintiffs' motion and rejecting the proposed additur, defendants were somehow required to further "challenge" the amount of the additur in order to preserve the issue for our review. Throughout their briefs on appeal, defendants assert not only that the court erred in setting aside the verdict after the first trial, but they also contend that the court's additur was excessive. Kaleida, for example, states in its brief that it "declined to stipulate to the inordinate additur," noting that the court "ordered a five-fold increase in [plaintiff]'s award for pain and suffering, more than doubled [plaintiff]'s award for supportive living expenses, and increased [plaintiff wife]'s award for loss of consortium by a factor of more than 15." Dr. Mongia similarly notes in his brief that "[t]he trial court's additur was more than four times the amount awarded by the jury as to the particular [elements] of damage[s] it felt to be inadequate." I thus conclude that the issue whether the additur was excessive is properly preserved for our review.

I take no position with respect to the majority's determination that the various elements of damages awarded in the second trial do not deviate materially from what would be reasonable compensation because, in my view, that issue should not be reached until all issues with respect to the first trial have been resolved. I also take no position with respect to defendants' contention that the court erred in precluding the admission of evidence relative to medical causation in the second trial, a contention that the majority does not address.


In re Liquidation of Midland Insurance Company Everest Reinsurance Company

Budd Larner, P.C., New York (Joseph J. Schiavone of counsel),
for appellant-respondent.
Simpson Thacher & Bartlett, LLP, New York (Barry R.
Ostrager of counsel), for Swiss Reinsurance America Corporation, GE
Reinsurance Corporation and Westport Insurance Corporation,
and Hogan Lovells US LLP, New York (Sean Thomas Keely of
counsel), for Clearwater Insurance Company, Metropolitan
Group Property and Casualty Insurance Company, and Allianz
S.p.A., respondents-appellants.
David Axinn, New York, for James J. Wrynn, respondent-
appellant.
Nixon Peabody LLP, Boston, MA (Joseph C. Tanski, of the bar
of the State of Massachusetts, admitted pro hac vice, of
counsel), and Nixon Peabody LLP, New York (Barbara A. Lukeman
of counsel), for California Insurance Guarantee Association,
Connecticut Insurance Guaranty Association, District of
Columbia Insurance Guaranty Association, Georgia Insurers
Insolvency Pool, Maine Insurance Guaranty Association,
Massachusetts Insurers Insolvency Fund, Mississippi Insurance
Guaranty Association, New Hampshire Insurance Guaranty
Association, Rhode Island Insurers Insolvency Fund, Texas Property
& Casualty Insurance Guaranty Association, Vermont Property
and Casualty Insurance Guaranty Association, and Virginia
Property and Casualty Insurance Guaranty Association,
respondents-appellants.
Shapiro, Rodarte & Forman LLP, Santa Monica, CA (Cindy F.
Forman of counsel), for Baxter International Inc., respondent.

Order, Supreme Court, New York County (Michael D. Stallman, J.), entered on or about January 15, 2008, which denied the motions of Everest Reinsurance Company to modify an anti-suit injunction and to vacate an order, same court and Justice, entered on or about November 8, 2006, and modified a claims allowance procedure order, same court (Beverly S. Cohen, J.), entered January 31, 1997, unanimously affirmed, without costs. Order, same court (Michael D. Stallman, J.), entered June 2, 2009, which set forth certain procedures for the allowance of claims against Midland Insurance Company, unanimously affirmed, without costs.

By order entered on or about April 3, 1986, Supreme Court (Thomas J. Hughes, J.) placed Midland Insurance Company in liquidation and permanently enjoined the commencement and prosecution of all actions against it (see Insurance Law § 7419[b]). Everest Reinsurance Company entered into excess of loss reinsurance treaties and facultative reinsurance certificates with Midland for policy periods in the 1970s and 1980s (collectively, the reinsurance contracts)[FN1]. Claiming that its contractual rights were not being honored, Everest moved the court for an order modifying the injunction so as to permit an action by Everest for a judgment declaring its rights as well as those of the liquidator under the reinsurance contracts. Everest sought leave to sue for a judgment declaring that the liquidator breached the reinsurance contracts by failing to provide Everest with (a) proper information regarding claims, (b) an opportunity to participate in settlement negotiations with Midland policyholders and (c) an opportunity to participate in the claim allowance process. The relief Everest would have wanted to seek in its action was a declaration that it was not required to provide reinsurance for claims affected by the foregoing alleged breaches and a further declaration that Everest has the right to interpose defenses in the liquidator's settlement negotiations and claims allowance processes. On this appeal, Everest argues that the court committed error in denying its motion to modify the injunction.

Insurance Law § 7419(b) vests a liquidation court with broad authority to issue injunctions as it deems necessary to prevent interference with the liquidator or the proceeding, or the waste of the insurer's assets. Accordingly, a court has the unquestioned authority to vacate an anti-suit injunction in the interest of justice (see Matter of Bean, 207 App Div 276, 280 [1923], affd 238 NY 618 [1924]). A motion for such relief is addressed to the sound discretion of the court (see Rosemont Enters. v Irving, 49 AD2d 445, 448 [1975]). One claiming error in the exercise of a court's discretion has the burden of showing an abuse of such discretionary power (id.). Everest correctly cites Matter of Bean v Stoddard (207 App Div 276 [1923], affd 238 NY 618 [1924]) for the proposition that in a liquidation proceeding a court may vacate an injunction in the interest of justice. "The phrase interest of justice' implies conditions which assist, or are in aid of or in the furtherance of, justice [and] bring about the type of justice which results when the law is correctly applied and administered' after consideration of the interests of both the litigants and society" (Hafkin v N. Shore Univ. Hosp., 279 AD2d 86, 90 [2000], affd 97 NY2d 95 [2001][citations omitted]).

In making its determination, the court found that Everest did not establish a likelihood of its success in proving that the liquidator violated its contractual investigation and interposition rights by refusing to allow Everest to participate in the allowance, disallowance and settlement of claims prior to their submission to the court. The court further noted that Everest will suffer no injury until it is called upon to make payment on claims that the liquidator allows and the court has approved. The court also recognized the public interest in the single management of a liquidation that Insurance Law § 7419(b) is intended to protect. Hence, we conclude that the court gave due consideration to the interest of justice in denying Everest's motion for an order vacating the anti-suit injunction. Although the court misstated Everest's burden on the motion to be proof by a preponderance of the evidence, we also find no abuse of discretion on the basis of the foregoing factors considered by the court.[FN2]

We reject Everest's argument that the court erroneously held that Everest's right to interpose defenses attaches only after the liquidator has allowed a claim. Under Insurance Law § 1308(a)(3), a reinsurance agreement may provide that where a claim is pending during an insurer's insolvency proceeding the reinsurer "may investigate such claim and interpose, at its own expense, in the proceeding where such claim is to be adjudicated any defenses which it deems available to the ceding company, its liquidator, receiver or statutory successor." Moreover, Insurance Law § 7432 and § 7433 provide for the processing of claims by the liquidator while § 7434(a)(1) contemplates the payment of claims upon the recommendation of the liquidator under the direction of the court. Hence, claims are adjudicated after they have been filed with the court.

Everest's claim of a right to interpose defenses at the commencement of a liquidation proceeding is also at odds with the very nature of reinsurance. Even where there is reinsurance, primary insurers are solely responsible for the investigation and defense of claims (see Unigard Sec. Ins. Co. v North Riv. Ins. Co., 79 NY2d 576, 583 [1992]). "The reinsurer does not assume liability for losses paid . . .; its only obligation is to indemnify the primary insurer (Matter of Midland Ins. Co., 79 NY2d at 258). The reinsurance contracts involved here contain typical "follow the settlements" or "follow the fortunes" provisions which leave reinsurers little room to dispute the primary insurers' claims handling (Unigard at 583). By operation of a "follow the settlements" clause, a reinsurer is bound by the settlement or compromise of a claim agreed to by a cedent unless it can show impropriety in arriving at the settlement (Excess Ins. Co. Ltd. v Factory Mut. Ins. Co., 3 NY3d 577, 583 n 3 [2004]). The reinsured's liability determinations are insulated from the reinsurer's challenge " unless they are fraudulent, in bad faith, or the payments are clearly beyond the scope of the original policy or in excess of [the reinsurer's] agreed-to exposure'" (Allstate Ins. Co. v Am. Home Assur. Co., 43 AD3d 113, 121 [2007], quoting North Riv. Ins. Co. v Ace Am. Reins. Co., 361 F3d 134, 140 [2d Cir 2004], lv denied 10 NY3d 711 [2008][internal quotation marks and citation omitted]). We are, therefore, not persuaded by Everest's argument that a reinsurer's right to investigate claims and interpose defenses attaches with the commencement of a liquidation proceeding and even before the liquidator has decided to allow a claim.

We also reject Everest's claim that the court lacked the authority to order a reference for hearings before a referee on defenses to be interposed by the reinsurers. Since 1994, objections to the liquidator's recommendations for the denial of policyholders' claims in this proceeding have been referred to a referee to hear and report (see Matter of Midland Ins. Co., 71 AD3d 221, 223 [2010], revd on other grounds 16 NY3d 536 [2011]). The court's January 15, 2008 order provides for "a process in which [the reinsurers'] defenses can be adjudicated as part of the judicial approval process, involving a hearing before a referee equivalent to that provided where an objection is filed to the liquidator's disallowance of a claim." Accordingly, the court set up a mechanism for a referee to hear and report to the court on the reinsurers' defenses. CPLR 4001 enables a court to "appoint a referee to determine an issue, perform an act, or inquire and report in any case where this power was heretofore exercised and as may be hereafter authorized by law." The statute carries over the appointment powers exercised by courts "traditionally" or under prior law (Siegel, Practice Commentaries [McKinney's Cons Laws of NY, Book 7B, CPLR C4001:1]). CPLR 4001 became effective in 1962 (L 1962, ch 308). Courts exercised the power to appoint referees to hear and report in liquidation proceedings prior to that time (see e.g. Matter of Natl. Sur. Co., 286 NY 216 [1941]) and since (see e.g. Matter of Union Indem. Ins. Co., 67 AD3d 469 [2009], lv denied 14 NY3d 859 [2010]; Matter of Midland Ins. Co. of New York, 269 AD2d 50 [2000]). We, therefore, find the court's appointment of a referee to hear and report with respect to the reinsurers' defenses to be within the proper exercise of the court's powers pursuant to CPLR 4001. Also, contrary to the arguments of Everest and the other reinsurers, their rights to issue subpoenas and conduct discovery have not been foreclosed. Such matters are within the discretion of a referee to hear and report (see CPLR 4201).

The court properly denied Everest's motion for an order precluding the liquidator and Midland's policyholders from introducing evidence of settlements entered into by Everest as a direct insurer in other proceedings. The proffered evidence is relevant inasmuch as it is offered to refute Everest's claims by showing that Everest, as a direct insurer in other proceedings, utilized the claims handling methodology it seeks to challenge as a reinsurer in this proceeding. Everest's reliance on CPLR 4547 is misplaced because the disputed evidence is not offered "as proof of liability for or invalidity of any claim" (id.). Moreover, the statute does not limit the admissibility of evidence offered for another purpose (id.).

The guaranty associations that have appeared in this proceeding assert that the court's order is erroneous to the extent that it allows a reinsurer to interpose defenses as to claims settled by the liquidator or claims the liquidator is bound by law to approve. The guaranty associations essentially argue that article 74 of the Insurance Law, which governs liquidation, trumps Insurance Law § 1308, which applies to reinsurance. We reject the guaranty associations' argument on the ground that liquidation cannot place a liquidator in a position different from that in which the insolvent insurer would have found itself but for the liquidation (see Matter of Midland Ins. Co., 79 NY2d at 264-265).[FN3]

We reject the liquidator's argument that the claims procedures set forth in the June 2, 2009 order are inefficient insofar as they allow the reinsurers to interpose defenses at the claims allowance stage. On the contrary, the court's procedure provides a useful mechanism for the disposition of the reinsurers' defenses during liquidation or in a subsequent action
brought by the liquidator. We have considered the parties' remaining contentions and find them unavailing.

THIS CONSTITUTES THE DECISION AND ORDER
OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.
ENTERED: AUGUST 25, 2011
CLERK
Footnotes


Footnote 1:"A reinsurance contract is one by which a reinsurer agrees to indemnify a primary insurer for losses it pays to its policyholders" (Matter of Midland Ins. Co., 79 NY2d 253, 258 [1992]). In exchange for the agreement to indemnify, the primary insurer "cedes" part of the premiums for its policies and the losses on those policies to the reinsurer (id.). A facultative insurance agreement is one issued to cover a particular risk while treaty reinsurance is obtained in advance of actual coverage and may apply to any risk the primary insurer covers (id.).

Footnote 2: Here the court relied on Icy Splash Food & Beverage, Inc. v Henckel (14 AD3d 595 [2005]), a case that is distinguishable because it involves the standard of proof on a trial as opposed to a motion.

Footnote 3: The appendices before this Court are insufficient to enable us to pass on the guaranty associations' assertion that the liquidator is bound by the settlements of the associations' claims. We note that the issue was not addressed by the court below and the liquidator states in its brief that it was first raised by the guaranty associations on a motion for leave to reargue. k of the Court
Decided and Entered: August 18, 2011

511319
FRANCO v TOWN OF CAIRO

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


Freeman Howard, P.C., Hudson (Andrew B. Howard
of counsel), for appellant.
Shantz & Belkin, Latham (Derek L. Hayden of
counsel), for Town of Cairo, respondent.
Law Office of Theresa Puleo, Albany (Norah M.
Murphy of counsel), for County of Greene, respondent.
MEMORANDUM AND ORDER

Lahtinen, J.
Appeal from an order of the Supreme Court (Teresi, J.), entered August 30, 2010 in Greene County, which denied petitioner's application pursuant to General Municipal Law § 50-e (5) for leave to file a late notice of claim.

In December 2009, petitioner fractured her ankle when she allegedly fell on ice while walking on a sidewalk adjacent to Main Street, near Living Structures Realty and the Cairo Public Library, in the Town of Cairo, Greene County. In June 2010, she made this application for leave to serve a late notice of claim upon respondents. Supreme Court denied the motion finding that petitioner failed to establish that respondents had knowledge of the accident within 90 days, set forth a reasonable excuse for her delay and demonstrate a lack of prejudice to respondents. Petitioner appeals.

The 90-day notice requirement of General Municipal Law § 50-e is intended "to provide the municipality with the opportunity to investigate the alleged defective condition in a timely fashion and assess the merits of the claim, not to avoid liability" (Williams v City of New York, 229 AD2d 114, 116 [1997]). Supreme Court is accorded discretion in determining whether to grant leave to serve a late notice of claim and the well-recognized nonexhaustive list of relevant factors include actual knowledge of the respondent, reasonable excuse of the petitioner, and prejudice to the respondent caused by the delay (see Matter of Hayes v Delaware-Cananga-Madison-Otsego Bd. of Coop. Educ. Servs., 79 AD3d 1405, 1405 [2010]; Kirtley v Albany County Airport Auth., 67 AD3d 1317, 1318-1319 [2009]). Although we agree with Supreme Court that petitioner did not establish a reasonable excuse for the delay, petitioner sufficiently set forth the factors of knowledge by respondents of the accident and a lack of prejudice. Employees of respondents were summoned to the scene to assist petitioner, who was immobile and still positioned at the place where she had fallen when they arrived. Knowledge may be imputed to a municipality where its employees discern more than merely generalized awareness of an accident and injuries from their presence at an accident site (see Matter of Schwindt v County of Essex, 60 AD3d 1248, 1249-1250 [2009]; Matter of Dewey v Town of Colonie, 54 AD3d 1142, 1143 [2008]; cf. Matter of Curiel v Town of Thurman, 289 AD2d 737, 738 [2001], lv denied 97 NY2d 611 [2002] [knowledge not imputed where causes of accident and connection to potential negligence were not apparent to employees at the scene]).

Here, police and emergency medical personnel were present and a written report was generated that specifically referenced the ice that allegedly caused petitioner to fall (see Matter of Dewey v Town of Colonie, 54 AD3d at 1143). The report states that petitioner was lying along the sidewalk and that she indicated she had fallen because of built up ice at such location. The potential serious nature of her injury was evident not only from her immobility, but also, as related in the report, from the fact that she was crying and believed that she had broken her ankle. Moreover, less than two months after the accident, a law firm sent a letter to the Cairo Public Library regarding petitioner's accident and requested that the letter be forwarded to the liability insurance carrier. There is sufficient evidence of actual knowledge and an opportunity to investigate within the 90 days after the accident. Accordingly, respondents were not substantially prejudiced by the delay of about three months beyond the initial 90 days (see Matter of Sutton v Town of Schuyler Falls, 185 AD2d 430, 432 [1992]; see also Matter of Hayes v Delaware-Cananga-Madison-Otsego Bd. of Coop. Educ. Servs., 79 AD3d at 1405-1406; Rosenblatt v City of New York, 160 AD2d 927, 927-928 [1990]).

Respondents' contention that the proposed action is meritless because there was no prior written notice of the condition may ultimately be a ground for summary judgment depending on what disclosure reveals, but is insufficient on this record to serve as a ground to deny the application to serve a late notice of claim (see Miller v County of Sullivan, 36 AD3d 994, 996-997 [2007]). In light of the circumstances set forth in the record, including the proof of knowledge of respondents of the accident and the lack of prejudice, petitioner's application should have been granted (see Matter of Ruperti v Lake Luzerne Cent. School Dist., 208 AD2d 1146, 1147 [1994]; Matter of Esposito v Carmel Cent. School Dist., 187 AD2d 854, 855 [1992]; see also Matter of Welch v Board of Educ. of Saratoga Cent. School Dist., 287 AD2d 761, 763-764 [2001]).

Mercure, J.P., Kavanagh and Garry, JJ., concur.


Rose, J. (dissenting).
I respectfully dissent. I cannot agree with the majority that petitioner sufficiently established that respondents acquired actual knowledge of the essential facts of the claim within 90 days of the accident. Although a Town of Cairo police officer responded to the scene and generated a police accident report, the content of that report is vague and ambiguous in describing the location of the accident, indicating that petitioner fell "on the ground due to ice that was built up along the sidewalk at the entrance of the driveway" to a private real estate office. It does not say that she fell on the sidewalk or that the ice was built up on the sidewalk. In short, the police report does not put respondent Town of Cairo on notice of petitioner's claim that negligent maintenance of the Town's sidewalk caused her to fall (see Kirtley v Albany County Airport Auth., 67 AD3d 1317, 1318-1319 [2009]; Matter of Curiel v Town of Thurman, 289 AD2d 737, 738 [2001], lv denied 97 NY2d 611 [2002]; Matter of Leiblein v Clark, 207 AD2d 348, 350 [1994]). The letter sent by petitioner's attorney to the Cairo Public Library is also insufficient to provide notice as it only mentions the accident date but gives no indication of the location, manner or cause of the accident. Nor does it offer any clarification or amplification to the police report. Instead, it confuses the issue of where this accident occurred by implying that it occurred at the Library. Furthermore, there is no indication of any connection between the Library and the Town.

Matter of Dewey v Town of Colonie (54 AD3d 1142 [2008]), relied upon by the majority, is distinguishable. The municipality in that case had actual knowledge of the claim based on a police accident report containing sufficient detail of the essential facts of the claim as well as Freedom of Information Law requests made by the petitioners and their attorneys to the municipality's police department and its attorney (id. at 1143). Here, there is only an ambiguous police accident report and a letter to the Library that does not include any detail about the accident.

Also, there is no evidence that respondent County of Greene acquired actual knowledge of the essential facts of the claim. The mere presence of a County medic at the scene of the accident is insufficient to satisfy the requirement of actual knowledge (see General Municipal Law § 50-e [5]; Matter of Crocco v Town of New Scotland, 307 AD2d 516, 517 [2003]). Nor is there any indication in the record that the medic generated a report that would put the County on notice of the accident, its cause or any basis upon which the County could be said to be negligent.

Given the lack of evidence that respondents had knowledge of the essential facts of the claim within 90 days, and petitioner's lack of any reasonable excuse for the delay in filing a notice of claim, I can find no abuse of discretion in Supreme Court's denial of the application to file a late notice of claim and, accordingly, would affirm the order (see Matter of Devivo v Town of Carmel, 68 AD3d 991, 992 [2009]; Matter of Jensen v City of Saratoga Springs, 203 AD2d 863, 864-865 [1994]; Caselli v City of New York, 105 AD2d 251, 260 [1984]).
ORDERED that the order is reversed, on the law, with costs, and application granted.

GPH Partners, LLC v. American Home Assurance Company

Ahmuty, Demers & McManus, Albertson (Brendan T.
Fitzpatrick of counsel), for appellant.
Coughlin Duffy, LLP, New York (Justin N. Kinney of counsel),
for respondent.

Order, Supreme Court, New York County (Milton A. Tingling, J.), entered January 26, 2010, which granted defendant-insurer, Admiral Insurance Company's (Admiral) motion for summary judgment declaring that it had no duty to defend or indemnify plaintiff with regard to the underlying personal injury action, unanimously reversed, on the law, with costs, the motion denied, and it is declared that defendant Admiral had a duty to indemnify plaintiff in the underlying action.

Supreme Court erred by considering only the language of the subject policy's wrap-up exclusion, without also examining whether Admiral timely asserted such exclusion as a basis for its disclaimer. "A disclaimer is unnecessary when a claim does not fall within the coverage terms of an insurance policy . . . [but] a timely disclaimer pursuant to Insurance Law § 3420 (d) is required when a claim falls within the coverage terms but is denied based on a policy exclusion" (Markevics v Liberty Mut. Ins. Co., 97 NY2d 646, 648-649 [2001] [citations omitted]; A. Serdivone, Inc. v Commercial Underwriter's Ins. Co., 7 AD3d 942, 943-44 [2004], lv dismissed 3 NY3d 701 [2004]).

"[T]imeliness of disclaimer is measured from the time when the insurer first learns of the grounds for disclaimer of liability or denial of coverage" (see First Fin. Ins. Co. v Jetco Contr. Corp., 1 NY3d 64, 68-69 [2003]). Thus, where an insurer "becomes sufficiently aware of facts which would support a disclaimer," the time to disclaim begins to run, and the insurer bears the burden of explaining any delay in disclaiming coverage (see Hunter Roberts Constr. Group, LLC v Arch Ins. Co., 75 AD3d 404, 409 [2010]). Where the basis for the disclaimer was, or should have been, readily apparent before onset of the delay, the insurer's explanation for its delay fails as a matter of law (id.). Even where the basis for disclaimer is not readily apparent, the insurer has a duty to promptly and diligently investigate the claim (see Those Certain Underwriters at Lloyds, London v Gray, 49 AD3d 1, 3 [2007]; City of New York v Welsbach Elec. Corp., 49 AD3d 322, 323 [2008]).

Admiral's May 1 and May 15, 2007 disclaimers were untimely as a matter of law. Via [*2]January 2007 emails, Admiral was on notice of plaintiff's claim for coverage. Grounds for disclaimer based on either delay in notice of the occurrence or the wrap-up exclusion should have been readily apparent to Admiral in January 2007, and, even if they were not, at a minimum, Admiral should have started an investigation at that time. Admiral's position that it only learned that plaintiff was making a coverage request via its attorney's April 23, 2007 letter requesting "confirmation" of coverage, and that it could not have known about the existence of the wrap-up policy until May 10, 2007, is not borne out by the record.

We have considered Admiral's remaining contentions and find them unavailing.
The Decision and Order of this Court entered herein on May 12, 2011 is hereby recalled and vacated (see M—2757 decided simultaneously herewith).